Lloyd Fonds — Taking shape

Lloyd Fonds (DB: L1OA)

Last close As at 22/02/2024

10.30

−0.05 (−0.48%)

Market capitalisation

144m

More on this equity

Research: Financials

Lloyd Fonds — Taking shape

Change is gathering pace at Lloyd Fonds. In line with its goal to become a leading asset manager in Germany over the medium term, it plans to launch its new business model, focused on open-end retail funds, in Q219. Growth may also be by acquisition (finances are robust) with assets under management targeted to exceed €5bn within five years (€1bn+ in 2019). Management is being further strengthened and strategic divestments are under review. Given likely c €2.5m one-off restructuring costs, current year guidance is newly lowered to a net loss of €1.5m. Continued weakness in H118 results only confirms the need to reposition.

Richard Finch

Written by

Richard Finch

Analyst, Consumer

Financials

Lloyd Fonds

Taking shape

Fund management

Scale research report - Update

11 October 2018

Price

€4.59

Market cap

€46m

Share price graph

Share details

Code

L10A

Listing

Deutsche Börse Scale

Shares in issue

10.1m

Net cash (€m) at 30 June 2018

13.1

Business description

Lloyd Fonds is an investment and asset manager in a range of alternative real assets, primarily in the areas of shipping and real estate. Over 20 years it has arranged more than 100 investments with a cumulative total volume of c €5bn. It is now repositioning towards liquid retail investment funds.

Bull

Proposed broadening of business to become an active asset manager.

Ambitious targeted AUM growth.

New, experienced management and sound finances.

Bear

Execution risk in repositioning the company.

Markets for current activities remain challenging.

Regulatory risks.

Analyst

Richard Finch

+44 (0)20 3077 5700

Change is gathering pace at Lloyd Fonds. In line with its goal to become a leading asset manager in Germany over the medium term, it plans to launch its new business model, focused on open-end retail funds, in Q219. Growth may also be by acquisition (finances are robust) with assets under management targeted to exceed €5bn within five years (€1bn+ in 2019). Management is being further strengthened and strategic divestments are under review. Given likely c €2.5m one-off restructuring costs, current year guidance is newly lowered to a net loss of €1.5m. Continued weakness in H118 results only confirms the need to reposition.

The new business model

Lloyd Fonds’s proposed reorientation towards open-end investment products is to be based on three new product lines: a range of actively managed retail funds, digital portfolio management and individual asset management, which can draw on existing expertise in alternative real assets, particularly real estate. Market launch is expected in Q219 following the formation of a dedicated capital management company and a reworking of the Lloyd Fonds brand. The repositioning is being supported by key management changes, including a chief investment officer from April 2019, two new anchor shareholders, notably DEWB, a long-established listed private equity company, and first expansion from its Hamburg base with a branch opening in Munich. Development is being funded by June’s €3.8m capital increase.

Tough going in H118

In view of such operational change, analysis of current financial performance offers limited guidance. The half to June saw a 22% reduction in sales, reflecting asset disposals in H117, contract expiries and insolvencies. However, divisional PBT was maintained as impairment reversals and fair value remeasurement gains made up for the €1.5m tax refund which flattered the comparative. A near doubling of central costs moved overall PBT sharply into loss (€0.5m vs €0.9m profit). Owing to repositioning measures, 2018 net profit guidance is cut from just below last year’s €1.4m profit to a €1.5m loss. Finances are sound with €13m net cash at June.

Valuation: Needing to deliver

Current investor appreciation of Lloyd Fonds’s reorientation (share price has more than doubled since the arrival of the new shareholders in March) shows a long-term view, given no quick earnings fix and possibly no dividend payout.

Historic financials

Year
end

Revenue
(€m)

PBT

(€m)

EPS

(€)

DPS
(€)

P/E

(x)

Yield
(%)

12/15

11.4

1.8

0.17

0.07

27.0

1.5

12/16

9.5

3.2

0.35

0.16

13.1

3.5

12/17

7.5

1.2

0.15

0.00

30.6

N/A

Source: Lloyd Fonds accounts

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.

Review of H118 results

The proposed wholesale shift in Lloyd Fonds’s activities mitigates concern about the financial performance of activities soon to be superseded. Moreover, the evident refocusing of management and an array of one-off items, both accounting and restructuring-related, make it difficult to assess underlying performance, notwithstanding appreciation of persistent market pressures.

H118’s continued profit woes (see Exhibit 1) are striking against a weak comparative, which had also markedly disappointed with a near halving of net profit despite a €1.5m boost from a tax refund related to associates. Although a downward step-change in newly-reported profit was to be expected without this exceptional item, the impact was compounded by a reduction in group sales of almost a quarter (€0.8m) as a result of lower income from trusteeship and real estate asset disposals as well as challenging shipping markets. There was no corresponding fall in costs as the predominant expense, labour, held up because of severance payments on a 30% reduced headcount. Lower depreciation was simply due to a change of accounting policy with the expense transferred to the finance result, while the reduction in material costs, driven by customised contracts was not material. Predictably, other operating costs included contradictory items, notably a net impairment reversals benefit of €0.4m and a similar level of property remeasurement gains, which together more than covered €0.6m higher admin costs (largely restructuring-led), hence a lower rise in other operating costs than might have been expected, given the scale of repositioning.

Exhibit 1: Financial performance

Year end December (€m)

2016

H117

H217

2017

H118

Revenue

9.5

3.9

3.6

7.5

3.1

Material costs

(1.0)

(0.3)

(0.2)

(0.5)

(0.2)

Labour costs

(4.3)

(2.1)

(2.7)

(4.8)

(2.0)

Depreciation

(0.5)

(0.3)

(0.2)

(0.5)

(0.1)

Other operating costs (net)

(3.3)

(1.7)

(1.6)

(3.3)

(1.9)

Associates

0.4

1.7

0.4

2.1

0.4

EBIT

0.8

1.3

(0.8)

0.5

(0.8)

Finance income

2.7

0.1

1.3

1.4

0.4

Finance expenses

(0.3)

(0.4)

(0.3)

(0.7)

(0.2)

Pre-tax profit

3.2

0.9

0.3

1.2

(0.5)

Net profit

3.2

1.0

0.4

1.4

(0.8)

Source: Lloyd Fonds accounts

Shipping saw some improvement in charter rates but markets remain subdued with container tanker fleet oversupply. The company mitigates this by pooling 8 of its 16 container ships, thereby stabilising income and optimising utilisation, and has newly agreed a flexible debt service until 2020. Real estate was quiet in H1 although management is confident about macro factors and its own focus on affordable housing where fundamentals are appealing.

Exhibit 2: Sales and PBT by segment

Year end December (€m)

2016

H117

H217

2017

H118

Revenue

Real estate

2.2

0.9

0.6

1.5

0.5

Share

23%

22%

17%

20%

16%

Shipping

5.6

2.2

2.2

4.4

1.9

Share

59%

57%

61%

59%

61%

Other assets

1.7

0.8

0.8

1.6

0.7

Total

9.5

3.9

3.6

7.5

3.1

Pre-tax profit

Real estate

1.9

(0.1)

0.3

0.2

0.1

Shipping

1.8

2.0

1.3

3.3

1.9

Other assets

2.2

0.7

0.7

1.4

0.7

Central costs

(2.8)

(1.7)

(2.1)

(3.8)

(3.2)

Total

3.2

0.9

0.3

1.2

(0.5)

Source: Lloyd Fonds accounts

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
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.

Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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. Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

295 Madison Avenue, 18th Floor

10017, New York

US

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: Healthcare

Newron Pharmaceuticals — Next up – R&D day

Newron continued to made steady progress in H118. A fuller debrief of pipeline assets including sarizotan (Rett syndrome) and Evenamide (schizophrenia) will take place at the R&D day in NYC, scheduled for 31 October. Royalty income from sales of Xadago (Parkinson’s disease, PD) rose by 54% to €2m, driven mainly by increased sales in the EU and Switzerland. However, the US sales contribution remained small (launched by partner US WorldMeds in H217). In H118 Newron reported an operating loss of €7.6m (vs a profit of €2.3m in H117 due to a €10.3m one-time milestone payment in the period), and revised cash and financial investments of €50.6m at July 2018 should enable funding to key value inflection points in 2020. We value Newron at CHF788m.

Continue Reading

Subscribe to Edison

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

Sign up for free