Where next for Liontrust?
Liontrust’s annual results this morning were yet another disappointment for the asset manager.
The business finished last year with a £600,000 loss, a drastic turnaround from the £43.9m profit reported for the previous period.
Outflows of £6.1bn for the year were up on the £4.8bn of redemptions the previous year.
The group finished 2023 with £27.8bn of assets under management, down from £31.4bn at the end of 2022.
The bad news didn’t end there. Liontrust said assets under management had continued to decline since the company’s year-end.
The figure dropped from £27.7bn at the end of March to £27.25bn last week. The company has seen investors withdraw around £13bn since March 2022, almost half of its current assets under management.
Liontrust’s revenue dropped 19 per cent over the year to 1.5 per cent below analysts’ expectations, even as operating expenses rose – the figure came in five per cent above expectations.
A key component that ate into Liontrust’s profits was costs related to the company’s failed acquisition of Swiss rival GAM last year, which totalled £9.5m.
Ben Yearsley, the founder of Fairview Investing, told Morning Wire the results were “not great”, though he added, “Tell me a listed active asset manager that has had good results”.
Liontrust’s poor showing seemed particularly “self inflicted”, Yearsley added, with the failed acquisition of GAM impacting both its negative profit and hitting its share price.
The firm’s share price dropped over 40 per cent throughout 2023 but has since begun the road to recovery, rising 17 per cent since the start of this year.
“Tell me a listed active asset manager that has had good results.”
Ben Yearsley, founder of Fairview Investing
Despite its terrible results, the company indicated it was still eager to continue attempting to acquire companies and was on the lookout for buying opportunities.
“The board also believes in selective acquisitions that accelerate the development of Liontrust and its ability to grow, typically through bringing in investment teams that complement our existing capability or expand distribution,” it said.
In March, the company denied it had been in talks to buy out fellow asset manager Artemis, which would have made it the eighth company bought by Liontrust over the last 12 years.
A recovery in UK equities
Liontrust’s currently trades at just 11.6 times its earnings.
“While this represents a discount to its longer-term average of 13.1 times, this discount is in common with the discounts for the wider traditional asset management group,” said a group of Barclays analysts.
This, along with “relatively weak flow momentum” and a low earnings per share growth rate, means the bank’s analysts said they preferred other financial services companies.
However, Darius McDermott, managing director of Chelsea Financial Services noted that the firm still ran a “good number of highly regarded funds”, such as its flagship European Dynamic fund, as well as its UK funds and range of responsible funds.
“The business of asset management generally has been much tougher in the last few years, and Liontrust is not immune to that,” concluded McDermott.
Ultimately, Liontrust is putting all its eggs in one basket: A recovery in UK equities.
As the company has a strong focus on the UK, it has been particularly hard hit by negative sentiment against London-listed stocks, and CEO John Ions said the business was “well-positioned for when the UK comes back into favour”.
“We are optimistic about the long-term outlook for the UK economy and stock market,” Ions added.
“The UK has not lost the ability to develop world-class businesses and it is about providing the incentives and liquidity to encourage such companies to list on the London Stock Exchange. A key part of this is attracting international investors to reinvest back in the UK market.”