River and Mercantile Group PLC Trading Statement (9370N)

TIDMRIV

RNS Number : 9370N

River and Mercantile Group PLC

24 January 2019

24 January 2019

LEI: 2138005C7REHURGWHW31

River and Mercantile Group PLC

Second Quarter Trading Update

31 December 2018

River and Mercantile Group PLC (R&M), the investment management and solutions business, today provides a trading update for the three and six months ended 31 December 2018.

Highlights for the six months ended 31 December 2018:

   --      Gross sales for the period were GBP2.8bn. 

-- Net sales for the period were GBP1.3bn, equivalent to 4% of opening AUM/NUM. This included GBP0.8bn from Equity Solutions and GBP0.7bn from Fiduciary Management.

-- Despite equity market falls, overall investment performance for the period was only negative GBP1.0bn (occurring in the second quarter), equivalent to 3% of opening AUM/NUM.

   --      As a result, fee earning AUM/NUM increased by 1.0% to GBP34.2bn. 

-- Performance fees earned in the six months ended 31 December 2018 are estimated to be GBP6.5m, of which GBP2.0m is from Equity Solutions and GBP4.5m from Fiduciary Management.

   --      Advisory fees earned in the six months are estimated to be GBP4.7m. 

Highlights for the three months ended 31 December 2018:

   --      Gross sales for the period were GBP1.6bn. 

-- Net sales for the period were GBP0.7bn, equivalent to 2% of opening AUM/NUM. This included GBP0.4bn from Equity Solutions and GBP0.4bn from Fiduciary Management.

-- Despite equity market falls, overall investment performance for the period was only negative GBP1.0bn, equivalent to 3% of opening AUM/NUM.

   --      Net rebalance and transfers was negative GBP0.5bn (1.5% of opening AUM/NUM). 
   --      As a result, fee earning AUM/NUM decreased by 2.3% to GBP34.2bn. 

-- Performance fees earned in the three months ended 31 December 2018 are estimated to be GBP3.1m from Fiduciary Management.

Mike Faulkner, CEO of River and Mercantile, commented:

I am pleased with the results of this quarter, where the Group has performed as we predicted in more challenging market conditions.

Our diversified business model is underscored by our investment performance across the Group during the quarter. Whilst Equity Solutions investment returns were in line with our expectations given market conditions, our other divisions were much less affected by market falls, or not affected at all.

As a result, the negative impact of markets during the quarter on overall opening AUM/NUM was only 3%, ultimately reflecting the diversified nature of our business and revenue streams which are much less exposed to equity market beta than traditional investment businesses.

Our strong distribution capability generated gross sales in the quarter equal to 5% of opening AUM/NUM, with a particularly positive contribution from our Institutional Equities and Fiduciary Management divisions. Our pipeline across the broader business remains strong, with our investment in our US and Australian presence generating a number of interesting and exciting opportunities. Our Fiduciary Management division has seen an increase in new business activity following the conclusion of the CMA review.

I noted in our trading statement following the last quarter, that we believed we were moving into a downturn which would impact absolute returns and we positioned our clients accordingly in preparation for these more difficult market conditions. It is clear that this was the correct decision and these proactive moves insulated client returns from the worst of the market falls.

Looking forward, our investment views are more positive and many of the macro economic signals that concerned us through the majority of the last period have played out in a manner that suggests that risk assets in many markets are likely to provide some positive returns - and in certain areas this may be significant. We are beginning to position our clients accordingly to take advantage of this. Whilst there are still prevalent risks we remain alive to the opportunities and have continued to advance our investment research ideas in order to deliver enhanced outcomes to clients including in emerging market strategies.

We are therefore confident that we are well placed to capitalise on opportunities to deliver positive outcomes to both existing and new clients in the second half of our financial year.

Interim Statements:

The Group will release its interim results for the six month period to 31 December 2018, on 11 March 2019.

Assets Under Management (AUM) and Notional Under Management (NUM)

AUM/NUM for the three months ended 31 December 2018.

 
 
                                                                   Equity Solutions 
                                                         ----------------------------------- 
                          Fiduciary        Derivative 
 GBP'm                    Management       Solutions      Wholesale   Institutional   Total    Total AUM/NUM 
                       ---------------  ---------------  ----------  --------------  -------  -------------- 
                            (AUM)            (NUM)          (AUM)         (AUM)       (AUM) 
 Opening fee earning 
  AUM/NUM                       10,919           19,050       1,817           3,179    4,996          34,965 
 Sales                             584              305          52             700      752           1,641 
 Redemptions                     (158)            (346)       (155)           (239)    (394)           (898) 
                                                                                              -------------- 
                                   426             (41)       (103)             461      358             743 
 Net rebalance and 
  transfers                      (348)            (192)           -               -        -           (540) 
 Net flow                           78            (233)       (103)             461      358             203 
 
 Investment 
  performance                    (237)                -       (276)           (486)    (762)           (999) 
                       ---------------  ---------------  ----------  --------------  -------  -------------- 
 Fee earning AUM/NUM            10,760           18,817       1,438           3,154    4,592          34,169 
 
 Mandates in 
 transition (31 
 December 2018)                      -                -           -               -        -               - 
 Redemptions in 
 transition (31 
 December 2018)                      -                -           -               -        -               - 
 Mandated AUM/NUM               10,760           18,817       1,438           3,154    4,592          34,169 
                       ===============  ===============  ==========  ==============  =======  ============== 
 
 Increase/(decrease) 
  in fee earning 
  assets                        (1.5%)           (1.2%)     (20.9%)          (0.8%)   (8.1%)          (2.3%) 
 Increase/(decrease) 
  in mandated assets            (4.1%)           (1.8%)     (20.9%)          (0.8%)   (8.1%)          (3.4%) 
                                        ---------------  ----------  --------------  -------  -------------- 
 

AUM/NUM for the six months ended 31 December 2018

 
 
                                                                   Equity Solutions 
                                                         ----------------------------------- 
                          Fiduciary        Derivative 
 GBP'm                    Management       Solutions      Wholesale   Institutional   Total    Total AUM/NUM 
                       ---------------  ---------------  ----------  --------------  -------  -------------- 
                            (AUM)            (NUM)          (AUM)         (AUM)       (AUM) 
 Opening fee earning 
  AUM/NUM                       10,642           18,622       1,887           2,692    4,579          33,843 
 Sales                           1,039              452         131           1,194    1,325           2,816 
 Redemptions                     (339)            (645)       (285)           (267)    (552)         (1,536) 
                                                                                              -------------- 
                                   700            (193)       (154)             927      773           1,280 
 Net rebalance and 
  transfers                      (353)              388           -               -        -              35 
 Net flow                          347              195       (154)             927      773           1,315 
 
 Investment 
  performance                    (229)                -       (295)           (465)    (760)           (989) 
                       ---------------  ---------------  ----------  --------------  -------  -------------- 
 Fee earning AUM/NUM            10,760           18,817       1,438           3,154    4,592          34,169 
 
 Mandates in 
 transition (31 
 December 2018)                      -                -           -               -        -               - 
 Redemptions in 
 transition (31 
 December 2018)                      -                -           -               -        -               - 
 Mandated AUM/NUM               10,760           18,817       1,438           3,154    4,592          34,169 
                       ===============  ===============  ==========  ==============  =======  ============== 
 
 Increase/(decrease) 
  in fee earning 
  assets                          1.1%             1.0%     (23.8%)           17.2%     0.3%            1.0% 
 Increase/(decrease) 
  in mandated assets              1.5%             1.1%     (23.8%)            9.5%   (3.7%)            0.5% 
                                        ---------------  ----------  --------------  -------  -------------- 
 

Performance fees

Performance fees earned in the three months ended 31 December 2018 are estimated to be GBP3.1m from Fiduciary Management. Performance fees earned in the six months ended 31 December 2018 are estimated to be GBP6.5m, which includes the previously announced performance fee from the River and Mercantile UK Micro Cap Investment Company Limited of approximately GBP2.0m and approximately GBP4.5m relating to Fiduciary Management. Advisory fees earned in the six months are estimated to be GBP4.7m.

Notes to editors:

River and Mercantile Group PLC (R&M) is an investment solutions business with a broad range of services, from consulting and advisory, to fully delegated fiduciary management and asset management.

R&M is focussed on creating investment solutions for institutional pension schemes, insurance and financial intermediaries.

For further information, please contact:

River & Mercantile Group PLC

Chris Rutt

Deputy Chief Financial Officer and Investor Relations

   Email:   [e-mail] 
   Tel:       [phone] 

Forward-looking statements

This announcement contains forward-looking statements with respect to the financial conditions, results and business of the Group. By their nature, forward looking statements involve risk and uncertainty because they relate to events, and depend on circumstances that will occur in the future. River and Mercantile Group's actual results may differ materially from the results expressed or implied in these forward looking statements. Nothing in this announcement should be construed as a profit forecast.

Notes:

Assets Under Management (AUM) represents the assets over which we act either as a discretionary investment manager on a partial or fully delegated basis in accordance with an investment management agreement.

Fee earning AUM/NUM represents amounts on which management fees and performance fees are charged.

Notional Under Management (NUM) represents the aggregate billing notional of derivative contracts and is the basis on which management fees are charged.

Net rebalance and transfers represents the net change in billing notional values of Derivatives (including Gilts) from existing client mandates and can increase or decrease based on changes in the underlying hedging strategies.

The category also represents transfers of client assets between divisions. The different billing structures between divisions, including the use of AUM or NUM, means that transfers will not net to zero.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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January 24, 2019 02:00 ET (07:00 GMT)