Quilter rallies over 7% despite ‘modest decline’ in net flows

Quilter’s share price has started 2023 with a bang. Last week, the wealth manager’s stock rallied over 7%, despite a trading update that suggested a decline in flows for Q4 2022. Boosting sentiment was data showing the UK economy actually expanded in November. But Quilter still has some way to go to recover from 2022’s tough operating environment.

Quilter’s [QLT] share price rallied last week despite the company warning that it expected a modest decline in net flows for Q4 2022 compared to the previous quarter, but will “remain positive”. In an update released Monday 9 January, the company said that positive net flows had been offset by adverse market movements for Q4.

Yet, data showing the UK economy grew in November helped spur Quilter and other wealth managers’ stocks upwards. Between 9 January and 13 January, Quilter’s share price climbed 7.7%, while Schroders [SDR] was up 6.2% and Abrdn [ABDN] 6.9%. All three outpaced the FTSE 100’s 3.3% gain. November’s growth in GDP fuelled optimism that the UK economy may have technically escaped a recession. This could be good news for Quilter and its peers.

A tough 2022 for Quilter

2022 was hard for Quilter. A drop in the value of bond and equity markets led to a decline in net inflows. In the first half of the year, Quilter reported a 12% fall in assets under management to £98.7bn. Paul Feeney, chief executive officer said that equity markets were experiencing “one of the worst periods of negative performance in recent years”, while the trading update described operating environments as “tough".

By the end of Q3 2022, net inflows had dropped 2% to £300m and assets under management (AUM) had declined to £96.9bn — AUM had been £108.5bn at the same time the previous year.

In the third quarter, the company said it had seen “solid” performance from its Quilter channel with quarterly gross platform flows of £637m, down from £654m in the same period the previous year. Quilter said the performance of its High Net Worth segment had been “resilient”, with moderately lower gross flows and stable retention leading to net flows for the quarter of £222m. The FTSE 250-group highlighted its retention rates which remained “stable” among its high net worth segment and reflected the “seasonality of the period”.

What’s happening with Quilter’s share price

Last year’s tough trading environment weighed on Quilter’s stock price. Having opened 2022 at 173.4p a share, by 6 July Quilter’s shares had hit an intraday low of 95.4p. A rumoured takeover by Natwest [NWG] boosted the stock 13% to 123.81p on 1 August. However, that momentum didn’t last long, with Quiter’s share price entering a downward trend before hitting a low of 81.99p on 12 October. Since then the stock has recovered somewhat to close  Friday 15 January at 103.65p.

Where next for Quilter?

Despite Quilter’s stock experiencing a strong start to 2023, it hasn’t been all good news. The Financial Ombudsman Service told Quilter it had to compensate a client over “unsuitable” pension advice given by a company connected to Quilter in the 1990s. Fitch has also has assigned Quilter's proposed issue of subordinated Tier 2 notes a BBB- rating.

2023 could be better for Quilter, especially if last week’s market optimism is sustained. However, it’s certainly wait and see on that front. Quilter’s own chief investment officer Marcus Brookes commented that November’s data did little to alleviate concerns that the UK had entered a recession, adding that “only time will tell just how long and deep a recession will be”.

For income seekers, Quilter paid out a full year dividend of 1.2p for 2022, down from the 1.7p paid out the previous year, while the stock carries a 5.62% forward yield.

The 13 analysts polled by Refiniv have a 103p median price target on Quilter. Hitting this would represent a 0.6% upside on Friday’s close. The highest target is 158p, while the lowest is 83p.