Brooks Macdonald’s share price has taken a hit after revealing higher net outflows and that it lost out on a £244m mandate.
The wealth manager haemorrhaged £506m over the six months to 31 December 2019, the first half of its financial year, a reversal from the same period last year when it drew in £241m worth of net new business.
Shares in the company sunk as much as 6% to £20.63 as markets digested the news on Thursday morning, but had rebounded to £21.00 as trading commenced.
Grosvenor Consultancy pulls £244m contract
Half of the redemptions came from Brooks losing a single mandate with Grosvenor Consultancy. The contract accounted for £244m in funds under management (FUM) and £600m in annualised revenues.
Brooks said the agreement with Grosvenor was terminated after the the two parties failed to reach “a satisfactory commercial arrangement” over the purchase of a sponsorship company attached to the Grosvenor funds.
Despite an uptick in redemptions, the DFM’s FUM remained stuck at £13.1bn between the end of June and December, lifted by £448m of performance related gains.
Brooks’ total investment performance was up 3.4%, ahead of the MSCI WMA Private Investor Balanced Index which rose 2.9%.
Chief executive adopts cautious stance
Chief executive Caroline Connellan (pictured) said it had been “a positive six months” with the group continuing to improve its margins over the medium term and acquiring Scottish manager Cornelian, a move she said would create additional value for shareholders.
But she continued to adopt a cautious stance on markets.
“While the recent UK election has removed some uncertainty, the broader macroeconomic and political backdrop makes it prudent to remain somewhat cautious about the short-term outlook for flows,” said Connellan.
The DFM said revenue, underlying profit and underlying profit margin were ahead compared with the same period last year and in line with expectations.
In its last set of full-year results Brooks said its drastic staff cuts had helped boost profit margins by 12%.
The wealth manager axed 50 jobs last January as part of a streamlining plan which it said would help the group respond to clients’ and advisers’ evolving needs and make it easier for advisers to do business with the firm.
Last October Brooks’ founder John Gumpel announced he would be leaving the business after 28 years.
