AJ Bell Holdings Ltd - Potential Intention to Float and 2018 FY Results

AJ Bell Holdings Limited (the "Company", "AJ Bell" or the "Group"), one of the largest investment platforms in the UK, announces that it intends to publish a Registration Document later today and is considering proceeding with an Initial Public Offer (the "IPO" or the "Offer").

 

AJ Bell is also announcing its financial results for the year ended 30 September 2018 in which the Group reported revenues up 19% to £89.7 million, profit before tax up 31% to £28.4 million and a 29% increase in basic earnings per share to 55.26 pence. Performance was driven by strong growth in the core platform business with assets under administration ("AUA") increasing 25% to £38.6 billion and platform customer numbers up 30% to 183,213.

 

AJ Bell's interim and ?nal dividends totalled £14.6 million (35.5 pence per share) in respect of full year 2018, together with a further special dividend of £8.0 million (19.5 pence per share).

 

Andy Bell, Chief Executive Officer, comments:

 

"The purpose at the heart of our business is to make it easy for people to invest. We do this by delivering innovative, low-cost and transparent investment products via our platform. This focus on the customer has enabled us to grow since formation in 1995 to become one of the largest investment platforms in the UK, spanning both D2C and advised markets. With nearly 200,000 customers and AUA of £46.1 billion, we are a business of scale operating in a fast growing market.

"We have a history of profitability, cash generation and dividends and this is once again demonstrated in our latest full year results. Revenue was up 19% and profit before tax increased 31%, with interim and final dividends totalling £14.6 million, an increase of 25% on the previous year.

 

"Our intention to float the business on the London Stock Exchange reflects both our historic achievements and our belief in how much more we can achieve. A listing offers us further reputational and commercial benefits that will support our growth plans."

 

2018 FULL YEAR FINANCIAL RESULTS

 

·   AJ Bell's retail customers for the year ended 30 September 2018 increased 20% to 197,912 (FY17: 164,557) and AUA increased 16% to £46.1 billion (FY17: £39.8 billion).

 

·   The increase in AUA was driven primarily by the Company's core platform business: platform AUA increased 25% to £38.6 billion (FY17: £30.9 billion), platform customer numbers increased 30% to 183,213 (FY17: 141,207) and net platform inflows were £5.9 billion in the year (FY17: £5.5 billion).

 

·     Revenue was up 19% to £89.7 million (FY17: £75.6 million) and profit before tax increased 31% to £28.4 million (FY17: £21.7 million), whilst basic earnings per share increased 29% to 55.26 pence (FY17: 42.85 pence).

 

·    AJ Bell's interim and ?nal dividends totalled £14.6 million (35.5 pence per share) in respect of full year 2018, together with a further special dividend of £8.0 million (19.5 pence per share).

 

·    This strong profitable business growth is why AJ Bell is recognised as one of the most financially stable investment platforms in the market.  It has materially no debt, net assets of £64.0 million and 440% coverage over its minimum required regulatory capital.

 

 

BUSINESS HIGHLIGHTS

 

·    AJ Bell is one of the UK's leading investment platforms operating successfully in both the advised and D2C segments.

 

·     AJ Bell's multi-channel model means it is well positioned to capitalise on the rapid structural growth of the accessible UK savings and investment market. The investment platform market is a fast growing segment within this sector with a number of key growth drivers:

 

The decline of defined benefit pensions and policy changes such as pension freedoms are creating demand for platform based savings products.

o  Increasing life expectancy means people are having to invest more for longer.

o  Regulation and capital requirements create high barriers to entry.

 

·      Since 2012, the Company has achieved a 26% compound annual growth rate ("CAGR") in platform AUA, well in excess of both the platform and wider investment market.

 

·      AJ Bell's success has been built on its proven, profitable and highly cash generative operating model:

 

o  The Company benefits from a stable and diverse income stream, reinforced by a 95% customer retention rate, offering good visibility to future performance.

AJ Bell's re-platforming was completed in 2014 and its efficient operational structure and technology architecture enable positive operating leverage.

o  The business is materially debt free, had an average cash conversion rate over 100% over the last three years and has declared a dividend in each of the last 15 years.

 

·     AJ Bell's platform delivers a high quality service at a competitive price and is designed to be easy to use by both advisers and retail customers. AJ Bell has won a total of 30 industry awards in 2016, 2017 and 2018. AJ Bell's platform gives access to a wide range of tax wrappers and investments, allowing advisers and customers to choose how they invest, and provides relevant and accessible investment content to assist with that choice.

 

·     AJ Bell maintains a strong independent brand and has one of the highest levels of customer retention in the market. Customer retention levels have remained relatively constant at approximately 95% in each of the last 3 financial years. The customer base for AJ Bell's platform propositions has grown strongly in recent years, both in terms of the number of new customers (CAGR over the last 6 years of 24%) and AUA (CAGR over the last 6 years of 26%).  Net inflows (total inflows less total outflows) are also positive at 17% for AJ Bell Investcentre and 26% for AJ Bell Youinvest, expressed as a percentage of opening assets for FY2018.

 

·     AJ Bell's platform technology is consistently improving to support the planned growth of the business and provide a reliable, easy to use service for clients. AJ Bell continues to invest significantly in technology to ensure the platform remains secure, flexible and scalable. The business took the decision some time ago to re-platform and the stability of its digital architecture and its ability to introduce innovative new services represents a material advantage compared to a number of other platforms that have undergone upgrades of their technology or re-platforming in recent years.

 

·    AJ Bell's business was founded on a transparent and innovative culture. This entrepreneurial spirit is supported by a committed management team, with an average length of service of 11 years, led by founder Andy Bell. In addition to senior management, AJ Bell's staff are highly engaged, and in February 2018 AJ Bell was named as one of the Sunday Times' 100 Best Companies to Work For. The Company also has a well-established corporate governance framework. This combination of culture, talent and structure underpins the future growth of the company.

 

POTENTIAL OFFER STRUCTURE

Should AJ Bell proceed with an IPO, the following is intended:

·    Premium listing on the Official List of the FCA (the "Official List") and admission to trading on the Main Market for listed securities of the London Stock Exchange (the "LSE") (together, "Admission"). 

·     Secondary sell-down of existing ordinary shares by selling shareholders. There is no intention for there to be a primary raise. 

·      The Company will also offer participation to qualifying AJ Bell customers through its platform. 

·     The Company intends that it would have a free float of at least 25% and expects that it would be eligible for inclusion in FTSE UK indices. 

·    A prospectus including full details of the offer is expected to be published on or around 27 November 2018. 

·     The Group will be re-registered as a public limited company prior to the intended date of Admission. This re-registered company would apply for admission of its ordinary shares (the "Shares") to the premium listing segment of the Official List and to trading on the Main Market of the LSE. 

·    Sponsor, financial adviser, sole bookrunner and broker: Numis Securities Limited.

 

REGISTRATION DOCUMENT

The Company has today submitted a Registration Document to the FCA for approval. Following approval, the Registration Document will be published and a copy will be submitted to the National Storage Mechanism and available for inspection at http://www.morningstar.co.uk/uk/NSM. A copy of the Registration Document will also be available from the Company's registered office, at 4 Exchange Quay, Salford Quays, Manchester, M5 3EE and online at www.ajbell.co.uk, subject to certain access restrictions.