If you hold shares in currency manager Record(LSE: REC), I've only one word to say to you this morning: "Ouch!" The group has just published its fourth quarter's trading statement to 31 March and the share price is 11.78% lower as a result.
Record in a spin
Record was on a bit of a roll until this morning. Most of the growth over the last year has now been wiped out in an hour. Such is investing...
Assets under management equivalents dipped 2.7% from $63.9bn on 31 December to $62.2bn, three calendar months later. Expressed in sterling, AUME fell 6.3%, from £47.3bn to £44.3bn. They were lacklustre last year as well.
Record lost one $1.7bn passive hedging mandate in the quarter, but was awarded another worth $2.2bn, maintaining client numbers at 60. Similarly, global stock market and exchange rate movements largely balanced each other out, although US dynamic hedging clients saw negative returns, as the US dollar weakened against a weighted basket of hedged currencies. Emerging market performance was also negative.
Record earned no performance fees in the quarter. Chief executive James Wood-Collins warned that moves to minimise costs and add value for clients could also reduce total passive hedging management fee revenues by 10% in the year to 31 March 2019. However, he reckons that fee losses should balance out in the longer run.
There is little for investors to celebrate today, plus the added worry over fees. Long-sighted investors might see this as a buying opportunity, with City forecasters pencilling in steady earnings per share (EPS) growth over the next three years. Meanwhile, the forecast yield of 6.6% is generous, although cover is thin at exactly 1. Record trades at a forecast 15.3 times earnings. That makes it strictly for brave bargain hunters.
FTSE 100 listed Standard Life Aberdeen(LSE: SLA) is down 15% in the last six months, following the loss of £109bn of Scottish and Lloyds Banking Group assets under management. The loss represents just 5% of revenues, so the negative reaction may have been overdone, and much of it could be made up by cost-cutting following the recent £11bn merger. Aberdeen Standard still remains one of the UK's largest asset managers and pension providers.
February's move to sell the group's insurance arm to Phoenix for £3.2bn was better news, injecting cash and freeing up capital, while the assets will remain under SLA's management. It could even pick up more from elsewhere in the Phoenix portfolio - a win-win if it happens.
Rising from the ashes
Standard Life Aberdeen's full-year 2017 profits dipped slightly despite a decent investment performance, which is a worry giving strong stock market growth over the time. However, management still lifted the full-year dividend by 7.5% to 21.30p a share. Standard Life Aberdeen's forecast yield is now a whopping 6.2%, covered 1.3 times.
The stock's forward valuation is a slightly discounted 13.2 times earnings but analysts are predicting a 5% drop in EPS this year, so expect further share-price choppiness. I feel the long-term outlook is brighter than today's numbers might suggest, especially for those seeking a sturdy 'buy and hold' income stream.
Our top analysts have highlighted five shares in the FTSE 100 in our special free report "5 Shares To Retire On". To find out the names of the shares and the reasons behind their inclusion, simply click here to view it immediately with no obligations whatsoever!
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Standard Life Aberdeen. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.