IFG shares fell more than 9% on the back of the Dublin-listed financial services group shelving plans to sell its financial advisory division, with the costs of keeping the business also putting paid to shareholder hopes of the award of a special dividend payment.
IFG said, in February, that it was considering selling its Saunderson House division, saying greater shareholder value may be created as a result, and that a number of approaches had already been received for the business unit.
However, the group yesterday said that, having reviewed the approaches, including one from Saunderson House’s own management team, 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,” it said.
IFG has now put in place retention arrangements for Saunderson House management and staff and will award £1.5m (€1.7m) both this year and next.
Analysts who welcomed the prospect of a sale, in February — saying it would generate cashflow and shareholder pay-outs and result in a more streamlined business — appeared downbeat yesterday.
“The decision to retain Saunderson House as part of IFG is likely to weigh on the stock in the near-term, as increased retention costs will hit Saunderson House’s operating margin, while the prospect of a special cash dividend has now been removed,” said Davy Stockbrokers.
IFG’s stock is up nearly 17% in the past 12 months but has suffered heavy one-day falls on more than one occasion already this year.
On February 3, the share price fell 10% after IFG said legacy legal costs, relating to an investment sold to clients, could stretch to around €23m and that, as a result, it would not be paying a 2017 dividend.
IFG yesterday said it has made a strong start to 2018, with profits “materially ahead” of the same period last year.
It added that both its James Hay specialist pensions business and Saunderson House are “well-positioned” for future growth and profitability.
“We believe the IFG share price may come under pressure in the short term as a result of this newsflow, which may also be supplemented by the £1.5m per annum retention package,” said Goodbody’s Cian Harty.
IFG has said it hopes to restore shareholder dividends when it is “appropriate and safe” to do so.