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  • Mark Watson-Mitchell

Arbuthnot Banking Group – the current year will see strong growth

This Thursday will see Arbuthnot Banking Group (ARBB) announcing its results for the year to end December 2018 and I believe that the accompanying statement will identify this current year as one of corporate growth.


Over its 185-year history the company has shown itself able to adapt and grow against a backdrop of a forever changing environment. Over the decades it has been involved with so many various business interests including: backing Cecil Rhodes’ Gold Fields of South Africa; managing its own coffee, tea and jute estates in Ceylon and India; and, financing banana growers in Jamaica.


Its management during its history has developed a set of working principles – that have done it very well to date: Integrity, Reciprocity, Independence, Culture, Entrepreneurialism, Stability and Teamwork. A very good corporate philosophy.


Over the years Arbuthnot has gone from being a merchant bank and is today a private banking group, with its services also including wealth planning, investment management, commercial banking and treasury.


Recent expansion of activities included the acquisition in 2017 of Renaissance Asset Finance, which handles hire purchase, lease finance and refinance funding through premium brokers and direct with customers all over the UK. It is said that this company is trading well and that its customer loan balances were some 21% ahead over 2018.


Undergoing a ‘soft launch’ currently is the group’s Specialist Lending business, focussed on providing short-term secured lending for professional property businesses and entrepreneurs.


Just over a month ago the Arbuthnot group launched its own Direct Deposit platform, an internet platform for marketing its deposit products with rates advertised on ‘best buy’ tables.


The Arbuthnot Commercial Asset Based Lending division, which only made its first loan in May 2018, ended the year with drawn balances of £25m and issued facilities of £43m.


The company, which is valued at some £194m, is 56% owned by the company’s chairman and chief executive Sir Henry Angest. Other shareholders include: Liontrust Asset Management with 6%; M&G investment Management with 4%; Slater Investments with 3.9%; Miton Asset Management with 3.5%; and R Paston with 3.5% - the company holds just over 2.5% in treasury. There are some 15.28m shares in issue.


The results due to be announced on Thursday could show the year to end December 2018 with revenue of just over £66m and pre-tax profits of close to £6m, worth about 38p per share in earnings, covering a 35p per share dividend.


The current year expansion should push revenue up to £80m and over £9.5m pre-tax profits, generating earnings of 57p per share and a cover of a dividend of some 39p per share.


Next year is estimated to see revenue hit the £110m level and a pre-tax profit of £13m, worth 75p in earnings and a healthy 44p in dividend per share.


The group’s shares hit a high of 1,717p way back in October 2016 and came close to that peak again in July last year when they hit 1,640p. In January this year they fell to a low of 1,033p before picking back up to the current 1,300p.


I believe that the shares will respond to positive news over the next year or two and will soon be reaching out again to scale the 2018 and then the 2016 peaks.