They have reported their first half numbers today and they look a bit disappointing with assets under management (AUM), turnover and profits all down slightly. This however is explained somewhat by the difficulties experienced in emerging markets in recent months and cost associated with their takeover of Scottish Widows Investment Partnership (SWIP) which has just been completed.
Despite this they claimed they had enjoyed further encouraging demand for certain fixed income and property strategies and continued to make progress in developing a diversified pipeline of new business which will be added to AUM in the coming months.
In addition to this they flagged that many of the costs associated with the acquisition had been taken in the first half, while many of the benefits would not be felt until the second half. That probably explains why full year forecasts are for a rise against the fall seen at this stage.
The only other positive was the dividend which was raised by 12.5% to 6.75 pence, despite the fall in underlying earnings from 14.88 to 14.32 pence. They say this is in line with the Board's objective to pay a growing dividend each year. While they claimed the addition of SWIP will reinforce their progressive dividend policy and while they will incur some one-off integration costs over the next year, it will apparently enhance their ability to return surplus capital to shareholders over time.
The shares are on around 14x this years expected earnings after a 4% share price fall first this, although this is prior to any changes on the back of these numbers, I guess there could be some more downgrades. The dividend which is forecast to be 17.7 pence, up by 10.7% versus the 12.5% increase in these numbers leaves the shares on a relatively attractive yield of around 4%. The shares have been range bound over the last year and were prior to today towards the top end of that range. In the absence of markets breaking out on the upside or emerging markets coming back into favour, then a breakout to the upside seems unlikely in the short term. Indeed given this one is quite high beta given the business exposure to markets, if we get another sell off in markets over the summer this one could well revisit the bottom end of its trading range. If it does head in that direction and goes below say 400 pence then I think it might be interesting to revisit it as a potential longer term buy.