BT Investment Management Ltd profit soars: Is it a buy?

Credit: Images Money

On a day where National Australia Bank Ltd. (ASX: NAB) will most likely steal most of the headlines, there was another noteworthy interim result announcement this morning from fund manager BT Investment Management Ltd (ASX: BTT).

All in all a very promising half for the company despite a challenging environment and a stronger Australian dollar. A few highlights are as follows (all figures are compared to the previous corresponding period):

  • Fee Revenue: +32% to $279 million.
  • Base Management Fee Margin: Increased two basis points to 0.50%.
  • Cash Net Profit After Tax: +26% to $88.6 million.
  • Earnings Per Share: +32% to 29.1 cents.
  • Interim Dividend: +6% to 18 cents per share.
  • Funds Under Management: +11% to $78.8 billion.

These solid results mean BTIM’s impressive growth continues. Funds under management have now grown by a compound annual growth rate of 16% per year in the last four years.

The reason for this strong performance has largely been down to the success of its JO Hambro business over in the United Kingdom. That business saw net inflows of $2 billion during the period, offsetting the $500 million outflow from its Australian business.

I’m a big fan of BTIM and have talked numerous times before about how I believe it is a great investment. My only real concern was the damage the Brexit vote could do to the company’s performance.

Management has tried to put shareholders at ease by advising that it believes it is in a strong position to effectively manage the outcome. Although it does admit that the implications of a Brexit are nothing more than guesswork at this stage. From my calculations there is approximately $7 billion of funds under management from UK-based clients that could be impacted.

But it is also worth considering the damage that a Brexit could do to the British pound. Should the pound weaken considerably it would most probably cause significant currency headwinds for the company, lessening the impact of its lucrative British operations on overall revenue. The JO Hambro segment produced 72.5% of BTIM’s total revenue in the first-half of the year.

If the Brexit is averted then I would expect both the British pound and BTIM to rally strongly. As the vote is too close to call at the moment, an investment in BTIM would be quite risky. Investors who are looking for exposure to the industry might want to consider Macquarie Group Ltd (ASX: MQG) instead.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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