Strategically, the group completed the acquisitions of Talbot and Muir, a high-quality provider of SIPP and small self-administered pension schemes, and Dunstan Thomas, a leading fintech provider, and announced a new fee-charging structure for clients.
In a brief trading update, the firm said these initiatives will reduce the proportional contribution of interest income to total revenue and improve the overall quality and diversity of earnings across the group.
“Despite the challenging environment we refused to be downbeat and remained focused on our growth strategy. As a result, we managed to execute key strategic initiatives and deliver a strong and robust performance in 2020,” said Will Self, the chief executive officer of Curtis Banks in the statement.
“Looking ahead, we will continue to build a business that looks set to benefit from macro-trends, namely greater numbers of UK savers and an ageing population. Building upon our success as one of the UK’s leading SIPP providers, we will continue to develop the business through enhancing our service to our clients and advisers, greater diversification of revenue streams and the targeting of improved operating profit and quality of earnings,” he added.
Proving the resilience of the business
Analysts at Peel Hunt reiterated a ‘buy’ rating and 310p price target on the stock and said they “expect Curtis Bank to deliver a robust trading performance”.
In a note to clients, the City broker’s analysts said: “There have been a number of important strategic developments over the course of the year: the acquisition of Talbot and Muir, as an example of the consolidation of the SIPP market, the group’s diversification with the acquisition of Dunstan Thomas, and the important initiative to amend the fee-charging structure, which should reduce the importance of interest income and improve the quality of earnings.”
They added: “Proving the resilience of the business, we assume that profits for the year are in line our expectations. We are forecasting PBT/EPS of £12.6m/16.8p, whilst consensus stands at £13.5m. Based on December 2021E estimates, the stock is now trading on c.11x. To us, this looks a very attractive valuation, given the earnings growth being delivered, the strong cash generation underpinning the c.5% yield and the improvement in the overall quality of earnings.”
In late morning trading, Curtis Banks shares drifted 0.9% lower to 226p.
— Adds broker comment, share price —