REG - Rathbones Group PLC - Third quarter trading update
19/10/2023 07:00
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RNS Number : 5827Q Rathbones Group PLC 19 October 2023
Rathbones Group Plc
third quarter trading update
Rathbones Group Plc ("Rathbones") announces a trading update for the three
months ended 30 September 2023.
Paul Stockton, Group Chief Executive of Rathbones, said:
"In September we were delighted to announce the completion of our combination
with Investec Wealth and Investment UK ("IW&I"), welcoming new clients and
colleagues into the Rathbones group. There is already a strong level of
collaboration across the enlarged group and an ongoing dedication to keeping
clients' interests at the forefront of everything we do.
We delivered net inflows in wealth management in the quarter in spite of a
market backdrop that remains challenging and higher outflows as clients use
funds to repay debt or prefer to hold assets in cash for the short term. We
continue to engage meaningfully with our clients, tailoring our propositions
to support their needs. In accordance with consumer duty, both Rathbones and
IW&I are committed to acting in the best interests of clients and we
remain priced competitively in the market.
The scale that Rathbones now has positions us strongly to navigate current
conditions successfully. We are confident in delivering the synergies
associated with the IW&I transaction, together with our 2023 and 2024
operating margin guidance for the enlarged Rathbones group."
Given the combination with IW&I completed only a few days before the end
of the third quarter, the commentary below refers to Rathbones, excluding
iW&I, except where otherwise stated. We look forward to providing more
detail on the performance of the enlarged group in our full year results.
Financial and business highlights:
- Total funds under management and administration ("FUMA"), including
IW&I, were £100.7 billion at 30 September (30 June 2023: £60.5 billion,
31 December 2022: £60.2 billion).
- £45.4 billion in the Investment Management business (30 June 2023:
£45.4 billion, 31 December 2022: £45.1 billion).
- £12.5 billion in the Rathbone Funds business (30 June 2023: £12.2
billion, 31 December 2022: £11.0 billion).
- £2.0 billion in Saunderson House (30 June 2023: £2.9 billion, 31
December 2022: £4.1 billion).
- £40.8 billion in Investec W&I.
- Discretionary and managed net inflows were £0.1 billion (Q3 2022: £0.4
billion) in the quarter to 30 September 2023, representing an annualised
growth rate of 1.2% (Q3 2022: 3.3%). As we reported in our interim results, we
continued to see strong levels of gross inflows (£1.2 billion in the quarter)
albeit that these were largely offset by a continued trend in elevated
outflows that reflect current conditions.
- Investment performance in our discretionary bespoke service lagged the MSCI
PIMFA balanced index in the quarter (-0.8% compared with +0.6%). Year to date
group performance remains positive, benefitting in particular from the strong
performance in our global opportunities and ethical bond funds.
- Underlying net operating income was £120.4 million for the three months
ended 30 September 2023, an increase of 6.5% from the £113.0 million for the
three months ended 30 September 2022.
- Fee income and commission in Investment Management totalled £78.5
million (Q3 2022: £79.6 million).
- Net interest income increased to £13.3 million from £5.6 million in Q3
2022 and we continue to pay competitive rates to our clients.
- Fees from advisory services and other income reduced to £11.0 million
(Q3 2022: £12.4 million) reflecting the expected reduced time-based charges
during the Saunderson House transition, offset by continuing growth in Vision
and Rathbone Financial Planning revenues. The migration of clients and FUMA
from Saunderson House is progressing well, with c.£1.8 billion of FUMA
transferred in the year to 30 September 2023. We continue to expect the
migration to be completed by the end of the first quarter of 2024, achieving
an incremental revenue margin of c.55bps across the group.
- Fee income in our funds business totalled £17.6 million (Q3 2022:
£15.4 million) reflecting strong inflows of £934 million from the Saunderson
House migration.
- We continue to expect to launch the first phase of our Client Lifecycle
Management (CLM) system in the first quarter of 2024, with further phases
expected to be made throughout the remainder of that year. Total expected
operating expenses of our digital programme have increased by £5 million to
£45 million, of which around £15 million will be incurred in 2024.
Full year results 2023
Results for the 12 months to 31 December 2023 will be announced on 6 March
2023.
Detailed financial information
Net operating income
3 months ended 30 September
9 months ended 30 September
2023 2022 Change 2023 2022 Change
Investment Management (£m) (£m) (%) (£m) (£m) (%)
- Fees 69.0 67.5 2.2 207.8 206.9 0.4
- Commissions 9.5 12.1 (21.5) 33.2 39.0 (14.9)
- Net interest income 13.3 5.6 137.5 35.6 11.6 206.9
- Fees from advisory services(1) & other income 11.0 12.4 (11.3) 32.0 40.3 (20.6)
102.8 97.6 5.3 308.6 297.8 3.6
Rathbone Funds 17.6 15.4 14.3 49.8 47.1 5.7
Net operating income 120.4 113.0 6.5 358.4 344.9 3.9
MSCI PIMFA Private Investor Balanced Index on principal charging dates(2) 1,703 1,606 6.0
1,699 1,692 0.4
1. Including income from trust, tax, financial planning services, Vision
Independent Financial Planning and Saunderson House.
2. The principal charging dates for Investment Management clients are 5
April, 30 June, 30 September and 31 December. Rathbone Funds income accrues on
daily levels of funds under management.
Funds under management and administration
(i) Breakdown of FUMA and flows by service level
Q3 ended 30 September 2023 Opening FUMA Net Flows Service Level Transfers(3) SHL Migrated Assets Market & investment Performance (£m) Closing FUMA Ann Net Growth(4)
(£m)
(£m)
(£m)
(£m)
(%)
(£m)
Gross Inflows Gross Outflows
(£m) (£m)
Discretionary service 45,302 976 (926) 50 (73) 839 (413) 45,705
Bespoke portfolios 42,711 883 (866) 17 (138) 441 (401) 42,630 0.2
Managed via in-house funds 2,591 93 (60) 33 65 398 (12) 3,075 5.1
Multi-asset funds 2,278 216 (129) 87 - - (20) 2,345 15.3
Total discretionary & managed 47,580 1,192 (1,055) 137 (73) 839 (433) 48,050 1.2
Non-discretionary service 743 11 (27) (16) (1) - 6 732 (8.6)
Total wealth management 48,323 1,203 (1,082) 121 (74) 839 (427) 48,782 1.0
Single-strategy funds 6,520 271 (442) (171) - - (36) 6,313 (10.5)
Execution only & banking 2,555 92 (141) (49) 74 2 12 2,594 (7.7)
Group (pre acquisitions) 57,398 1,566 (1,665) (99) - 841 (451) 57,689 (0.7)
Saunderson House(5) 3,135 25 (163) (138) - (841) 55 2,211 (17.6)
Total group (pre acquisitions) 60,533 1,591 (1,828) (237) - - (396) 59,900 (1.6)
Investec W&I - - - - - - - 40,781 -
Total for enlarged group - - - - - - - 100,681 -
9 months ended 30 September 2023 Opening FUMA Net Flows Service Level Transfers(3) Market & investment Performance (£m) Closing FUMA Ann Net Growth(4)
(£m)
(£m)
(£m)
(£m)
(%)
SHL Migrated Assets
Gross Inflows Gross Outflows (£m)
(£m) (£m)
Discretionary service 44,322 3,057 (2,943) 114 (273) 1,761 (219) 45,705
Bespoke portfolios 42,894 2,754 (2,777) (23) (853) 827 (215) 42,630 (0.1)
Managed via in-house funds 1,428 303 (166) 137 580 934 (4) 3,075 12.8
Multi-asset funds 2,159 616 (431) 185 - - 1 2,345 11.4
Total discretionary & managed 46,481 3,673 (3,374) 299 (273) 1,761 (218) 48,050 0.9
Non-discretionary service 757 29 (53) (24) (13) 2 10 732 (4.2)
Total wealth management 47,238 3,702 (3,427) 275 (286) 1,763 (208) 48,782 0.8
Single-strategy funds 6,474 976 (1,426) (450) - - 289 6,313 (9.3)
Execution only & banking 2,404 240 (377) (137) 286 - 41 2,594 (7.6)
Group (pre acquisitions) 56,116 4,918 (5,230) (312) - 1,763 122 57,689 (0.7)
Saunderson House(5) 4,117 103 (397) (294) - (1,763) 151 2,211 (9.5)
Total group (pre acquisitions) 60,233 5,021 (5,627) (606) - - 273 59,900 (1.3)
Investec W&I - - - - - - - 40,781 -
Total for enlarged group - - - - - - - 100,681 -
(ii) Breakdown of Rathbones Investment Management FUMA and flows by channel
Q3 ended 30 September 2023 Opening FUMA Net Flows Service Level Transfers(3) SHL Migrated Assets Market & investment Performance (£m) Closing FUMA Ann Net Growth(4)
(£m)
(£m)
(£m)
(£m)
(%)
(£m)
Gross Inflows Gross Outflows
(£m) (£m)
Total direct 33,333 605 (676) (71) (30) - (284) 32,948 (0.9)
Total financial adviser linked 11,969 371 (250) 121 (43) 839 (129) 12,757 4.0
Total discretionary service 45,302 976 (926) 50 (73) 839 (413) 45,705 0.4
Execution only & banking 2,555 92 (141) (49) 74 2 12 2,594 (7.7)
Non-discretionary service 743 11 (27) (16) (1) - 6 732 (8.6)
Total Investment Management 48,600 1,079 (1,094) (15) - 841 (395) 49,031 (0.1)
Investec W&I - - - - - - - 40,781 -
Total Investment Management for enlarged group - - - - - - - 89,812 -
9 months ended 30 September 2023 Opening FUMA Net Flows Service Level Transfers(3) SHL Migrated Assets Market & investment Performance (£m) Closing FUMA Ann Net Growth(4)
(£m)
(£m)
(£m)
(£m)
(%)
(£m)
Gross Inflows Gross Outflows
(£m) (£m)
Total direct 33,639 1,962 (2,232) (270) (226) - (195) 32,948 (1.1)
Total financial adviser linked 10,683 1,095 (711) 384 (47) 1,761 (24) 12,757 4.8
Total discretionary service 44,322 3,057 (2,943) 114 (273) 1,761 (219) 45,705 0.3
Execution only & banking 2,404 240 (377) (137) 286 - 41 2,594 (7.6)
Non-discretionary service 757 29 (53) (24) (13) 2 10 732 (4.2)
Total Investment Management 47,483 3,326 (3,373) (47) - 1,763 (168) 49,031 (0.1)
Investec W&I - - - - - - - 40,781 -
Total Investment Management for enlarged group - - - - - - - 89,812 -
3. Service Level Transfers represent client FUMA which has transferred from
one service to another within the group during the period.
4. Annualised net growth in flows calculated as net flows/opening FUMA.
5. Total funds under advice by Saunderson House, including those clients
transferred to fellow group companies totalled £4.11 billion at 30 September
2023 (30 September 2022: £4.15 billion).
(iii) Total Group FUMA
At 30 September At 30 June
2023 2022 Change 2023 Change
£m £m % £m %
Rathbones Investment Management Gross FUMA 49,031 45,557 7.6 48,600 0.9
Of which: invested in Rathbones Funds discretionary wrapped funds(6) (3,631) (2,403) 51.1 (3,169) 14.5
Rathbone Funds 12,547 10,624 18.1 12,165 3.1
Saunderson House 2,211 4,151 (46.7) 3,135 (29.5)
Of which: invested in Rathbones Funds discretionary wrapped funds(7) (246) - - (198) 24.2
Total Group FUMA 59,912 57,929 3.4 60,533 (1.0)
Investec W&I 40,781 - - - -
Of which: invested in Rathbones Funds discretionary wrapped funds(8) (12)
Total Group FUMA for enlarged group 100,681 - - - -
6. Discretionary wrapped funds represent funds operated by Rathbone Funds,
managed by both Rathbone Investment Management teams and Rathbone Funds
managers.
7. Discretionary wrapped funds represent funds operated by Rathbone Funds,
managed by both Saunderson House teams and Rathbone Funds managers.
8. Discretionary wrapped funds represent funds operated by Rathbone Funds,
managed by both Investec W&I teams and Rathbone Funds managers.
The MSCI PIMFA Private Investor Balanced Index closed at 1,711 on 17 October
2023, an increase of 0.5% since 30 September 2023. Investment Management fee
income in the fourth quarter is dependent upon the value of funds under
management at 31 December 2023.
19 October 2023
For further information contact:
Rathbones Group Plc
Paul Stockton, Group Chief Executive Officer
Jennifer Mathias, Group Chief Financial Officer
Sarah Lewandowski, Head of Investor Relations
Tel: 07702605524
Email: sarah.lewandowski@rathbones.com
Camarco
Ed Gascoigne-Pees
Julia Tilley
Tel: 020 3757 4984
Email: ed.gascoigne-pees@camarco.co.uk
Rathbones Group Plc
Rathbones provides individual investment and wealth management services for
private clients, charities, trustees and professional partners. We have been
trusted for generations to manage and preserve our clients' wealth. Our
tradition of investing and acting for everyone's tomorrow has been with us
from the beginning and continues to lead us forward.
Rathbones has over 3,300 employees in 23 locations across the UK and Channel
Islands; its headquarters is 8 Finsbury Circus, London, EC2M 7AZ.
www.rathbones.com
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