Hits: 18

29 July 2020

Rathbone – H1 Results

Share Price 1516p

Mkt Cap £869m

Conflict Disclosure: No Holding 

  • Results It’s always helpful when statements are headed “a strong first half” as it somehow suggests we may not get that from the numbers. Net inflows in investment management were 0.9% and in unit trusts 5.2% in Q2 and overall were down 2% in H1 to £49.4bn. Revenue was up 3.6% to £179m and underlying PBT down 1.2% to £46m. EPS down 5% to 67.5p. Margin 25.7%. Outlook is “well placed”.
  • Estimates FY estimates assume a small reduction in revenue and £73.4m adjusted PBT which looks too low on account of the market recovery during Q2.
  • Valuation PE 14.8X on numbers that could be 10-15% too low, meaning the share may trade closer to 13X in reality. Yield 4.6%
  • Conclusion I don’t recall these shares trading on such a low multiple. There is potential for growth from the court of protection and ESG businesses as well as consolidation with the strong balance sheet. Having reported margins at the lower end of medium term guidance this could be a good time to be picking these up.

20 Fbriary 2020

Rathbone FY results 

Share Price 1958p

Mkt Cap £1,103m

Conflict Disclosure: No Holding

  • Results AUM was up 14% over the year to £50.4bn made up of a 11.7% uplift in Investment Management AUM and a 32% increase in Unit Trust Management AUM. PBT was down 3.2% to £88.7m on the back of a £39m increase in costs. “Growth led investments”, Software impairment costs of £3.1m and the increased FSCS levy of £4.5m are singled out. The retired CEO’s accelerated executive awards and cessation of box profits are also mentioned. Underlying EPS was down 7% to 132.8p while statutory EPS was 50.3p. Outlook is confident so the dividend is raised 6% to 70p. The costs stripped out of underlying include Acquisition costs, £4.7m of Speirs & Jeffrey integration costs of £4.7m and £3.1m software written down.
  • Estimates Results are a little shy of the £91.4m consensus I am seeing. Going forward 4% PBT growth is forecast.
  • Valuation Per 15.1, Yield 3.5%
  • Culture The results major on Governance, Culture, Purpose, Shareholder engagement etc. The chairman is to step down as his tenure has exceeded 9 years. The gender pay gap however is 43% and the glassdoor reviews are average at 3.6.
  • Conclusion The industry as a whole is face stiff headwinds in terms of fee pressure deriving from increasing customer choice coupled with increasing costs while the unit trust business is sub scale in a consolidating industry.  In such an environment consolidation would seem to be the logical conclusion. In the absence of that it is hard to get excited.

9 January 2020

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Rathbone – AUM Update 

Share Price 2130p

Mkt Cap £1,200m

Conflict Disclosure: No Holding

  • Update Investment management net outflows of 0.8% in the 3 months to December while Unit Trusts had net inflows of 4.2%. Markets helped so AUM was up 2.5% over the quarter. Outlook refers to being focussed on objectives set out in the October strategic updates and expected volatility. In October the company guided to lower margins and lower organic growth.
  • Estimates  130p EPS is expected for Dec 2019 which is expected to grow 7% in the year ahead
  • Valuation PE 16.4X Dec 2019, yield 3.4%. Brewin PE is also 16.4X.
  • Conclusion The likelihood of corporate activity is perhaps increasing as Rathbone de rating brings it into line with Brewin on the back of the October update.  That could make this exciting again.  As central cost pressures increase in the sector synergies from corporate activity could be very significant.

17 October 2019

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Rathbone Brothers Plc – Q3 and Strategy Update 

Share Price 2380p

Mkt cap £1.34bn

Conflict Disclosure: No Holding

  • Update Net inflows were modest in Q3 at £0.1bn. AUM is £49.4bn. Q3 revenues up 8.3% year on year while Unit Trust revenues were flat in Q3. The strategy presentation is on the website and appears to be about driving productivity and increasing specialist areas.  More to come later.
  • Estimates Hi underlying PBT fell 3.5% to £46.6m, reflecting the loss of unit trust box profits, increased FSCS levy and accelerated executive compensation charges. A flat performance is expected in H2 with consensus showing £93m PBT.
  • Valuation PER 17.2X and yield 2.9%. Mkt Cap/AUM 2.9%
  • Conclusion It can’t be easy doing a strategy update as a new CEO when Tilney and Smith & Williamson have just parked a tank on your lawn.  The company is having a few headwinds this year and it is hard to see the shares doing much until the results of the strategy start to be delivered.

9 August 2019

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Flow Trophy 

  • With Hargreaves results yesterday the June reporting is complete so the flow trophy can be awarded for the best flows in the quarter to June. The picture is shown on the charts below.
  • Liontrust can step up onto the stage for the second quarter in a row having snatched the trophy back from Polar 6 months ago.  The other award can be collected later by Miton.
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24 July 2019

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Rathbone – H1 Results  

Share Price 2175p

Mkt Cap £1.22bn

Conflict Disclosure: No holding

  • Update. AUM of £49.2bn was up £1.67bn from March but within this the company suffered modest net outflows. Over 6 months net organic “growth is -0.2%. Revenue was up 13% to £174m. Underlying PBT fell 3.5% to £46.6m and EPS decreased to 71.4p (2018 76.1p). Three reasons are cited: unit trust box profits, executive awards and the higher FSCS levy. Outlook is cautious
  • Estimates. Rathbone had £39.9bn AUM last June. Forecasts look for 9.2% revenue growth in the year to Dec 19. This may be a little full at the PBt level given the higher costs
  • Valuation PER 16.1 Yield 3.2%
  • Conclusion The cautious outlook and likelihood of downgrades will result in shares moving down. This looks like a hiatus and coincides with a new CEO who may possibly be getting the dirty washing out.  Sometimes that creates an opportunity. But not today

9 May 2019

Rathbone – Q1 Update 

Share Price 2460p

Mkt Cap £1.36bn

Disclosure: No holding

  • Update Net inflows were .3% in investment management and 1% in the unit trusts bringing total AUM up 7.7% over the three months to March to £47.5bn. Net operating income in investment management was 15% up on the comparable period last year to £76.8m while in Unit trusts the net operating income was modestly down to £8.5m on account of the absence of box profits
  • Estimates Net operating income in Q1 accounts for 25.1% of the full year estimate suggesting not much market assistance is required to achieve the full year numbers
  • Valuation PER 17.2, yield 2.85%
  • Conclusion Trading towards the top end of its historical range I am struggling to see the unique attraction.

21 February 2019

Rathbone – FY Results 

Share Price 2250p

Mkt Cap £1.24bn

  • Results PBT up 4.7% to £91.6m.  Investment Management showed 3.4% pure organic growth with AUM growing to £44.1bn. Revenue was £275m.  Unit trusts had £5.6bn of AUM at the year end and achieved a 34.6% operating margin to deliver £12.7m PBT.  One off costs have been stripped out which is a recurring theme with Rathbone. This time there are £19.9m of acquisition costs stripped out of underlying profit which seems a large number.  The dividend is raised 8.2% to 66p and the outlook is confident
  • Estimates Estimates look for 22% PBT growth this year which is driven by the acquisition of Speirs & Jeffrey
  • Valuation PER 16 and yield 3.1%. EV/AUM 2.5%
  • Conclusion This reliable and high quality business is priced at a premium to peers and with the CFO taking over from the CEO and a ned CFO arriving on 1 April the shares may tread water until the new management team has gained a fan club

10 January 2019

Rathbone – Q4 Update 

Share Price 2484p

Mkt cap £1.37bn

  • Update AUM was £44.1bn. In investment management net inflows over 3 months were 1.4% and 2% in the unit trusts. Encouragingly deferred consideration for Speirs and Jeffrey will be paid out early implying the integration is possibly proceeding ahead of expectations.
  • Estimates Forecasts are for £311m revenue for the year to Dec 18 and £72.9m PAT which is EPS of £143.5p. In 2019 consensus looks for 14% revenue growth and 9% EPS growth. In the light of AUM being 12.8% ahead of 12 months ago that may be manageable but the downgrade for market weakness is possible on results on 12 February
  • Valuation Rolling 12 month forward PER is 15.9X and yield 2.8%. Brewin trades at 14X with a 5.4% yield.
  • Conclusion Shares look up with events in the light of market uncertainty. In the light of management changes coming I find myself wondering if we finally get the long rumoured merger of Rathbone and Brewin this year.