Market slowdown weighs on Quilter

Wealth manager Quilter (QLT) is coming to the end of a period of significant restructuring at a rather difficult time. Adverse market conditions meant that its assets under management and administration (AuMA) came in at £99bn for the first half of the year – below consensus expectations of £100bn.

Quilter noted that traditional multi-asset portfolios comprising 60 per cent equities and 40 per cent bonds have had their largest negative year-to-date return on record. In light of this, management said its overall AuMA figure was “relatively resilient”.

Successful cost-cutting measures did allow the company to outperform expectations for its adjusted pre-tax profits by £6mn. “Despite the inflationary headwinds, we kept a tight control on costs, and with stable revenues we’ve come in with a 9 per cent increase in profits, which is a pretty big beat,” said Quilter chief executive Paul Feeney.

However, some are sceptical that Quilter is truly on track to reach operating margin targets of 25 per cent in the next financial year, and 30 per cent by 2025.

Broker Numis says pre-tax profit figures were flattered by a lower-than-normal Financial Services Compensation Scheme cost, and that Quilter’s normalised operating margin is therefore somewhere around 21 per cent, one percentage point below last year.

Quilter’s price/earnings multiple for the current financial year is a fairly hefty 19 times (although it’s expected to fall to 15 times by 2023). In the meantime, the company must prove it’s moving in the right direction – providing it doesn’t become the latest wealth manager to be acquired in the interim. Hold.