Dublin-listed IFG decides against selling unit despite offers

Dublin-headquartered but UK-focused financial services firm IFG has decided not to proceed with a plan to sell one of its core businesses.

In a note to investors, Davy said the decision to keep the business would likely weigh on the stock in the near-term with newly announced retention awards also expected to hit operating margin.

IFG announced plans to dispose of its Saunderson House unit in early February as it outlined how legacy claims against the group could cost it more than £20 million. The announcement led to shares declining 17 per cent.

However, in an update to shareholders on Tuesday, IFG said while it had received a number of offers for the unit, which were in line with market expectations, it had decided against proceeding with a sale.

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“The board has concluded that the offers were not wholly aligned with the strategy of Saunderson House and would present significant execution risks that would likely create lower shareholder value than from retaining the business. As a result, the board has concluded that it is not in the best interests of shareholders of IFG to proceed with the sale process,” the company said in a statement.

IFG said it was now focused on continuing to develop Saunderson House and would be issuing a retention award of £1.5 million for both 2018 and 2019 for senior management of the company.

The group added that it had started 2018 strongly, with profitability materially ahead of the same period a year earlier.

“The board believes that both businesses are well positioned for future growth and profitability,” it said.

IFG offers financial solutions through Saunderson and a separate unit, James Hay Partnership. The two business units combined serve more than 60,000 customers.

The group said in early February it was incurring significant legal and remediation costs linked to UK revenue’s investigation into Elysian Fuels. A structured investment in biofuel businesses, it was initiated between 2011 and 2015 and has led to notices of assessment totalling £1.8 million, which have been appealed.

About 500 of James Hay’s clients invested a total of about £55 million (€62 million) in Elysian Fuels. The maximum potential sanction charge which may be assessed by UK Revenue against James Hay is about £20 million, assuming all Elysian Fuels shares are deemed valueless at inception, and no underlying clients discharge their own tax liabilities.

A second legacy claim relating to a legal action in Jersey has been reduced by £1 million to £2 million. However, the company said further remediation costs linked to other potential legacy claims could be forthcoming although these are not expected to exceed £5 million.

Davy said the Elysian Fuels case with UK Revenue continues to weigh on the stock, as evidenced by the company’s £400,000 pretax loss last year and its decision not to pay a final dividend for 2017.

Commenting on the decision not to sell Saunderson House, Eamonn Hughes, an analyst with Goodbody said while the stock, which has risen 7 per cent since early February will take a hit in the short term, the comapny will likely remain a key growth driver for IFG.