Rathbones posts mixed performance as it works on Invested combination

(Sharecast News) - Investment manager Rathbones Group reported 2.7% growth in total funds under management and administration (FUMA) in its interim results on Wednesday, reaching £60.5bn, compared to £58.9bn at the same point last year. The FTSE 250 company said underlying net operating income for the six months ended 30 June amounted to £238m - a 2.6% increase on the year.

During the same timeframe, the average level of MSCI PIMFA Private Investor Balanced index fell 2%, averaging 1,697.

In the investment management division, fee income and commission for the first six months amounted to £162.5m, down 2.3%.

Similarly, fee income in the funds business totalled £31.1m, down 3.1% from £31.8m in the first half of 2022.

The firm's net interest income surged to £23m, however, making for a significant increase from the £6.1m recorded a year ago.

Although gross organic inflows were strong, representing an annualised growth rate of 11.4% of opening FUMA, the company faced elevated outflows during the period.

The outflows were primarily attributed to net losses in Rathbones' charities business, and increased lower-value outflows from accounts that remained with the company.

As a result, total discretionary and managed net inflows reached £0.2bn in the first half, compared to £0.6bn during the same period in 2022, indicating an annualised growth rate of 0.7%, down from 2.3% a year ago.

Within net inflows, discretionary service net inflows amounted to £0.1b, down from £0.4bn, while net inflows into the multi-asset fund range reached £0.1bn, representing an annualised net growth rate of 9.1%.

However, single strategy net outflows in the funds business amounted to £0.3b, widening from £0.2bn.

Rathbones reported an underlying profit before tax of £50.7m for the half-year, slightly higher than the £50m it recorded in the same period last year.

Its statutory profit before tax for the six months ended 30 June totalled £26m, down from £32.6m.

That included £11.2m of costs associated with the combination of Rathbones with Investec W&I, mainly comprising professional and legal fees.

In line with its progressive dividend policy, Rathbones hiked its interim dividend by 3.6% to 29p.

Additionally, the company said it intended to bring forward a portion of the final dividend for 2023 to shareholders on the register shortly before completion of its combination with Investec W&I.

"After a more positive last half of 2022, the first half of 2023 was a challenging period for investors as markets digested material changes in inflation expectations and interest rates," said group chief executive officer Paul Stockton.

"Rathbones funds under management and advice (FUMA) and net operating income have remained resilient, growing by 2.7% and 2.6%, respectively compared with the same period a year ago.

"Gross inflows into our discretionary and managed business were strong in the first half of the year at an annualised 10.7% of FUMA, although net inflows in the period were £161m, representing an annualised growth rate of 0.7%."

Stockton said outflows were elevated in Rathbones' charities business, including one large client outflow.

"Client retention rates remain high at 92.8% albeit economic conditions have resulted in a marginally higher incidence of low value outflows from accounts that remain with us.

"We are grateful for the strong support from shareholders who in June voted convincingly in favour of the Investec Wealth & Investment combination."

Integration plans were progressing well, Paul Stockton reported, with the company expecting to complete towards the end of the third quarter.

"The transaction presents many exciting opportunities for all stakeholders and places the enlarged Rathbones in a strong position to navigate the current markets and take advantage of future growth opportunities in the sector."

At 0838 BST, shares in Rathbones Group were down 1.25% at 1,902p.

Reporting by Josh White for Sharecast.com.