Ninety-One’s annual dividend fell 10% to 13.2 pence per share in the year to March 31 following significant market and other headwinds that saw a £10.6 billion (about R138bn) net annual outflows of asset under management (AUM).
Coming off a record 2022 and many years of growth in AUM, the London and JSE-listed asset manager faced higher inflation, a fast rise in interest rates, heightened geopolitical uncertainty, a liability-driven investing (LDI) crisis in the UK, bank failures in the developed world and energy shortages across the world.
All of this led to risk-aversion among asset owners, creating headwinds for a firm that primarily offers “risk-on”, public-market strategies, the group said.
“This (the decline in AUM) is disappointing” and the group was working hard to turn around the outflow that had occurred mainly in the second half,” CEO Hendrik du Toit said in an online presentation yesterday.
On the JSE, the share price slid 5.4% at one point yesterday to R38.31 after the results were released.
Du Toit said although they were not overly exposed to particular clients, most of the decline in AUM was from three clients who had reallocated their assets and who, importantly, continued to be clients of the group. The decline in AUM was not due to the group’s performance, he said.
He said economic prospects in their original home market, South Africa, were deteriorating.
“These circumstances have impacted our results, in particular our net flows. However, it has not dampened our motivation. Ours is a battle-hardened and resilient business, adept at navigating change and finding opportunities,” Du Toit said.
Assets under management (AUM) decreased by 10% to to £129.3bn.
The variable compensation model cushioned the decline in underlying earnings.
“We believe this alignment between staff compensation and shareholder experience is vital for the integrity of our business model, in good and bad times,” the group said,
Profit before tax reduced by 20% to £212.6 million. Adjusted operating profit decreased by 10% to £206.9m. Basic earnings per share decreased 19% to 18.2 pence and adjusted earnings per share decreased 10% to 17.3 pence. The balance sheet was strong with no debt.
“We have identified long-term opportunities, which match our capabilities, and intend to pursue them with vigour. These include global and international equities, emerging market equities, emerging market fixed income, including specialist credit and sustainable investing,” said Du Toit.
He said they were innovating in the sustainability space where growth was anticipated in the coming years.
In South Africa, he said Ninety One was better equipped than most of its domestic competitors to deal with the recent liberalisation of exchange controls in the country.
“The outcome has not been positive for the South African industry,” he said.
“Across our Client Groups we have experienced flow pressure, often due to asset allocation decisions as opposed to dissatisfaction with service or performance. We do not expect the bulk of those big allocation changes to be repeated over the coming year and we intend to regain those allocations when market conditions normalise,” he said.
However, he warned market conditions might potentially include volatile and possibly unsupportive financial market conditions.
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