Business Irish

Wednesday 23 August 2017

Investors dump shares in IFG Group after profits drop 26pc

Stock photo: Depositphotos
Stock photo: Depositphotos

Gretchen Friemann

Shares in the London and Dublin-listed financial services company, IFG Group, tumbled to a 12-month low yesterday as investors reacted to a 26pc decline in annual pre-tax profits.

Lower interest rates were blamed for the deterioration over the past financial year, which marked a sharp reversal from 2015 when IFG, the parent of James Hay and Saunderson House, posted an 86pc increase to £8.6m. That compares to £6.4m in 2016.

In a note to clients Goodbody stockbrokers reiterated its buy recommendation on the stock, pointing out the growth prospects in Saunderson House, a financial advisory firm angled towards top earners in the legal sector, remain robust.

While annual revenue at IFG rose by 10pc to £78.5m, margin pressure at pensions adminstrator James Hay drove down the group's net profit.

The compression, triggered by the Bank of England's August interest rate cut, resulted in lower rates on the firm's cash deposits.

Analysts described this pressure as a short-term headwind but warned it would corrode first-half earnings for the 2017 financial year.

Goodbody trimmed its earnings per share forecast by 2pc to 9pc in response to the more challenging conditions. Davy also kept its neutral rating on IFG. Analyst Emer Lang stressed the £3.5m impact from the base rate cut would be alleviated in the second half of the year by pricing changes to James Hay's platform.

Lang noted the 11pc increase in the dividend signalled "management's confidence in the group's strategy".

Despite the disappointing profit figure, IFG's chief executive, James Cotter, struck an optimistic note, insisting the group enters 2017 "with both businesses in stronger positions than last year".

He claimed the group's key subsidiaries are "benefiting from the accelerated investment in people and technology".

He also stressed IFG's growth in assets under administration, which leapt by 14pc to £26.7bn, along with the revenue gains helped to position the group for "sustainable growth".

IFG, which is headquartered in Dublin but focused on the UK, sold its Irish pension and advisory business in 2015 and recorded a near £2m "exceptional cost" due to the closure of offices in Ireland.

After concluding a strategy overhaul Mr Cotter emphasised the group has returned to the acquisition path and will seek consolidation opportunities for both subsidiaries.

But the upbeat story failed to quell investors' fears. The group's share price closed over 11pc lower yesterday at €1.51.

It is understood much of the selling stemmed from a single investor.

Irish Independent

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