Liontrust's strategies fail to find favour

Liontrust Asset Management (LIO) swung to a net loss of £3.49mn for FY2024, a year notable for a marked reduction in the fund management group’s assets under management (AUM) and a failed attempt to acquire GAM Holding AG. The good news is that because of its healthy cash buffer, the group kept its annual dividend pay rate at 72p a share.

Group chairman Alastair Barbour said the tilt at Gam was undertaken to add “investment teams that complement [Liontrust’s] existing capability or expand distribution”, a straightforward enough objective, but unfortunately not enough to win the support of the majority of Gam's shareholders. The failed bid resulted in £9.51mn in related costs within administrative expenses, which came on top of another £5.59mn in restructuring costs for past acquisitions.

Indeed, past deals to acquire Majedie Asset Management and the Architas UK investment business have weighed on performance as initial expectations have been recalibrated due to “an increase in net outflows which led to actual revenues being lower than originally forecast”. The main problem is that pension funds and institutional investors have shied away from UK equities, although there are signs that sentiment may be improving. In any event, the group's strategies failed to find favour, resulting in an 11.5 per cent reduction in AUM to £27.8bn.

FactSet consensus estimates point to an increase in AUM, coming in at £28.7bn, although the outlook on adjusted earnings is not favourable. Many of the issues which have weighed on investor sentiment are beyond management’s control, but the prospect of a reduction in the risk-free rate of return could rekindle domestic interest. We revert to hold following a positive technical signal recorded midway through March.

Last IC View: Sell, 576p, 16 Nov 2023