Brooks Macdonald Group plc · LSE:BRK
Brooks Macdonald — H1 FY2019 Earnings Presentation
38 slides from Brooks Macdonald's earnings presentation, March 2019
Slide 1: Half year results for the six months ended 31 December 2018
Half year results for the six months ended 31 December 2018 Caroline Connellan, Chief Executive Ben Thorpe, Finance Director
Slide 2: Caroline Connellan, Chief Executive
Caroline Connellan Chief Executive
Slide 3: Opportunity, strengths and performance
Opportunity, strengths and performance • Strong fundamental opportunity remains despite shorter-term macroeconomic and political uncertainty • The strengths that made Brooks Macdonald what it is today, plus the investment we are making through our strategy, position us well for the future • We are c
Slide 4: Delivering our strategy: progressing in line with expectations
Delivering our strategy: progressing in line with expectations … Improved returns from Phase one: Sept 2017 – Sept 2018 sustainable and scalable business model Reinforce foundations and take immediate actions to improve Increase value by ✓ margins enhancing what we do and how we do it • Focus on cor
Slide 5: Shifting focus towards delivering sustainable and value-enhancing growth
… shifting focus towards delivering sustainable and value-enhancing growth… Phase two: Sept 2018 for ~2 years Increase value by enhancing what we do and how we do it Today Improved returns from sustainable and scalable business model • Maintain focus on clients and advisers: – Propositions: • Launch
Slide 6: While delivering good underlying financial performance
… while delivering good underlying financial performance Organic net inflows (%, FUM (£bn) Revenue1 (£m) annualised run-rate) +1% +8% 7.3 3.9 11.7 11.9 48.3 52.0 -17.3 H1 FY18 H1 FY19 H1 FY18 H1 FY19 Total UKIM International Underlying1,2 PBT (£m) Underlying1,2 diluted EPS (p) Interim dividend (p) +
Slide 7: Continued progress on Channel Islands legacy matters
Continued progress on Channel Islands legacy matters • Reached agreement in principle with the new directors of the Dublin-based fund, who informed shareholders on 12 March that they had agreed Brooks Macdonald’s goodwill offer of £3.4 million and that they would call an Extraordinary General Meetin
Slide 8: Ben Thorpe, Finance Director
Ben Thorpe Finance Director BM BROOKS MACDONALD
Slide 9: Good progress made on financial priorities in H1
Good progress made on financial priorities in H1 Growing profitability Underlying PBT (£m) • Continued growth in FUM, ongoing shift to higher quality earnings +8% • Efficiency improvements deliver material headcount reduction (net £4m annual savings) • Continued enhancements in cost discipline, atte
Slide 10: Continuing growth in funds under management
Continuing growth in funds under management Net flows – 31 December 30 June 2018 Net flow Performance annual run 2018 £m rate BPS 7,699 180 (599) 7,281 5% MPS 1,488 99 (96) 1,491 13% UKIM discretionary 9,187 280 (695) 8,772 6% Funds 1,428 108 (72) 1,464 15% UKIM total 10,615 388 (766) 10,236 7% BMI
Slide 11: UK Investment Management (UKIM) income up 8%
UK Investment Management (UKIM) income up 8% H1 FY18 H1 FY19 % BPS revenue yield Average MSCI Balanced on billing dates 1,572 1,548 -2% Quarterly breakdown H2 FY18 – H1 FY19 (bps) 100 95.6 89.2 89.4 87.6 Average FUM on billing dates (£m) 80 28.1 20.1 21.2 19.1 BPS 7,101 7,599 7% 60 MPS 1,323 1,530 1
Slide 12: Cost and headcount increasingly tightly controlled
Cost and headcount increasingly tightly controlled H1 FY19 H1 FY19 H1 H2 H1 vs. H1 vs. H2 FY18 FY18 FY19 FY18 FY18 • Staff costs up due to average Staff costs 20.3 22.6 22.3 10% -1% headcount, benefits and pay review, Non Staff costs 13.8 16.5 17.0 23% 3% and risk management and operational framewor
Slide 13: Good progress in profitability with measures to address FP performance
Good progress in profitability with measures being taken to address FP performance UK Investment Financial All other H1 FY19 (£m) management International planning segments Total Revenue 42.3 7.4 1.8 0.5 52.0 Direct cost (21.4) (5.0) (1.4) (15.3) (43.0) Internal cost recharges (9.7) (1.5) (1.2) 12.5
Slide 14: Financial summary – good progress
Financial summary – good progress H1 H1 % £m, continuing operations FY18 FY19 Change FY18 • All figures on continuing Total income 48.3 52.0 8% 100.8 operations basis, excluding Braemar Estates (sold Total underlying costs 40.0 43.0 8% 82.9 December 2017) and Employee Benefits (sold December 2018) U
Slide 15: Statutory PBT reconciliation
Statutory PBT reconciliation £m H1 FY18 H1 FY19 • Reduction in goodwill relating to Levitas the result Underlying profit before tax, continuing operations 8.3 9.0 of moving to a new 5-year partnership with lower Amortisation of client relationships (1.2) (1.1) sponsorship fee, on which Changes in fa
Slide 16: Cash flow
Cash flow Cash movements for 6 months to 31 December 2018 (£m) 45.0 Higher working capital due 0.5 (0.6) to payment of prior year 10.8 (8.3) bonuses and lower accruals 40.0 for the current year 35.0 (0.3) (2.2) 30.9 (4.1) 30.0 4.0 2.9 (1.9) 24.8 25.0 0.6 H1 FY18 H2 FY18 H1 FY19 20.0 Computer Softwar
Slide 17: Caroline Connellan, Chief Executive
Caroline Connellan Chief Executive
Slide 18: Underlying trends positive despite near-term headwinds
Underlying trends positive despite near-term headwinds Positive underlying market trends Well placed despite the current, more uncertain, environment • Demographic trends remain supportive to wealth management, • Shorter-term, difficult market conditions alongside increasing public policy-driven and
Slide 19: Confidence in the future
Confidence in the future • Progress: doing what we said we would do – delivering our strategy and improving financial performance • Foundation, Focus, Growth: clear on our investment priorities, building on our strengths • Well positioned: despite current headwinds, fundamental opportunity remains s
Slide 20: Appendices
Appendices BM BROOKS MACDONALD
Slide 21: Who we are
Who we are Protecting and enhancing our clients’ wealth through the provision of investment management and advice alongside exceptional service Our strengths • Client centric culture • Uniquely strong brand and reputation in the adviser channel • Strong centralised investment process Three core busi
Slide 22: Our history
Our history Funds under management reach £12bn Open East Anglia office 2018 Half year results for the six months ended 31 December 2018 22
Slide 23: Our guiding principles
Our guiding principles … underpin everything we do and the way we do it Half year results for the six months ended 31 December 2018 23
Slide 24: Our investment management product offering and distribution model
Our investment management product offering and distribution model Managed Bespoke Portfolio Portfolio Funds Service (BPS) Service (MPS) Responsible Investment Service Defensive Capital Fund (DCF) Specified Portfolio Mandate AIM Portfolio Service (APS) Adviser Court of Protection (CoP) Multi-Asset Fu
Slide 25: Leadership team
Leadership team Caroline Connellan Andrew Shepherd Robin Eggar John Wallace Darren Zaman Adrian Keane-Munday Chief Executive Officer Deputy CEO, Head of London, UKIM Head of Regions, UKIM CEO, International MD Financial Planning, MD Distribution Marketing & Proposition Director Ben Thorpe Richard Sp
Slide 26: Investment performance
Investment performance Rolling 12 months performance (%) Cumulative performance (%) 12 mths 12 mths 12 mths 12 mths 12 mths to to to to to 3 year to 5 year to 10 year to 31.12.14 31.12.15 31.12.16 31.12.17 31.12.18 31.12.18 31.12.18 31.12.18 BM Low Risk 4.46 2.15 6.01 5.39 -3.13 8.23 15.49 62.53 Low
Slide 27: Asset allocation guidance
Asset allocation guidance Current guidance portfolios – March 2019 The investment managers’ tolerance limits: +/-3 +/-5 +/-7 Low-to- Medium-to- Low Medium High Medium High UK fixed income 29 18 12 4 0 International fixed income 17 11 3 2 0 UK equities 7 14 20 25 29 North American equities 2 6 10 14
Slide 28: Recent awards
Recent awards 2019 • Citywire Wealth Manager: Regional Stars (South East) • PAM: 50 Most Influential • Portfolio Adviser: Gold Award in Absolute Return section (Defensive Capital Fund) 2018 • Investment Week: Fund Manager of the Year Awards, Absolute Return – Multi-Asset Finalist • Citywire Wealth M
Slide 29: Adviser market trends
Adviser market trends Adviser use of outsourcing 2017-18 Advisers’ preferred bespoke DFM providers, 2017-18 50% 2017 2018 40% 30% 20% 39% 37% 28% 10% 20% 0% Proportion of advisers who Of those outsourcing, currently outsource any proportion who currently investment management outsource more than 50%
Slide 30: Funds under management breakdown FY14 – H1 FY19
Funds under management breakdown FY14 – H1 FY19 FUM £bn 12 10 FUM CAGR 14.1% 8 6 12.4 11.9 10.5 4 8.3 7.4 6.6 2 0 Year to June Year to June Year to June Year to June Year to June Half year to ‘14 ‘15 ‘16 ‘17 ‘18 Dec ’18 Growth 28.2% 13.2% 12.0% 25.9% 18.7% (4.5%) Net new business 14.7% 9.8% 11.6% 11
Slide 31: Funds under management breakdown H1 FY19 vs. H1 FY18
Funds under management breakdown H1 FY19 vs. H1 FY18 31 31 % Change % Change 30 June Net flows Performance December December over 6 over 12 2018 H1 ‘19 H1 ‘19 £m 2017 2018 months months BPS 7,316 7,699 180 (599) 7,281 (5.4%) (0.5%) MPS 1,369 1,488 99 (96) 1,491 0.2% 8.2% UKIM discretionary 8,686 9,1
Slide 32: Income and yield breakdown H1 FY19 vs. H1 FY18
Income and yield breakdown H1 FY19 vs. H1 FY18 Income (£m) Yield (bps) H1 H2 H1 H2 FY18 FY18 FY18 H1 FY19 FY18 FY18 FY18 H1 FY19 BPS • Fees 24.4 25.7 50.1 26.6 67.6 67.8 67.7 68.8 • Non Fee 7.6 9.2 16.8 7.4 21.5 24.5 23.1 19.6 Total 32.0 34.9 66.9 34.0 89.1 92.3 90.7 88.4 MPS 3.6 4.0 7.6 4.0 53.9 52
Slide 33: Cash flows
Cash flows £m H1 FY18 H1 FY19 Opening cash 32.2 30.9 Continuing EBITDA 9.6 10.8 Capital expenditure (2.9) (0.6) Working capital (5.3) (8.3) Deferred consideration and disposal of investment (1.9) - Tax and interest (1.4) (0.3) Dilution management 0.4 (2.2) Dividends (3.5) (4.1) Exceptional items (1.
Slide 34: Capital expenditure
Capital expenditure Capital expenditure H1 FY18 – H1 FY19 (£m) 4.5 4.0 4 0.2 3.5 0.4 3 2.9 2.5 0.7 2 0.5 3.4 1.5 1 1.7 0.6 0.5 0.2 0.2 0 0.2 H1 FY18 H2 FY18 H1 FY19 Computer Software Property Related IT Equipment Half year results for the six months ended 31 December 2018 34
Slide 35: Interim and final dividend
Interim and final dividend Underlying 120 117.7 100 105.1 80 91.3 87.9 86.2 60 47.0 41.0 35.0 51.9 40 26.0 30.5 17.0 19.0 20 12.0 15.0 7.0 10.0 0 FY14 FY15 FY16 FY17 FY18 H1 FY19 Cover: 3.3 3.0 2.5 2.6 2.5 Underlying earnings per share (p) Total dividend (p) Interim dividend (p) Statutory 100 94.4 8
Slide 36: Channel Islands legacy matters
Channel Islands legacy matters • Decision announced in July 2017 to deal proactively with certain legacy matters arising from the former Spearpoint business (acquired 2012). These matters relate to a number of discretionary portfolios formerly managed by Spearpoint, now managed by our Jersey office,
Slide 37: Contacts
Contacts Caroline Connellan Ben Thorpe Chief Executive Finance Director 72 Welbeck Street 72 Welbeck Street London London W1G 0AY W1G 0AY T 020 7499 6424 T 020 7499 6424 D 020 7408 5577 D 020 7927 4955 F 020 7499 5718 F 020 7499 5718 E caroline.connellan@brooksmacdonald.com E ben.thorpe@brooksmacdon
Slide 38: Important information
Important information This presentation has been prepared for general information on matters of interest only and does not constitute an invitation to treat or a promotion, solicitation, or offer capable of acceptance and does not constitute professional advice of any kind. You should not act upon t
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