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Quilter, hived off from Old Mutual, 'still has a lot to do' as profits rise

Wealth manager Quilter PLC, in maiden earnings results after emerging from the Old Mutual Ltd. group, reported an increase in adjusted profit but warned that it may see higher-than-expected asset outflows because of some personnel departures.

The U.K.-based firm reported a 16% rise in adjusted profit before tax from continuing operations in the first half — to £110 million, up from £95 million in the first half of 2017. Continuing operations represent Quilter's business excluding the results of the single strategy business, which was sold to shareholders, and Old Mutual Wealth Italy.

Quilter also saw a 2% increase in assets under management and administration over the half, with positive net flows of £2.2 billion bringing AUMA to £116.5 billion.

On an Aug. 8 conference call, CEO Paul Feeney said the business was where the company expected it to be at this stage, but added that "we still have a lot to do."

In 2016, Old Mutual CEO Bruce Hemphill announced the breakup of the Anglo-South African financial services group, saying regulatory changes made the group structure "a costly structure with insufficient synergies to justify those costs." Quilter was known as Old Mutual Wealth Management before its June 2018 demerger and IPO. It sold its single-strategy asset management division, Old Mutual Global Investors, earlier in 2018 to private equity firm TA Associates for £583 million.

Quilter Investors, the company's multi-asset business, saw its AUMA increase to £18.4 billion by June 30, up 30% from a year before. Quilter International, the offshore international arm based in the Isle of Man, showed a sharp drop in its first half inflows to £100 million (from £400 million in the first half of 2017), which Feeney attributed to "challenging" international markets.

Market performance in the second quarter was "softer" than in the first, said CFO Tim Tookey. He said the company's balance sheet — which includes £587 billion in cash, £221 billion of which is to be paid to shareholders in a special dividend — is "a conservative position [which is] what you would expect from a newly listed company with a few key areas to conclude and resolve."

Its cash holdings also include £69 billion set aside for "any potential fine" arising from FCA redress action for Old Mutual Wealth Life Insurance's use of exit fees, Tookey said.

The company saw 12 of its investment managers depart during the demerger and flotation, and Feeney said it "would not be a surprise if these departures led to higher than trend outflows" in the coming 12 to 18 months.

The second half of the year will see Quilter introduce a new customer platform, whose code has been delivered and which is undergoing validation, Feeney said.

The migration, which he said was on track and within budget, will start with a soft launch on a limited basis in late 2018 or early 2019.