Rathbones Group Plc · LSE:RAT
Rathbones — H1 2023 Earnings Presentation
44 slides from Rathbones's earnings presentation, Jul 26, 2023
Slide 1: 2023 Interim Results
RATHBONES GROUP PLC 2023 INTERIM RESULTS 26 JULY 2023 RATHBONES GROUP PLC
Slide 2: Your Team Today
RATHBONES GROUP PLC | Interim Results 1 YOUR TEAM TODAY Paul Stockton Jennifer Mathias Group Chief Executive Officer Group Chief Financial Officer
Slide 3: Business Update
RATHBONES GROUP PLC | Interim Results 2 BUSINESS UPDATE Paul Stockton Group Chief Executive Officer RATHBONES GROUP PLC
Slide 4: Market Backdrop
RATHBONES GROUP PLC | Interim Results 3 MARKET BACKDROP Retail sales of UK funds and recognised overseas funds (£m) 1 2023 so far — Challenging equity markets 6,000 — Balancing inflation and interest rate expectations 4,000 — Changing investor sentiment and asset allocation 2,000 - -2,000 Our respon
Slide 5: Diversified and Valued Business Model
RATHBONES GROUP PLC | Interim Results 4 4 DIVERSIFIED AND VALUED BUSINESS MODEL A diversified model Asset Wealth Financial planning − Balanced business model, which delivers resilient Management Management and advice growth (Funds) − Focus on financial planning and advice to drive Benefits of scale
Slide 6: Saunderson House – Enhancing the Business Model
RATHBONES GROUP PLC | Interim Results 5 SAUNDERSON HOUSE – ENHANCING THE BUSINESS MODEL At acquisition Target Rathbones model Lower cost and improved In-house solutions: Proposition Proposition solutions to clients Fund of funds with Multi asset fund service c.£1bn FUMA migrated at third parties Bes
Slide 7: Digital Projects: Managing Change Within Budget
RATHBONES GROUP PLC | Interim Results 6 DIGITAL PROJECTS: MANAGING CHANGE WITHIN BUDGET My Rathbones Charles River asset Investcloud CLM1 enhancement and management client reporting — Transformation of — Enhanced functionality — Increased client usage prospecting, onboarding — Stronger investment —
Slide 8: Maintaining Momentum for Growth
RATHBONES GROUP PLC | Interim Results 7 MAINTAINING MOMENTUM FOR GROWTH Enriching the client and adviser Inspiring our people proposition and experience − Employee net promotor score of 39 − Brand refresh versus benchmark of 22 (Source: Enriching the − Upgraded website Peakon) Operating − Clarifying
Slide 9: Combination with Investec W&I on Track
RATHBONES GROUP PLC | Interim Results 8 COMBINATION WITH INVESTEC W&I ON TRACK — Strong shareholder support Defining the Setting — Integration planning underway client direction journey — Completion around the end of Q3 — Exciting opportunities Winning Managing risk hearts and minds Integration Secu
Slide 10: Financial Results
RATHBONES GROUP PLC | Interim Results 9 FINANCIAL RESULTS Jennifer Mathias Group Chief Financial Officer RATHBONES GROUP PLC
Slide 11: Financial Highlights
RATHBONES GROUP PLC | Interim Results 10 FINANCIAL HIGHLIGHTS FUMA (£bn) Operating income (£m) Underlying PBT (£m) 231.9 238.0 50.0 50.7 58.9 60.5 +2.7% +2.6% +1.4% y-o-y y-o-y y-o-y H1 22 H1 23 H1 22 H1 23 H1 22 H1 23 Statutory PBT (£m) Underlying basic EPS (pence) Interim dividend per share (pence
Slide 12: Continued Net Inflows in Discretionary and Managed
RATHBONES GROUP PLC | Interim Results 11 CONTINUED NET INFLOWS IN DISCRETIONARY AND MANAGED Discretionary and managed gross inflows (£m) Discretionary and managed net inflows (£m) 2.3% 3.2% 0.7% Ann. growth rate 2,481 718 2,213 2,112 598 176 H1 22 H2 22 H1 23 222 Discretionary and managed (excluding
Slide 13: Diversified Income Streams
RATHBONES GROUP PLC | Interim Results 12 DIVERSIFIED INCOME STREAMS H1 23 H1 22 % Diversified sources of income (£m) (£m) change − Total Investment Management, commission and funds Investment Management fee income 138.8 139.4 (-) income reduced in line with market Net commission income 23.7 26.9 (12
Slide 14: Stable Investment Management Margin, Increasing Interest Income
RATHBONES GROUP PLC | Interim Results 13 STABLE INVESTMENT MANAGEMENT MARGIN, INCREASING INTEREST INCOME Basis point return from discretionary fees¹ Advisory fee income (£m) Saunderson House 61.1 61.0 26.9 59.9 56.2 22.3 20.8 52.9 17.0 12.5 10.5 9.9 9.8 10.3 2019 2020 2021 2022 H1 23 H1 22 H2 22 H1
Slide 15: Disciplined Expense Growth Supports Strategy
RATHBONES GROUP PLC | Interim Results 14 COSTS DISCIPLINED EXPENSE GROWTH SUPPORTS STRATEGY H1 23 H1 22 % change − Increased fixed staff costs: (£m) (£m) − Impact of recruitment in 2022 Fixed staff costs 88.3 79.6 11 − 6% average salary increase Variable staff costs¹ 43.9 44.2 (1) − Reduction in oth
Slide 16: Disciplined Expense Growth Supports Strategy
RATHBONES GROUP PLC | Interim Results 15 COSTS DISCIPLINED EXPENSE GROWTH SUPPORTS STRATEGY Staff costs £3.5m £3.3m £1.5m £132.1m £123.8m Staff costs − Impact of BAU hires in H2 2022 and H1 2023 − Average salary increase of 6% − Impact of digital programme hires H1 22 BAU FTE growth Salary inflation
Slide 17: Resilient Underlying Profit Before Tax
RATHBONES GROUP PLC | Interim Results 16 RESILIENT UNDERLYING PROFIT BEFORE TAX Underlying PBT H1 23 H1 22 % change (£m) (£m) − Increased interest income largely offset by lower commission and impact of Saunderson House migration Underlying profit before tax 50.7 50.0 1 − Underlying operating margin
Slide 18: Strong Capital Position, Supports Dividend Increase
RATHBONES GROUP PLC | Interim Results 17 STRONG CAPITAL POSITION, SUPPORTS DIVIDEND INCREASE 30 June 2023 (£m) Total: £317.8m Capital position 40.0 Surplus: − Highly cash-generative business Tier 2 277.8 £98.1m Tier 1 219.7 − CET1 ratio of 17.6% Capital requirement Own funds Requirement − FPC announ
Slide 19: Financial Outlook for H2 2023
RATHBONES GROUP PLC | Interim Results 18 FINANCIAL OUTLOOK FOR H2 2023 Revenues − Stable revenue margin − Rising base rate to continue to positively impact net interest income; FY 23 net interest income expected to be c.£45 million, up from previous guidance of £35 million Costs − Hiring now largely
Slide 20: Strong Outlook for the Enlarged Rathbones Group
RATHBONES GROUP PLC | Interim Results 19 STRONG OUTLOOK FOR THE ENLARGED RATHBONES GROUP 2023 2024 Medium term post integration 3+ years post IW&I completion — Investec combination — Integration planning — Strong market position for completion expected in Q3 23 — Balancing earnings and costs growth
Slide 21: Q&A
RATHBONES GROUP PLC | Interim Results 20 Q&A
Slide 22: Appendix
Interim results 21 APPENDIX
Slide 23: Accessing the Financial Advice Market
RATHBONES GROUP PLC | Interim Results 22 ACCESSING THE FINANCIAL ADVICE MARKET RFP In-house financial planning Vision Independent Financial Planning Distribution of investment services to external IFAs − ‘Whole of market’ advice through in- − Independent IFA network house financial planners for clie
Slide 24: We Deliver Client Solutions Across Multiple Channels
RATHBONES GROUP PLC | Interim Results 23 WE DELIVER CLIENT SOLUTIONS ACROSS MULTIPLE CHANNELS Channels Rathbones investment process Our ambition WEALTH Direct or B2B Bespoke discretionary − Expand client and advisor networks MANAGEMENT Investment − Grow market share Management Managed fund solutions
Slide 25: Strong Track Record of Acquisitions
RATHBONES GROUP PLC | Interim Results 24 SUPPORTING AND DELIVERING GROWTH STRONG TRACK RECORD OF ACQUISITIONS Other historical transactions Saunderson House (2021) FUMA Year Target Integration progressing well (£bn) Encouraging revenue and growth potential Vision Independent Financial 19.9% holding
Slide 26: Movement in Funds Under Management and Administration
RATHBONES GROUP PLC | Interim Results 25 MOVEMENT IN FUNDS UNDER MANAGEMENT AND ADMINISTRATION Investment Management business Funds business H1 23 H1 22 H1 23 H1 22 (£bn) (£bn) (£bn) (£bn) Opening FUMA 45.1 50.3 Opening FUM 11.0 13.0 Inflows 2.3 1.8 Inflows 2.3 1.7 – organic¹ 2.3 1.8 Outflows (1.6)
Slide 27: Breakdown of Net Organic Inflows by Service Level
RATHBONES GROUP PLC | Interim Results 26 BREAKDOWN OF NET ORGANIC INFLOWS BY SERVICE LEVEL Service level H1 23 H1 22 H1 21 Net flows Ann. net growth Net flows Ann. net growth Net flows Ann. net growth (£m) (%) (£m) (%) (£m) (%) Discretionary service 63 376 714 − Bespoke portfolios (39) (0.2) 301 1.3
Slide 28: Breakdown of Net Organic Inflows by Channel
RATHBONES GROUP PLC | Interim Results 27 BREAKDOWN OF NET ORGANIC INFLOWS BY CHANNEL Channel H1 23 H1 22 H1 21 Net flows Ann. net growth Net flows Ann. net growth Net flows Ann. net growth (£m) (%) (£m) (%) (£m) (%) Discretionary service − Bespoke portfolios (237) (1.4) 62 0.3 286 1.7 − Managed via
Slide 29: Investment Management Client Base
RATHBONES GROUP PLC | Interim Results 28 INVESTMENT MANAGEMENT CLIENT BASE Analysis of funds under management¹ Service level by FUM Fund type by FUM 2% 5% 12% Private clients 9% 34% ISAs Discretionary Charities Advisory Pensions 13% Trusts Execution-only Other 93% 12% 20% Size of client relationship
Slide 30: Where Our Clients' Assets Are Invested
RATHBONES GROUP PLC | Interim Results 29 WHERE OUR CLIENTS’ ASSETS ARE INVESTED¹ 6.1% 8.8% 5.5% 9.4% 4.4% 10.5% 5.2% 11.9% 4.5% 10.9% 47% 36.3% 41.8% 44.6% 41.5% 42.4% Direct holdings 35.4% 30.6% 28.6% 26.9% 53% 29.4% Collectives 13.4% 12.7% 12.8% 15.3% 11.1% FY 19 FY 20 FY 21 FY 22 H1 23 Fixed inco
Slide 31: Performance – Single Strategy Funds
RATHBONES GROUP PLC | Interim Results 30 PERFORMANCE – SINGLE STRATEGY FUNDS Performance¹ at 30 June 2023 1 year 3 year 5 year Size of fund (£m)6 Rathbone Global Opportunities Fund4 16.88 19.28 55.26 3,538.6 Sector: IA Global 10.79 27.26 44.14 Rathbone Income Fund4 9.14 33.10 16.72 FTSE All Share 7.
Slide 32: Performance – Multi-Asset Funds
RATHBONES GROUP PLC | Interim Results 31 PERFORMANCE – MULTI-ASSET FUNDS Performance1 at 30 June 2023 (S-class shares) 1 year 3 years 5 years Size of fund (£m)5 Rathbone Multi-Asset Total Return Portfolio2 2.29 8.36 16.06 Bank of England Base Rate +2% 5.22 10.01 15.94 506.3 Volatility as % of FTSE D
Slide 33: Total Capital Expenditure
RATHBONES GROUP PLC | Interim Results 32 TOTAL CAPITAL EXPENDITURE Technology and other Capital expenditure (£m) − The transition to modern cloud based solutions and ‘software 4.8 as a service’ operating licenses continues to drive reduced capitalisation, but increased incurred costs in the annual P
Slide 34: Earnings Per Share
RATHBONES GROUP PLC | Interim Results 33 EARNINGS PER SHARE H1 23 H1 22 Pre tax Post tax EPS Pre tax Post tax EPS (£m) (£m) (p)1 (£m) (£m) (p)2 Underlying profit attributable to shareholders 50.7 38.9 66.4 50.0 39.6 67.6 Charges in relation to client relationships and goodwill (9.5) (7.3) (12.4) (9.
Slide 35: Segmental Results
RATHBONES GROUP PLC | Interim Results 34 SEGMENTAL RESULTS Investment Management Funds Indirect Total 30 June 2023 (£m) (£m) (£m) (£m) Net investment management fee income 138.8 31.1 - 169.9 Net commission income 23.7 - - 23.7 Net interest income 22.2 0.8 - 23.0 Fees from advisory services and other
Slide 36: Analysing the Balance Sheet
RATHBONES GROUP PLC | Interim Results 35 ANALYSING THE BALANCE SHEET 30/06/23 30/06/22 30/06/23 30/06/22 Assets (£’000) (£’000) Liabilities (£’000) (£’000) Cash and balances with central banks 1,141,926 1,683,670 Deposits by banks 17,173 19,587 Settlement balances 215,119 137,672 Settlement balances
Slide 37: Capital Ratios
RATHBONES GROUP PLC | Interim Results 36 CAPITAL RATIOS H1 23 (£m) H1 22 (£m) Total risk exposure amount Total risk exposure amount (risk-weighted assets) (risk-weighted assets) 98.1 £1,576m £1,576m 96.7 126.1 CET1 ratio2 CET1 ratio2 17.6% 126.1 16.7% £317.8m £302.4m Total own funds1,4 Consolidated
Slide 38: Reconciliation of Equity to Total Own Funds
RATHBONES GROUP PLC | Interim Results 37 RECONCILIATION OF EQUITY TO TOTAL OWN FUNDS H1 23 H1 22 (£m) (£m) Equity − Share capital and share premium 313.9 307.0 − Reserves 337.3 351.4 Less: – Own shares (47.8) (45.3) − Intangible assets1 (318.6) (334.8) − Retirement benefit asset (7.0) (15.9) Total c
Slide 39: Investment Management – Number of Investment Managers and FUMA per Office
RATHBONES GROUP PLC | Interim Results 38 INVESTMENT MANAGEMENT – NUMBER OF INVESTMENT MANAGERS AND FUMA PER OFFICE Investment management funds under management Office location Number of investment managers¹ and administration (£bn at 30/06/23) London 152 23.4 Glasgow 53 6.6 Liverpool 32 3.2 Edinburg
Slide 40: Shareholders at 30 June 2023
RATHBONES GROUP PLC | Interim Results 39 SHAREHOLDERS AT 30 JUNE 2023 10% Lindsell Train 8% Current Rathbones staff Heronbridge Vanguard Group 41% 5% BlackRock Aviva Investors Franklin Templeton 5% Fidelity Investments Aberforth Partners Janus Henderson 5% Marathon Invesco 4% Slater Investments Othe
Slide 41: Appendix: Responsible Business at Rathbones
RATHBONES GROUP PLC | Interim Results 40 APPENDIX: RESPONSIBLE BUSINESS AT RATHBONES Our alignment with the Sustainable Development Goals Pillar Highlights from H1 23 Responsible investment − Published voting season review − Gender and racial diversity – in Q1, we wrote to 30 premium listed companie
Slide 42: Appendix: Responsible Business at Rathbones Continued
RATHBONES GROUP PLC | Interim Results 41 APPENDIX: RESPONSIBLE BUSINESS AT RATHBONES CONTINUED Our alignment with the Sustainable Development Goals Pillar Highlights from H1 23 Our people − Our diversity, equality and inclusion plan is now being delivered − Achieved an employee net promotor score of
Slide 43: Investment Management – Annual Management Fees for Direct Private Clients
RATHBONES GROUP PLC | Interim Results 42 INVESTMENT MANAGEMENT – ANNUAL MANAGEMENT FEES FOR DIRECT PRIVATE CLIENTS¹ Our fee is completely transparent and we do not charge: Discretionary management fees Applied across main funds and ISA (subject to VAT) funds (pa)² − Fixed and minimum fees First £250
Slide 44: Important Information
RATHBONES GROUP PLC | Interim Results 43 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 betwe