Har­wood Wealth Man­age­ment pros­pers

The small cap is in the mid­dle of rapid buy-and-build strat­egy

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Hamp­shire-based Har­wood Wealth Man­age­ment (HW.:AIM)

is a highly ac­quis­i­tive busi­ness in the fi­nan­cial plan­ning and dis­cre­tionary wealth man­age­ment space.

It has ac­quired over 53 businesses to date, in­clud­ing four in the first half of 2017 and two more re­cently. The four businesses bought in the first half pe­riod cost an av­er­age of £2.1m each and added an ex­tra £1bn in as­sets un­der in­flu­ence (AUI) to the firm.

This method of in­creas­ing the size of a busi­ness is also em­ployed by Har­wood’s much larger peer St James’s

Place (STJ). How­ever nonex­ec­u­tive chair­man Peter Mann dif­fer­en­ti­ates his busi­ness from those sim­i­lar to wealth man­agers like St James’s Place.

Mann says those businesses which join up with the Har­wood brand are free to op­er­ate in their own way. There are sig­nif­i­cant ad­van­tages to us­ing the com­pany’s in­fra­struc­ture in­clud­ing its back of­fice func­tions for re­port­ing pur­poses but they are not man­dated to do so.

Har­wood is mak­ing hay as the IFA mar­ket con­sol­i­dates due to ris­ing costs of do­ing busi­ness. Driv­ers in­clude stay­ing reg­u­la­tory com­pli­ant on top of fur­ther

leg­is­la­tion in the fi­nan­cial ad­vice space.

THE TIME IS NOW

Mann says it’s a good time to be in fi­nan­cial ser­vices as peo­ple need ad­vice about pen­sion free­dom.

Since the Gov­ern­ment an­nounced its pen­sion free­dom pol­icy in the 2014 bud­get, more peo­ple have needed to seek ad­vice on what to do with their pen­sion.

Ac­cord­ing to the com­pany, post pen­sion re­form, it re­ceives fee rev­enue from cus­tomers into their 70s. Pre­vi­ously, Har­wood would stop re­ceiv­ing rev­enue when clients were age 65.

N+1 Singer an­a­lyst An­drew Watson says Har­wood is ‘prof­itable and highly cash gen­er­a­tive’. He es­ti­mates the com­pany will end 2017 with £18.1m net cash po­si­tion.

Watson fore­casts 3.2p div­i­dend per share for 2018. De­spite Mann de­scrib­ing the com­pany as a ‘growth’ stock, the div­i­dend fig­ure im­plies a yield of 2.1% so in­vest­ing in Har­wood can pro­vide some in­come as well.

We be­lieve Har­wood will con­tinue to cre­ate value by con­sol­i­dat­ing the IFA mar­ket, hav­ing raised £10m via a share plac­ing in March to add to the com­pany’s fire power.

The com­pany’s share price has in­creased by 91% since its stock mar­ket flota­tion in March 2016 and Watson sees ‘in­trin­sic value north of 230p a share’. (DS)

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