Rathbones Group Plc · LSE:RAT
Rathbones — Rathbone Brothers — H1 2018 Earnings Presentation
38 slides from Rathbones's earnings presentation, July 2018
Slide 1: 2018 Interim results
Rathbone Brothers Plc 2018 Interim results
Slide 2: Financial results
Rathbone Brothers Plc | Interim results Page 2 Financial results Paul Stockton Finance Director
Slide 3: A strong first half
Rathbone Brothers Plc | Interim results Page 3 A strong first half Underlying profit before tax — underlying profit before tax1 increased 11.5% to £48.3m reflecting both income Growing growth and controlled expenditure +11.5% £48.3m profitability — profit before tax reached £43.7m (H1 2017: £43.3m £
Slide 4: Continuing growth in funds under management
Rathbone Brothers Plc | Interim results Page 4 Continuing growth in funds under management Investment Unit Total Total Management Trusts H1 2018 H1 2017 H1 2018 H1 2018 (£bn) (£bn) (£bn) (£bn) Opening funds under management 33.8 5.3 39.1 34.2 Investment Management Inflows 1.8 1.0 2.8 2.5 — sources o
Slide 5: Income up 7.6% year-on-year
Rathbone Brothers Plc | Interim results Page 5 Income up 7.6% year-on-year H1 2018 H1 2017 % FY 2017 Steady Investment Management basis point return on (£m) (£m) change (£m) average funds under management¹ 74.4 74.9 2.3 3.2 13.8 12.6 Average FTSE 100 Index 7418 7322 1.3 7426 (on quarterly billing da
Slide 6: Expenditure in line with expectations
Rathbone Brothers Plc | Interim results Page 6 Expenditure in line with expectations H1 2018 H1 2017 % FY 2017 Fixed staff costs (£m) (£m) change (£m) — lower average fixed staff costs per employee largely reflects Fixed staff costs 46.8 44.7 4.7 87.8 2017 pension changes Average FTE1 employees — sa
Slide 7: Profit before tax
Rathbone Brothers Plc | Interim results Page 7 Profit before tax H1 2018 H1 2017 % FY 2017 (£m) (£m) change (£m) Underlying operating income 153.2 142.4 7.6 286.0 Head office relocation Underlying operating expenses (104.9) (99.1) 5.9 (198.5) — assignment of leases on surplus property at 1 Curzon St
Slide 8: Balance sheet management
Rathbone Brothers Plc | Interim results Page 8 Balance sheet management 30/06/18 31/12/17 Assets (£m) (£m) Total own funds1 277.0 216.8 Pillar 1 own funds requirement 79.4 78.3 — Share issue of £60 million increased own funds ahead of the acquisition of Surplus before Pillar 2 197.6 138.5 Speirs & J
Slide 9: Business update
Rathbone Brothers Plc | Interim results Page 9 Business update Philip Howell Chief Executive
Slide 10: An overview of the first half
Rathbone Brothers Plc | Interim results Page 10 An overview of the first half H1 2018 − underlying investment management net organic growth rates steady at consistent levels of quality Investment − staff equity plan introduced to increase employee ownership in the firm and align incentives with thos
Slide 11: Acquisition of Speirs & Jeffrey
Rathbone Brothers Plc | Interim results Page 11 Acquisition of Speirs & Jeffrey ─ Scotland’s largest independent wealth manager with a total of £6.7bn funds under management and c.8,500 clients ─ completion expected in Q3 2018 with initial consideration of £104m payable on completion ─ £79 million i
Slide 12: Looking ahead to the second half
Rathbone Brothers Plc | Interim results Page 12 Looking ahead to the second half - complete Speirs & Jeffrey acquisition and plan for successful transition to Rathbones Key - continue to work through our technology programme priorities - process enhancement to create capacity across the business - c
Slide 13: Appendix
Rathbone Brothers Plc | Interim results Page 13 Appendix
Slide 14: The wealth management sector remains robust
Rathbone Brothers Plc | Interim results Page 14 The wealth management sector remains robust — UK wealth industry continues to grow, reaching nearly £1 trillion of assets — Rathbones own funds reached £39.9 billion, a c. 4% market share UK wealth industry assets Total Rathbone funds under Investment
Slide 15: Rathbones at a glance
Rathbone Brothers Plc | Interim results Page 15 Rathbones at a glance Rathbone Brothers Plc, through its subsidiaries, is a leading provider of high-quality, personalised investment and wealth management services for private clients, charities and trustees. Our services include discretionary investm
Slide 16: Leading UK private client wealth managers
Rathbone Brothers Plc | Interim results Page 16 Leading UK private client wealth managers Top 10 UK Wealth Managers by funds under management (£billion)1 Client referrals Intermediaries 89.9 Independent Part of a larger financial group Distribution focused competitors 53.9 46.6 44.5 6.7 39.7 39.9 37
Slide 17: Working through our strategy
Rathbone Brothers Plc | Interim results Page 17 Working through our strategy Client referrals Intermediaries Specialist Unit Trusts Strategic Acquisitions services initiatives — new client — leveraging Vision — charities — investment — Private Office — company or introductions — B2B panels - — Green
Slide 18: Our business model
Rathbone Brothers Plc | Interim results Page 18 Our business model What makes us different How we do it What makes us different A sound investment case Individual relationships with clients For investors — a relationship based approach — our service is delivered directly though investment managers —
Slide 19: Pooling intellectual capital across the firm
Rathbone Brothers Plc | Interim results Page 19 Pooling intellectual capital across the firm Investment committees: Research Asset allocation team UK equity Overseas equity Collectives RIM & RUTM investment Fixed income managers Stewardship External research Rathbones recommendations and stock lists
Slide 20: Analysing the balance sheet
Rathbone Brothers Plc | Interim results Page 20 Analysing the balance sheet 30/06/18 31/12/17 30/06/17 30/06/18 31/12/17 30/06/17 Assets (£’000) (£’000) (£’000) Liabilities (£’000) (£’000) (£’000) Cash and balances with central banks 1,306,881 1,375,382 1,480,932 Deposits by banks 3,785 1,338 9,065
Slide 21: Underlying PBT (£m) / EPS (p)
Rathbone Brothers Plc | Interim results Page 21 Underlying profits before tax¹ (£m) and EPS (p) 90 80 70 Underlying PBT (£m) / EPS (p) 68.3 60 53.2 51.2 51.1 50 43.2 40 44.2 41.6 30 35.7 20 24.8 10 29.3 32.3 61.6 37.2 33.2 70.4 35.3 39.6 74.9 43.3 44.2 87.5 48.3 0 2 2014 2015 2016 2017 2018 1st Half
Slide 22: Earnings per share
Rathbone Brothers Plc | Interim results Page 22 Earnings per share H1 2018 H1 2017 Pre tax Post tax Pre tax Post tax EPS (p)1 EPS (p)1 (£m) (£m) (£m) (£m) Underlying profit attributable to shareholders 48.3 38.7 76.1 43.3 34.5 68.4 Gain on plan amendment of defined benefits pension schemes - - - 5.5
Slide 23: Shareholders at 30 June 2018
Rathbone Brothers Plc | Interim results Page 23 Shareholders at 30 June 2018 Lindsell Train Investment Mgt Rathbones staff, former staff & directors 14.4% Mawer Investment Mgt 28.8% MFS Investment Mgt¹ Blackrock Aviva Investors 12.7% Kabouter Troy Asset Mgt Heronbridge Investment Mgt Baillie Gifford
Slide 24: Segmental results
Rathbone Brothers Plc | Interim results Page 24 Segmental results H1 2018 Investment Management Unit Trusts Indirect Total (£m) (£m) (£m) (£m) Net investment management fee income 98.4 15.9 - 114.3 Net commission income 21.0 - - 21.0 Net interest income 6.9 - - 6.9 Fees from advisory services and ot
Slide 25: Reconciliation of equity to total own funds
Rathbone Brothers Plc | Interim results Page 25 Reconciliation of equity to total own funds HY 2018 FY 2017 H1 2017 (£m) (£m) % change (£m) Equity Share capital and share premium 207.3 145.7 42.3 145.3 Reserves 246.0 222.5 10.6 202.5 Less: - Unverified year to date earnings (23.8) - (13.9) - Own sha
Slide 26: Total operating expenses
Rathbone Brothers Plc | Interim results Page 26 Total operating expenses H1 2018 H1 2017 5% 4% 2% 4% 4% 3% 8% 9% 38% 43% 9% £109.5m £121.3m 21% 3% 2% 24% 21% Staff - payroll (excluding variable) Staff - variable Staff - other Property Depreciation & amortisation Professional Settlements IT
Slide 27: Capital expenditure
Rathbone Brothers Plc | Interim results Page 27 Capital expenditure £10.4m 12 10 1.9 8 2.3 £ million 6 £4.6m 0.6 4 6.2 1.7 2 2.3 0 FY 2017 H1 2018 Purchased software IT & other Property¹ — FY2018 expenditure expected to be in line with FY2017 ¹ Property expenditure in general only includes leasehold
Slide 28: Other information
Rathbone Brothers Plc | Interim results Page 28 Other information H1 2018 H1 2017 % change FY 2017 Investment Management Total rate of net growth in funds under management 2.5% 4.0% 3.9% Revenue margin on FUM (excluding Charities team) (bps) 78.0 77.2 1.0 75.5 Revenue margin on Charities team FUM (b
Slide 29: Analysis of operating income
Rathbone Brothers Plc | Interim results Page 29 Analysis of operating income Basis point return from fees Basis point return from commission 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 0 10 20 30 40 50 60 0.0 5.0 10.0 15.0 20.0 25.0 Basis point return from interest Advisory fee income (£m) 201
Slide 30: Investment Management client base
Investment Management | Interim results Page 30 Investment Management client base Analysis of funds under management¹ 4.0% Service level Service level 2.5% 9.7% Private clients Discretionary 11.0% ISAs Advisory 35.3% Trusts Execution-only 12.8% Charities Pensions 13.9% Other 93.5% 17.3% Size of clie
Slide 31: Where our clients' assets are invested
Rathbone Brothers Plc | Interim results Page 31 Where our clients’ assets are invested¹ Direct FY 2015 13.1% 42.6% 30.3% 8.9% 5.1% holdings 51.3% H1 2016 13.7% 39.1% 31.2% 9.4% 6.6% Collectives FY 2016 13.4% 38.8% 31.8% 10.0% 6.0% 48.7% H1 2017 13.3% 36.9% 33.5% 9.2% 7.1% FY 2017 13.1% 36.4% 34.3% 9
Slide 32: Offices
Rathbone Brothers Plc | Interim results Page 32 Offices Funds under Number of investment Office location management professionals¹ (£bn at 30/06/2018)² London 145 18.3 Liverpool 26 2.2 Edinburgh 26 2.6 Other offices³ 97 12.1 Total 294 35.2 ¹ As at 30 June 2018 excluding 15 fund managers in Rathbone
Slide 33: Annual management fees
Rathbone Brothers Plc | Interim results Page 33 Annual management fees¹ Discretionary Management fees (subject to VAT) Applied across Main Funds and ISA funds (pa)² First £250,000 1.20% Next £500,000 1.00% Next £750,000 0.75% Balance over £1,500,000 0.50% Illustration of fees (how our management fee
Slide 34: Performance: retail funds
Unit Trusts| Interim results Page 34 Performance: retail funds Performance¹ and Quartile Ranking at Size of fund YTD 2018 1 year 3 year 5 year 10 years 30 June 2018 (I-Class units) (£m)† Rathbone Global Opportunities Inst Acc in GB 11.43 1 19.72 1 71.02 1 122.10 1 1,401.1 Sector : IA Global TR in GB
Slide 35: Performance: outcome oriented funds
Unit Trusts| Interim results Page 35 Performance: outcome oriented funds Discrete year performance1 at Size of fund 1 year 3 years 5 years 30 June 2018 (S-class shares) (£m)† Rathbone Multi Asset Total Return Portfolio S Inc TR in GB 2 1.68 11.83 23.24 294.7 Offset Instrument : LIBOR GBP 6m +2% TR i
Slide 36: Reference sheet
Rathbone Brothers Plc | Interim results Page 36 Reference sheet Common Equity Common Equity Tier 1 capital as a proportion of total risk Tier 1 ratio: exposure amount Leverage ratio: Tier 1 capital resources as a percentage of total assets, excluding intangible assets and investment in associates, p
Slide 37: Corporate governance at Rathbones
Rathbone Brothers Plc | Interim results Page 37 Corporate governance at Rathbones We believe it is in the best interests of our clients for the companies in which we invest to adopt best practice in corporate governance. This provides a framework in which each company can be managed in the long-term
Slide 38: Important information
Rathbone Brothers Plc Page 38 Important information The value of investments and the income from them may go down as well as up and you may not get back your original investment. Past performance should not be seen as an indication of future performance. Changes in rates of exchange between currenci