Brooks Macdonald Group Plc · LSE:BRK
Brooks Macdonald — H1 FY22 Earnings Presentation
40 slides from Brooks Macdonald's earnings presentation, Mar 10, 2022
Slide 1: Half year results
Half year results for the six months ended 31 December 2021 Strategy delivering strong results 10 March 2022
Slide 2: Speakers
Speakers v Andrew Ben Shepherd Thorpe CEO Chief Financial Officer
Slide 3: Context and introduction
Andrew Shepherd 1 Context and introduction 2 Financial results 3 Opportunity and outlook 4 Q&A 5 Appendices
Slide 4: Financial results
Ben Thorpe 1 Context and introduction 2 Financial results 3 Opportunity and outlook 4 Q&A 5 Appendices
Slide 5: Another strong half year with underlying profit margin reaching 28.4%
Another strong half year with underlying profit margin reaching 28.4% Total revenue (£m) Underlying profit before tax (£m) Underlying profit margin before tax (%) +10.7% +3.3pts +25.7% 61.9 17.6 28.4% 54.9 55.9 25.1% 14.0 20.9% 11.5 H1 FY20 H1 FY21 H1 FY22 H1 FY20 H1 FY21 H1 FY22 H1 FY20 H1 FY21 H1
Slide 6: Total FUM reached £17.3bn with annualised net flows of 4% in H1 FY22
Total FUM reached £17.3bn with annualised net flows of 4% in H1 FY22 Total FUM for FY18 to H1 FY22 Annual organic net flows (%) (£bn) 5.3% 17.3 CAGR 16.5 FY18 FY19 FY20 FY21 H1 FY22 10.9% 13.7 13.1 13.1 12.3 4.0 3.3 (2.0) (5.9) FY18 FY19 FY20 FY21 H1 FY22 Half year results for the six months ended 3
Slide 7: Continuing improvement in net flows across the board
Continuing improvement in net flows across the board Organic net flows by quarter FY21-22 Organic net flows (£m) FY21 FY22 Closing (£m) FUM annualised growth (%) Q1 Q2 Q3 Q4 Q1 Q2 (£m) (119) (43) (26) 28 6 51 BPS 9,814 (5.8%) (2.1%) (1.2%) 1.4% 0.3% 2.2% (81) 40 139 184 162 156 MPS 2,834 (17.9%) 8.8
Slide 8: Improving net flows underpinned by higher gross inflows and declining gross outflows
Improving net flows underpinned by higher gross inflows and declining gross outflows Annualised gross and net flows by half year (%) 15.5 14.6 11.3 12.0 11.3 4.0 1.2 (4.1) (5.4) (7.7) (10.6) (14.3) (16.1) (16.7) (19.0) H1 FY20 H2 FY20 H1 FY21 H2 FY21 H1 FY22 Gross inflows Gross outflows Net flows Ha
Slide 9: Revenue up 10.7% and continued cost discipline delivering margin improvement
Revenue up 10.7% and continued cost discipline delivering margin improvement H1 FY21 H1 FY22 Increase/(decrease) £m £m £ % Fee income 44.3 52.6 8.3 18.7 Transactional income 7.5 5.6 (1.9) (25.3) Other income 4.1 3.7 (0.3) (7.3) Total revenue 55.9 61.9 6.0 10.7 Total underlying costs (see page 11) (4
Slide 10: Overall yield reduction predominantly driven by drop in non-fee income
Overall yield reduction predominantly driven by drop in non-fee income Yield bridge from H1 FY21 to H1 FY22 (bps) 0.2bps (5.5bps) 0.1 0.6 (0.5) 73.7 73.9 (4.9) (0.3) (0.3) 68.4 H1 FY21 Fee income Non-fee income Change in FY21 Non-fee income Fee income Change in H1 FY22 increase increase product mix
Slide 11: Continued cost discipline whilst investing for growth
Continued cost discipline whilst investing for growth H1 FY21 H1 FY22 Change £m £m £ % Fixed staff costs 19.9 18.7 (1.2) (6.0) SS&C impact Variable staff costs 7.3 8.0 0.7 9.6 • Fixed staff costs decrease of £(1.2)m largely driven by the Acquired staff costs 0.2 1.6 1.4 N/M transfer of a number of r
Slide 12: Strong capital position to support growth and dividend enhancement
Strong capital position to support growth and dividend enhancement Interim and Final dividend per share (p) Own Funds1 Attribution (£m) Surplus capital up 40.0 66% from FY21 surplus of £10.6m 32.0 32.0 30.0 17.7 +13% +10% +12% +11% Total 21.0 23.0 26.0 17.0 19.0 £55.8m 38.2 FY18 FY19 FY20 FY21 FY22
Slide 13: H2 FY22 guidance points
H2 FY22 guidance points • Net flows in H2 will remain in positive territory but quarterly progression will not necessarily be linear FUM • UKIM pipeline remains strong with current events expected to have an impact on BPS conversion times • International half year net flows expected to return to bei
Slide 14: Opportunity and outlook
Andrew Shepherd 1 Context and introduction 2 Financial results 3 Opportunity and outlook 4 Q&A 5 Appendices
Slide 15: Within our existing strategy we have identified five priority areas for 2022
Within our existing strategy we have identified five priority areas for 2022 Investment Solutions Private Clients • MPS, Funds, BMIS – • Build client-focused service fastest growing • Standardise and streamline sectors of the market processes Our Guiding Principles Delivering Our Promise • Attractin
Slide 16: Platform MPS FUM growth and plans for Investment Solutions businesses
We sharply accelerated Platform MPS FUM growth to 73% in 2021, and we have clear plans for our Investments Solutions businesses Brooks Macdonald Platform MPS FUM 2017- How we will accelerate growth in our 2,000 2021 (£m) Investment Solutions businesses • Across the Solutions businesses: Calendar yea
Slide 17: Our digital transformation is progressing
Our digital transformation is progressing, with the end goal of market-leading adviser experience and client service Delivered 2021 Benefits BM digital transformation Administrative Allowing BM to focus on processes investment management transferred to SS&C and financial planning Retained Ensuring c
Slide 18: Disciplined acquisition criteria shape our ambitions for inorganic growth
Disciplined acquisition criteria shape our ambitions for inorganic growth How we think about M&A There are three characteristics that underpin our approach to M&A: • Disciplined acquisition criteria – we have applied consistent criteria to all potential targets. To be considered, the target must: 1.
Slide 19: Committed to our Corporate Social Responsibility and ESG agenda
We are committed to our Corporate Social Responsibility and Environmental, Social & Governance agenda Diversity & Fundraising Property Procurement Inclusion • Diversity critical to our • Partnering with the • Opened three new • Only work with ability to innovate and Dame Kelly Holmes offices, ensuri
Slide 20: We have five clear priorities for 2022
We have five clear priorities for 2022 1. Investment Solutions: MPS, Funds and BMIS the fastest growing sectors of the market – an enormous opportunity for Brooks Macdonald 2. Private Clients: delivering client focused service and streamlining our processes 3. “Being the best we can be”: continuous
Slide 21: Q&A
BM BROOKS MACDONALD
Slide 22: Appendices
BM BROOKS MACDONALD
Slide 23: Leadership team
Leadership team Andrew Shepherd Ben Thorpe Lynsey Cross Robin Eggar Tom Emery Group CEO Chief Financial Officer Chief Operating Officer Managing Director, UKIM Chief People Officer Richard Hughes Alick Mackay Edward Park Priti Verma CEO International Director, Strategy & Chief Investment Chief Risk
Slide 24: 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 2021 24
Slide 25: 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 c.26m £1.9tn • Supportive policy environment: publi
Slide 26: 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 27: 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 28: Our Centralised Investment Process has delivered consistently strong investment performance
Our Centralised Investment Process has delivered consistently strong investment performance Cumulative performance (%) 1 year to 3 yrs to 5 yrs to 10 yrs to 31.12.21 31.12.21 31.12.21 31.12.21 BM Low Risk 4.27 16.92 19.37 58.18 Low Risk ARC Sterling Cautious PCI 4.23 17.35 18.15 45.73 Relative perfo
Slide 29: Driving organic growth
Driving organic growth 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 investment and • CIP
Slide 30: Our specialist BPS proposition
Our specialist BPS proposition • Environmental, Social & Governance offering which aims to delivery meaningful change to sustainability changes on behalf of investors Responsible • Two options – Advance, which invests in funds giving exposure to businesses Investment providing direct solutions to th
Slide 31: Fundamental opportunity – IFA outsourcing
Fundamental opportunity – IFA outsourcing The trend for IFAs to outsource investment management to IFAs decide to outsource to let them focus and reduce their DFMs is continuing, with the proportion of model portfolios and administrative and compliance burden, but choice of DFM funds in the mix of u
Slide 32: Higher statutory profit with adjusting items relating to acquisitions and platform transformation
Higher statutory profit with adjusting items relating to acquisitions and platform transformation H1 FY21 H1 FY22 £m £m Notes on reconciliation to statutory profits: Underlying profit before tax 14.0 17.6 Amortisation of client relationships (£2.7m) Higher charge in prior period reflecting the recen
Slide 33: Improved performance in both divisions, International margin enhanced by Lloyds
Improved performance in both divisions, International margin enhanced by Lloyds full period impact UK Investment H1 FY22 (£m) International Group1 Total Management Revenue 50.9 11.0 - 61.9 Direct costs (20.1) (6.8) (17.4) (44.3) Contribution 30.8 4.2 (17.4) 17.6 Indirect cost recharges (14.0) (1.8)
Slide 34: Lloyds and MPS driving mix change in average FUM, and decline in non-fee income
Lloyds and MPS driving mix change in average FUM, and decline in non-fee income year on year Average FUM (%) and yield (bps) Income by service and type (%) 73.7bps 73.9bps 68.4bps 1% 103.7bps 4% 101.9bps 5% 102.6bps 5% 5% 5% 12% 69.4bps 11% 72.1bps 71.5bps 10% 11% 16% 16% 15% 55.3bps 55.7bps 1% 7% 1
Slide 35: Higher average FUM, growth in revenue and slight drop in non-fee yields
Higher average FUM, growth in revenue and slight drop in non-fee yields Revenue Yields Avg FUM H1 H1 H1 H1 H1 FY22 H1 H1 Notes on yields movement: Change Change FY21 FY22 FY21 FY21 FY22 vs FY21 FY21 FY22 UKIM: £m £m % bps bps bps bps £m £m % BPS fee yield – down slightly on FY21 BPS fees 28.8 31.6 9
Slide 36: Cash flows
Cash flows £m H1 FY21 H1 FY22 Opening cash 50.2 54.9 Cash flows from operating activities 16.7 18.5 Working capital movements (6.2) (9.1) Net interest received - - Cash paid on purchase of subsidiary (5.3) - Dividends paid (5.0) (6.3) Net tax paid (3.0) (2.8) Purchase of shares by EBT, net of share
Slide 37: Cash outflows weighted in H1 covering dividends, bonuses and CAM deferred consideration
Cash outflows weighted in H1 covering dividends, bonuses and CAM deferred consideration Half year results for the six months ended 31 December 2021 37
Slide 38: Capital expenditure trend
Capital expenditure trend Capital expenditure FY17 – H1 FY22 (£m) 7.0 0.9 1.0 4.9 0.6 3.7 3.5 1.7 0.2 0.5 0.4 0.4 2.6 0.2 2.4 5.1 0.1 0.4 0.1 1.7 0.2 3.1 2.6 0.4 2.6 2.0 2.2 1.1 FY17 FY18 FY19 FY20 FY21 H1 FY21 H1 FY22 Infrastructure & Technology Property Related IT Equipment Half year results for t
Slide 39: Contacts
Contacts Andrew Shepherd Ben Thorpe CEO Chief Financial Officer 21 Lombard Street 21 Lombard Street London London EC3V 9AH EC3V 9AH T 020 7659 3492 T 020 7659 3492 E info@brooksmacdonald.com E info@brooksmacdonald.com John Welch Edward Berry Peel Hunt FTI Consulting Moor House, 120 London Wall 200 A
Slide 40: 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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