River and Mercantile is to invest heavily in its distribution in order to grow the business over the next three to five years, despite warning that the impact of coronavirus will be a “challenge”.
River and Mercantile's interim results for the six months ended December 2019, published today (March 16), showed one of the company's key priorities for 2020 was to develop its distribution to drive growth over the coming years.
According to the results, River and Mercantile will invest £3.8m, primarily in 2020 and a similar level in 2021, across its UK, Australia and US businesses.
James Barham, group chief executive, said there would be investment across all aspects of the distribution function from sales to client service and marketing.
He said the firm had a capacity across its products in excess of £200bn, yet was only consuming £42bn.
He said: “[The] positive demand cycle is a critical reason why we are now investing in distribution, in order to accelerate growth, and scale the business in the next three to five years.
“We are facing extremely volatile market conditions and whilst I am excited about the development of the business over the balance of our financial year and the next few years, we do recognise the challenges these markets create.
“Our investment teams are working to ensure that the impact on our clients' portfolios are minimised and that we are positioned to take advantage of opportunities as they arise.”
The firm reported a growth of 24 per cent in its assets under management, which was a result of growth in its fiduciary management, derivatives and institutional equities parts of the business.
Fees from its advice offering grew 1 per cent in the six months hitting £5.4m, up from £5.3m for the six months ended June 2019.
Statutory net profit after tax was £4.1m, compared to £6.7m for the six months ended December 2018, as a result of lower performance fees partly offset by increased management fees.
Financial markets have been shaken in recent weeks by the growing coronavirus crisis, with many seeing their biggest daily declines in 30 years as countries close borders and introduced lockdowns to curb the coronavirus crisis.
Despite additional measures from the Federal Reserve announced last night (March 15), the FTSE this morning saw a 7 per cent drop, while Euro Stoxx 50 was down 6 per cent.
Despite this River and Mercantile believes it will continue to grow throughout 2020.
Mr Barham said: “Whilst we all face challenges in the current climate especially with the uncertainty associated with COVID-19, the market reaction and the medium-term economic impact, we have confidence in our business' resilience and ability to continue to grow our business and to deliver for our clients."
He added: “I believe we have taken the necessary steps so far to prepare for the increasing challenges that will develop as the government moves through the phases of management of the pandemic.
“We are prepared and able to run our business on the basis that all our people are forced to work from home for a reasonable period. All our systems are accessible from various locations enabling our people to carry out their duties safely as though they were in the office.
“The significant volatility in investment markets is another dimension to the challenge. I am acutely aware of our responsibility to our clients as the steward of their assets and financial strategy. Whatever the circumstances, we will continue to fulfil our commitments to them in the weeks and months ahead.”
amy.austin@ft.com
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