XPS Pensions Group post strong results despite drop in share price

Pensions consultancy firm XPS Pensions Group share price dropped by 65 pence per share yesterday (27 June) despite a recording a 75 per cent growth in total revenue.

The group’s share price dropped from 160 pence per share to 95 pence per share following the release of their results, which has been mainly attributed to a lower profitability forecast for the next year.

According to XPS Pensions, the business grew by 5 per cent on a like for like basis, with pensions revenue recording a 51 per cent increase, growing from £37.7m to £56.8m over the year.

Speaking to our sister publication, Pensions Age, XPS Pensions Group co-ceo, Paul Cuff, said: “The reason the share price has changed is because we’ve changed our guidance for the profitability of the firm next year … we expect it to be a bit suppressed before returning to normal levels after that. The core reason for that is we have beefed up our central functions to support growth in the future.”

The group said that an early exit from a transitional services agreement with Punter Southall Group, who offered subsidies in respect of IT, finance and HR, is expected to cost them around £2m per annum.

“Although we expect the business to grow again by mid-single digits in revenue, out profits probably won’t grow next year, it will be suppressed, maybe flat. But then we expect profit to grow after that,” Cuff added.

“The market was guided for that until we released these results, I do think there was probably a highly disproportionate reaction to it on the very morning, where they have seen our profit may not be as good as we hoped next year, and I dare say that may right itself.

“It is also very thin trading, very few of our shares have traded, but those that have traded have been at the discount that you can see.”

The group said that it still sees a strong demand in the market, with pension schemes needing guidance on the new funding code to be introduced by The Pensions Regulator, GMP Equalisation and “the continued fallout of the Competition and Markets Authority (CMA) review” into fiduciary managers.

“The broader market backdrop is favourable, with a continued pipeline of first time outsourcing opportunities for our Administration business, the continued fallout of the CMA review benefitting our Investment business, and the impact of distracting corporate activity at competitors creating opportunities in our Pensions business. We look forward to the future with optimism," Cuff concluded.

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