Lloyd Fonds — On track to reach targeted €7.0bn AUM

Lloyd Fonds (DB: L1OA)

Last close As at 17/04/2024

10.30

−0.05 (−0.48%)

Market capitalisation

144m

More on this equity

Research: Financials

Lloyd Fonds — On track to reach targeted €7.0bn AUM

Lloyd Fonds (LF) continues its business repositioning under Strategy 2023/2025 to active portfolio management, expanding its assets under management (AUM) within new core business to €1.9bn as at 26 March 2021 from €1.1bn as at end-June 2020. This exclusively organic growth was driven by a robust managed funds performance and net funds inflow. Management reiterates its guidance to reach €7.0bn in AUM by the end of 2024 and 45% EBITDA margin. Management’s target is underpinned by the H220 EBITDA margin of 44%, healthy AUM growth in Q121, and a potential revival in M&A activity, which would help accelerate the expansion.

Written by

Michal Mordel

Analyst, Investment trusts

Financials

Lloyd Fonds

On track to reach targeted €7.0bn AUM

Fund management

Scale research report - Update

13 April 2021

Price

€7.28

Market cap

€97m

Share price graph

Share details

Code

L10A

Listing

Deutsche Börse Scale

Shares in issue

13.3m

Net debt as at 31 December 2020

€12.4m

Business description

Lloyd Fonds positions itself as an integrated asset manager and partner for private customers and institutional capital. It aims to provide added value through transparent, active asset management, forward-looking digital solutions with the secondary brand LAIC, as well as individual and institutional asset management.

Bull

Transformation to an active asset manager.

Ambitious targeted AUM growth.

Onboarding of new experienced management and sound balance sheet.

Bear

Execution risk in business repositioning.

Markets for legacy activities remain volatile.

Regulatory risks of inorganic growth.

Analysts

Michal Mordel

+44 (0)20 3077 5700

Michal Mierzwiak

+44 (0)20 3077 5700

Lloyd Fonds (LF) continues its business repositioning under Strategy 2023/2025 to active portfolio management, expanding its assets under management (AUM) within new core business to €1.9bn as at 26 March 2021 from €1.1bn as at end-June 2020. This exclusively organic growth was driven by a robust managed funds performance and net funds inflow. Management reiterates its guidance to reach €7.0bn in AUM by the end of 2024 and 45% EBITDA margin. Management’s target is underpinned by the H220 EBITDA margin of 44%, healthy AUM growth in Q121, and a potential revival in M&A activity, which would help accelerate the expansion.

FY20 financials: Minor net loss

LF continues to bear the cost of the transformation with a FY20 net loss of €0.7m. The result is ahead of management’s expectations in H120, which assumed a net loss for the period of around €4.0m. The results were strongly supported by the stock market rally in the second half of 2020 which translated to higher fees collected by LF. Meanwhile, the Real Assets segment is being wound down and continues to generate diminishing fees (a 38% net return in FY20) and gains on disposals through profit-sharing agreements (€0.7m in FY20).

Successful launch of LAIC

The artificial intelligence (AI)-based individual portfolio management, LAIC, was launched in April 2020 and has already attracted €100m in AUM. With this important milestone LF now has three fully operational and complementary business lines – fund management, wealth management and digital individual portfolio management. LF continues to grow organically while searching for potential acquisition targets, especially in the highly fragmented wealth management market in Germany.

Valuation: Trading at an increasing discount to peers

As Refinitiv consensus implies a superior operating earnings increase in 2021–23e, based on EV/EBITDA multiples, LF trades at an increasing discount to the peer group, which now includes asset managers only. Consensus is also expecting LF to report a net profit as soon as FY22 and increasing profits further in subsequent years, translating into a rapidly diminishing premium to peers based on P/E multiples for 2022–23e.

Consensus estimates

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/19

8.2

(5.1)

(0.01)

0.0

N/A

N/A

12/20

27.7

(3.0)

(0.00)

0.0

N/A

N/A

12/21e

29.3

1.1

(0.01)

0.0

N/A

N/A

12/22e

36.0

5.9

0.22

0.0

33.1

N/A

Source: Lloyd Fonds accounts, Refinitiv consensus as at 13 April 2021

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

FY20 financials: Close to breaking even

With the successful integration of SPSW Capital (SPSW) and Lange Assets & Consulting (LAC), the new business lines became the main drivers of LF’s consolidated results: Lloyd Fonds (open-ended funds management), Lloyd Vermögen (wealth management) and LAIC (AI-based individual portfolio management) are recognised under the Lloyd Fonds Liquid Assets segment and made up 81% of LF’s FY20 revenues. The FY20 results were better than management expected at H120 (with a net loss at €0.7m for FY20 versus the c €4.0m guided by management), as the stock market rally supported the performance of managed funds (see Exhibit 2) and growth in fee income led to a 237% y-o-y increase in LF’s top-line to €27.7m.

Costs increased y-o-y mostly due to the consolidation of the late-2019 acquisitions of SPSW and LAC (described in our previous note), which led to an increase in headcount which in turn led to personnel expenses of €11.7m (+34% y-o-y). The other operating result decreased by 13% y-o-y to a negative €8.4m, which is mostly attributable to legal expenses borne in 2019 due to restructuring and acquisitions. The overall operating profit was €3.2m compared to a €10.9m loss in FY19.

Net financial costs amounted to €6.2m compared to net financial income of €5.9m in FY19. The regular interest burden increased due to two convertible bond issues, but the y-o-y difference in the net financial result is attributable to one-offs. LF recognised a €3.3m financial cost in FY20 related to tranche payments for the SPSW and LAC acquisitions. LF also continued to dispose of its legacy portfolio, which was a significant results driver in 2019; the recognised profit amounted to €0.7m in FY20 compared to €7.0m in FY19.

The pre-tax loss of €3.0m compared to a €5.1m loss in FY19. As in FY19, LF recognised a carried forward tax loss (€4.0m versus €5.0m in FY19), and further tax losses will be also recognised in the next reporting periods. Income attributable to minority shareholders amounted to €1.7m (LF owns a 90% stake in SPSW).

Exhibit 1: Financial highlights

Year end December (€000s)

FY19

FY20

y-o-y

Revenues

8,223

27,739

237%

Lloyd Fonds Liquid Assets

-

22,348

N/A

Lloyd Fonds Real Assets

8,223

4,595

(44%)

Lloyd Fonds Group*

-

796

N/A

Cost of materials

(426)

(1,072)

152%

Personnel costs

(8,732)

(11,726)

34%

D&A

(1,258)

(3,750)

198%

Other operating result

(9,603)

(8,385)

(13%)

Result from associates

858

400

(53%)

Operating earnings (EBIT)

(10,938)

3,206

N/A

EBITDA

(9,680)

6,956

N/A

Lloyd Fonds Liquid Assets

-

9,890

N/A

Lloyd Fonds Real Assets

3,592

1,633

N/A

Lloyd Fonds Group*

(13,272)

(4,567)

N/A

Net financial income/(cost)

5,864

(6,156)

N/A

Pre-tax profit

(5,074)

(2,950)

N/A

Income tax

4,981

3,964

(20%)

Minorities

0

(1,717)

N/A

Net profit attributable to majority shareholders

(93)

(703)

N/A

Source: Lloyd Fonds. Note: *Represents company overheads.

The Real Assets segment represents LF’s legacy business where fees are diminishing in line with the decrease in AUM following disposals. In FY20, revenues in this segment amounted to €4.6m (down 44% y-o-y), and the EBITDA margin increased to 36% (FY19: c 26%), as LF continued to reduce headcount and close operations in the segment. The Real Assets segment‘s contribution to the bottom line was much lower y-o-y due to the above mentioned lower gains on disposals.

To perform the restructuring and acquisitions LF reached for external financing by issuing two convertible bonds executed in May 2019 (€6.1m) and July 2020 (€5.0m). It also consolidated the underlying leverage of acquired companies and in turn current net debt stands at €12.4m compared to €5.6m at end-FY19. It plans to finance further growth externally, including the planned issue of a LAIC-Token in 2021 – a blockchain-based participation rights in fully owned LAIC Capital. LF informed the market that it is on track to reach its targeted €7.0bn in AUM and 45% EBITDA margin by 2024. This statement has been underpinned by strong fees in Q121 of €3.0m.

Organic growth brings AUM to €1.85bn

On the back of fully organic growth, LF expanded its core-business AUM (Lloyd Fonds Liquid Assets) by 57% in FY20, reaching €1.66bn as at 31 December 2020, compared to €1.06bn at end-2019. We note that this increase was largely achieved in H220 (AUM at 30 June amounted to €1.1bn), due to the broad equity market rally, which fuelled a robust funds’ performance, assisted by net funds inflows. LF significantly exceeded its guidance from H120, which assumed end-2020 AUM amounting to c €1.4bn with the company announcing that it had reached this level by 12 November 2020. The successful development continued in Q121, with overall AUM as at 26 March 2021 reaching €1.85bn. Management expects this figure to increase going forward as organic growth should be assisted by M&A activity. We note that the company has not provided a targeted AUM value as at end-2021 but reconfirmed its plan to exceed €7bn by the end of 2024.

The investment funds segment (Lloyds Fonds) solidified its position as the largest in the company’s structure, expanding to c €1.2bn AUM as at end-2020, from €0.9bn 12 months earlier, and then further to €1.33bn as at 26 March 2021. It includes eight funds with various risk profiles, which since 1 August 2020 are all managed by SPSW. We note, however, that LAC will serve as an advisor for the ‘Lloyd Fonds – ASSETS Defensive Opportunities’ fund. Meanwhile, the three funds already managed by SPSW prior to its acquisition by LF in Q419 were renamed during FY20 to match the Lloyd Fonds brand.

Exhibit 2: Funds managed by Lloyd Fonds

Fund

Type

AUM* (€m)

One-year Performance* (%)

FY20 performance (%)

Lloyd Fonds – Active Value Selection

Equity fund

58.0

75.6

26.7

Lloyd Fonds – European Quality and Growth

Equity fund

7.1

31.7

62.2

Lloyd Fonds – European Hidden Champions

Equity fund

179.8

5.9

71.1

Lloyd Fonds – Green Dividend World

Equity fund

19.5

10.6

7.7

Lloyd Fonds – WHC Global Discovery

Mixed fund

571.7

7.7

22.7

Lloyd Fonds – Global Multi Asset Sustainable

Mixed fund

115.7

7.4

11.7

Lloyd Fonds – Special Yield Opportunities

Fixed-income fund

56.1

2.2

3.0

Lloyd Fonds – ASSETS Defensive Opportunities

Fixed-income fund

85.6

0.9

0.4

Source: Lloyd Fonds. Note: *Data as at 12 April 2021 (except for European Quality and Growth: 6 April 2021). Returns of retail tranches.

LAC will continue its key role in the wealth management segment (Lloyds Vermögen), where AUM increased from €200m at end-2019 to €410m at 31 December 2020 and remained stable over Q121. According to the management, this segment has significant development potential, as the very fragmented German wealth management market needs consolidation, with LF potentially playing an active role in the process. As the company’s acquisition targets include entities with AUM ranging from €0.5bn to €1.0bn, it could potentially result in doubling the managed assets on a single transaction.

On 1 April 2020, LAIC launched its operations, offering individual investment accounts managed by a fully digitalised, AI-based management system, for both private and institutional clients. The product portfolio was then expanded to include five mixed funds, individual retirement plans and an institutional open-ended fund. The segment’s AUM at end-December reached €50m, then more than doubled over Q121 (€102m at 26 March 2021). The expansion could accelerate further, as on 21 February 2021 the Federal Financial Supervisory Authority (BaFin) granted permission to offer LAIC services in Austria.

The Lloyd Fonds Real Assets represents LF’s legacy assets of real estate, shipping, private equity and life insurance funds and is being gradually phased down. The funds continue to contribute to LF’s top line (17% in FY20 versus 42% in H120). The three active real estate funds are focused on office (60%) and hotel (40%) properties in Germany and the Netherlands. LF’s fleet under management as at end-2020 consisted of 10 vessels (down from 19 at end-2019), and all three British life insurance funds are already in liquidation.

Valuation

As the strategic shift from real assets towards marketable securities progresses, LF’s business model is now positioned among other asset management groups. Therefore, we have narrowed the peer group by removing the real assets investors from it. Based on an EV/EBITDA multiple for 2021–23e LF trades at an increasing discount to peers, which is attributable to the consensus expectation of a superior operating earnings increase over the analysed period. It is worth noting that this metric is in part shaped by the level of indebtedness, while all British peers reported net cash positions. According to Refinitiv consensus, LF will report net income as soon as FY22, which would result in a diminishing premium to peers based on a P/E valuation for 2022–23e figures.

Exhibit 3: Peer group comparison

 

Market cap

EV/EBITDA (x)

P/E (x)

 

(m)

2021e

2022e

2023e

2021e

2022e

2023e

Flatex

2,415

17.6

14.6

13.2

21.2

17.1

15.1

Frenkel Topping

£58

12.5

10.6

 

18.5

15.7

 

Ashmore Group

£3,321

12.6

12.2

11.1

16.9

18.8

17.2

Azimut Holding

2,905

9.3

8.7

7.9

10.7

10.2

9.2

Jupiter Fund Management

£1,887

8.4

7.9

7.3

13.6

12.8

12.2

Man Group

$2,774

6.9

6.4

5.8

10.0

9.0

8.0

Impax Asset Management

£1,401

32.0

26.1

22.9

43.5

31.8

25.4

Peer group average

14.2

12.4

11.4

19.2

16.5

14.5

Lloyd Fonds

€97

14.6

9.3

6.3

N/A

33.1

15.2

Premium/(discount) to peer group

3%

(25%)

(45%)

N/A

101%

4%

Source: Refinitiv consensus at 13 April 2021.


General disclaimer and copyright

Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally.

Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Lloyd Fonds

View All

Latest from the Financials sector

View All Financials content

Research: Investment Companies

Axiom European Financial Debt Fund — Capital opportunities

Axiom European Financial Debt Fund (AXI) is a closed-end fund that invests in European financials regulatory capital. If a bank’s operations and equity position are robust enough to withstand shock asset losses, these instruments can be to a way to earn a premium return. Axiom also seeks opportunities from regulatory changes that lead banks to redeem some of their legacy instruments that no longer have the same capital rating under stricter rules. This is a niche space where it is important to be familiar with not only the banks, but also regulation, local legislation and even politics. The portfolio has a 6.1% running yield; 7.3% to perpetuity. The stock is trading on a 6.5% dividend, 8% below NAV.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free