When it was spun out of Old Mutual last year, Quilter (QLT) was not shy about its plans to become a major advice-led wealth manager. Given this aspiration, there was something unfocused about the entity that eventually listed, not least of which was a high-margin life assurance book, which has been in run-off.
In profit terms, the division is meaningful. In the first half of 2019, it paid out £130m to Quilter, contributing £26m to group-wide adjusted pre-tax profits, and a quarter of adjusted earnings per share. Without it, the operating margin would have dropped from 29 to 26 per cent.
Investors should now reset their profit expectations to this level, after Quilter confirmed the cash sale of the division to SwissRe subsidiary ReAssure for £425m. That figure was £50m ahead of Numis’s estimated value for the business, and 20 per cent ahead of Quilter’s own pro-forma carrying value at the close of 2018.
Once the deal completes, shareholders can expect to receive “a meaningful proportion of the net sale proceeds”, although stronger momentum elsewhere would also be welcome. While non-life assurance assets under management rose 9 per cent in the period, the second quarter saw net outflows of £0.2bn and a high-wire platform migration programme is to cost £25m more, despite signs of “good progress”.
Consensus forecasts are for earnings of 10.8p a share in 2019, rising to 12p in 2020.
| QUILTER (QLT) | ||||
| ORD PRICE: | 139p | MARKET VALUE: | £2.64bn | |
| TOUCH: | 138.6-139.1p | 12-MONTH HIGH: | 157p | LOW: 109p |
| DIVIDEND YIELD: | 3.6% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 102p* | NET CASH: | £1.66bn | |
| Year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 0.29 | -3.0 | 0.1 | nil |
| 2019 | 5.51 | 38.0 | -1.7 | 1.7 |
| % change | - | - | - | - |
| Ex-div: | 29 Aug | |||
| Payment: | 20 Sep | |||
| *Includes intangible assets of £587m, or 31p a share | ||||
