City round-up: Rathbones; Character Group; BAE Systems

Rathbones, the private wealth management group with a key office in the Port of Liverpool Building, said it has made a positive start to the financial year in a first quarter trading update this morning, ahead of its AGM.

During the period for the three months ended March 31, 2024, total funds under management and administration (FUMA) reached £107.6bn, compared with £105.3bn at December 31, 2023.

Last September the group completed its merger with Investec Wealth and Investment.

Statutory profit before tax of £39.1m, reflects non-underlying costs of £20.2m, comprising £10.7m in relation to the amortisation of intangible assets and £9.5m in relation to integration and acquisition costs.

Group chief executive, Paul Stockton, said: “Rathbones has made a positive start to 2024, with operating income 13.6% higher than the first quarter of 2023 on a like-for-like basis, and 89.8% higher incorporating Investec Wealth & Investment (IW&I).

“Total funds under management and administration increased by 2.1% in the quarter (Q1 2023: 1.1%) to £107.6bn. Despite outflows remaining elevated overall, Rathbones Investment Management (RIM) continued to deliver strong gross inflows in discretionary and managed services, achieving an annualised net organic growth rate of 2.8% (Q1 2023: 2.6%).”

He added: “The integration of IW&I is progressing well with run-rate synergies now £10.6m, up from the £8m reported at 31 December 2023. Work to combine the group’s offices in locations where both Rathbones and IW&I have offices is also progressing well, with Birmingham, Cheltenham, Exeter, and Glasgow colleagues already working in combined premises and others, including our London head office, to follow during this year.

“We also remain on track to launch our digital Client Lifecycle Management system in June this year.”

He said: “While economic uncertainty and headwinds remain in the UK and abroad, Rathbones is well equipped to navigate challenging market conditions. We remain confident in our integration and synergy targets and are well positioned to take advantage of the future benefits of the group’s scale.”

Analysts at investment bank, Panmure Gordon, retained their Hold call on Rathbones’ stock after this morning’s update.

Rae Maile and Ross Luckman said: “There are plenty of moving parts in Rathbones’ Q1 update: FUMA was a touch disappointing relative to our estimates due to elevated outflows, in particular from Investec; operating income was better than expected due to commissions and interest income but fee income was a touch weaker than we had expected; operating margin guidance is unchanged in the mid-20% range, despite the benefit of synergies.

“The cyclical issues impacting the sector are apparent, the question remains whether the merger with Investec will position the business any more strongly for the secular growth opportunity when the cyclical issues pass. On that point we remain to be convinced.”

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Character Group

Character Group, the Oldham-based toys retailer, says it expects full year profits to exceed current market expectations, in a trading update today.

Announcing interim results for the six months ended February 29, 2024, it saw revenues remain static, but improved its pre-tax profit level.

The group designs, manufactures, and distributes various toys, games, and gifts based on television and cartoon characters. It operates in the UK and other parts of the world under the brand name Peppa Pig, Bluey, Pokemon, My Little Pony, and others.

Figures released today show sales of £57.6m in the reporting period, compared with £57.9 at the same point last year. A pre-tax profit of £2.2m was up on last year’s £200,000 pre-tax profit, mainly due to reduced selling and distribution costs.

Cash and cash equivalents stood at £12.9m at the end of the reporting period, compared with £10.7m the previous year. The group has no long term debt.

An interim dividend of 8p per share remains the same as the prior year.

A group statement said: “We have been encouraged by the enthusiasm with which our product portfolio has been received by our customers. The industry buzz around some of our new releases, such as Terror Fried, and new additions to our established lines, like Goo Jit Zu, is very encouraging, too.

“The group has a strong portfolio of products, underpinned by a strong balance sheet, and has a net cash position with substantial unutilised working capital facilities in place.

“On the back of our first half-year’s performance and these signs of the group’s robust health, we anticipate profit before tax and highlighted items in respect of the full year to 31 August 2024 will exceed current market expectations. The board is comfortable that the group is on course to meet its targets.”

Looking ahead, it said: “We anticipate that the strength of our offering will allow us to at least maintain our market share in our domestic territories and increase international sales, particularly in the US.”

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BAE Submarine at Barrow

Defence group, BAE Systems, is to report to its AGM today that current trading remains strong, as global security tensions remain high.

The group operates factories in Warton and Salmesbury, near Preston, building military aircraft, as well as a submarine building facility in Barrow, and employs around 15,000 staff in the region.

The group will issue guidance to the market that top line sales have increased by over 10% from 2023’s £25.3bn in overall revenue.

Major highlights include a $4bn order from the Australian Government to build Australia’s new fleet of nuclear powered submarines as part of the AUKUS trilateral security pact between the United States, the United Kingdom and Australia.

BAE also welcomed the higher defence spending and the passing of the US supplemental aid package to Ukraine and the commitment by the UK Government to spend 2.5% of GDP by 2030 should build further positive momentum.

Other awards include deals in Denmark, a $365m contract from NASA for the National Oceanic and Atmospheric Administration for Space & Mission Systems to develop and build a new instrument to monitor global air quality and a contract with the UK Ministry of Defence to maintain and repair gifted L119 Light Guns in Ukraine.

Charles Woodburn, BAE Systems Chief Executive, said: “Trading so far this year has been in line with expectations. Operational performance continues to be strong and our backlog and programme incumbencies underscore our confidence in our long-term value-creating model. 

“We’re continuing to deliver on mission critical requirements for our customers, and progress our long-term strategic programmes within the elevated threat environment. We have commenced the integration of our new Space & Mission Systems business in the US following the closing of the Ball Aerospace acquisition in February. Our global presence and diverse portfolio of products and services provide high visibility for top-line growth, margin expansion and cash generation in the coming years.”