River and Mercantile has revealed it swung to a loss in the first half of 2022, weeks before it will be decided whether Assetco will snap up the boutique manager.
The fund group posted a statutory loss after tax of £6.8m over the six months ended 31 December 2021 compared to a £3.3m profit the year before.
However, adjusted underlying profit before tax, which includes the impact of performance fees, was up 4% at £6.4m.
Underlying revenue rose by just £0.4m to £34.6m. While the group took in 6% higher net management fees over the period, advisory fees dropped sharply by over one fifth.
River and Mercantile said the loss was down to transaction costs related to the sale of its Solutions business to Schroders, including remuneration and impairment charges primarily from the loss of an institutional individually managed account (IMA).
Associated outflows from Hanbury’s departure have been ‘modest’
The £230m sale is one of several significant changes made by the group during the period to improve profitability and realise value for shareholders. It is also seeking permission to offload its US Solutions business to the management team, further signalling its return to “pure play asset management”.
But the biggest development is its likely acquisition by Martin Gilbert’s latest vehicle Assetco. Shareholders of the asset and wealth management consolidator will decide at its AGM on 13 April whether to greenlight the £98.8m deal.
Since the possible sale was announced, River and Mercantile has endured several blows to the business, with the resignation of founding partner and heavy-hitter Dan Hanbury and the loss of a £927m client mandate.
Addressing Hanbury’s departure in the interim results, CEO Alex Hoctor-Duncan (pictured) said outflows from his strategies have been “modest,” adding that several clients have invested in the Smaller Companies fund since George Esnor took over. Former Schroders man Matt Hudson has been lined up to replace Hanbury on the UK Equity Income fund.
Equity Solutions AUM falls 28% from lost mandate
During the interim period, River and Mercantile saw a marked improvement in net flows, which came in at £1.3bn compared to £0.1bn a year ago.
Its UK wholesale business brought in £285m, though its institutional arm racked up £847m worth of redemptions. This took assets in its Equity Solutions division to £4.2bn.
However, at the end of February AUM had plunged back down by 28%, mainly reflecting the hit from the pulled institutional mandate.
“We have a mandate to accelerate growth, to broaden our platform and to stand out as a differentiated, purpose driven asset management firm,” Hoctor-Duncan said.
“I believe our purpose and culture will deliver superior investment excellence and establish the foundation of our platform for consistent and high-quality growth. We will become an attractor of talent and an incubator of innovation.”
