Quliter delivers after ‘Old Mutt’ demerger | Business News
Some companies depart the FTSE 100 due to being taken over.
Some fall on hard times and are ejected when their share price and market capitalisation fall.
But very few depart the index having broken themselves up.
One that did was Old Mutual, the financial services group, a member of the Footsie from September 1999 until its break-up took effect at the end of June last year.
The Old Mutual name lives on in South Africa, the land of its birth, while Old Mutual Limited continues to have a listing on the London Stock Exchange although its primary listing is in Johannesburg.
However, the most substantial part of the business to remain in the UK is Quilter, which runs the wealth management operations that previously traded under the Old Mutual banner and which has more than 900,000 customers around the world.
As part of its separation from Old Mutual, it reorganised itself into two divisions: Advice and Wealth Management, which includes providing financial advice to savers and Wealth Platforms, which provides a service – sometimes described as a ‘wrap’ or a ‘fund supermarket’ that allows investors to manage assets such as investment funds held in their ISAs and Self-Invested Personal Pensions (SIPPs).
It also sold its stand-alone asset management business to its management, led by Richard Buxton, one of the City’s best-known fund managers.
This business has been rechristened Merian Global Investors.
Today Quilter – which also inherited from its former parent the sponsorship of English rugby’s autumn internationals – published its results for the whole of 2018, most of which saw it trading as a business separate from its former parent, but they are something of a curate’s egg.
The positive news is that Quilter appears to be delivering on the promises it made to investors at the time of its demerger from the company affectionately known in the Square Mile as ‘Old Mutt’.
Revenues were up by 8%, to a better-than-expected £788m, while adjusted pre-tax profits rose by 11%, to a record £233m, which again was better than expected.
The results have sent the shares ahead by more than 6% – valuing the company at more than £2.5bn.
That still makes it small when set against the likes of Hargreaves Lansdown and St James’s Place, the businesses with which Quilter is increasingly likely to find itself compared, but it is nonetheless a substantial business in its own right.
The company is also in expansionary mode and hiring staff.
It is also buying in small advisory firms where possible.
That was the good news.
The worrying news is that, despite the bounce-back in markets this year, investor sentiment remains depressed following the torrid final three months of 2018.
Paul Feeney, the chief executive, insisted today that, while the advice and wealth management industry in the UK is “still very much a secular growth story”, Brexit and other wider global macroeconomic concerns will have an impact in the short term.
Investors, he noted, are in “wealth preservation mode” at present.
Assets under administration and management at Quilter fell by 4%, to £109.3bn, during 2018 as an inflow of £2.7bn in new client money was outweighed by falls in the market to the tune of £7.8bn.
Other concerns include the cost of building a new investment platform and the hassle of migrating assets onto it.
This began in May 2017 and, to date, the company said it had spent £79m on the project – with the total cost likely to be “towards the upper end” of the £120m-£160m range it has set out.
The migration of clients to the new platform is likely to get underway this autumn with around 10% of the assets under administration affected.
The other concern is one of competition.
Lloyds Banking Group announced a partnership in October last year with Schroders, the asset manager, setting up a new wealth management joint venture that will have £80bn worth of assets under management.
The pair said they were looking for the business to be one of the UK’s top three financial planning and advice firms within five years – St James’s Place and Quilter being the current number one and two players respectively.
Mr Feeney was sanguine about the development today.
He said: “We’ve seen the Lloyds Schroders tie-up, Lloyds saying they want 700 financial advisers, they want to be the third largest wealth manager in three years – but that’s good competition.
“I’ve been in the industry for 30 years – I’ve seen the banks come in, I’ve seen the banks go out, banks come in, banks go out – but if they come in and do it the right way, it’s going to benefit everybody.
“Quite frankly, good competition makes our business a better business.”
And, in what some may see as a dig at Lloyds, he added: “This isn’t a peripheral business for us. This is our core business, this is what we do.”
That is probably the best summary of the long-term growth story for this business.
Britons need more financial advice and there is a shortage of financial advisors.
To that end, a company that traces its origins back to 1771 will hope it can prove capable of riding out short-term market turbulence, regardless of the impact that has on investor sentiment.