Investment Platform Analysis: AJ Bell

According to data from TipRanks, all of the insider transactions over the past six months have been share sales. This isn’t normally a good sign, but it may simply reflect the desire of insiders to cash in on a rising share price.

• Elizabeth Carrington – Human Resources Director
  Informative Sell – 30,000 shares
• Peter Birch –  Chief Financial Officer
  Informative Sell – 23,500 shares
• Michael Summersgill – Chief Executuive Officer
  Informative Sell –  205,000 shares
• Karen Goodman – Chief Risk Officer
  Informative Sell – 15,785 shares
• Andy Bell – Consultant, >10% Owner
  Informative Sell – 7,500,000 shares
• Mohamed Tagari – Chief Technology Offier
  Informative Sell – 4,963 shares
• Bill Mackay – Divisional Managing Director
  Informative Sell – 50,882 shares
• Simon Turner – Non-Executive, Director
  Informative Sell – 27,267 shares

Assets Under Administration (AUA) has followed a positive trajectory since the turn of the decade, rising to £83.7 billion on 30 June 2024 – a company record. This positive trajectory reflects the business’s ongoing ability to attract new clients and encourage new deposits, as well as the appreciation of existing assets.

Number of users vs previous year and quarter.

AJ Bell had 528,000 clients at the end of the quarter (Q3) ending 30 June 2024. New client numbers rose by 25,000 during the quarter – faster than Hargreaves Lansdown. Total clients have risen from 476,000 at the end of FY2023.

Average revenue per user (ARPU) vs previous year and quarter.

Average Revenue Per User (ARPU) rose in 2023 reaching £458.86. This sharp increase from 2022 partially reflects higher returns on customer cash deposits. This figure is based on revenues of £218.2 million in 2023 and 476,000 users at the end of the period.

Data suggest that this positive trend will continue. The company reported revenue of £131.3 million in H1 of 2024 and noted that total user volume had risen to 503,000. This translates to a half-year ARPU of £261.03 and can be extrapolated to a full-year figure of £522.07.

Revenue vs previous year vs consensus estimates.

Revenue generation has improved significantly over the past four years, moving from £126.7 million in 2020 to £218.2 million in 2023. This growth has been driven by increasing user numbers and improving margins on customer cash deposits over the past 24 months.

According to data from FactSet, this positive trend is set to continue. Revenue is expected to reach £259.6 million for the financial year ending 30 June 2024.

Earnings per share (EPS) vs previous year vs consensus estimates.

Earnings Per Share (EPS) has improved significantly over the past four years, rising from 9.47p per share in 2020 to 16.53p per share in 2023. According to data from FactSet, EPS is set to rise further to 20.13p for 2024, representing further impressive gains despite higher corporation tax.

Revenue breakdown

AJ Bell provides a revenue breakdown, indicating revenue generated from its Advised Platform, its Direct to Consumer (D2C) Platform, and Non-Platform revenue.

• In 2023, the company’s Advised platform generated £104.8 million, up from £83.2 million in 2022.
• In 2023, the company’s D2C platform generated £99.8 million, up from £68.3 million.
• In 2023, the company’s Non-Platform activities generated £13.6 million, up from £12.3 million in 2022.

Gross margin vs previous year and quarter vs consensus estimates

The gross profit margin is an indicator of gross profitability, reflecting the percentage of revenue that exceeds the cost of goods sold (COGS) – AJ Bell publishes costs as Administrative Expenses. The gross profit margin was 39.49% in 2023, up from 35.95% in 2022.

Operating margin vs previous year and quarter vs consensus estimates.

The operating margin is a measure of profitability calculated by dividing operating income by sales. According to data from FactSet, the operating margin was 39.5% in 2023, 35.98% in 2022, and 38.54% in 2021.

Free cash flow vs previous year vs consensus estimates.

AJ Bell reported free cash flow of £102.23 million for 2023. This was up from £44.98 million in 2022 and £39.01 million in 2021, according to data from FactSet.

Net debt/cash vs previous year vs previous quarter.

AJ Bell is in a strong financial position with £133.9 million in cash at the end of FY2023. This was up from £70.7 million at the end of 2022.

Analysts’ price targets and ratings including commentary.

Based on 13 analysts offering 12-month price targets for AJ Bell in the last 3 months. The average price target is 431.7p with a high forecast of 500p and a low forecast of 284p.