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XPS Pensions: the best financial stock in the FTSE 250?

XPS Pensions: the best financial stock in the FTSE 250?

FTSE 250 component XPS Pensions Group LON:XPS still looks as if it has more to offer investors, despite an already excellent showing on the share price, which was nudging £3 at time of writing. XPS Pensions is seeing some very solid revenue growth (+19%) and the share price speaks for itself really, up 26% YTD and 124% over the last two years.

All this has been achieved in a climate of difficult economic circumstances and market volatility, yet the XPS management team continues to reward shareholders with very solid returns.

XPS Pensions still ranks among my top financial stocks on the London market, and indeed in Europe. Results released on 20 June saw revenues of £52m and net income of £24m. We also saw a massive increase in earnings per share compared with the same quarter last year.

Another big green flag for XPS is the 24 consecutive quarters of increase in the company’s income line (compared to the corresponding quarter of the previous year). It demonstrates stability, responsible management, and most importantly scope for further growth.

Added bonus: EBITDA margin rose sharply from 14.9% to 23.4%. Free cash flow has also increased and the company continues to pay out decent dividends as a consequence.

So who are XPS Pensions Group?

XPS provides employee benefit consultancy and related business services to UK corporates. Clients include pension schemes and master trust schemes, along with providers of SIPP and SSAS pension services. Other divisions look after scheme administration, accounting, de-risking and payroll.

The company is regarded as the leading pensions consulting and administration group in the UK with significant benefits of scale. It is the largest publicly quoted pensions consultancy in the UK.

Some highlights from its latest report to investors include:

  • Seven consecutive years of revenue growth
  • Double digit growth in every one of the company’s core divisions
  • Continued growth in other areas – e.g. risk transfer
  • Delivery of a new administration platform for XPS’ pension administration business

The workplace pensions market in the UK

XPS Pensions works across the UK’s defined benefit and defined contributions schemes markets. The former, the defined benefit (DB) schemes are more of a legacy pensions framework which started to be phased out in the mid-1990s, but still require servicing as there are still millions of pensions on DB schemes. Half of all private sector DB schemes remain open to building benefits in 2024.

Pension schemes require advice and solutions and must continue to meet core compliance requirements. The sector is also seeing plenty of long-term growth drivers which should benefit this stock, including the de-risking of schemes via buy-ins and buy-outs, ongoing regulatory change, further administration outsourcing and more focus on ESG requirements.


XPS, as a mid-tier player in this space, remains relatively agile and capable of capitalising on evolving trends in the UK pensions market. It has significant room to grow its market share, either organically or through consolidation opportunities. There is also scope here to expand XPS’ current service offerings to its existing pensions clients.

A still-fragmented UK pensions market means XPS also has the opportunity to continue to grow through further acquisitions.

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This article does not constitute investment advice.  Do your own research or consult a professional advisor.

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