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Quilter ups Lighthouse provision

The wealth manager's fortunes fluctuated over the first half
August 11, 2020

A mixed bag for Quilter (QLT) at the half-year mark, with a pronounced step up in client inflows tempered by a doubling in provisions to compensate British Steel workers who were advised to transfer out of their defined-benefit (DB) pensions by Lighthouse, an advisory network acquired by the wealth manager midway through last year for £42.2m. The Financial Conduct Authority (FCA) is currently looking into the issue, so Quilter has set aside £24m in aggregate to cover balance sheet adjustments and a charge on the P&L account.

IC TIP: Hold at 153p

At £107bn, assets under management (AuM) are slightly down on the 2019 year-end comparator but have recovered significantly from the £95.3bn position at the end of the first quarter. The group has benefited from lower cash outflows and stable gross sales, so it registered £1.1bn in net client inflows against £300,000 last time around, while the asset retention rate increased 4 percentage points to 92 per cent.

Market volatility has undermined profitability, with the operating margin falling by 5 percentage points to 21 per cent, but management has focused on driving down discretionary costs – notwithstanding the nearly completed platform migration project - and has pitched the interim dividend at the bottom end of its target payout range.

Consensus estimates compiled by FactSet gives adjusted EPS of 6.82p, rising to 8.99p in 2021.

QUILTER (QLT)   
ORD PRICE:153pMARKET VALUE:£2.82bn
TOUCH:153-154p12-MONTH HIGH:179pLOW: 97.6p
DIVIDEND YIELD:2.9%PE RATIO:49
NET ASSET VALUE:107p*NET CASH:£2.14bn
Half-year to 30 JuneTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201945038.0-1.701.7
20204288.002.501.0
% change-5-79--41
Ex-div:03 Sep   
Payment:21 Sep   
*Includes intangible assets of £578m, or 31p a share.