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Investing.com -- JTC Plc (LON:JTC) shares fell over 4% on Tuesday after the fund services provider posted full-year results that missed forecasts on revenue and profit, weighed down by higher-than-expected one-off costs, even as underlying growth and cash generation remained solid.
JTC’s full-year revenue came in slightly below at £305.4 million versus a forecast of £310 million.
The shortfall was primarily due to a lower contribution from acquisitions, although organic growth remained strong at 11.3%, just under the 11.4% forecast and down slightly from 12.5% in the first half.
Both the Institutional Client Services and Private Client Services divisions continued to perform well, delivering organic growth of 10% and 14% respectively.
Adjusted EBITDA was £101.7 million, 3% below the expected £104.7 million. The EBITDA margin stood at 33.3%, a touch below the 33.7% forecast.
Margin gains in the PCS division were offset by a weaker performance in ICS. Rising staff costs, now 53.1% of revenue compared to 51.2% a year earlier, reflected investments made in anticipation of continued growth.
One-off costs were higher than expected, totalling £52.6 million. This included £15.3 million related to acquisition and integration, and £36.4 million for the Employee Incentive Plan (EIP), under which 4.7 million shares were granted to employees.
Half of these vested in July 2024 and were fully expensed in the period. RBC Capital Markets noted that these EIP costs, though reported below the EBITDA line, are effectively a form of staff expense and should be viewed as part of the normal cost base.
Free cash flow conversion was a highlight for the Jersey-based administration specialist, coming in at 98%, well above its guidance range of 85–90%.
This helped bring year-end net debt down to £182 million, below the forecast of £192 million, with leverage at 1.8x EBITDA.
Return on invested capital rose by 30 basis points to 12.6%, driven by strong earnings and cash performance.
Adjusted earnings per share were 41.8p, slightly under the forecast of 42.4p. The dividend for the year was 12.54p, up 12% year-on-year but short of the expected 13.6p.
Starting the new financial year strong, the global fund administration group has built a robust £55 million pipeline of new business by the end of Q1.
They are also still exploring potential acquisitions, backed by their available financial resources.
Management has reaffirmed its medium-term guidance of 10%+ organic growth, EBITDA margins between 33% and 38%, cash conversion of 85–90%, and net debt in the 1.5–2.0x EBITDA range.
Its longer-term “Cosmos era” goal—to double the size of the business over four years from FY23 levels—remains on track.
On valuation, the specialist in cross-border financial services trades at 15.3 times 2025 earnings, with an EV/EBITA multiple of 13.9x. The free cash flow yield stands at 5.6%, and the dividend yield at 2.0%.
RBC Capital Markets maintains a positive view on JTC’s long-term prospects, citing high margins, strong cash generation, and the firm’s jurisdictional reach.
However, analysts also caution that integration and acquisition risks persist. While the governance and administration provider is seen as structurally well-positioned, RBC currently sees more compelling value elsewhere in the sector.