Accelerated growth in FY20 fuels momentum

FY20 results confirmed the rapid momentum building behind both group divisions. Legacy made particularly strong progress, on the back of more urgent need for owners of legacy assets to free up capital during 2020. Program Management is firmly on track, reporting strong growth in contracted GWP in FY20 and to the end of Q1 2021.

For context, the ‘accelerated progress’ referred to in the results’ report is the result of RQIH’s decision to move quickly to capitalise upon opportunities thrown up by a disruptive year:
- that puts prospects for Legacy ahead of where we had anticipated. Demand for its solutions remains strong and it reports a pipeline of potential deals where it has exclusivity.
- Program Management is building fast and reported its first profit in FY20. This operationally geared business should be expected to generate significant cash profit as contracted Gross Written Premium (GWP) and fee income move into line.

The group’s ongoing transformation prompted a review of the financial strategy, as it seeks to establish a self-sustaining financial model that generates sufficient cash to finance both investment in the group, and progressive distributions, without further calls for external capital.

At this stage of development, we view 240p/share as fair value, using a sum of the parts for two distinct businesses and revenue profiles: as a fee business PM is valued at a multiple of pre-tax operating earnings, Legacy at a multiple of Tangible NAV, in line with specialty insurers. That is still well below industry peers and underplays the synergies inherent in their combination in one group.

Audio summary of note here, and pdf below: