Companies and economies around the world continued to feel the effects of the coronavirus-enforced lockdowns during the second half of 2020. Investment Week reports on how they have done since then.
Brooks Macdonald
Brooks Macdonald's total funds under management (FUM) increased by 13.3% in the six months to 31 December to a record £15.5bn, which the firm said was driven by a combination of its acquisition of Lloyds Banking Group's Channel Islands funds, net inflows of £367m and an outperformance of the MSCI PIMFA Private Investor Balanced index.
The firm's revenue increased by 1.8% to £55.9m, while its underlying profit before tax was up 21.7% to £14m. Profit margins increased "significantly" from 20.9% to 25.1% between H1 and H2 2020, which the firm said was driven by "higher revenue and strong cost discipline".
The "exceptional gain" related to Brooks' Lloyds Channel Islands acquisition, as well as improved investment performance, led to statutory profit before tax increasing by 84.1% to £14.4m between the first and second half of the year.
Meanwhile, group net flows were "marginally positive" over the entire calendar year, with the exception of the firm's Defensive Capital fund which saw outflows "in line with trends in the IA Targeted Absolute Return sector". Brooks' interim dividend was raised by 9.5% to 23p, which the firm said underlined "the board's confidence in Brooks Macdonald's strong balance sheet and future prospects".
CEO Caroline Connellan said the firm's record level of funds under management "shows that the investment we have made and the actions we have taken are delivering financial and strategic benefits for the business now and positioning us well for the future".
"Looking ahead, client sentiment has held up well and, although the timescale for easing of lockdown restrictions remains uncertain, we continue to have a positive outlook," she added. "Momentum is building in the business and we are on track to meet full year profit expectations."
Based on Brooks Macdonald's half-year results, Peel Hunt has left its 2021 profit expectations for the firm - which is upgraded after January's update - unchanged at a profit-before-tax of £29.8m and an earnings-per-share of 150p.
"Although we recognise the flows have been more challenging, it is worth highlighting that Brooks is set to deliver strong earnings growth in the coming years," it said. "The return to more positive flows should be the catalyst for the shares to re-rate, and today's statement should give some confidence that this will happen sooner rather than later."
Peel Hunt added that, based on its forecasts, the stock now trades on a December 2021 EV/EBIT of 8.6x, which is in line with the sector average.
"The stock now yields 3.5%, with the dividend well covered by earnings and expected to grow in coming years as cover is reduced," it continued. "We retain our positive recommendation, and see material upside."
Ashmore Group
Emerging markets specialist group Ashmore has announced a pre-tax profit increase of 14% for H2 2020, which was driven largely by the outperformance of its investment vehicles.
According to its H2 2020 results, AUM growth for the firm grew by 11% over the last six months of the year to $93bn, with investment performance contributing $10.8bn and offsetting $1.14bn of outflows.
The total outflows - which were driven by £2bn's worth of intermediary retail client money switching out of local currency mandates despite £0.6bn of inflows from institutional investors in total - were expected by the firm. It explained that "higher churn rates" and market relative investment driving assets under management is "typical for the initial recovery period immediately following a fall in markets such as that experienced in early 2020".
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During the last six months of the year, 97% of assets under management beat their respective benchmarks, while 50% of AUM outperformed over one year. Some 39% outperformed over three years, while 91% of AUM has outperformed over the last five years.
Mark Coombs, CEO of Ashmore Group, said: "[The firm's] performance in this period reflects the early stages of a typical recovery cycle, with strong investment performance driving AUM growth and delivering mark-to-market gains on the firm's seed capital investments.
"Given the recovery in average AUM and revenues naturally occurs with a lag, Ashmore has continued to focus on managing operating costs and has therefore maintained the Group's operating profitability at a high level. The firm has also continued to make progress against its strategic objectives by diversifying its investment capabilities and growing the scale of its local asset management platforms."
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Ashmore's operating performance reflects a 6% fall in assets under management compared to the same period over the previous year, with adjusted net revenue and EBITDA both 12% lower. Due to its "ongoing focus on cost control", according to the firm, the adjusted EBITDA margin was kept at 68%.
Meanwhile, the firm's equities under management increased by 41% over the six-month period, due to net inflows of $300m and performance-added value of $1.6bn.
Looking ahead to 2021, the CEO said the delivery of vaccination programmes around the world will be "critical" to an economic recovery, and that government and central bank stimulus will provide "near-term support" but lead to US dollar weakness over time.
"As the short-term effect of this stimulus wears off, investors will seek higher growth and returns than are available in the developed markets, and will continue the trend of increasing allocations to the emerging markets, which offer superior growth and attractive valuations," he added.
