Jupiter, the UK-listed fund management company, is set to move to a net cash position on its balance sheet after a resolution to pay £80m of debt.
The move, together with a higher than expected dividend per share, had analysts upbeat about the company after it announced its preliminary 2010 results last week.
The company ended the period with £62.7m of net debt versus a JP Morgan Cazenove estimate of £74m and an RBS estimate of £107.9m.
A debt repayment authorised by the board of £80m after the year-end will leave £203m of gross debt.
“This has the effect of reducing our estimate of the group’s interest expense by just under £2m this year and £3m in future periods,” said Paul Measday and Rae Maile, authors of the JP Morgan Cazenove report.
They estimate that Jupiter will move to a cash-neutral position by the end of 2011 and after that will continue to generate substantial free cash flow.
“We continue to model gross cash and debt, inducing a negative interest spread, which suggests upside to profit and EPS estimates as the company pays down its debt,” they said.
Jupiter raised £220m to pay off debt when it floated in June last year. Funds under management at 31 December totaled £24.1bn having increased 23% over the year. RBS said 4Q fund flows were also “strong” at £770m.
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