Quilter finds its feet

Interpreting half-year results for Quilter (QLT) was always going to be a challenge after a series of disposals and reorganisations meant that accounts had to be significantly restated on a reported basis, thus making direct comparisons difficult. However, the newly consolidated wealth manager seems to have left its Old Mutual days behind it and reported a rising dividend from a very low base. Notably, there was no real guidance on what Quilter intends to do with its very large pile of cash.

As with all the wealth managers, the market tide helped to float the company’s boat as assets under management (AUM) grew by a 7.5 per cent to £126.6bn in the half. The growth in AUM drove fee income, although fee margins were relatively mixed as Quilter saw a decline in some areas. Despite this the overall operating margin was still an improved 24 per cent (2020: 21 per cent.) Management said that the dividend payout of 1.7p put it in the upper third of its target of paying 40-60 per cent of net income to shareholders; the unusually low payout last year distorts the comparison.

Quilter looks exposed to a static mortgage market after a frenetic half of activity as consumers rushed to take advantage of housing stimulus measures. The company also expects the behaviour of investors and advisers to change in the second half as equity markets moderate. On the plus side, Quilter looks more cohesive following the sale of Quilter International and the setting up of a new investment platform. However, there still needs to a clear strategy to hand back cash to investors as a forecast yield of 3 per cent for 2022 looks very measly. Hold.

Last IC view: Hold, 149p, 10 Mar 2021