Brooks Macdonald Group plc · LSE:BRK
Brooks Macdonald — FY2020 Earnings Presentation
42 slides from Brooks Macdonald's earnings presentation, September 2020
Slide 1: Overview and full year results
Overview and full year results Year ended 30 June 2020 Caroline Connellan, CEO Ben Thorpe, Group Finance Director Robin Eggar, Managing Director, UKIM Positive year, strong financial performance
Slide 2: Caroline Connellan, CEO
Caroline Connellan CEO BM BROOKS MACDONALD
Slide 3: A positive year with strong financial performance and two acquisitions
A positive year with strong financial performance and two acquisitions • Continued to execute strategy with discipline and rigour, delivering what we said we would – now a more robust business and confident about the future Underlying profit margin (%) • Successful “protect to thrive” response to pa
Slide 4: “Protect to thrive” approach through COVID-19
“Protect to thrive” approach through COVID-19, emerging from lockdown as a stronger organisation Focusing on • Initiatives to support physical and mental health • Improved employee • Extensive communication, regular “pulse” surveys, with engagement health and positive feedback • Increased buy-in for
Slide 5: Ben Thorpe
Ben Thorpe Group Finance Director Note: Numbers may not always cast due to rounding
Slide 6: Strong performance delivering record revenue and underlying profit
Strong performance delivering record revenue and underlying profit... Total revenue (£m) Underlying profit before tax Underlying profit before tax (£m) margin (%) +2.7% +1.6pts +11.1% 98.6 105.7 108.6 21.2% 23.0 18.8% 19.6% 18.5 20.7 FY18 FY19 FY20 FY18 FY19 FY20 FY18 FY19 FY20 Statutory profit befo
Slide 7: FUM up 4% on FY19 to new record
FUM up 4% on FY19 to new record, net flows in FY20 impacted by client sentiment and focus on business quality 16 14 CAGR 14.4% +4.1% 1.0 12 10 £bn 8 13.1 13.7 6 12.3 10.3 4 8.0 2 0 FY16 FY17 FY18 FY19 FY20 Growth 11.9% 26.0% 19.2% 6.8% 4.1% Organic net new business 11.5% 11.4% 15.1% 3.3% (5.9%) Acqu
Slide 8: All three business segments delivering additional profit in FY20
All three business segments delivering additional profit in FY20 Group and UK Investment Financial FY20 (£m) International consolidation Total management planning adjustments Revenue 91.4 13.4 3.8 - 108.6 Direct costs (42.0) (8.0) (3.2) (32.4) (85.6) Contribution 49.4 5.4 0.6 (32.4) 23.0 Indirect co
Slide 9: Disciplined approach to costs
Disciplined approach to costs, costs down ex Cornelian and the FSCS levy increase FY19 FY20 Change • Total costs down £2.1m (2.5%) ex Cornelian £m £m £ % and the increase in the FSCS levy. Fixed staff costs (37.1) (39.1) (2.0) 5.4% Variable staff costs (15.5) (10.8) 4.7 (30.3%) • Total Cornelian cos
Slide 10: Adjusting items now more growth focused
Adjusting items now more growth focused FY19 FY20 One-off items recognised in FY20: £m £m Underlying profit before tax from continuing operations 20.7 23.0 Acquisition costs (£4.2m) Costs incurred in relation to the acquisition and Amortisation of client relationships (2.2) (2.9) integration of Corn
Slide 11: Two strongly accretive acquisitions in the year
Two strongly accretive acquisitions in the year, one complete, the other on track Brooks Macdonald’s acquisition criteria: (i) high quality business; (ii) compelling strategic and cultural fit; (iii) value-adding through strong EPS accretion • Acquisition announced November ‘19, completed February ‘
Slide 12: FY21 guidance points
FY21 guidance points • Outlook remains uncertain. Pipeline recovering to FY20 levels in UKIM. Lead time on converting pipeline to new business currently somewhat extended • International pipeline recovering more strongly given Channel Islands are nearly “back to normal”, although FUM some other Inte
Slide 13: Robin Eggar
Robin Eggar Managing Director, UKIM
Slide 14: Good progress over FY20 and well positioned for the future
We have made good progress over FY20 and we are well positioned for the future People Investment performance • Continued recruitment and investment in talent • Investment performance of 1.0% for FY20, ahead across Investment Management and Business of MSCI PIMFA Balanced Index, which fell 3.5% Devel
Slide 15: The opportunity for UKIM is excellent
The opportunity for UKIM is excellent and gross inflows held up well in FY20 The organic growth opportunity for UK Investment Management Wealth is growing in the UK… … as is the number of advisers. FY20 flows and pipeline Forecast UK assets by wealth Number of advisers in directly band1 (£trn) autho
Slide 16: Our Responsible Investment Service is ahead of the market
Our Responsible Investment Service is ahead of the market and we see enormous potential for growth Responsible Investment What we have done • Launched October 2018, with Avoid and Advance • Pandemic has not diverted investors from responsible strategies available investing – evidence suggests that i
Slide 17: Caroline Connellan
Caroline Connellan CEO BM BROOKS MACDONALD
Slide 18: The market potential is significant and COVID-19 is creating opportunities
The market potential is significant and COVID-19 is creating further opportunities. We are emerging from a period of change as a more robust business, confident about the future Nearing completion of the … targeting the scale of the underlying … to shape the market as the leading 2017 strategy, pivo
Slide 19: Our bold vision for Brooks Macdonald
Our bold vision for Brooks Macdonald is as the leading investment manager for intermediaries, grounded in our purpose of realising ambitions and securing futures Market-leading organic growth People and Culture Best-in-class adviser experience and excellent client service, rigorous Centralised Inves
Slide 20: A clear path forward supporting delivery of all three value drivers
We have a clear path forward supporting delivery of all three value drivers, driving organic growth and aiming for top quartile underlying profit margin We are close to concluding a partnership agreement with a … with a positive impact on all three value drivers of leading wealth management technolo
Slide 21: Confident in our vision as leading investment manager for intermediaries
We are confident in our vision for Brooks Macdonald as the leading investment manager for intermediaries • Emerging from a period of change as a more robust business, ready to capitalise on the growth opportunities we see ahead • Fundamental market potential for Brooks Macdonald is strong, with focu
Slide 22: Appendices
Appendices BM BROOKS MACDONALD
Slide 23: Our guiding principles
Our guiding principles … underpin everything we do and the way we do it Full year results for the year ended 30 June 2020 23
Slide 24: Strategy announced in 2017
Strategy announced in 2017 • Launched strategy in late 2017: to deliver sustainable value-enhancing growth • Foundations reinforced: simplified and de-risked Group, strengthened senior team, upgraded risk management and operational framework, improved cost discipline • Phase 2 – decisive actions to
Slide 25: Driving organic growth going forward
Driving organic growth going forward Importance to advisers What Brooks Macdonald will deliver • Critical to assure advisers of consistency of • Bring best of our ideas consistently to clients’ portfolios, giving client returns consistently strong returns Robust • Incorporates input from all investm
Slide 26: Leadership team
Leadership team Caroline Connellan Ben Thorpe Robin Eggar Andrew Shepherd Adrian Keane-Munday CEO, Executive Director Group Finance Director, Managing Director, UKIM CEO International MD Financial Planning, Executive Director Deputy Group CEO Marketing Director Richard Spencer Priti Verma Lynsey Cro
Slide 27: Investment performance
Investment performance 1 year to 3 yrs to 5 yrs to 10 yrs to QTD 30.06.20 30.06.20 30.06.20 30.06.20 BM Low Risk 7.63 -0.25 5.06 16.08 54.20 Low Risk ARC Sterling Cautious PCI 6.33 1.66 5.54 13.84 40.45 Relative performance 1.30 -1.91 -0.48 2.25 13.75 BM Low-to-Medium Risk 10.52 -0.14 7.29 21.79 69.
Slide 28: Recent awards
Recent awards Brooks Macdonald services have achieved a 5 Star Rating in every category of DFM Rating produced by Defaqto. 2019 2020 • Defaqto: 5 star rating for MPS, BPS and MPS platform • Defaqto: 5-star rating for the MPS and BPS • Defaqto: Gold Standard for DFM Service • Defaqto: 5-star rating f
Slide 29: Fundamental opportunity – demographics and policy
Fundamental opportunity – demographics and policy Underlying demographic and policy trends Trigger for seeking financial advice (%) UK household wealth2 by age band • Supportive demographic trends: ageing population with need to save for retirement 50% c.26m £1.9tn • Supportive policy environment: p
Slide 30: Fundamental opportunity – UK wealth market
Fundamental opportunity – UK wealth market UK S&I market Wealth market participants by segment (by investment management provider) Retail Mass affluent Upper affluent High net worth £2.6trn High NS&I touch Private / bulge bracket banks Occupational DC £0.7trn Cash ISAs Financial advisers £1.4trn IFA
Slide 31: Fundamental opportunity – IFA market
Fundamental opportunity – IFA market IFA firm characteristics IFA firms by size, share of FA population and share of BM funds1 (%) c.26k c.£8bn 0.7% 5.8% 2.4% • Large national scale leaders 1.5% Financial Times Top 100 • Targeting individuals and firms in the ‘long tail’ to increase adviser numbers
Slide 32: Fundamental opportunity – IFA outsourcing
Fundamental opportunity – IFA outsourcing The trend for IFAs to outsource investment IFAs decide to outsource to let them focus and management to DFMs is continuing, with the reduce their administrative and compliance proportion of model portfolios and funds in the burden, but choice of DFM depends
Slide 33: FY20 progress in International
FY20 progress in International – moving from protection to growth • Stabilised and built a right-sized and focussed team • Cut peripheral and sub-scale products and services • Integrated fully into Group’s capabilities • Agreed strategies for Adviser, Trustee and Private Client channels and begun im
Slide 34: Higher average FUM and stable revenue margins driving UKIM income growth
Higher average FUM and stable revenue margins resulting in good UKIM income growth FY19 FY20 Change BPS annualised income yield FY20 vs FY19 & FY18 (bps) Average MSCI PIMFA Private Investor 1,579 1,585 0.4% 92.0 Balanced Index on billing dates 90.7 90.9 23.1 23.4 24.1 Average FUM on billing dates (£
Slide 35: Cash flows
Cash flows £m FY19 FY20 Opening cash 30.9 34.6 Cash flows from operating activities 23.4 28.8 Proceeds from share placing - 29.4 Working capital movements 0.6 2.5 Discontinued operations (0.1) 0.6 Net interest received 0.2 0.3 Upfront consideration on Cornelian - (20.4) Dividends (6.7) (7.7) Net tax
Slide 36: Strong cash generation supporting robust capital position
Strong cash generation supporting the Group’s robust capital position Cash movements for 12 months to 30 June 2020 (£m) 0.6 0.3 (20.4) 2.5 29.4 (7.7) (5.9) 28.8 (4.1) (3.6) (0.9) (3.4) 50.2 34.6 Full year results for the year ended 30 June 2020 36
Slide 37: Income and yield breakdown FY20 vs. FY19
Income and yield breakdown FY20 vs. FY19 Income (£m) Yields (bps) FY19 FY20 FY19 FY20 BPS Fees 53.0 53.2 67.5 67.9 BPS Non Fee 18.3 18.8 23.4 24.1 Total BPS 71.3 72.0 90.9 92.0 MPS 7.8 8.0 48.9 46.8 UKIM Discretionary (excl. CAM) 79.1 80.0 83.8 83.9 Funds 6.9 6.4 45.0 47.7 UKIM Total (excl. CAM) 86.
Slide 38: Capital expenditure
Capital expenditure Capital expenditure FY17 – FY20 (£m) 8.0 7.0 7.0 0.9 6.0 1.0 5.0 4.0 3.6 3.5 0.5 0.4 3.0 0.4 5.1 1.6 2.0 1.7 0.2 2.6 0.4 1.0 1.6 1.1 0.0 FY17 FY18 FY19 FY20 Computer Software Property Related IT Equipment Full year results for the year ended 30 June 2020 38
Slide 39: Final dividend
Final dividend Underlying 120 123.5 123.7 115.8 117.7 100 80 91.3 87.9 53.0 60 51.0 47.0 41.0 40 30.5 35.0 20 0 FY15 FY16 FY17 FY18 FY19 FY20 Cover: 3.0 2.5 2.8 2.5 2.4 2.3 Underlying earnings per share1(p) Total dividend (p) Statutory 120 100 94.4 80 60 68.3 51.0 53.0 47.0 41.0 40 30.5 35.0 43.0 39
Slide 40: FY18 and FY19 restated P&Ls
FY18 and FY19 restated P&Ls FY19 ACD Platform MPS FY19 FY18 ACD Platform MPS FY18 Reported adj. VAT adj. Restated Reported adj. VAT adj. Restated Revenue 107.3 (1.2) (0.4) 105.7 99.9 (1.0) (0.3) 98.6 Total underlying costs (86.3) 1.2 0.1 (85.0) (81.2) 1.0 0.1 (80.1) Underlying profit before tax 21.0
Slide 41: Contacts
Contacts Caroline Connellan Ben Thorpe CEO Group Finance Director 21 Lombard Street 21 Lombard Street London London EC3V 9AH EC3V 9AH T 020 7408 5577 T 020 7927 4955 E caroline.connellan@brooksmacdonald.com E ben.thorpe@brooksmacdonald.com Adrian Trimmings Reg Hoare Peel Hunt MHP Communications Moor
Slide 42: Important information
Important information This presentation has been prepared for general information on ARC Private Client Indices (“PCI”) are based on historical matters of interest only and does not constitute an invitation to information and past performance is not indicative of future treat or a promotion, solicit
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