Rathbones Group (RAT) H1 2024 earnings summary

Executive summary

• Funds under management and administration (FUMA) rose 3.4% to £108.9bn as of June 30, 2024, driven by improved market conditions and stronger net flows in Q2.

• Underlying operating profit reached £112.1m, with an operating margin of 25.1%, up from 21.3% a year ago.

• Integration of Investec Wealth & Investment (IW&I) is progressing ahead of schedule, delivering £20m in annualized run-rate synergies by June, above the £15m year-one target.

• Digital transformation advanced with the launch of InvestCloud CLM and other platforms, supporting enhanced client and investment manager experience.

• 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 the inclusion of IW&I and 11.6% growth in the legacy business.

• Statutory profit before tax rose to £65.3m (up 151.2% year-over-year), despite higher goodwill amortization and integration costs.

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

• Gross inflows were £6.1bn, with a strong annualized growth rate of 11.6%.

• Net outflows for the period were £0.6bn, but Q2 saw a marked recovery, with net outflows reduced to £30m.

Outlook and guidance

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

• Digital investment in CLM to complete within the £45m budget by year-end.

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

• Progressive dividend policy to be maintained, with further capital benefits anticipated from a pension scheme buy-in.

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