Slide 1: Rathbone Brothers Plc Preliminary Results - 31 December 2014
RATHBONE BROTHERS PLC PRELIMINARY RESULTS - 31 DECEMBER 2014 19 FEBRUARY 2015 RATHBONES Established 1742
Slide 2: Agenda
AGENDA MARK NICHOLLS CHAIRMAN PHILIP HOWELL CHIEF EXECUTIVE PAUL STOCKTON FINANCE DIRECTOR RUPERT BARON HEAD OF LONDON NICK SWALES REGIONAL DIRECTOR
Slide 3: Strategic objectives and 2014 progress
• Develop our strategic thinking and processes • Refined medium term strategy, shared with analysts, investors and employees • Continue to grow funds under management • 23.6% increase in funds under management, two significant acquisitions • Strengthening our senior management team to position • CEO
Slide 4: Key results: profit, funds under management, EPS, dividends
Underlying¹ profit before tax Rate of total net growth in Funds under management funds under management2 + 21.8% + 23.6% £27.2bn £61.5m 19.6% £50.5m £22.0bn 9.0% 2013 2014 2013 2014 2013 2014 Underlying¹ earnings per share Basic earnings per share Total dividends per share + 18.1% - 0.3% + 6.1% 102.
Slide 5: Underlying operating income and profit before tax
FY 2014 FY 2013 % change (£m) (£m) Average FTSE 100 Index 6657 6419 3.7 Net investment management fee income 133.8 113.9 17.5 Net commission income 43.7 42.0 4.0 Net interest income 9.2 8.6 7.0 Fees from advisory services and other income 14.1 11.9 18.5 Underlying operating income 200.8 176.4 13.8 U
Slide 6: Underlying operating expenses
FY 2014 FY 2013 % change (£m) (£m) Fixed staff costs 61.9 56.9 8.8 Average FTE¹ employees during the year 880 833 5.6 Actual FTE¹ employees at the year end 929 852 9.0 Variable staff costs 35.2 27.9 26.2 Variable staff costs as a % of underlying profit before tax and before variable staff costs 36.4
Slide 7: Underlying profit before tax to profit before tax
FY 2014 FY 2013 % change (£m) (£m) Underlying operating margin¹ 30.6% 28.6% Underlying profit before tax 61.5 50.5 21.8 Refund of levies for the Financial Services Compensation Scheme 1.0 - Gain on disposal of financial securities 6.8 - Gain on disposal of pension administration business 0.7 - Charg
Slide 8: Balance sheet and capital ratios
31/12/14 31/12/13 (£m) (£m) Assets Cash, deposits and investments 1,333.0 966.8 Loans and advances to customers¹ 101.6 95.5 Prepayments, accrued income and other assets 62.3 48.1 Property, plant and equipment 10.2 11.5 Intangible assets and investment in associates 161.1 106.3 Surplus on retirement
Slide 9: Capital expenditure
17% 24% 31% 44% 46% 54% 83% 76% 56% 69% Investment¹ 8 Maintenance/replacement² 6 5.2 £ million 1.7 0.2 4 0.9 0.7 1.5 2.3 1.9 1.7 1.6 2 2.4 1.4 1.7 1.7 1.7 0 2010 2011 2012 2013 2014 Property³ IT & other Purchased software ¹ Investment represents capital expenditure on new assets and IT systems, data
Slide 10: Growth initiatives and strategic priorities
Resource Growth initiatives Operational efficiency Investment process management • Team approach to • Leverage front end • Strengthen our • Reinforce senior organic growth systems investment risk management to support • Expand IFA and • Rebalance investment management capability strategic growth pro
Slide 11: Unit Trusts performance
• Funds under management increased to £2.5bn (2013: £1.8bn) in spite of poor markets • Good momentum in net sales at £554m (2013: £327m) – in the top 20 for total net sales in 2014¹ • Majority of funds in 1st or 2nd quartile over three and five years² • Both multi-asset funds and Strategic Bond fund
Slide 12: Funds under management: Investment Management and Unit Trusts
Investment Unit Trusts Total Total Management FY 2014 FY 2014 FY 2013 FY 2014 (£bn) (£bn) (£bn) (£bn) Opening funds under management 20.2 1.8 22.0 18.0 Inflows 5.5 1.0 6.5 3.3 - Organic¹ 2.3 1.0 3.3 2.7 - Purchased² 3.2 - 3.2 0.6 Outflow of money (1.5) (0.4) (1.9) (1.5) - Retained accounts (1.0) - C
Slide 13: Newcastle office case study
• Why Rathbones? • First impressions: – Investment process – Culture – Operations and systems – Business capability • Future growth and development aspirations Total funds under management - Newcastle • Giving something back 250 £ million 200 150 100 50 0 H1 2013 FY 2013 H1 2014 FY 2014 13
Slide 14: London funds under management and acquisitions
London based Client funds under Investment Support staff² conversion management professionals rate³ (£’bn)¹ 31 December 2013 12.20 91 52 Deutsche4 0.63 5 4 95% Jupiter5 1.96 15 5 88% Organic growth, investment performance and recruitment 1.10 10 (1) 31 December 2014 15.89 121 60 ¹ Figures include AU
Slide 15: New brand: Look forward
• Reflects key attributes that set us apart: individual, independent, informed and quality • Highlights our progressive, forward looking and innovative nature • Supports strategic growth plans • ‘Look forward’ is a message to our clients and ourselves – to focus on the future • Heritage remains impo
Slide 16: How our new brand might be used
RATHBONE BROTHERS PLC HOW OUR NEW BRAND MIGHT BE USED Roth b O Nn eS Investment management for Look forward® individuals, charities and IFAs. 16
Slide 17: Strategic growth priorities
Organic growth Strategic growth Resource Investment process Sensible acquisition • Team initiatives management • Research and opportunities composition and • Charities and • Training and central process • Branches technology Greenbank management • Performance and (Glasgow) and • Distribution • Priva
Slide 18: Appendices
APPENDICES 18
Slide 19: Company objectives
• To provide high-quality investment management, tax, trust and pension services for private individuals, charities and trusts. • To provide a growing stream of dividend income for shareholders, delivered through steady and consistent growth in earnings per share. • To provide an interesting and sti
Slide 20: Detailed balance sheet
31/12/14 31/12/13 31/12/14 31/12/13 Assets (£’000) (£’000) Liabilities (£’000) (£’000) Cash and balances with central banks 727,178 211,005 Settlement balances 22,584 27,626 Settlement balances 15,890 19,611 Due to customers 1,282,426 891,897 Loans and advances to banks 144,399 106,327 Accruals, def
Slide 21: Earnings per share and dividend per share
80 70 76.1p 75.9p 60 66.7p 66.5p 50 49.8p 52.0p 49.0p pence 40 46.0p 47.0p 44.0p 30 20 10 0 2010 2011 2012 2013 2014 Basic EPS Dividend per share Dividend cover 1.1x 1.5x 1.4x 1.6x 1.5x Dividend payout 88% 69% 71% 64% 69% ratio Dividend per 5% 2% 4% 6% share growth Inflation growth 4% 3% 2% 1% (12 m
Slide 22: Underlying PBT and EPS by half year
60 51.6 50 Underlying PBT (£m) / EPS (p) 38.6 40 34.6 34.3 37.5 30 32.4 25.5 31.9 24.3 24.3 20 10 18.1 20.4 38.5 24.2 22.0 46.2 23.1 21.7 44.8 26.1 24.4 50.5 29.6 31.9 61.5 0 2010 2011 2012 2013 2014 1st Half UPBT (£m) 2nd Half UPBT (£m) Full Year UPBT (£m) 1st Half EPS (p) 2nd Half EPS (p)² ¹ Under
Slide 23: Underlying earnings per share reconciliation
FY 2014 FY 2013 Post tax Post tax EPS (p)1 EPS (p)2 (£m) (£m) Underlying profit attributable to shareholders 48.1 102.4 39.6 86.7 Refund of levies for the Financial Services Compensation Scheme 0.8 1.7 - - Gain on disposal of financial securities 5.3 11.3 - - Gain on disposal of pension administrati
Slide 24: Shareholder breakdown
Rathbone staff, former staff and directors Lindsell Train¹ 16.1% BlackRock Investment Management² MFS Investment Management³ 35.9% Heronbridge Investment Management 13.1% Troy Asset Management Aviva Investors Franklin Templeton Investment Management 10.2% Legal & General Investment Management 2.6% 2
Slide 25: Board and senior management
Mark Nicholls Chairman Executive directors Non-executive directors Philip Howell¹ David Harrel² Chief Executive Paul Stockton James Dean Finance Director Paul Chavasse Kathryn Matthews Head of Investment Management Sarah Gentleman³ Philip Howell Paul Stockton Paul Chavasse Chief Executive Finance Di
Slide 26: Segmental income and costs
Investment Indirect Management Unit Trusts expenses Total y/e 31 December 2014 (£m) (£m) (£m) (£m) Net investment management fee income 120.5 13.3 - 133.8 Net commission income 43.7 - - 43.7 Net interest income 9.2 - - 9.2 Fees from advisory services and other income 13.6 2.2 6.8 22.6 Operating inco
Slide 27: Underlying profit margin and net interest income
35% 25 32% 30% 31% 30% 29% 29% 28% 20 Net interest income (£m) Underlying profit margin 25% 15 20% 15% 10 10% 5 5% 0% 2009 2010 2011 2012 2013 2014 Underlying profit margin Net interest income Headcount1 681 699 746 789 833 880 FUM (£bn)2 11.4 14.4 15.8 17.2 20.5 24.4 1 Average full time equivalent
Slide 28: Operating expenses breakdown
31 December 2014 31 December 2013 2% 4% 3% 4% 5% 13% 8% 39% 43% 8% £163.6m £132.2m 13% 10% 3% 2% 22% 21% Staff - payroll (excluding variable) Staff - variable Staff - other Property Depreciation & amortisation Professional Settlements IT 28
Slide 29: Funds under management growth
4.0 3.0 2.0 1.0 0.0 -1.0 -2.0 30.0 £ billion 24.7 25.0 20.2 20.0 16.7 14.6 14.8 15.0 10.0 5.0 0.0 2010 2011 2012 2013 2014 Funds under mangement Organic growth¹ Purchased growth Outflows¹ ¹ Organic growth is new business from current clients or from new clients (including those via intermediaries);
Slide 30: Investment Management key performance indicators
FY 2014 FY 2013 % change Investment Management Total rate of net growth in funds under management 19.6% 9.0% Revenue margin on FUM (excluding Charities team) (bps) 80.9 84.9 (4.7) Revenue margin on Charities team FUM (bps) 46.0 45.5 1.1 Underlying operating income (£m) 185.3 165.3 12.1 Underlying pr
Slide 31: Investment Management income and profit
FY 2014 FY 2013 % change (£m) (£m) Average FTSE 100 Index1 6657 6419 3.7 Net investment management fee income 120.5 104.2 15.6 Net commission income 43.7 42.0 4.0 Net interest income 9.2 8.6 7.0 Fees from advisory services and other income 11.9 10.5 13.3 Underlying operating income 185.3 165.3 12.1
Slide 32: Investment management fees
7% 5% Investment Management Commission² Interest³ Fees 23% Rathbones 100p 100p 100p 65% Cost to client 120p 100p 55p (or 72p) Net investment management fee income Net commission income Net interest income Fees from advisory services and other income ¹ Year ended 31 December 2014 ² Allowable cost for
Slide 33: Basis point returns by income type
Basis point return from fees¹ Basis point return from commission 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 0 10 20 30 40 50 60 0 10 20 30 Basis point return from interest Advisory fee income (£m) 2010 2010 2011 2011 2012 2012 2013 2013 H1 2014 2014 H2 0 5 10 0 2 4 6 8 10 ¹ 2010 return calcul
Slide 34: Revenue margin
Basis points (bps) FY 2014 FY 2013 Return on fees 54.2 54.9 Return on commission 19.7 22.1 Return on interest and other income 3.3 3.5 Total revenue margin 77.2 80.5 Average funds under management (£bn)¹ 22.2 19.0 Portfolio turnover² 16.0% 16.4% 1 On our quarterly charging dates ² See reference shee
Slide 35: Funds by service level, account type and client value
Service level Account type Value of client relationship 3.8% 8.1% 9.8% 4.6% 17.7% 11.2% 14.1% 40.3% 8.2% 13.1% 17.6% 12.8% 91.6% 32.6% 14.5% Discretionary Private client <£250,000 Advisory ISAs £250,000 - £500,000 Execution-only Trust and settlements £500,000 - £1m Charities £1m - £5m Pensions (incl
Slide 36: Asset allocation
56.3% H1 2012 18.2% 44.8% 23.7% 7.6% 5.7% FY 2012 18.0% 45.0% 25.1% 7.2% 4.7% H1 2013 15.8% 45.6% 27.4% 6.5% 4.7% 48.9% 51.1% FY 2013 14.6% 47.4% 27.3% 6.5% 4.2% Direct holdings Collectives H1 2014 14.8% 45.9% 27.7% 6.8% 4.8% FY 2014 14.2% 43.7% 29.8% 7.2% 5.1% Fixed income UK equities Overseas equi
Slide 37: Investment professionals and funds by office
Number of investment Funds under management Office location professionals¹ (£bn at 31/12/14)² London 121 15.89 Liverpool 25 2.19 Edinburgh 26 2.04 Winchester 18 1.37 Bristol 16 1.24 Other offices³ 43 2.50 Total 249 25.23 ¹ As at 31 December 2014 excluding fund managers in Rathbone Unit Trust Managem
Slide 38: Fee structure and transparency
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 fees are applied to a Portfolio of £400,000. VAT should be added) £250,000
Slide 39: Fund performance and quartile ranking
Performance¹ and Quartile Ranking at Size of fund 1 year 3 year 5 year 31 December 2014 (I-Class Units) (£m) † FTSE 100 Index 0.74 N/A 31.46 N/A 44.82 N/A N/A Rathbone Income Fund 6.95 1 54.71 1 86.14 1 994.61 Rathbone Global Opportunities Fund 9.56 2 53.68 1 88.26 1 504.17 Rathbone Ethical Bond Fun
Slide 40: Discrete year fund performance
Discrete year performance at Size of fund 2009 2010 2011 2012 2013 2014 31 December (I-Class Units) (£m) Rathbone Income Fund 24.40 19.60 0.60 15.84 24.88 6.95 994.61 Rathbone Global Opportunities Fund 39.00 27.55 -3.96 10.41 27.04 9.56 504.17 Rathbone Ethical Bond Fund 19.82 15.22 2.42 18.26 4.87 1
Slide 41: Reference sheet: definitions
• Common Equity Tier 1 ratio: Common Equity Tier 1 capital as a proportion of total risk exposure amount • Leverage ratio: Tier 1 capital resources as a percentage of total assets, excluding intangible assets and investment in associates, plus a proportion of off balance sheet exposures • Portfolio
Slide 42: Rathbone Brothers Plc contact details
Rathbone Brothers Plc 1 Curzon Street London W1J 5FB Telephone +44 (0)20 7399 0000 Facsimile +44 (0)20 7399 0011 www.rathbones.com Issued by Rathbone Brothers Plc for use by professional investors only. This presentation has been prepared for general information on matters of interest only and does