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AJ Bell

AJ Bell’s first-half profits leap, but investors cash in as new business growth slows

Revenue and profit soared, but a drop in dealing activity and new business won led to some investors cashing out after the stock’s remarkable run

AJ Bell stadium
The stock floated at 160p in December

AJ Bell PLC’s (LON:AJB) share price surge came to a swift end on Thursday, as investors banked big profits following the release of its half-year results.

The investment platform reported a 17% jump in revenue to £50.1mln in the six months ended 31 March (H1 18: £42.9mln), while pre-tax profits jumped by almost a third to £17.7mln. The interim dividend was raised to 1.50p per share (H1 18: 1.46p).

READ: AJ Bell enjoys strong second quarter

Performance was helped by a pick-up in customer numbers, which rose to 215,000 in the period, up by almost 17,000 compared to the halfway stage of 2018.

But, like some of its larger rivals, AJ Bell has found it harder to get those customers to part with more of their money, as they hold back on investments amid all the political and economic uncertainty.

During the first half, net cash inflows – new business won – fell to £2.1bn, down from £2.9bn at the same point last year, while dealing activity fell 14%.

The company laid the blame squarely at the feet of Brexit, stating that the “current economic and political uncertainty continue to impact customers’ decision-making”.

Shares have surged since IPO

“This robust financial performance enables us to continue to invest in the platform to achieve our ambition of becoming the easiest platform to use, underpinning our principal purpose of helping people to invest,” said chief executive Andy Bell.

AJ Bell shares were down almost 5% on Thursday to 410.5p, bringing an end to a remarkable run for the stock, which only floated in December.

Since then, the shares have risen by more than 150% from their IPO price of 160p, netting huge paper profits for those early investors.

City broker downgrades to ‘reduce’ from 'hold'

“We believe AJ Bell offers investors a structural growth opportunity and we consequently are a buyer of the shares on a long-term view,” said Numis in a note to clients.

“However, our recommendation is based on just a 12-month time horizon. Consequently, given the recent exceptional share price performance (47% alpha in the past three months alone) our short-term recommendation falls to ‘reduce’.”

Numis kept its 346p price target in place, almost 10% below the shares’ current market value.

-- Adds analyst comment --

Quick facts: AJ Bell

Price: £3.73

Market: LSE
Market Cap: £1.52 billion
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