Quilter gets warm welcome after Old Mutual spin-off

Old Mutual's wealth management arm Quilter began trading separately on the London and Johannesburg stock exchanges on Monday with an initial market cap of £2.8bn that soon swelled as the shares traded higher.

Quilter's initial public offering was priced at 145p per share, out of an indicated range of 125p to 155p per share. After just over an hour of trading on Monday, the shares had risen 8.5% to 157.3p.

"Today is an important milestone in the history of our business and I am immensely proud of what we have achieved," said Quilter chief executive Paul Feeney. "We are delighted to be in a position to list as a standalone business and are excited by the opportunities ahead of us.

"We are making good progress towards our vision of becoming the UK's leading wealth management business. Our proven multi-channel business model is delivering value for our customers, advisers and shareholders. Having established leading positions across one of the largest wealth management markets in the world, and it is a structural growth market, I believe we have great momentum to build on our success and a bright future ahead."

The Anglo-South African group made 9.6% of Quilter's shares available for float and the IPO has seen an uptake of 8.7%, with a further over-allotment possible. Old Mutual's shareholders have been transferred 86.6% of the shares.

Old Mutual itself expects net proceeds of about £231.1m, including expected proceeds from certain non-executive directors of Quilter and certain non-executive directors of Old Mutual, excluding any proceeds of the over-allotment option if exercised.

Quilter, which been floated with £111.6bn of customer investments under its administration, is in the process of rebuilding its online platform and, along with four other closed book life assurance peers, is awaiting the results of an investigation by the Financial Conduct Authority around the appropriateness of certain charges levied on long standing customer products.

Broker Numis noted the IPO price values the company at 13 times 2019 full year earnings per share and with an expected 3.5% dividend yield, which compares to peers Brewin at 13.9x and 5.1%, Rathbones 16.8x/2.7% and St James's Place 15.8x/5.1%.

"We think that the small discount to wealth sector comparables is appropriate, taking into account what we see as a business model lacking focus, an operating margin target that might be missed, uncertainties around the completion/implementation of a new IT platform, uncertain resolution of an FCA investigation and a long-term overhang," Numis analysts said.