In what may count as one of the good kinds of problems, Rathbones has pledged a major strategy review as its assets close in on a long-term target of £40 billion earlier than originally intended.
Client assets within the group stood at £39.1 billion at the end of 2017, up 14% over the 12 months, compared to a WMA Balanced index return of 7.2%.
By 9.02 shares in Rathbones were up 0.5% at £27.50.
‘In 2014 we set out a five-year strategy which had the ambition to reach £40 billion of funds under management by the end of 2018,’ said Rathbones chair Mark Nicholls.
‘Accepting that investment markets have been favourable, we are now well within sight of that goal with many of our strategic initiatives continuing to gain momentum.
‘Accordingly, over the next few months, the board and executive team will work to refresh our strategy to ensure our core business remains robust and that we can benefit from the changing landscape of our industry.’
Group profitability before tax climbed 17% to £58.9 million. Gains were defrayed by the £4.9 million cost of an aborted bid to purchase Smith & Williamson and those associated with a move from Mayfair to a new headquarters in the City.
‘We continually monitor opportunities to grow the business through smaller acquisitions, but during the year we discussed with an industry peer, Smith & Williamson, the benefits of combining our businesses,’ added Nicholls.
‘The benefits to both parties and our respective clients could have been considerable but, following extensive discussions, we were unable to conclude a transaction that was in the best interests of both parties.
‘Nevertheless, I believe that our measured approach to this opportunity served us well. We will continue to apply this discipline when we pursue other opportunities.’
The company has proposed a full year dividend of 61p, up 7% on the prior year.
The business noted that 2017 had been a ‘very demanding’ period for new regulation, with operating costs climbing 12% over the period. The business also launched new client suitability, enrolment and ongoing management tech systems in the period.
Analyst Cantor Fitzgerald reiterated its hold guidance on the stock on a £27 price target, noting that while the results were a mild outperformance of expectation, the price was at the top end of both historical and sector comparisons.
'Based on our [full year] 2018 EPS estimate of 140p (+8%), the shares are currently trading on a forward PE of over 19x versus the five year average of 17.7x which puts them at the top end of the fair value range as well as a premium to the other listed wealth managers,' said analyst Keith Baird.