Profits grow at trimmed down Quilter

Quilter (QLT) is gearing up for another big capital return, following the sale of Quilter International in November - the last leg of its restructuring programme which started when the company listed in June 2018. Management is proposing a £328mn share buyback - equivalent to 17 per cent of the market capitalisation. This comes on the heels of a £375mn share buyback which completed in January following the sale of Quilter Life Assurance. 

While this doesn’t look like a growth strategy, continued cost discipline and the launch of its new Quilter Investment Platform helped the company grow its profits by 28 per cent in 2021, with net flows rising £4bn compared with £1.5bn the previous year. The company has been largely successful in its bid to stem adviser outflows, which is critical given its direct focus on wealth management. Adviser productivity, measured by gross sales per Quilter adviser, rose by 28 per cent to £2.3mn. Adjusted earnings per share at 10.4p were slightly higher than consensus estimates at 9.9p.

But while chief executive Paul Feeney said 2022 flows are so far “comfortably ahead” of 2021 for the first two months of the year, the economic shocks arising from the tragedy in the Ukraine, and the impact this might have on achieving targets, are difficult to predict. Operationally, he also noted that the completion of the company's technology update would allow it to achieve a notable level of operational gearing on its existing cost base. 

Management seems to be doing a good job of repositioning the business and the wealth management market in the UK is a structural growth industry. However, the outlook is very uncertain, which isn't quite reflected in a higher than industry average price/earnings forecast of 17 times Panmure Gordon's forecasts for 2022. Hold.

Last IC view: Hold,161p, 11 August