Profits crash at Liontrust

Liontrust (LIO) grabbed the headlines for all the wrong reasons after failing to land its controversial takeover of rival manager GAM earlier this year. The fallout from that episode was realised in these results as the company booked £8mn of charges in the half, out of a total of £11mn related to the failed bid. This, combined with a £30mn impairment charged for its Majedie acquisition, tipped the company into a significant statutory pre-tax loss of £10mn.

"The board is pleased that Liontrust attempted to acquire GAM and then remained resolute in sticking to a price that we believe was fair for the value of the business," the company said. 

Liontrust’s main problem is that its environmental, social, and governance (ESG) and UK equities focus just isn’t popular with investors who can earn decent interest on cash again. 

Net outflows increased by 50 per cent to £3.2bn, to leave total assets under management (AuM) 12 per cent lower at £27.7bn. The main reason for the impairments was that pension funds and institutional investors have shied away from UK equities, which has affected the mandates that Liontrust inherited from Majedie after the takeover. While this does not affect the company's net cash position, it calls into question the ultimate worth of the takeovers. 

Numis analyst David McCann was unsparing in his assessment of Liontrust’s problems. “We think [Liontrust] is cheap for a reason, namely the persistent net outflows, the lack of an obvious strategy or catalyst to return the group to net inflows, the lack of an obvious growth strategy more generally,” he wrote in a note. 

Trading at around eight times earnings for 2024, the shares are cheap, but the results were easily the worst from an asset manager we have seen this half. Sell.

Last IC View: Hold, 749p, 21 Jun 2023