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Rathbone Brothers posts organic net outflows

The wealth manager's margins are down and organic net fund flows are negative
July 24, 2019

Last time wealth manager Rathbone Brothers (RAT) posted statutory results, we noted the flattering effect of last August’s acquisition of Scottish rival Speirs & Jeffrey. Figures for the half-year to June underline that point.

IC TIP: Hold at 2,200p

Within the main investment management division, funds under management hit £42.5bn, powered by the migration of 96 per cent of S&J’s £6.7bn-worth of client funds to date. But the underlying annualised rate of organic growth is currently negative – exclude acquired business, and the group has seen outflows of £34m so far in 2019.

Fortunately, market performance has been resilient. In the six months in which the FTSE 100 Index and MSCI WMA Private Investor Balanced Index increased 10.4 and 9.9 per cent, respectively, Rathbone’s funds rose 11.6 per cent. Paul Stockton, overseeing his first set of results since his appointment as chief executive, said markets had been “kinder” than the end of last year, but remained cautious that “investment markets look likely to remain volatile in the second half” of 2019.

Expect similar noises from asset managers throughout this reporting period. Mr Stockton also thinks peers’ profits will be knocked by higher charges from the Financial Services Compensation Scheme. An “unexpected” £1.8m levy in the first half helps to explain the 4 per cent dip in Rathbone’s own underlying pre-tax profits.

Analysts at Peel Hunt expect adjusted earnings of 126.5p a share in 2019, and 143.3p in 2020.

RATHBONE BROTHERS (RAT)  
ORD PRICE:2,200pMARKET VALUE:£1.23bn
TOUCH:2,190-2,200p12-MONTH HIGH:2,654pLOW: 2,055p
DIVIDEND YIELD:4.1%PE RATIO:48
NET ASSET VALUE:847p*  
Half-year to 30 JunTotal operating income (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201815343.768.324
201917320.025.825
% change+13-54-62+4
Ex-div:5 Sep   
Payment:1 Oct   
*Includes intangible assets of £236m, or 420p a share.