Rathbone Brothers plc (LON: RAT) have announced lower profit expectations in the next 2-3 years, causing share prices to fall.
Underlying operations income amounted to £86.3 million for the first quarter of 2019, with £76.7 million arising from investment management dealings.
In the report published this morning, Rathbone Brothers had increased funds under management and administration by 4.5 per cent to £49.4 billion.
Plans for the next 2-3 years were also unveiled. With plans outlined to invest heavily to enhance organic growth, which will hopefully drive down operating margins in the short term.
In 2018, operating margins reported at 29.4%, and plans are set to lower this by 2022.
Paul Stockton, Chief Executive of Rathbone Brothers Plc, said ““Our funds under management and administration increased marginally in the quarter to £49.4 billion. In difficult markets we continue to focus on providing a quality service to our clients, navigating through ongoing market uncertainty but also selectively investing to pursue organic growth opportunities and develop our business.”
As a result, shares in Rathbone Brothers plc dipped 8.61%, trading at 2,175p 17/11/2019 13:05 BST.
Analysts at Shore Capital said “During an extended multi-year period where Rathbones has grown at a slower (organic) rate than many of its listed DFM peers, we have struggled to see a positive investment case, especially as its rating has generally remained at a premium to such peers.”
Rathbone saw total net fund inflows of £100 million, in the third quarter versus £7 billion, but this was down to the acquisition of Speirs & Jeffrey.
Rathbone said “”This reflected ongoing weak investor sentiment and investment manager departures. Both factors, together with anticipated outflows from short term discretionary mandates, are expected to continue to weigh on net growth in funds under management & administration into 2020,”
Although the stock price has dipped from this company announcement, this could be a short term fall as other firms in the industry have experienced volatility, both positive and negative. These include Augean plc (LON: AUG), Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN).
With the plans to cut operating costs by 2022, this will present a new challenge for Rathbone Brother Plc.