Flows

  • With all the fund managers save Jupiter having now reported the wealth manager chart could lead us to think that it is an industry in structural decline:
  • Except the picture is similar for the platforms which according to Hargreaves Lansdown are in structural growth
  • Though the fund managers seem to have had a more benign environment
  • Conclusion The field seems to be grouping into leaders and laggards with Jupiter, Polar and Premier Miton struggling while Liontrust, Ashmore, and Impax are battling it out for the flow trophy.  Liontrust remains in the lead for the third consecutive quarter while it is too early to award the wooden spoon to Polar as Jupiter could yet snatch away the spoon.

News

  • Knights Group acquires Croftons for £2.8m which is 1X revenue and 6.7X PBT
  • MJ Hudson completes acquisition of Anglo Saxon Trust and has paid initial consideration of £3.7m

Burford Capital– 2019 Trading Update

Share Price 630p

Mkt Cap £1,378m

Conflict Disclosure: No Holding

  • Update The first 5 bullet points are positive but the sixth one starts with “balance sheet net realised gains and unrealised gains for 2019 are expected to be lower than in 2018”. January saw events that realised more than $100m in balance sheet profits and had these occurred in December results would have been materially higher.
  • Estimates 2018 pre-tax profit was £305m and the consensus expectation showing on my screen is $357m. That’s quite a large warning.
  • Valuation NAV was expected to be £1,655 which is a little ahead of the market cap. PER 5.5, yield 1.7%.
  • Culture The company’s response to last year’s shorting attack evidenced complacency despite the fact that some changes have been made in response to the criticisms.  The suggestion that listing in the US may help the share price is disappointing  
  • Conclusion There is perhaps a valuation argument for holding the shares post their 70% decline but they are likely to get cheaper before the vultures arrive.

River & Mercantile – Q2 Trading Update

Share Price 273p

Mkt Cap £233m

Conflict Disclosure: No Holding

  • Update Net inflows were 1.7% over the quarter to December, taking AUM to £42.3bn. Investment performance was negatice 0.4% over 3 months but positive over 6 months.  Flows over 6 months are 4.4% of AUM. The outlook statement is very positive noting a new Fiduciary client of £1.16bn since the period end and a growing pipeline of opportunities across the business. Performance fees for the half year are expected to be £2m and advisory fee revenues in the quarter are £3m
  • Estimates A small decline in revenue is expected to June 20 followed by 13% growth. Reduced costs result in 18% PBT growth to £18.8m in June 20 followed by 20% growth thereafter
  • Valuation EV/AUM 5% PER 15X yield 5.4%.
  • Culture The company discloses its weighted average fund performance which is helpful. The 12 galssdoor review largely refer to it as being friendly and collegiate giving it a good 4.3 rating.
  • Conclusion Emerging from a difficult period having invested in distribution the flows are starting to come through despite a difficult quarter for performance. This could be higher rated as flows accelerate over the next 2 years.  Perhaps £50bn AUM is possible which with the operational leverage post investment could work magically for profit growth.

Arden Partners – FY Results

Share Price 16p

Mkt cap £4.7m

Conflict Disclosure: No Holding

  • Results  Revenue £6.6m and loss before tax £2.6m. Of the £6.6m revenue, £5.8m was form corporate finance from the 55 corporate clients. The current year has started well. Net assets were £6.1m, down from £9.2m.   Cash was £2.5m and book was £3m.
  • Estimates None
  • Valuation 23% discount to NAV
  • Conclusion Being a small company in a difficult market is a tricky place to be.

jeremy@charltonillingworth.co.uk