Polar Capital  

Analysts buoyant despite Polar's profit hit

Analysts buoyant despite Polar's profit hit
(Pexels Alesia Kozik)

Analysts are bullish on Polar Capital’s future despite the group posting a drop in performance.

The asset manager reported an 18 per cent year-on-year drop in pre-tax profit to £62.1mn in the year to March 31.

In its full year results, submitted to the stock exchange this morning (June 27), Polar attributed this to a lower contribution from performance fee profits compared to last year’s “near record highs”.

Peel Hunt said the results were “solid”, highlighting that core profits were ahead of its expectations, rising 35 per cent to £69.4mn, but that it suffered through the tough markets seen since the start of the year.

“Whilst the business has been making good progress, the deterioration in market conditions in recent months is proving difficult for Polar,” the company said in a research note.

It added: “However, the business remains robustly profitable and the benefits of diversification are reducing the headwind from the technology franchise.”

Peel Hunt has therefore downgraded its AUM and flow assumptions, as well as reducing performance fee expectations, contributing to a 12 per cent reduction in profit forecasts next year.

Chief executive officer of Polar Capital, Gavin Rochussen, said investment performance has been “more challenging” than the prior year when the group’s portfolios benefitted from the so-called “Covid-19 winners”.

He added: “The group's strong balance sheet and range of differentiated fund strategies, supported by our performance led approach and our strong culture, positions us well to weather the current backdrop of inflationary pressures, macro uncertainty, rising interest rates and market volatility."

Assets under management nudged up 6 per cent to £22.1bn, and a dividend of 32p per share will be paid next month, bringing the annual dividend to 46p, a 15 per cent increase.

The group saw net inflows of £391mn, however the last quarter of the year was the first three-month period of net outflows since 2020.

Polar’s technology funds saw net redemptions of £1.3bn, following the rotation away from growth stocks earlier this year.

These flows were partially offset by net inflows of £873mn into the Polar Capital Emerging Market Stars strategy, alongside £561mn invested into the healthcare strategies, £143mn into the alternative convertible bond funds, and £85mn into the European Opportunities fund.

The Sustainable Thematic Equities strategy, launched in September last year, saw £120mn in net inflows.

Research firm Equity Development highlighted the robustness of Polar’s balance sheet, which has net assets of £156mn, cash and equivalents of £121mn and no debt. 

The note said: “We…note that active managers generally have seen large outflows in Q1 2022, but historical trends suggest that this tends to reverse as markets recover, which bodes well for Polar.”