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Ninety One posts strong debt-free balance sheet, despite significant headwinds


Ninety One posts strong debt-free balance sheet, despite significant headwinds
17-05-23 / Tau kaVodloza

Ninety One posts strong debt-free balance sheet, despite significant headwinds

Cape Town - Ninety One, the Anglo-South African asset management business, based in London and Cape Town and dual-listed on the London Stock Exchange and the Johannesburg Stock Exchange has today posted its annual results with an adjusted operating profit having decreased by 10% to £206.9 million (2022: £230.4 million), and adjusted earnings per share (“EPS”) having decreased by 10%, while the basic EPS declined by 19%.

The asset management company said the difference between the adjusted and basic EPS reflects the profit from the sale of Silica and the share scheme net credit in the prior year, adding that in a year of cost pressures fuelled by the highest developed market inflation rates in decades, its variable compensation model has cushioned the decline in underlying earnings.

In his review of the company's annual performance, Chief Executive Officer and Founder, Hendrik du Toit said the comapany believes that this alignment between staff compensation and shareholder experience is vital for the integrity of its business model, in good and bad times, adding that closing Assets Under Management (AUM) decreased by 10% to £129.3 billion (31 March 2022: £143.9 billion), reflecting net outflows and lower asset prices. He said almost two thirds of net outflows were driven by equities, particularly from global and Asian core equity strategies and UK equities. Notwithstanding this, there were still net inflows into some of Ninety One's focus strategies such as global quality, sustainable and natural resources equity strategies. du Toit said the company is working hard to regain positive momentum after a difficult second half.

"The past year was challenging for Ninety One. We faced significant headwinds. We nevertheless remain confident of the underlying strength of our business and the relevance and quality of our proposition to clients. Our people are united and motivated to serve our clients and unlock the compelling long-term growth potential of Ninety One.

"The 2023 financial year has been difficult for our industry and for Ninety One. Coming off a record year in 2022, we faced the combination of higher inflation, the fastest rise in interest rates since we started the business, heightened geopolitical uncertainty, a liability-driven investing (“LDI”) crisis in the UK, significant bank failures in the developed world and energy shortages across the world. All of this led to unprecedented risk-aversion among asset owners. This created significant headwinds for a firm like ours, which primarily offers “risk-on”, public-market strategies.

"Furthermore, and regrettably, we have to mention the deterioration of economic prospects in our original home market, South Africa, where we have a substantial business. We consider it our duty to call this out, but also to work constructively with government, civil society and other stakeholders to improve this situation. 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 opportunity."

Ninety One said over the past year, the majority of the strategies it has offered were not aligned with the immediate preference of asset owners for lower risk or uncorrelated assets. Its skillsets have been carefully developed and curated over many years, and the company remains committed to its long-term strategy. The asset management company said it must be able to withstand periods of low demand, ply its trade and
build the track records and capacity that clients require when they want to allocate to the investment strategies it offers.

It reiterated that its business strategy has not changed, and building strong market positions takes time and commitment and the discipline not to change tack to pursue short-term market opportunities. Over time, it said, it intends to grow by offering client-relevant strategies which produce good long-term results. In the active investment management industry this is referred to as alpha, it added, further explaining that this requires a combination of consistency and creativity which is key to successful innovation over time. In this highly
competitive industry, those who fail to raise their game year after year inevitably fall behind, it said.

"As we have done since inception in 1991, we continue to invest for long-term growth. Ninety One is a resilient business, with a largely risk-on product offering and a track record of navigating difficult conditions and change. We see ample growth opportunities ahead as risk appetite returns, so long as we keep delivering for our clients and serve society at large. We are mindful of the fact that we have no business without the support of our clients and the communities within which we operate.

"We thank them and our other stakeholders profoundly for their support after 32 years in business. We will remain actively involved in the move to a more sustainable future, including the financing of this multi-decade
transition. Our stated purpose is, after all, to invest for a better tomorrow.
Our focus remains firmly on execution. We look to the future with confidence," concludes du Toit.

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