Rathbones Group (RAT) H1 2024 earnings summary

Executive summary

• Funds under management and administration (FUMA) rose 3.4% in H1 2024 to £108.9bn, driven by improved markets, flows, and a marked Q2 recovery.

• Underlying operating profit reached £112.1m, up 120.7% year-over-year, with margin rising to 25.1% from 21.3%.

• Integration of Investec Wealth & Investment (IW&I) is on track, delivering £20m run-rate synergies by June, ahead of the £15m year-one target, with client migration progressing well.

• Digital transformation advanced with the InvestCloud CLM platform now live for 1,200 users and further enhancements planned.

• Interim dividend increased 3.4% to 30p per share, reflecting business strength and balance sheet confidence.

Financial highlights

• Operating income increased 88% year-over-year to £447.4m, reflecting IW&I inclusion, higher FUMA, and 11.6% growth in legacy business.

• Statutory profit before tax rose 151.2% to £65.3m, despite higher goodwill amortization and integration costs.

• Underlying EPS up 21% to 80.4p; basic EPS was 43.9p.

• Gross inflows were £6.1bn, with net outflows of £0.6bn, but Q2 saw a marked recovery in net flows and annualized growth rate of 11.6%.

• Net interest income rose to £32.7m, benefiting from higher rates and treasury returns.

Outlook and guidance

• Underlying operating margin expected to remain in the mid-20s for FY24, progressing to 30%+ from September 2026.

• Digital investment in CLM to complete in H2 2024 within £45m guidance.

• Synergies from IW&I integration expected to reach £60m run-rate by 2026.

• Progressive dividend policy maintained, looking through integration costs.

• Short-term outlook for flows is improving as client confidence rises, supported by a more stable UK political backdrop and lower inflation.