February 23, 2017 / 9:10 AM / 3 years ago

Rathbone Brothers profit boosted by stock market gains

LONDON (Reuters) - British wealth manager Rathbone Brothers reported higher than expected underlying pretax profit for 2016 on Thursday, helped by stock market gains following Britain’s vote to leave the European Union.

Rathbones, which can trace its roots to a timber merchants in Liverpool in the 18th century, is over half way through a five-year plan to develop its investment, research and IT capabilities. While associated costs weighed on its pretax profit the company said the strategic overhaul was on track.

The company flagged an additional 5 million pounds ($6.2 million) of costs for 2017, though it could trim this estimate if markets endure a prolonged downturn. Rathbones said it would also consider new acquisitions.

“After a nervous start to 2016, the FTSE 100 performed increasingly strongly as the year progressed, largely reflecting the impact of a sharp fall in sterling after the EU referendum vote,” Rathbone Brothers Chairman Mark Nicholls said. “Nevertheless, the recovery in the second half had a favourable impact on our financial performance.”

The company confirmed that total funds under management stood at 34.2 billion pounds at the end of 2016, up from 29.2 billion a year earlier, helped by stock markets. The FTSE 100 index of leading UK shares rose 14.4 percent in 2016.

Rathbones said net organic growth at its investment management division was 2.9 percent, down from 3 percent, though fee income rose 14.5 percent to 184.8 million pounds.

Costs related to its acquisition of Vision Independent Financial Planning, a move to a new headquarters and charges in relation to client relationships and goodwill all weighed on pretax profit, which fell 14.5 percent.

Stripping out those costs, underlying pretax profit rose 6.4 percent to 74.9 million pounds, ahead of a market consensus of 71 million pounds, Peel Hunt analyst Stuart Duncan said in a note to clients.

That helped underpin a final dividend of 36 pence giving a total dividend for the year of 57 pence a share, up 3.6 percent.

“The results this morning were ahead of our expectations,” said Duncan. “This was achieved during a period of transition and investment in distribution initiatives and the private office.”

“These will contribute to full-year 2017 ... growth, supporting our continuing positive stance on the shares,” he said, raising his target price 2,450 pence a share.

Shares in Rathbones were down 0.3 percent at 2,243 pence at 0810 GMT, broadly in line with the FTSE mid-cap index.

($1 = 0.8037 pounds)

Editing by David Clarke

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