Tatton Asset Management Plc · LSE:TAM
Tatton Asset Management — FY2024 Earnings Presentation
46 slides from Tatton Asset Management's earnings presentation, June 2024
Slide 1: Tatton Asset Management Investor and Analyst Presentation
TATTON ASSET MANAGEMENT INVESTOR AND ANALYST PRESENTATION JUNE 2024
Slide 2: Disclaimer
Disclaimer The information contained in this document (“Presentation”) has been prepared by Tatton Asset Management plc (the “Company”). The content of this Presentation has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000. The Slides are be
Slide 3: Agenda
AGENDA Our Team 04 Key Highlights 07 Financial Performance 11 Strategic Update 19 Investment Management Update 29 Summary 40
Slide 4: Introduction to the Team
INTRODUCTION TO THE TEAM
Slide 5: Introduction to the Team
INTRODUCTION TO THE TEAM Paul Hogarth Paul Edwards Lothar Mentel CEO CFO CIO Over 40 years’ experience at Joined Tatton Asset Co-founder of Tatton Capital Board level in the financial Management plc as Group Limited in 2012 services sector CFO in May 2018 Ex CIO of Octopus. Has held Founder of Tatto
Slide 6: Divisional Structure
DIVISIONAL STRUCTURE Tatton Asset Management plc (“TAM” or “Group”) Investment Management Division IFA Support Services Division (“Tatton”) (“Paradigm”) • Tatton Investment Management offers on- platform model DFM MPS, the fastest-growing segment of the wealth management market Paradigm Consulting P
Slide 7: Key Highlights
KEY HIGHLIGHTS
Slide 8: Key Financial & Operational Highlights
KEY FINANCIAL & OPERATIONAL HIGHLIGHTS Financial Highlights Group Revenue Adjusted Adjusted Operating Fully Adjusted Total Year Operating Profit2 Margin2 Diluted EPS3 Dividend £36.8m £18.5m 50.3% 22.91p 16.0p up 13.9% up 12.9% 2023: 50.7% up 11.2% 2023: 14.5p Operational Highlights AUM/AUI1 Tatton I
Slide 9: Strong Financial Performance Since IPO
STRONG FINANCIAL PERFORMANCE SINCE IPO Group Revenue (£m) 18% CAGR Adj Operating Profit1 (£m) 22% CAGR £36.8m £18.5m £32.3m £29.4m £16.4m £14.5m £23.4m £21.4m £11.4m £17.5m £9.1m £15.5m £7.3m £11.9m £6.2m £4.5m Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Mar-17 Mar-18 Mar-19 Mar-20 Mar-2
Slide 10: Assets Under Management / Influence
ASSETS UNDER MANAGEMENT / INFLUENCE Tatton Assets Under Management / Influence1 in £ billion 20.0 Central Bank Pivot 17.5 Fight on inflation 15.0 Russia invades Ukraine 12.5 Global £ billion pandemic 10.0 Mar 2020 Market crash 7.5 5.0 2.5 2013 Tatton Incorporated 0.0 10 1. Assets Under Influence (AU
Slide 11: Financial Performance
FINANCIAL PERFORMANCE
Slide 12: Group Profit & Loss
GROUP PROFIT & LOSS Growth Mar-24 Mar-23 • Group revenue increased 13.9% to £36.8m % £000’s £000’s • Group adjusted operating profit1 increased 12.9% to £18.5m Revenue 13.9% 36,807 32,327 Administrative expenses (18,293) (15,925) • Adjusted operating profit margin1 50.3% Adjusted Operating profit1 1
Slide 13: Divisional Performance: Tatton
DIVISIONAL PERFORMANCE: TATTON AUM/I (£bn) Revenue (£m) o Strong underlying growth in AUM/I to £17.6bn, underpinned by: +26.9% £17.6bn +19.0% £30.9m • Record net inflows of £2.303bn, an average of £192m per month – £13.9bn £25.9m equates to 18.1% of opening AUM - £12.7bn • Net inflows in H2 FY24 wer
Slide 14: Divisional Performance: Paradigm
DIVISIONAL PERFORMANCE: PARADIGM Mortgage Completions (£bn) Revenue (£m) o Paradigm Mortgages grew market share, participating in mortgage -7.8% completions totaling £13.1 billion (2023: £14.5 billion), a 9.7% -9.7% £6.4m reduction year on year, which compares to a 29% year-on-year fall in £14.5bn £
Slide 15: Group Financial Strength
GROUP FINANCIAL STRENGTH Mar-24 Mar-23 £000’s £000’s Mar-24 Goodwill & intangible assets 18,834 19,714 Regulatory capital requirement £4.3m Tangible fixed assets 816 454 Total Shareholder funds £43.3m Trade & other receivables 5,402 3,905 Less: Foreseeable dividend (£4.8m) Tax 2,569 1,379 Less: Non-
Slide 16: Group Cash Flow Bridge
GROUP CASH FLOW BRIDGE Purchase of own Shares Cash generated from operations Capex, lease & other sundry items Dividends paid relates to FY23 final dividend of Mar 10.0p, and FY24 interim Mar FY24 Corporation 2023 dividend of 8.0p tax payments on 2024 account 16
Slide 17: Margin Trends & Evolution
MARGIN TRENDS & EVOLUTION Adj.OP Margin1 Trends (%) o Group long-term Adj OP margin1 trend anticipated to 70.0% grow by 1-2% per annum over the medium-term Tatton Revenue Yield 23.8bps 22.8bps 23.3bps 22.8bps 22.5bps 22.1bps 21.9bps o Margin is driven by Volume, Mix, Yield & Costs 60.0% o Volume – M
Slide 18: Key Drivers & Outlook
KEY DRIVERS & OUTLOOK FY24 FY25 OUTLOOK • Average AUM of £14.1bn v £11.7bn in FY23 • Net inflows £0.9bn after 11 weeks, and expected to normalise to £150m - £200m per month • Record net inflows of +£2.303bn • Markets remain uncertain and volatility remains but REVENUE TATTON • AUM supported by posit
Slide 19: Strategic Update
STRATEGIC UPDATE
Slide 20: Largest Participant in the Fastest Growing Segment of the Market
Largest participant in the fastest growing segment of the market MARKET GROWTH ON PLATFORM FUNDS UNDER MANAGEMENT 2024 £17.6bn 2023 13.4% 2022 £13.9bn 13.4% 2021 £11.3bn 20248 Tatton 2020 £9.0bn 13.9% AUM/AUI 2018 2019 £6.7bn 13.5% 20237 Size: % of on- £4.9bn £6.1bn 12.3% £722bn platform DFM 12.7% 2
Slide 21: Roadmap to Growth – 5 Year Plan
ROADMAP TO GROWTH – 5 YEAR PLAN ASSETS UNDER MANAGEMENT / INFLUENCE • FY24 - AUM/I1 £17.6bn +17.3% ahead of £15bn target • NEW target to reach £30bn of AUM/I1 in 5-years, between FY24 to FY29 £18.6bn • Growth to be delivered by organic net inflows, averaging over £2.0bn per year • Maintaining strong
Slide 22: Tatton AUM Growth by Firm Cohort
TATTON AUM GROWTH BY FIRM COHORT AUM growth, showing assets generated from each year’s new firms (‘cohorts’) 975 £18.0bn 1000 869 Financial year £16.0bn 900 2024 746 800 £14.0bn 2023 668 700 2022 £12.0bn Number of Firms 595 2021 600 AUM (£bn) £10.0bn 2020 445 500 2019 £8.0bn 341 400 2018 £6.0bn 2017
Slide 23: Tatton – Opportunity Update
TATTON – OPPORTUNITY UPDATE CONTINUED PROGRESSION Mar 2022 Mar 2023 Mar 2024 Number of firms 746 Number of firms 869 Number of firms 975 Direct firms Paradigm firms Direct firms Paradigm firms Direct firms Paradigm firms 581 / 78% 165 / 22% 703 / 81% 166 / 19% 821 / 84% 154 / 16% AUM £11.3bn AUM £12
Slide 24: Growth Through Non-Paradigm IFA Relationships
Strong growth through accelerating number of non-Paradigm IFA relationships, with sizeable opportunity for further growth Non-Paradigm firms now represents 821 firms and 62% of AUM • Successfully increased penetration of non-Paradigm firms from £5.9m of average AUM per firm in Mar-19 to £12.6m in Ma
Slide 25: Evolved MPS Offering
EVOLVED MPS OFFERING CO-BRANDED WHITE LABELLED APPOINTED INVESTMENT TATTON MPS TATTON MPS ADVISER (AIA) MPS 23 arrangements 11 arrangements 3 arrangements £1,199m AUM (Mar24) £1,062m AUM (Mar24) £362m AUM (Mar24) • Offering jointly branded client • Offering IFA firm branded • Offering a joint invest
Slide 26: Impact of Consumer Duty
Impact of Consumer Duty Fair value of Helpful Customer Product & services Consumer products & service fit for purpose understanding services Tatton MPS Market Impact • Tatton MPS aligned to principles of consumer duty • Sets higher and clearer standards of consumer protection across financial servic
Slide 27: Paradigm: Mortgages, Compliance & Protect
PARADIGM • The current market is resilient, but this continues to be tested by Membership growth 2017 - 2024 economic factors, consumer confidence & affordability constraints 2000 1250 Mortgage • Q1-2024 delivered a marked increase in both properties for sale & Protection buyer activity leading to a
Slide 28: Investment Case
✓ Leading market position – the market leader in the UK DFM MPS market with £17.6bn1 of AUM/I, operating in the fastest growing segment of the UK wealth market Large barriers to entry - breadth of investment and INVESTMENT CASE ✓ service offering with +11-year investment track record, and a wide dis
Slide 29: Investment Management Update
INVESTMENT MANAGEMENT UPDATE
Slide 30: Proposition Enhancement – 2024
PROPOSITION ENHANCEMENT – 2024 Passive Fund range replicating Tatton Tracker MPS, complementing Core range BACKGROUND PURPOSE CONSTRUCTION OCF BENEFITS Reduction of CGT CGT optimisation MPS portfolio, 25-30 bps for global CGT roll-up allowance led to for tax exposed enhanced by ETF multi-asset Simpl
Slide 31: Money Market Portfolio Follow Up
Money Market (MM) Portfolio follow up MM PORTFOLIO vs MPS RANGE Existing MPS range of risk profiles complemented by a “risk profile 1 or 2” money market MPS Chart: Since launch 16 Aug to June 10 2024 Money Market MPS in solid dark blue, Source: TattonIM and Morningstar, 11/06/2024 31
Slide 32: MPS Investment Portfolio Returns – 10 Years
MPS INVESTMENT PORTFOLIO RETURNS 10 years to 31st March 2024 Portfolio Performance (per cent.) - core product set annualised, after Risk Return - 10 Years to 31st March 2024 DFM charge and fund costs 12.0% ARC Active Tracker Hybrid Peers1 10.0% Defensive 3.2 3.5 3.5 2.4 Annualised Return 8.0% Cautio
Slide 33: MPS Investment Portfolio Returns – 5 Years
MPS INVESTMENT PORTFOLIO RETURNS 5 years to 31st March 2024 Portfolio Performance (per cent.) - core product set Risk Return - 5 Years to 31st March 2024 annualised, after DFM charge and fund costs 12.0% ARC Active Tracker Hybrid Ethical Peers1 10.0% Defensive 2.1 2.3 2.2 3.3 2.1 Annualised Return 8
Slide 34: MPS Investment Portfolio Returns – 1 Year
MPS INVESTMENT PORTFOLIO RETURNS 1 year to 31st March 2024 Portfolio Performance (per cent.) - core product set Risk Return - 1 Year to 31st March 2024 annualised, after DFM charge and fund costs 25.0% ARC Active Tracker Hybrid Ethical Peers1 20.0% Defensive 5.3 6.5 5.9 9.6 4.7 Annualised Return 15.
Slide 35: Ethical Investment Portfolio Returns
ETHICAL INVESTMENT PORTFOLIO RETURNS 5 years to 31st March 2024 Risk Return - 5 Years to 31st March 2024 Tatton Fund Performance (% - ethical product set, annualised, after DFM charge and fund costs 12.0% ARC 10.0% Ethical Peers1 Annualised Return 8.0% Defensive 3.3 2.1 6.0% Cautious 5.2 3.4 4.0% Ba
Slide 36: Distribution of AUM Across Proposition Matrix
DISTRIBUTION OF AUM ACROSS PROPOSITION MATRIX 45 multi-asset portfolio choices that satisfy multi-manager, index tracker, income drawdown and ethical investment choices across 6 standard UK risk profiles (3-8 out of 1-10) and a UK home bias set as well as a global market capitalisation weighted set
Slide 37: Investment Backdrop – 2024
INVESTMENT BACKDROP – 2024 Resilience of economy to high rates continues – earnings STATUS QUO – China suffers growth picks up Low inflation, but strong economic outlook limits BACK TO domestic demand weakness room for substantial rate MID CYCLE cuts Central bank pivot led Bond markets doing central
Slide 38: 2024 Market Variables
Labour markets still 2024 MARKET linchpin both for yields and for VARIABLES Risks: demand Wildcards: AI boom/bust, Higher rates default cycle risk China BETWEEN SOLID vs. demand resilience US budget deficit Watching high yield spreads EXPANSION AND CREDIT for widening DEFAULT CYCLE FEARS UK: Balance
Slide 39: Investment Outlook – 2024
INVESTMENT OUTLOOK – 2024 Cycle rewind: Markets grind higher as earnings steadily improve STRONG SENTIMENT, Sentiment: The 2008/2009 GFC and the COVID Pandemic lead to next BUT RISK OF RATE CUT disaster behind every corner thinking DISAPPOINTMENT Interest rates: Will come down, but likely not more t
Slide 40: Summary
SUMMARY Growing the IFA relationships to grow AUM • New Roadmap to Growth target to reach £30bn AUM by 2029 • Organic growth continues to be a key strategic focus, through existing channels and continuing to promote cobranding, white labels, back book migrations and AIAs. • Further disciplined M&A a
Slide 41: Appendices
APPENDICES
Slide 42: Clearly Defined Growth Strategy
CLEARLY DEFINED GROWTH STRATEGY Increase Tatton’s market share Deepen Tatton’s IFA relationships to through organic growth grow AUM/I • Significant opportunity to strengthen existing • MPS market continues to mature and is IFA relationships, particularly with non- forecast to grow from £131bn1 today
Slide 43: Maximising Shareholder Value
MAXIMISING SHAREHOLDER VALUE • The Group has continued its growth trajectory and delivered against its financial performance targets • Earnings generated from the business are issued to shareholders as dividends or reinvested in the business to drive future growth to maximise shareholder value £115m
Slide 44: Tatton Share Price
TATTON SHARE PRICE COMPARISON TO PEER GROUP Share price performance comparison v peer group 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -40.0% -50.0% 1 TAM PLC Peer Group Average FTSE AIM All Share 44 1. Selected peer group companies, including AJ Bell, Rathbones, Brooks Macdonald, Polar
Slide 45: Tatton Ecosystem
TATTON ECOSYSTEM Direct Tatton Ecosystem Nucleus Direct Firms Paradigm Firms Aviva Tenet Firms Fintel Firms TAM PLC (Group Propositions) Paradigm 8AM Firms Consulting Company Mar-24 Proposition Transact Other Strategic Partners Sesame Bankhall Tatton MPS £15.294bn MPS Paradigm Tatton Mortgages AUM M
Slide 46: Exceptional Asset Retention Provides Strong Visibility
Exceptional asset retention provides strong visibility March 2024 Consolidation True Potential Tatton AUM • 19 IFAs £16.551bn 1.4% Attrition1 c.£236m Retention Avellemy 98.6% • Ascot Lloyd Benchmark Other Consolidators 46 1. Attrition of assets under management from consolidators
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