Ninety One's closing assets under management decrease by 8% in H1, to £132.3bn

• Risk-on business operating in a risk-off environment.
• Closing assets under management decreased by 8% in the six months, to £132.3 billion.
• Net outflows of £3.2 billion.
• Long-term investment performance remains competitive.
• Basic earnings per share decreased by 16% to 9.4 pence and adjusted earnings per share decreased by 7% to 9.0 pence.
• Interim dividend of 6.5 pence per share, consistent with stated dividend policy.
• Staff shareholding increased to 28.0%.

Johannesburg - Ninety One, an independent investment manager founded in South Africa in 1991, and listed on the London and Johannesburg Stock exchanges this morning announced its interim (H1) results for the period ended 30 September 2022.

In the announcement, Hendrik du Toit, Ninety One's founder and chief executive said that the operating conditions during the first half of the 2023 financial year were extremely challenging, adding that the caution the company signalled at the beginning of this reporting period was justified. Like many other business leaders at the helm of global organisations, du Toit  lamented the impact of rising inflation and interest rates, instability in energy markets, rising geopolitical risk and political uncertainty on top of sharply lower financial asset prices to have translated into bear market conditions for the reporting period.

Adjusted operating revenue

Ninety One said that management fees decreased 1% to £312.8 million (H1 2022: £314.8 million), against a 1% increase in average AUM. The average management fee rate was 0.5 bps lower at 45.2 bps (H1 2022: 45.7bps). This is largely due to a change in the mix of investment strategies owned by our clients. Performance fees were lower at £11.0 million (H1 2022: £13.6 million), largely due to negative absolute returns in this period.

Other income of £6.6 million (H1 2022: loss of £0.3 million) mostly consists of a foreign exchange gain of £7.4 million (H1 2022: loss of £0.3 million) which was mainly due to US dollar asset translations where the pound sterling weakened against the US dollar.

Assets under management (AUM)

Closing AUM decreased by 8% to £132.3bn (31 March 2022: £143.9bn), reflecting net outflows of £3.2bn (H1 2022: net inflows of £3.9bn) and negative market and foreign exchange movement of £8.4bn (H1 2022: positive £5.2bn). Average AUM increased 1% to £138.2bn (H1 2022: £137.5bn).

Profit before tax

Profit before tax decreased 16% to £110.6 million compared to the prior period (H1 2022: £132.1 million), which included the profit on the sale of Silica. Adjusted operating profit decreased 7% to £107.9 million (H1 2022: £115.6 million) and is more reflective of Ninety One’s operating performance.

Earnings Per Share (EPS)

Basic earnings per share (“Basic EPS”) decreased by 16% to 9.4p (H1 2022: 11.2p), while diluted EPS decreased 15% to 9.4p (H1 2022: 11.1p). Basic headline EPS (“Basic HEPS”) and diluted HEPS both decreased 5% to 9.4p (H1 2022: both 9.9p).

Adjusted EPS decreased broadly in line with adjusted operating profit by 7% to 9.0p (H1 2022: 9.7p), which is more reflective of the core operating performance of Ninety One.

Total assets and liabilities

Total assets increased to £837.2 million (31 March 2022: £829.5 million), largely due to an increase in trade and other receivables within other current assets. Trade and other receivables increased from £199.4 million to £300.6 million mainly due to an increase in subscription debtors. Cash and cash equivalents decreased to £325.9 million (31 March 2022: £406.6 million) following payment of variable compensation in April 2022.

Ninety One has limited seed investments. Seed capital for mutual funds was £2.7 million (31 March 2022: £2.7 million) and co-investments in alternatives totalled £9.9 million (31 March 2022: £6.3 million).

Total liabilities increased marginally to £498.6 million (31 March 2022: £487.9 million). There is no debt financing on the balance sheet. Equity decreased to £338.6 million (31 March 2022: £341.6 million), mainly reflecting the decline in profits for the period, net of the payment of the prior year final dividend and the impact of share scheme movements.

Ninety One has established employee benefit trusts for the purpose of purchasing shares and satisfying the share-based payment awards granted to employees. Over the period, 10.0 million shares were purchased through these trusts and 3.1 million shares were released to employees, resulting in a total of 24.5 million shares which is 2.7% of Ninety One’s 922.7 million total shares in issue.

Dividends

The Board has considered the strength of the balance sheet and the outlook for the remainder of the year. In line with the stated dividend policy, the Board has declared an interim dividend of 6.5p per share. Of this, 4.6p per share represents 50% of profit after tax prior to the recognition of non-operating items and 1.9p per share represents after-tax earnings after ensuring Ninety One has sufficient capital to meet current or expected changes in regulatory capital requirements and investment needs, as well as a reasonable buffer to protect against fluctuations in those requirements. The interim dividend will be paid on 15 December 2022 to shareholders recorded on the UK and South African share registers on 2 December 2022.

Hendrik du Toit, Founder and Chief Executive Officer, commented: “Rising inflation and interest rates, increased geopolitical uncertainty and sharply lower financial asset prices contributed to challenging operating conditions. The high levels of client engagement could not counter the impact of this environment on our results. We saw net outflows in the first half, caused by lower levels of new business volumes and portfolio derisking by clients.

"We are anticipating that these tough conditions will persist for the foreseeable future. We remain committed to our long-term strategy and focusing all our attention on managing the investments of our clients to the standards they expect and delivering industry-leading service levels. In spite of the challenges, our people are motivated, experienced and adequately supported for the task at hand.”

Outlook

Ninety One said it is cautious about the near term, adding that its working assumption is that we will be operating in challenging markets for the foreseeable future. The investment manager said it continues to build its business for the long term, while applying appropriate cost discipline.

It said it is a resilient business with a diversified offering and a long track record of operating in different market conditions, and sees ample long-term growth opportunities ahead in spite of current market conditions and the rapidly changing world in which we operate.