InvestmentsOct 21 2014

Numis labels Brooks Macdonald’s Q3 ‘disappointing’

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Brooks Macdonald delivered “weaker than expected net flows” into its discretionary funds under management in a third quarter it labelled “reasonable”.

Broker Numis Securities has downgraded its profit expectations for Brooks Macdonald following what it termed a “disappointing” quarter for the firm.

Brooks Macdonald today reported that its discretionary FUM grew by 2 per cent to £6.68bn in the third quarter of 2014.

The growth came mainly from inflows of £102m along with a £25m uptick through the performance of its portfolios.

Chris Macdonald, Chief Executive of Brooks Macdonald, acknowledged the “more challenging markets” during the quarter but claimed the FUM growth represented “a reasonable start to the new financial year”.

But Numis said the FUM growth was 2 per cent lower than it had expected because net flows had been much lower than their estimate of £262m.

Analysts David McCann said that while the long term outlook for growth at Brooks Macdonald was still strong “we see no need for investors to buy into the stock in the short term”.

However, another broker, Canaccord Genuity, said “reasonable” was a fair reflection of the period, which is Brooks’s “seasonally slowest trading period”.

However, it pointed out that in the same perid in 2013 Brooks had seen 5.2 per cent FUM growth, while in 2012 FUM growth had been 6.5 per cent.

Numis downgraded its earnings per share forecasts for the firm for the next three years this morning and reduced its target price by 5 per cent to 1,470p, keeping its recommendation as ‘hold’. Canaccord Genuity kept its ‘buy’ rating and 1,865p target price.

The London Stock Exchange has shown no movement in Brooks Macdonald’s shares so far this morning, though they had fallen by more than 5 per cent yesterday.