Slide 1: Preliminary results: Building for the future
Rathbone Brothers Plc Preliminary results Building for the future 23 February 2017
Slide 2: Agenda
Rathbone Brothers Plc | Preliminary results Page 2 Agenda 1. 2016 in context 2. Financial results 3. Strategic update — Distribution — Rathbone Private Office 4. Q&A Mark Nicholls Philip Howell Paul Stockton Mike Webb Chairman Chief Executive Finance Director CEO of RUTM
Slide 3: 2016 in context
Rathbone Brothers Plc | Preliminary results Page 3 2016 in context — a year marked by considerable political change and uncertainty — subdued first half for investors, followed by market recovery as the year progressed — results ahead of expectations benefitting from positive investment markets and
Slide 4: Financial results
Rathbone Brothers Plc | Preliminary results Page 4 Financial results Paul Stockton Finance Director
Slide 5: 2016 financial highlights
Rathbone Brothers Plc | Preliminary results Page 5 2016 financial highlights FUM growth continues Stable underlying operating Balance sheet management — total funds under management up margin on track 17.1% to £34.2bn — underlying PBT up 6.4% to £74.9m — completed a 4.6% share placing, resulting in
Slide 6: Funds under management
Rathbone Brothers Plc | Preliminary results Page 6 Funds under management Investment Unit Total Total Organic gross inflows Management Trusts FY 2016 FY 2016 FY 2016 FY 2015 — one third of new business (£bn) (£bn) continues to be sourced by (£bn) (£bn) intermediaries Opening funds under management 2
Slide 7: Improving income quality
Rathbone Brothers Plc | Preliminary results Page 7 Improving income quality Investment management and advisory fee income represents 79.9% of underlying operating income (2015: 76.5%) FY 2016 FY 2015 % (£m) (£m) change Investment Management basis point return on average funds under management¹ 77.2
Slide 8: Balancing expenditure
Rathbone Brothers Plc | Preliminary results Page 8 Balancing expenditure FY 2016 FY 2015 % Growth in headcount 2016 (£m) (£m) change 1,120 1,100 Fixed staff costs 79.8 73.5 8.6 21 1,080 17 Average FTE1 employees 1,060 1,066 981 8.7 18 1,101 during the year 1,040 27 Actual FTE1 employees at 1,020 1,1
Slide 9: Profit before tax
Rathbone Brothers Plc | Preliminary results Page 9 Profit before tax Strong Vision growth¹ FY 2016 FY 2015 % (£m) (£m) change 120 £1.03bn 1.20 £0.85bn 100 1.00 Number of appointed Average FTSE 100 Index (on quarterly £0.67bn representatives 6659 6415 3.8 99 billing dates) 80 0.80 FUA (£bn) 60 81 0.6
Slide 10: Balance sheet management
Rathbone Brothers Plc | Preliminary results Page 10 Balance sheet management 31/12/16 31/12/15* 2016 sources and uses of capital Assets (£m) (£m) Sources Uses Profit after tax Total own funds1 174.2 144.3 (pre amort'n) Pension deficit5 £53.2m £31.4m Pillar 1 own funds requirement 71.5 67.2 Sources S
Slide 11: Building a sustainable business
Rathbone Brothers Plc | Preliminary results Page 11 Building a sustainable business Philip Howell Chief Executive
Slide 12: In 2014 we shared an aspiration to reach £40 billion funds under management
Rathbone Brothers Plc | Preliminary results Page 12 In 2014 we shared an aspiration to reach £40 billion funds under management in 2018… How are we doing? — improve team structures 40 38 — simplify pricing structures 36 — grow charities and specialist services 34 32 — establish Rathbone Privat
Slide 13: Rathbone Unit Trust Management
Rathbone Brothers Plc | Preliminary results Page 13 Rathbone Unit Trust Management Looking back Looking forward FY FY % change % change — momentum good but redemptions higher 2016 2015 Rathbones industry¹ Funds under — volatile markets £4.0bn £3.1bn 29.0 12.6 Cautious investor management — macro eco
Slide 14: Distribution: A five year plan
Rathbone Brothers Plc | Preliminary results Page 14 Distribution A five year plan Mindsets MPS Lack of skills, DFM suitability options knowledge, experience Pricing flexibility Proposition Uniformed proposition, Collateral delivery and collateral Pricing Fully resourced Infrastructure Experienced an
Slide 15: Vision Independent Financial Planning
Rathbone Brothers Plc | Preliminary results Page 15 Vision Independent Financial Planning Encouraging growth for 2017 — much of 2016 was focused on post acquisition activities — comprehensive reviews — strengthening and implementing governance and IT overlays — resuming adviser recruitment — positio
Slide 16: What does Rathbone Private Office do?
Rathbone Brothers Plc | Preliminary results Page 16 What does Rathbone Private Office do? — aimed at clients with over £10m of investable assets — in-depth advice on overall asset allocation — transparent consolidated reporting — discretionary investment management allowing access to the top-tier mo
Slide 17: Access to third party providers
Rathbone Brothers Plc | Preliminary results Page 17 Access to third party providers — wide-ranging advisory solutions covering equities, bonds, foreign exchange, commodities and alternative asset classes — best-in-class fund selection — resident and non-domiciled compliant solutions — extensive lend
Slide 18: Progressing our strategy in 2016
Rathbone Brothers Plc | Preliminary results Page 18 Progressing our strategy in 2016 As planned, we spent an additional £6m in 2016 on strategic initiatives Initiative What have we delivered to date? 2017 milestones — sales and management team in place Intermediary — +c.£200m funds under management
Slide 19: Supporting our strategy in 2017
Rathbone Brothers Plc | Preliminary results Page 19 Supporting our strategy in 2017 Client relationship New system Total potential Client service management financial impacts Client “journey” Process re-engineering Capital expenditure New CRM tool +c.£1m Investment manager Simpler cost allocation Gr
Slide 20: Focusing on delivery
Rathbone Brothers Plc | Preliminary results Page 20 Focusing on delivery — maintain momentum in strategic initiatives — drive improvements but keep cost discipline — manage our balance sheet risks — acquisition opportunities that fit our culture Exciting challenges and opportunities ahead, mindful o
Slide 21: Q&A
Rathbone Brothers Plc | Preliminary results Page 21 Q&A
Slide 22: Appendix
Rathbone Brothers Plc | Preliminary results Page 22 Appendix
Slide 23: Rathbones at a glance
Rathbone Brothers Plc | Preliminary results Page 23 Rathbones at a glance Rathbone Brothers Plc, through its subsidiaries, is a leading provider of high-quality, personalised investment and wealth management services for private clients, charities and trustees. Our services include discretionary inv
Slide 24: Our business model
Rathbone Brothers Plc | Preliminary results Page 24 Our business model What makes us different How we do it What makes us different Scale and expertise Individual relationships with clients For investors — 287 highly trained investment professionals — our service is delivered directly though investm
Slide 25: Current growth strategy
Rathbone Brothers Plc | Preliminary results Page 25 Current growth strategy Client referrals Intermediaries Specialist Unit Trust Strategic Acquisitions services initiatives — new client — leveraging vision — charities — investment — Private Office — company or introductions — B2B panels - — Greenba
Slide 26: Leading UK private client wealth managers
Rathbone Brothers Plc | Preliminary results Page 26 Leading UK private client wealth managers Private client AUM (£m) Private client AUM (£m) Total Disc. Adv. Total Disc. Adv. 1 St. James's Place Wealth Management 58,600 -¹ - 21 Thesis Asset Management 9,998 9,198 800 2 Coutts 49,239 47,269 1,970 22
Slide 27: Analysing the balance sheet
Rathbone Brothers Plc | Preliminary results Page 27 Analysing the balance sheet 31/12/16 31/12/15* 31/12/16 31/12/15* Assets (£’000) (£’000) Liabilities (£’000) (£’000) Cash and balances with central banks 1,075,673 583,156 Deposits by banks 294 299 Settlement balances 37,787 17,948 Settlement balan
Slide 28: Dividend and earnings per share
Rathbone Brothers Plc | Preliminary results Page 28 Dividend and earnings per share 120 100 97.4p 80 78.9p pence 76.1p 76.0p 60 66.5p 55.0p 57.0p 49.0p 52.0p 40 47.0p 20 0 2012 2013 2014 2015 2016 Basic EPS Dividend per share Dividend cover 1.4x 1.6x 1.5x 1.8x 1.4x Dividend payout ratio 71% 64% 68%
Slide 29: Underlying PBT (£m) / EPS (p)
Rathbone Brothers Plc | Preliminary results Page 29 Underlying profits before tax¹ (£m) and EPS (p) 70 60 53.2 Underlying PBT (£m) / EPS (p) 51.2 50 43.2 38.6 40 44.2 34.6 37.5 35.7 30 31.9 20 24.8 10 23.1 21.7 44.8 26.1 24.4 50.5 29.3 32.3 61.6 37.2 33.2 70.4 35.3 39.6 74.9 0 2012 2013 2014 2015 20
Slide 30: Earnings per share
Rathbone Brothers Plc | Preliminary results Page 30 Earnings per share FY 2016 FY 2015 Pre tax Post tax Pre tax Post tax EPS (p)1 EPS (p)1 (£m) (£m) (£m) (£m) Underlying profit attributable to shareholders 74.9 59.1 122.1 70.4 55.7 117.0 Charges in relation to client relationships and goodwill (11.8
Slide 31: Shareholders at 31 December 2016
Rathbone Brothers Plc | Preliminary results Shareholders at 31 December 2016 Rathbones staff, former staff & directors Lindsell Train Investment Mgt¹ 14.7% MFS Investment Mgt² 28.6% Mawer Investment Mgt Franklin Templeton Investments Aviva Investors 13.9% Troy Asset Mgt Aberdeen Asset Mgt³ Heronbrid
Slide 32: Segmental results
Rathbone Brothers Plc | Preliminary results Page 32 Segmental results y/e 31 December 2016 Investment Management Unit Trusts Indirect expenses Total (£m) (£m) (£m) (£m) Net investment management fee income 163.3 21.5 - 184.8 Net commission income 38.9 - - 38.9 Net interest income 11.6 - - 11.6 Fees
Slide 33: Reconciliation of equity to total own funds
Rathbone Brothers Plc | Preliminary results Page 33 Reconciliation of equity to total own funds FY 2016 FY 2015* (£m) (£m) % change Equity Share capital and share premium 142.5 100.1 42.4 Reserves 188.5 206.3 (8.6) Less: - Own shares (6.2) (6.2) - - Intangible assets1 (166.4) (170.5) (2.4) Total Com
Slide 34: Capital expenditure
Rathbone Brothers Plc | Preliminary results Page 34 Capital expenditure 11% Investment¹ 24% 24% 31% 44% Maintenance/replacement² 56% 69% 76% 76% 89% 16 14 12 9.7 10 £ million 8 6 0.8 1.7 0.7 0.2 4 2.4 1.5 1.7 2.3 1.6 2 2.4 2.7 2.5 1.7 1.7 0 2012 2013 2014 2015 2016 Purchased software IT & other Prop
Slide 35: Total operating expenses
Rathbone Brothers Plc | Preliminary results Page 35 Total operating expenses 31 December 2016 31 December 2015 4% 2% 2% 4% 4% 4% 9% 9% 40% 43% 14% £201.2m 12% £171.4m 3% 2% 25% 23% Staff - payroll (excluding variable) Staff - variable Staff - other Property Depreciation & amortisation Professional S
Slide 36: Other information
Rathbone Brothers Plc | Preliminary results Page 36 Other information FY 2016 FY 2015 % change Investment Management Total rate of net growth in funds under management 4.5% 5.7% Revenue margin on FUM (excluding Charities team) (bps) 77.3 79.4 (2.6) Revenue margin on Charities team FUM (bps) 46.4 46.
Slide 37: Analysis of operating income
Investment Management | Preliminary results Page 37 Analysis of operating income Basis point return from fees Basis point return from commission 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 0 10 20 30 40 50 60 0 10 20 30 Basis point return from interest Advisory fee income (£m) 2012 2012 H1 H2
Slide 38: Investment Management client base
Investment Management | Preliminary results Page 38 Investment Management client base Analysis of funds under management¹ Service level Service level 3.0% 4.2% 9.4% Private clients Discretionary 11.7% ISAs Advisory 38.1% Trusts Execution-only Charities 13.3% Pensions 11.8% Other 92.8% 15.7% Size of
Slide 39: Where our clients' assets are invested
Investment Management | Preliminary results Page 39 Where our clients’ assets are invested¹ Direct H1 2014 14.8% 45.9% 27.7% 6.8% 4.8% holdings 53.1% FY 2014 14.2% 43.7% 29.8% 7.2% 5.1% Collectives H1 2015 13.5% 43.0% 29.5% 8.4% 5.6% 46.9% FY 2015 13.1% 42.6% 30.3% 8.9% 5.1% H1 2016 13.7% 39.1% 31.2
Slide 40: Offices
Investment Management | Preliminary results Page 40 Offices Funds under Number of investment Office location management professionals¹ (£bn at 31/12/16)² London 132 19.64 Liverpool 25 2.00 Edinburgh 27 2.44 Winchester 18 1.65 Bristol 17 0.71 Other offices³ 54 4.57 Total 273 31.01 ¹ As at 31 December
Slide 41: Annual management fees
Investment Management | Preliminary results Page 41 Annual management fees¹ 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
Slide 42: Performance: retail funds
Unit Trusts| Preliminary results Page 42 Performance: retail funds Performance¹ and Quartile Ranking at Size of fund YTD 2017 1 year 3 year 5 year 31 December 2016 (I-Class units and S-class shares) (£m)† Rathbone Global Opportunities Inst Acc in GB 2.06 1 16.79 4 47.91 2 107.2 1 923.8 Sector : IA G
Slide 43: Performance: outcome oriented funds
Unit Trusts| Preliminary results Page 43 Performance: outcome oriented funds Discrete year performance1 at Size of fund 1 year 3 years 5 years 31 December 2016 (S-class shares) (£m)† Rathbone Multi Asset Total Return Portfolio S Inc TR in GB 2 6.13 16.34 29.97 178.0 Offset Instrument : LIBOR GBP 6m
Slide 44: Reference sheet
Rathbone Brothers Plc | Preliminary results Page 44 Reference sheet Common Equity Common Equity Tier 1 capital as a proportion of total risk Tier 1 ratio: exposure amount Leverage ratio: Tier 1 capital resources as a percentage of total assets, excluding intangible assets and investment in associate
Slide 45: Important information
Rathbone Brothers Plc | Preliminary results Page 45 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 exc