Ninety One, the asset manager spun out of Investec in 2020, suffered a drop in first-half earnings due to severe volatility in financial markets and client outflows precipitated by the war in Ukraine and accelerating global inflation.
The London- and Johannesburg-listed firm, which reports its results in pounds, said basic earnings per share fell 16% to 9.4p in the six months to end-September, while adjusted operating profit dropped 7% to £107.9m (R2.2bn) in the period.
The company still managed to declare an interim dividend of 6.5p a share, marginally lower than the 6.9p previously.
Ninety One’s closing assets under management dropped 8% in the six months to £132.3bn, driven partially by the fall in value of the listed instruments in which it invests and cumulative net outflows of £3.2bn.
CEO Hendrik du Toit said the outflows were mainly due to some large institutional investors taking pre-emptive action to flee to the relative safety of cash amid signs the Ukraine war, rampant inflation and slowing global economic growth could upend markets.
“If you’re a long-only investment manager one part of your earnings growth is the performance of markets and if markets don’t perform you don’t get the kind of flows that you normally generate,” Du Toit said. “For about 25% of all our reporting periods we’ve had negative flows but over time we generate positive flows and over time the asset base grows. A few large institutions quite cleverly took money off the table and are ... sitting and waiting for opportunities as the market cheapens.”
Financial markets worldwide have been roiled by a combination of Russia’s invasion of Ukraine at the end of February, lingering supply chain disruptions in the wake of Covid-19 and accelerating global inflation on surging fuel and energy costs. At the same time, monetary tightening by the US Federal Reserve has sparked off a series of central bank rate hikes across the globe, further piling pressure on consumers.
“Rising inflation and interest rates, increased geopolitical uncertainty and sharply lower financial asset prices contributed to challenging operating conditions,” Du Toit said.
“High levels of client engagement could not counter the impact of this environment on our results.”
While Ninety One saw a decline in assets under management in all its five key regions — the UK, Europe, Africa, Asia-Pacific and the Americas — Du Toit said the SA business remains “resilient”.
He also praised the Reserve Bank’s decision to begin hiking interest rates early in an effort to contain inflation, though he warned that market pressure is unlikely to let up soon.
“When we consider the outlook, we are cautious about the near term and expect challenging markets to persist for the foreseeable future,” he said. “We will maintain cost discipline but we will not sacrifice long-term growth and organisational stability just to meet near-term financial targets.”
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