RIV.L Regulatory News (RIV)

3 February 2020

LEI: 2138005C7REHURGWHW31

River and Mercantile Group PLC

Second Quarter Trading Update

31 December 2019

River and Mercantile Group PLC (R&M), the asset management and investment solutions business, today provides a trading update for the three months and six months ended 31 December 2019.

Summary of the three months ended 31 December 2019:

·; Fee earning AUM/NUM increased in the quarter by 1.4% to £42.3bn.

·; In the quarter ended 31 December 2019:

- Gross Sales were £1.8bn;

- Net flows were £0.7bn;

- Net Sales ratio was 1.8% of opening AUM/NUM at 1 October 2019; and

- Investment performance was negative £160m or 0.4% of opening AUM/NUM.

Summary of the six months ended 31 December 2019:

·; Fee earning AUM/NUM increased in the six months by 6.2% to £42.3bn.

·; In the six months ended 31 December 2019:

- Gross Sales were £3.0bn;

- Net flows were £1.8bn;

- Net Sales ratio was 4.4% of opening AUM/NUM at 1 July 2019; and

- Investment performance was positive across all Divisions, adding £0.7bn or 1.8% of opening AUM/NUM.

 James Barham, Group Chief Executive, commented:

This quarter has seen positive net sales for our Wholesale business for the first time since the fourth quarter of 2017. This reflects strongly on the team led by David Hanratty who joined the business as Global Head of Distribution last year and demonstrates the clear commitment to invest in the broader distribution capabilities of the Group. I will discuss this in greater depth along with our longer term plans when we announce our interim results in early March.

The net sales ratio for the first half, which measures all client flows, was 4.4% of opening AUM/NUM and the investment return ratio added a further 1.8% of opening AUM/NUM. The combination of net sales and investment performance has generated growth in AUM/NUM of 6.2% in the first half. This is an encouraging outcome at this stage and in line with our total growth rate target of 12% pa.

In the first six months investment performance was positive across all divisions adding £0.7bn in AUM. Again, we have seen the benefits of having our Group divisions diversified in terms of investment exposures with Fiduciary Management performing particularly strongly in the first quarter whereas Equity Solutions investment performance was stronger in the second.

Our view on markets continues to be positive with our River FOURcast indicating Stable market conditions. We believe expectations for economic growth will increase and credit conditions strengthen, setting a supportive environment for asset markets in general and equities in particular. Within equities, conditions should favour value style investing, especially given the attractive starting point.

Since the calendar year end, we have been appointed by a range of additional clients which include a new Fiduciary client mandate of £1.16bn (Fiduciary Management AUM: £630m and Derivatives NUM: £530m). This mandate was signed in January and will transition by the end of this quarter. We are delighted with this appointment, which was based on both the strength of our investment performance (Fiduciary Management annualised return of 10% since 2003) and the innovative solutions that we provide.

We are also beginning to see a growing pipeline of opportunities more broadly across the business and we expect these to materialise later in the year. In addition, we have seen a number of our Solutions clients meet their objectives and following strong investment outcomes are able to reduce their liabilities through insurance. We see this as a positive client outcome in spite of the negative impact on our underlying assets under management or advice.

Assets Under Management (AUM) and Notional Under Management (NUM)

AUM/NUM for the three months ended 31 December 2019.

AUM/NUM for the six months ended 31 December 2019.

Included in Fiduciary Management and Derivative Solutions redemptions in the six months ended 31 December 2019 are £314m of client assets that went to buy out or buy in.

Redemptions in transition in Derivative Solutions represent structured equity transactions with contractual maturity dates in the next 3 months. Redemptions in transition in Fiduciary Management represents a redemption from the River and Mercantile Dynamic Asset Allocation Fund.

Performance and advisory fees

For the three months ended 31 December 2019, performance fee revenues are estimated to be £0.6m, all from Fiduciary Management. For the six months ended 31 December 2019 performance fees aggregate approximately £1.1m. Our current estimate of performance fees for the six months ending 30 June 2020 is approximately £2.0m.

Advisory fee revenues for the quarter ended 31 December are estimated to be £3.0m.

Notes to editors:

R&M is an asset management and investment solutions business with a broad range of services, from consulting and advisory, to fully delegated fiduciary management and asset management.

R&M is focussed on creating investment solutions for institutional pension schemes, insurance and financial intermediaries.

River FOURcast is a proprietary economic model developed by R&M which is used to indicate our future views of the financial markets. The model uses a number of economic and sentiment indicators to determine the potential future direction of financial markets as being: "STABLE", "UPWARD RERATING", "APPREHENSION" or "DOWNTURN".

For further information, please contact:

River and Mercantile Group PLC

Kevin Hayes

Chief Financial Officer

Tel: +44 (0)20 3327 5100

Forward-looking statements

This announcement contains forward-looking statements with respect to the financial conditions, results and business of R&M. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. R&M's actual results may differ materially from the results expressed or implied in these forward-looking statements. Nothing in this announcement should be construed as a profit forecast.

Notes:

Assets Under Management (AUM) represents the assets over which we act either as a discretionary investment manager on a partial or fully delegated basis in accordance with an investment management agreement.

Fee earning AUM/NUM represents amounts on which management fees and performance fees are charged.

Notional Under Management (NUM) represents the aggregate billing notional of derivative contracts and is the basis on which management fees are charged.

Net rebalance and transfers represents the net change in billing notional values of Derivatives (including Gilts) from existing client mandates and can increase or decrease based on changes in the underlying hedging strategies.

The category also represents transfers of client assets between divisions. The different billing structures between divisions, including the use of AUM or NUM, means that transfers will not net to zero.

Net Sales Ratio represents gross sales, redemptions, net rebalance and transfers divided by opening AUM/NUM

Net Investment Ratio represents investment performance divided by opening AUM/NUM.