Investment platform AJ Bell has appointed Numis Securities Limited to explore an Initial Public Offering (IPO) on the Main Market of the London Stock Exchange.
The IPO would include a retail share offer, available exclusively to AJ Bell customers and is expected to take place towards the end of 2018 or early 2019.
A listing will give investors, including AJ Bell customers, the opportunity to participate in AJ Bell’s future success, the firm writes. The Group does not intend to raise new capital as part of the IPO given its financial strength, highly profitable business model and debt-free balance sheet.
The Group’s two largest shareholders, co-founder and chief executive Andy Bell (pictured) and Invesco Perpetual, will both retain cornerstone shareholdings post-IPO.
Andy Bell, chief executive, says: “These are exciting times for our business. Over the last 22 years we have built a multi-award winning and easy to use investment platform that is the engine room of a fast growing and profitable business. An IPO is a natural next step in our journey and will provide a further boost to our future growth through the increased profile a stock market listing will give us.
“We believe the outlook for our business is extremely positive. The need for people to save and invest for their future has never been stronger and we are making it easier for them to do that. Our focus on the needs of our customers has resulted in assets invested via our platform increasing by 26 per cent a year on average over the last five years, with total assets under administration hitting GBP42 billion.
“Our highly profitable, proven model continues to deliver outstanding performance. In 2017 revenues grew 17 per cent to GBP75.6 million whilst our efficient operating model delivered a 29 per cent growth in profit before tax to GBP21.7 million. We were pleased to grow our dividend by 10 per cent, equating to a 66 per cent pay-out ratio. Our profitable operations are supported by a strong, debt-free balance sheet and give us a secure platform from which to realise our growth ambitions.
“We now have 172,000 customers and I want them to be able to share in our success by giving them exclusive access to the offer.”
AJ Bell’s business model and growth prospects are listed as their market – a fast growing retail market within the UK savings and investment industry and the role of the investment platform’s market within retail savings. This is forecast to grow from 35 per cent of a GBP1.5 trillion addressable market in 2015 to 55 per cent of a GP2.2 trillion market in 2020, the firm writes.
The firm says that the sustained historic organic growth of AJ Bell (Platform AUA Compound Annual Growth Rate of 26 per cent over the past five years) has outpaced growth in the platform market.
The firm writes that its proposition is that it is an award-winning platform, operating in both the direct-to-consumer and advised market segments.
“Unlike many of our competitors, AJ Bell maximises growth opportunities by embracing both the direct-to-consumer and advised market segments. AJ Bell has highly competitive prices in both segments – headline platform charge of 0.25 per cent in the direct to consumer segment and 0.20 per cent in the advised market.
“Our customers are a loyal base of high quality customers with average customer portfolio value in both the direct-to-consumer (GBP100,000) and advised (GBP327,000) markets are higher than the respective market leaders. Customer retention rate is over 95 per cent.”
The firm’s Business Model is that it is a profitable and scalable platform with a history of consistent profitability – pre-tax profit of GBP21.7 million in FY17. Back-office re-platforming is completed and fully embedded in the business.
The firm says that it has high quality of earnings and predictable and sustainable revenue streams through high retention rates and a mix of transactional and recurring revenue. “Our profit margins are driven by our efficient operating model.”
Highly cash generative and capital light model supports progressive dividend policy; there is a debt-free balance sheet and strong cash generation and a track record of both maintaining investment in the business and progressive dividend payment.
The firm writes that its team is entrepreneurial and founder-led, by committed and stable senior management team led by co-founder Andy Bell, and the management sell down is modest and remaining with the business post IPO.
For the 12 months ended 30 September 2017 AJ Bell reported revenue of GBP75.6 million (FY16: GBP64.5 million) and pre-tax profit of GBP21.7 million (FY16: GBP16.8 million). AJ Bell has no debt and this financial position enabled it to continue its progressive dividend policy with a 10 per cent increase to 28.25p a share in the period.
The firm writes that trading continued to be strong in the company’s first quarter to 31 December 2017 with customer numbers increasing to 172,000 and AUA of GBP42 billion.