Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

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April 4, 2023

Rathbone look after the wealthy, Ramsdens the not so wealthy

Macro & Overnight

Despite elevated inflation, the Reserve Bank of Australia didn’t raise its policy interest rate yesterday.

After the OPEC+ decision to cut production, oil prices have increased, but markets don’t see a significant or persistent problem.


UK Company News

Rathbones has announced the acquisition of Investec Wealth UK. Investec Group will become a strategic shareholder in the enlarged Rathbones. Investec will take 29.9% of Rathbones’ enlarged ordinary voting shares but, via convertible issue, will have an economic interest of 41.25%. On completion, this deal adds £39.7 billion of FUMA, 325 investment managers and 45 financial planners, and approximately 40,000 clients. It aims to deliver at least £60 million on a pre-tax cash basis by consolidating technology platforms and operations, leveraging Rathbones’ technology platform and additional net interest income due to migrating Investec W&I UK’s client and firm cash onto Rathbones’ platform and banking licence. 

Subject to regulatory approval, the combination of Rathbone and Investec Wealth creates a new giant in the rapidly consolidating UK wealth management sector. It will undoubtedly cause the departure of some wealth managers and their clients as all styles and preferences won’t feature sufficiently in the enlarged entity for 100% retention. It is also worth noting that one of the synergies is the more efficient capture of wealth client interest income via Rathbone’s UK banking license. I suspect this is an item regulators will look at more closely in the future. 

Likewise, the fast-growing UK floor coverings distributor delivered a Q1 revenue growth of 19.7%, with significant growth in its logistics infrastructure. The focus to achieve a return on investment in sales and point of sale collateral was vindicated with a 25.7% increase in Likewise Branded Revenue. It thinks it can double its current cutting capacity aligning with its aspirations to achieve revenue of well over £200 million. It has a strong balance sheet and is inherently cash generative, which will accelerate as the speed of investment reduces from 2024. The board remains confident in meeting market expectations for 2023. 

Tony Brewer, the founder and CEO of Likewise and former CEO of industry leader Headlam, is leading an improbable charge into the UK floor coverings distribution market. His track record and today’s positive update suggest he is worth following.  

Ramsdens, the pawnbroker and jeweller, increased retail gross profit by over 20%, foreign currency exchange by 40%, and the pawnbroking loan book grew by 13%. Its gold purchases have increased by over 20%. 

Ramsden’s shares have done well, but the value here is being the (nearly) last man standing in legally offering credit to customers in the lower socioeconomic groupings. With payday lending, weekly collected credit and subprime motor loans having been cracked down on, the pawnbroker is the only remaining legitimate option for far too many people in this country.


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