Mortgage Advice Bureau
Dividends this year £3.96m
Peter Brodnicki is either brave, desperate or very well prepared. Yesterday the co-founder of Mortgage Advice Bureau ignored the wreckage of abandoned flotations around him and pressed the button on his own initial public offering.
The decisions by Miller Homes, the housebuilder, Aldermore and Virgin Money, the retail banks, and BCA Marketplace, the used-car dealer, to pull or delay their floats has not deterred Mr Brodnicki, a former divisional head with L&G.
Nor has the profit warning last week from Foxtons, which operates in a related part of the housing market and sees things cooling markedly — in London, at least.
Investor sentiment is weak. Institutions have been spooked by the faltering global growth outlook and are in no mood to put a penny more into equities right now. It is a curious time to float. However, Mr Brodnicki, who admits that he delayed the announcement because of the market turmoil of two weeks ago, argues that the flotations chill will get him far more attention than normal, if only from investors wondering why anyone would be that “ballsy”. He and Canaccord Genuity, the company broker, have also taken informal soundings from prospective investors and come away reassured.
It is his own money on the line: he owns 53.3 per cent of the business, which operates a network for independent mortgage brokers, offering technology, compliance support and training and development as well as franchising the MAB name.
In normal conditions the company might be valued at £70 million to £100 million. It is raising no new capital, but merely seeking an exit for the existing shareholders, who will on average sell down their holdings by 45 per cent.
The one hugely enticing aspect of MAB is its fabulous growth record. It has lifted underlying pre-tax profits by more than 40 per cent for each of the past four years, and the business remains attractively scalable.
There are negatives: the housing market is showing signs of faltering; the highly regulated operating environment throws up serious risks; the listing is on the lightly regulated AIM market; and, bizarrely, the finance director is a part-timer.
My advice Await prospectus
Why Speedy growth record from company whose share market debut will be a real test for the wider flotations market
Partnership Assurance
Sales £1.23bn Profit £131m
Partnership Assurance has been under the cosh from almost the moment it listed on the stock exchange, at 385p a share, in June last year. A specialist provider of pensions for smokers and others with life-shortening illnesses, only three months after a glittering market debut, Partnership was hit with a damaging dose of the City regulator.
The Financial Conduct Authority (FCA) began an investigation into whether Partnership had flouted new rules banning the payment of upfront commissions to financial advisers. It could have been censured, fined or forced to rethink its business model. After 13 months, the FCA dropped its investigation, with no further action yesterday, after finding no evidence of wrongdoing. You might have expected the shares to bounce, but they drifted ½p lower to 92¾p.
This is because Partnership has other, more life-threatening, things to worry about, in the form of George Osborne’s overhaul of the annuities market, which has halved Partnership’s sales. Like other threatened providers, Partnership is reinventing its products and diversifying, but the shares are a gamble until there is more clarity on the new annuities regime.
My advice Avoid
Why The shares are cheap but the outlook murky
Petra Diamonds
Revenue $472m Net profit $68m
Petra Diamonds is one of the bolder bets on gemstone mining and exploration. The FTSE 250 company has been investing heavily for years in rejuvenating its collection of old De Beers mines, and the latest figures for the September quarter suggest that the heavy capex may at last be starting to pay off.
Production grew by 2 per cent to a record 834,000 carats, while revenues soared by 55 per cent to $100.8 million, thanks in part to the sale of a 122-carat blue diamond from its Cullinan mine. (Petra’s mines disgorge more than their fair share of whoppers, which makes the revenue line highly volatile.)
There were encouraging production surges from the group’s three smaller mines, while Petra’s expansion plans at its two big mines — Finsch and Cullinan — are “firmly on track”, according to Johan Dippenaar, the chief executive. He is sticking with his production target of five million carats a year by 2019.
The price of rough diamonds has displayed its normal summer/ autumn dip, with Petra’s selling prices down by about 3 per cent compared with the first half. However, there is every reason to expect a firming as buyers build inventories in advance of the present-buying season. Petra looks inexpensively priced, given that it has reserves of 300 million carats. It may pay a dividend from next year, a year earlier than planned, which would help to give the shares a stronger underpinning. The downsides are labour relations in South Africa, political and currency risk and the danger that the upfront investment won’t pay off in full.
My advice Hold
Why A potential gem, but fairly priced, given the risks
And finally . . .
British banks largely withstood the buffeting from the weekend stress tests, but Banco Santander, one of the most widely held shares in the UK, dropped by 23½p to 539p in London yesterday. The Spanish group, which boasts 1.6 million British shareholders after buying the former Abbey National and Alliance & Leicester building societies, passed the test, but it revealed that it would have to provide for another €200 million of losses, which it said was immaterial in the context of its €1.1 trillion balance sheet.
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