Quilter share price slips back despite takeover talk boost

Quilter’s [QLT.L] share price has slipped back towards the 100p level after closing for the week at 103.35p on Friday 2 September, following an early August bounce after fresh acquisition rumours in the UK wealth management company.

UK bank NatWest is reportedly one of several suitors for Quilter, with the latest takeover conjecture coming just before the FTSE 250 stock’s recently published interim figures, which yielded mixed results, but with some promising signs as the company focuses on reducing costs. Analysts’ latest commentary on Quilter also suggest there’s some potential upside in the stock. 

What’s happening with the Quilter share price?

Quilter’s share price is down 27.9% year-to-date as of 2 September as the wealth manager contends with the challenging macro environment and knock-on effect on people’s wallets. The stock hit a 52-week low of 95.4p on 6 July, and the recent trajectory suggests the share price could be about to retest this level — the shares are only 8.33% above that low. Quilter stock is now -45.18% weaker than the 52-week high at 188.53p reached on 4 November last year.

Last week’s close gives Quilter a market capitalisation of £1.44bn, some way off its £2.7bn valuation after it was spun out from Old Mutual and listed on the London Stock Exchange back in 2018.

However, last month, acquisition interest caused the Quilter share price to spike. On 1 August the stock jumped 17.91% in intraday trading to 123.81p as takeover rumours swirled around the business. According to reports, NatWest is in the early stages of considering a bid — the second occasion the bank has been linked with a major acquisition in the financial advice sector in 2022. Several private equity firms, including Bain Capital, BC Partners and CVC, have also reportedly shown an interest in acquiring the mid-cap stock.

Macroeconomic challenges hit inflows

In last month’s half-year results, CEO Paul Feeney admitted the company is facing “revenue headwinds”, as fund outflows rose by £300m. In the first six months, Quilter’s assets under management fell 12% to £98.7bn, down from £111.8bn. Feeney also said the environment for new inflows “has become more challenging” in 2022, with net inflows 30% lower at £1.4bn, compared with £2bn a year earlier.

Quilter’s net advice fee revenue dropped by £1m in the first half to £303m, which the company puts down to last year’s repositioning of its advice business. A strategy to boost adviser productivity has seen a higher-than-usual number of advisers leaving the company.

Focus on costs boosts first-half profit

Despite the net inflows setback, Quilter still managed to increase its H1 profit before tax to £182m, up from a £21m loss a year earlier, thanks largely to a policyholder tax credit of £145m. In contrast, the firm faced a £48m tax charge in the first six months of 2021. Quilter has also focused on cutting costs, and Feeney said last month that “despite revenue headwinds, our cost discipline delivered positive operating leverage and a solid P&L outturn”, despite higher cost challenges following the pandemic. The drive on costs — operating expenses reduced from £248m to £242m — helped operating margin increase from 18% to 20% in the first half of 2022.

Further reinforcing Quilter’s strong first half, the company was named among the top platform performers in the second quarter of 2022 by research specialists Fundscape, after pulling in the most gross and net sales. Quilter and Transact hit £1.9bn in gross sales, ahead of True Potential and Aviva [AV.L], reported FTAdviser. Fundscape said the two vertically integrated platforms “stood out from the crowd” in the second quarter, owing to their support of advisers and investors in the face of extremely tough market conditions.

What are analysts predicting for Quilter’s share price?

The 13 analysts offering 12-month price targets for Quilter have a median target of 130p, with a high estimate of 198.33p and a low estimate of 100p, according to the Financial Times. The median estimate represents a potential upside of 25.8% from Friday’s 103.35p closing price. In terms of analysts’ recommendations compiled by the FT, it’s a mixed bag, with two ‘buy’, three ‘outperform’, five ‘hold’ and three ‘underperform’ ratings. Notably, analysts aren’t recommending a ‘sell’, so for current Quilter investors, it may be a case of sitting tight and riding out the current macroeconomic storm.