Britain’s Jupiter Fund Management beat full-year profit forecasts on Monday, buoyed by inflows into its equity funds, only to see its shares drop after it flagged an impending rise in operational costs.
Asset managers have been impacted by increased market volatility in recent months on the back of concerns around the outlook for economic growth, although Jupiter’s funds posted strong performance for the year and 2016 inflows were positive.
While revenue, pretax profit and dividend all beat a company-supplied consensus of analyst expectations, shares in Jupiter slid at the open after it said a change in how it runs its continental Europe funds could cost 7 million pounds a year.
Shore Capital analyst Paul McGinnis said while the results were slightly ahead of both his and the market’s expectations, the cost of changing how it ran its Luxembourg funds was higher than he had expected.
“This will put our current 2016 forecast PBT (pretax profit) of 167.3 million pounds under pressure for downgrade,” he told clients in a note, flagging the stock as a “sell”.
Shares in Jupiter initially spiked to their highest in nearly a month before turning lower to be down 3.3 percent at 391.5 pence by 0835 GMT, the second-biggest fallers in a 0.6 percent weaker FTSE mid-cap index.
Despite the share-sapping response to the prospect of higher costs, the company posted a forecast-beating 9 percent jump in revenue to 329.5 million pounds, after a 5.5 percent rise in the management fee it charges for administering each client’s funds.
That was driven in large part by demand for its European equity and strategic bond funds, and, despite a volatile start to the year, Chief Executive Maarten Slendebroek said 2016 flows were “net positive” and following a similar pattern of demand.
The higher revenue underpinned a 2.9 percent rise in full-year pretax profit to 164.4 million pounds, compared with a forecast 161.4 million, and a 29 percent increase in its full-year dividend to 25.5 pence per share.
The company said it would continue to focus on diversifying its business by opening branches in Spain and Italy and launching funds. Slendebroek said he also expected funds managed in continental Europe to be relatively unaffected should the UK vote to leave the European Union in a June referendum.
“I really strongly believe that the route we have in place … will be absolutely fine in five years’ time as well,” he said.