Rathbone reports asset growth, warns on margins

Rathbone Brothers on Thursday reported third quarter growth in funds under management but warned that its investment plans will diminish operating margins.

Total funds under management and administration stood at £49.4bn at 30 September, 4% higher than at the same point last year.

Rathbones said it intends to leverage the core strengths of its business by investing to stimulate organic growth, which will have the consequence of reducing operating margins to the mid-twenties, below previous guidance of 30%.

Meanwhile, the company reported that total net inflows slowed to £0.1bn in the third quarter, down from £7.0bn, with the company attributing this drop to its acquisition of Speirs & Jeffrey in the summer of 2018.

The core investment management segment saw total net outflows stood at £164m during the quarter, compared with net inflows of £6.9bn in the same period last year, due to weak investor sentiment and investment manager departures.

The FTSE 250-listed company said that both factors, together with anticipated outflows from short term discretionary mandates, are expected to continue to weigh on net growth in funds under management next year.

Underlying net operating income increased by 8% to £86.3m as the investment management division's contribution grew by 8% and unit trust revenue remained flat.

Chief executive Paul Stockton said: "Our funds under management and administration increased marginally in the quarter to £49.4bn. In difficult markets we continue to focus on providing a quality service to our clients, navigating through ongoing market uncertainty but also selectively investing to pursue organic growth opportunities and develop our business."

Analysts from Shore Capital said: "During an extended multi-year period where Rathbones has grown at a slower (organic) rate than many of its listed DFM peers, we have struggled to see a positive investment case, especially as its rating has generally remained at a premium to such peers."

Rathbone Brothers shares were down 6.51% at 2,225.00p at 1041 BST.