In line, outflows offset by positive performance

Q4 AuM was flat qoq at £27.8bn (vs SCMe £27.8bn). Net outflows improved a little, offset entirely by performance. There are some pockets of net inflows, whilst the performance metrics on key funds including Sustainable Investments remains strong. We make no material changes to our forecasts (FY24e unch). We continue to believe that the current valuation (9x PER) is pricing downside risk which is abating given the likelihood of a declining rate trend, alongside a sustainable 11% yield. We reitera

Q3: flows deteriorated but negated by performance

AuM grew by a modest 0.6% qoq to £27.8bn (SCMe £27.8bn) with £1.7bn net outflows and £1.8bn positive performance. October saw most of the redemptions, with the injection of performance in Nov-Dec having no impact on flows. Although AuM is in line with our estimate, we adopt greater caution given persisting redemptions assuming outflows continue for longer. This drives a 10% reduction in outer year estimates (FY24e unch), though the 72p dividend remains covered. At 8x FY25e PER, with a 12% yield,

Interims in line, valuation still pricing “worst case”

H1 results reflect the well flagged decline in AuM (-10% yoy) impacting management fees mechanically (-15%). Adj. PBT -16% yoy, with >50% of our FY24e covered, though clear evidence of insulation from a carefully designed cost model and persistent discipline helping to underpin a 37% margin. AuM ticked back by 4% to 9/11, but there is optimism from markets in recent days. We make no material changes to forecasts. The valuation continues to price excessive downside at 4x EBITDA with a covered 12%

Net outflows as expected, valuation prices worst case

Liontrust saw AuM decline by 6% to £27.7bn in Q2 (£27.5bn at 12/10) with £1.6bn net outflows; as expected. We leave our earnings forecasts unchanged. There has been no material change to underlying redemptions, which reinforces that net outflows are a product of reticence to contribute new money in current conditions. With confidence in process intact, this leaves Liontrust well positioned to benefit when sentiment turns. Trading at only 7x PER and 4x EV/EBITDA with a 12%+ dividend yield, the sh

Risks grossly overestimated at this valuation

Liontrust’s core investment thesis remains unchanged and the current valuation is an astounding 7x PER/4x EBITDA with a 12% yield underpinned by the explicit dividend indication. Using Bloomberg data, we believe that flows remained elusive during the Summer (SCMe £1.2bn net outflows). We reinstate our forecasts at the bottom end of the consensus range, assuming a return to net inflows in 2024. We set an 1100p 12m Target Price using a 14x FY25e PER equating to 9x EV/EBITDA, noting a 12% dividend

AuM -6% in Q1 on caution and manager resignation

Liontrust provided an AuM update recently at the final results: £30.5bn at 16th June. Since then, continued caution and a manager resignation have prompted outflows. AuM fell 6% qoq to £29.5bn at end Q1’23 with a further tick down to £29.0bn as at 12th July. Liontrust has secured its own shareholders’ approval for the GAM transaction and GAM’s largest institutional shareholder, Silchester International, has confirmed its support for the proposal. The main offer period for GAM shareholders to ten

FY23 outturn well flagged, GAM pending approval

The FY23 outturn was well flagged at the Q4 trading update, so the £87.1m adj. PBT (-10% yoy) was not a surprise. The results reflect headwinds in flows/performance from wider markets, a full year of Majedie costs and higher performance fees. The balance sheet is liquid and the board has maintained the dividend payout yoy. AuMA has ticked down to £30.5bn in Q1 (FY23 £31.4bn) with flat market performance. The GAM transaction remains subject to shareholder approval and as such we remain “restricte

GAM circular published: colour on cost synergies

Liontrust has published the circular with regard to the acquisition of GAM, adding some further detail on the proposed transaction ahead of the GM on 7th July. In this update, we focus on new information only drawing attention to additional detail around prospective £56m cost synergies. GAM remains in exclusive talks with Carne to exit the FMS division (a prerequisite for completion) as well as a commitment to a pay “at least” a 72p/sh dividend in FY24 during the integration period. Liontrust ex

Developing reach & scale, targeting cost synergies

Liontrust has announced it has agreed terms to acquire GAM Holding A.G. (“GAM”) for £96m, satisfied in Liontrust shares. Although we are now restricted, we distil and assimilate key facts from the RNS. We note that the acquisition presents a strong fit with a number of Liontrust’s stated strategic priorities around distribution reach and scale. Incorporating explicit disclosure and indications around margin aspirations (underpinned by a targeted £57m annualised cost synergies) alongside consensu

Correction to outer year estimates

We have identified a minor error in the outer year forecasts which we published in our note dated 19th April. We correct this. Our FY23e forecast remains unchanged. The revisions which we made remain the same magnitude (EPS: +5% FY23e/-5% FY24e/-6% FY25e) with no impact to our previous valuation. We reiterate our BUY recommendation and 1510p 12m Target Price (17x FY24e PER).

Difficult Q4 for flows, performance fees drive outturn

Liontrust’s FY23 outturn will be ahead of prior market expectations at “no less than £86m adj. PBT” (vs SCMe £82.8m) on £17m performance fees; +5% vs prior FY23e. AuM declined by 3.6% qoq to £31.4bn on £2.0bn net inflows as challenging sentiment continued, although there were ~£750m across two mandate losses. AuM has ticked up to £31.8bn in April on better performance. We incorporate lower AuM and moderate H1’24 flows which drives a ~10% reduction to u/l FY24e/FY25e EPS, but revise our performan

Hardman & Co Insight - Asset managers had a poor 2022

Asset managers had a poor 2022: the S&P Composite 1500 Asset Management Index was down 22% and, according to the Investment Company Institute (ICI), worldwide mutual funds fell by 20%, from $76tr to $60tr. When bond and equity markets fall, the results are unlikely to be pretty: with revenues trending down and multiples contracting, there is a double whammy to contend with. So how do valuations shape up now, after a bullish start to the new year? The first chart is my favourite chart of asset m

AuM grows in Q3 on performance, reduced outflows

Liontrust posted +3% AuM growth in Q3. Although net outflows persisted, redemption trends improved (£0.6bn vs £1.6bn Q2). There was a considerable boost from performance. Cashflow Solution funds posted good inflows and Economic Advantage funds saw neutral flows. Although the £32.6bn AuM was a little below our £33.7bn estimate, this number was achieved only thirteen days later on positive performance in the first weeks of 2023. We take a cautious view leaving FY23e all but unchanged (reducing out

LIBERUM: Plus500: Strategic progress pays dividends

Tatton Asset Management (TAM LN) - Record net inflows

Tatton, the leading on-platform discretionary fund manager (DFM) and IFA support services Group has released a trading update ahead of its results to 31 March 2024, due on 18 June 2024.

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

Ondo InsurTech FY24 Trading Update

Ondo InsurTech has released a brief post-YE update revealing its good progress continued through 2H24 and consequently FY24 will be in line with market expectations.

Foxtons Group (FOXT LN) - 1Q24 IMS shows real momentum

Foxtons Group plc first quarter revenue rose 9% to £35.7m (1Q23: £32.9m) with growth delivered across all business segments. Trading is in line with management's expectations.

BlackRock World Mining

BRWM’s managers: we see all the classic signs of high commodity prices...

Morning Note – 18 April 2024

NextEnergy Solar Fund - Attractive Refinancing

The refinancing of a £135m revolving credit facility and the extension of a similar £70m facility gives NESF firepower as development opportunities for new solar are especially attractive thanks to lower module prices in Europe. They give the fund key financial flexibility at a critical time as it pursues its capital recycling programme.

Foxtons Group - FY24 underpinned by market share gains

Foxtons Group’s Q1 revenue grew by 9%, supported by growth in all three divisions as the strategic initiatives continue to gain significant momentum, driven by investment in staff, best-in-class bespoke IT and data platforms. This implies that Foxtons’ medium-term targets are now coming into focus. Market share is being gained in all divisions, which puts Foxtons in a good position as the sales market stabilises. We maintain our valuation of 132p/share and believe that if interest rates stabilis

NextEnergy Solar Fund – High- and growing-income opportunity?

NextEnergy Solar Fund (NESF) is almost 10 years old. Since launch, it has built a £1.2bn, 933MW portfolio of 100 operating solar assets, powering the equivalent of over 330,000 homes, declared dividends totalling £333m, and avoided the emission of about 2.2 Mt CO2e. NESF is on track to pay 8.35p in dividends, with forecast dividend cover of about 1.3x. Share price weakness that has afflicted the whole sector means that dividend translates to a yield of 11.1%, one of the highest in its sector, a

The Hardman & Co Monthly: April 2024

Feature article: Steady as she goes, but could be better: A review of investment company liquidity since 2016 Liquidity is the lifeblood of equity markets. The measurement of liquid asset availability to a market or company is a way of gauging a market’s health. This article builds on our previous work, which analysed the liquidity data for non-financial trading companies, by applying the same analytical techniques to the investment companies (IC) space. We analyse liquidity for ICs as a whol

Initial Equity Trading Comments - 19 February 2024

M Winkworth+ (WINK, House Stock at 163p) - Solid FY23A results, well placed to grow

Hybridan Research: Sector Review: Artificial intelligence in UK cybersecurity: the human uplift 17/04/2024

Artificial intelligence (AI) is a double-edged sword in cybersecurity. Whilst new AI models, architectures, and innovations are emerging to protect the security posture of organisations, attackers are also benefiting from deepfakes, sophisticated phishing, and automation of malicious codes. To ensure the impact of AI on cybersecurity to be a net-positive, we need to pit good AI against bad AI. Point solutions enhanced with machine learning: Global cybersecurity has been built with point soluti

Resilient FY24, confident long-term outlook

Vp’s full year update highlights sector-leading results, once again benefiting from the diversity of its end markets and the quality of its specialist businesses. With results expected to be broadly in line with expectations, we trim our FY24 PBT forecast by c.5% to £39.0m, a shade below the FY23 outturn (£40.2m). We consider this an impressively resilient performance set against a mixed market backdrop. Under new leadership, a strategic refresh is underway and management is confident in long