First half earnings slide at Rathbone Brothers

Rathbone Brothers issued its half-yearly report on Wednesday, reporting total funds under management at 30 June of £30.6bn, up 4.8% from £29.2 billion at 31 December.

The FTSE 250 firm said that compared to an increase of 4.2% in the FTSE 100 Index and an increase of 5.4% in the FTSE WMA Balanced Index over the same period.

Total net organic and acquired growth in the funds managed by Investment Management was £0.5bn in the first six months of 2016, representing a net annual growth rate of 4.2%.

Rathbone’s board said net organic growth of £0.3bn for the first half represents an underlying annualised rate of net organic growth of 2.5%, compared to 2.8% a year ago.

Underlying profit before tax decreased 5.1% to £35.3m from £37.2m in the first six months of 2016, with the underlying profit margin remaining relatively strong at 29.4% compared to 31.9% in 2015.

Profit before tax was £22.8m for the six months ended 30 June, down 28.3% compared to £31.8m in 2015, which the board said reflected the impact of previously announced non-underlying costs in relation to the acquisition of the Vision businesses, and costs incurred to date in respect of Rathbone’s planned London office move to 8 Finsbury Circus.

Basic earnings per share decreased 32.9% to 35.7p from 53.2p, and the board recommended a 21.0p interim dividend for 2016, in line with last year.

Underlying operating income in Investment Management of £108.8m in the first six months of 2016 was up 1.9%, mostly due to growth in funds under management.

Rathbone said the average FTSE 100 Index was 6298 on quarterly billing dates in 2016, compared to 6677 in 2015, a decrease of 5.7%.

Net interest income of £5.7m in the first six months of 2016 increased 3.6% from £5.5m in 2015, largely due to an increase in average liquidity to £1.7bn for the six months to 30 June.

Underlying operating expenses of £84.9m for the six months ended were up 6.7% from £79.6m in the first half of 2015, largely reflecting higher fixed staff costs and higher direct costs according to the board.

Funds under management in Unit Trusts were £3.3bn at 30 June, with net inflows of £259m in the first half of 2016, up from £107m last year.

Underlying operating income in Unit Trusts was £11.4m in the six months, an increase of 14.0% from £10.0m in the first half of 2015.

Shareholders' equity stood at £279.7m at 30 June, a 6.8% fall from 31 December, largely as a result of the value of retirement benefit obligations which increased by £27.5m from £4.5m to £32.0m during the period.

“Whilst turbulent market conditions and planned expenditure have impacted profitability, we continue to pursue our growth plans,” said Rathbone Brothers chief executive Philip Howell.

“In an eventful first half, our investment teams have worked hard to ensure that client communications are timely and insightful.

“Although our outlook is cautious, Rathbones will remain alert to acquisition opportunities that fit with our culture and philosophy,” Howell added.