Quilter battens down the hatches
• Drop in revenue and profit during first half
Quilter, the London-based wealth manager spun out of Old Mutual, is bracing for a tough end to 2020 after reporting a first-half drop in profit during what it called “a uniquely challenging environment”. “It’s not any specific thing that we think is going to hurt our revenue other than the fact that when you’re managing through this crisis, you manage cautiously,” CEO Paul Feeney said in an interview on Wednesday, after the company reported firsthalf net inflows of £1.1bn (R25.4bn), up from £300m in the previous matching period.
Quilter, the London-based wealth manager spun out of Old Mutual, is bracing for a tough end to 2020 after reporting a first-half drop in profit during what it called “a uniquely challenging environment”.
“It’s not any specific thing that we think is going to hurt our revenue other than the fact that when you’re managing through this crisis, you manage cautiously,” CEO Paul Feeney said in an interview after the company reported first-half net inflows of £1.1bn (R25.4bn), up from £300m in the previous matching period.
Quilter, which broke away from Old Mutual after the insurer returned to SA in 2018, posted a 38% drop in adjusted pretax profit to £71m in the six months to June. Revenue fell 4% to £335m, reflecting sliding equity prices as the Covid-19 outbreak intensified early in the second quarter.
Wealth and asset managers earn fees on the amounts they manage for clients. Asset value and performance fluctuate with movements in share prices, which in turn influence the appetite of potential clients for putting money to work in financial markets.
That was demonstrated in Quilter’s performance. While assets under management fell to £107.4bn on June 30, compared with £110.4bn at end-December, it was an improvement on the £95.3bn at end-March.
After falling about 25% in the March quarter, the FTSE 100 gained about 9% in the second quarter. With its peers across the globe it benefited as central banks injected unprecedented amounts of stimulus into economies. Quilter said that its net inflow number was due to lower outflows while gross sales were stable at about £6bn.
PEOPLE ARE TRYING TO MAP THE ROUTE OUT OF COVID. WE’RE TRYING TO BUILD A STRONGER SHIP... HOPE FOR THE BEST , PLAN FOR THE WORST
The company is cautious about its outlook in an uncertain environment for global economies and financial markets. Asset prices have swung in recent months based on conflicting headlines about a possible Covid-19 vaccine being developed successfully.
Markets are also unsettled by tension between China and the US that could depress a global economy already reeling from Covid-19 and national lockdowns in key markets.
“We’ve managed very well though this Covid crisis so far,” said Feeney. “People are trying to map the route out of Covid. We’re just trying to build a stronger ship. I’m just cautious and ... I would just hope for the best but plan for the worst.”
The board recommended an interim dividend of 1p, down 41% from the matching period in 2019, which it said is at the lower end of its target range. Quilter said it will announce the overall 2020 payout to investors with the full-year results.
As part of efforts to ensure its resilience the company will cut discretionary spending by £30m in its 2020 year.
“Our cautious outlook with broadly stable market conditions for the remainder of the year means we continue to expect revenue headwinds,” it said.