Rathbones Group Plc · LSE:RAT
Rathbones — H1 2021 Earnings Presentation
44 slides from Rathbones's earnings presentation, Jul 28, 2021
Slide 1: Interim results 2021
2021 Interim results 28 July 2021
Slide 2: H1 2021 highlights
Rathbone Brothers Plc | Interim results Page 1 H1 2021 highlights – FUMA up 8.2% to £59.2bn — FY 20: £54.7bn, H1 20: £49.4bn – Strong financial performance driven by growing FUMA – Acquisition of Saunderson House – Investing in technology
Slide 3: Financial Results
Financial Results Jennifer Mathias Group Finance Director
Slide 4: A strong first half
Rathbone Brothers Plc | Interim results Page 3 A strong first half Operating income (£m) Underlying operating expenses (£m) Underlying PBT (£m) 150.7 62.9 213.5 133.1 179.0 Underlying 46.0 29.4% operating margin +19.3% +13.2% 25.7% +36.7% H1 2020 H1 2021 H1 2020 H1 2021 H1 2020 H1 2021 Underlying ba
Slide 5: Investment Management flows and FUMA
Rathbone Brothers Plc | Interim results Page 4 Investment Management flows and FUMA Investment Management business H1 2021 H1 2020 (£bn) (£bn) % change — FUMA growth of 15.5% y-o-y, 6.5% YTD Opening funds under management and — Gross organic flows up 21.1% y-o-y 44.9 43.0 4.4 administration — Purcha
Slide 6: Rathbone Funds flows and FUMA
Rathbone Brothers Plc | Interim results Page 5 Rathbone Funds flows and FUMA Funds business — FUMA growth of 42.5% y-o-y, 10.7% YTD H1 2021 H1 2020 (£bn) (£bn) % change —Single strategy funds grew to £9.1bn Opening funds under management 9.8 7.4 32.4 (FY20: £8.1bn), multi-asset funds grew to £2.3bn
Slide 7: Revenue growth reflects growing FUMA and positive markets
Rathbone Brothers Plc | Interim results Page 6 Revenue growth reflects growing FUMA and positive markets IM Funds H1 2021 H1 2020 % (£m) (£m) (£m) (£m) change Investment Management revenue margin2 (bps) Average MSCI PIMFA 76.6 72.7 74.2 index (on quarterly 1741 1482 17.5 2.2 1.3 0.4 billing dates) 1
Slide 8: Strong operating margin supported by growth
Rathbone Brothers Plc | Interim results Page 7 Strong operating margin supported by growth H1 H1 2021 2020 % Fixed staff costs change (£m) (£m) —Planned recruitment to support our client proposition and Fixed staff costs 62.9 59.3 6.1 change agenda Average FTE1 employees 1,645 1,508 9.1 Variable sta
Slide 9: Profit before tax reflects growth and strategic delivery
Rathbone Brothers Plc | Interim results Page 8 Profit before tax reflects growth and strategic delivery H1 2021 H1 2020 % (£m) (£m) change Acquisition-related costs Underlying profit before tax 62.9 46.0 36.7 —£6.5m in relation to S&J consideration Charges in relation to client —Total FY charge anti
Slide 10: Robust capital position
Rathbone Brothers Plc | Interim results Page 9 Robust capital position 30 June 2021 (£m) Pillar 1: Minimum requirement for capital — Expected losses across credit, market and operational risk requirements Total Risk Pillar 2A: Additional requirement for firm- 105.1 Exposure specific risks Amount (Ri
Slide 11: Financial outlook and guidance for H2
Rathbone Brothers Plc | Interim results Page 10 Financial outlook and guidance for H2 – Investment in the business continues, in line with strategic plans (operating expenditure) – Total S&J deferred consideration P&L charge of £10m expected in 2021 – Saunderson House to complete in H2 – Maintaining
Slide 12: Strategic update
Strategic update Paul Stockton Chief Executive Officer
Slide 13: Delivering on our commitments (1/3)
Rathbone Brothers Plc | Interim results Page 12 Delivering on our commitments (1/3) Investment professionals Growth – Ongoing investment manager 315 recruitment – Adding investment – Targeted product and service 304 manager and planner – Strategic adviser partnerships to both client and adviser capa
Slide 14: Rathbone Funds - a success story
Rathbone Brothers Plc | Interim results Page 13 Rathbone Funds - a success story FUM (£bn) 11.4 Total FUM 9.8 2.3 1.7 7.4 9.1 8.1 5.4 5.6 1.1 Multi-asset funds 6.3 0.8 1.0 Single-strategy funds 4.6 4.6 2017 2018 2019 2020 H1 2021 Net flows (£bn) 0.9 0.5 0.9 1.5 1.1 Incubating next Strong A clear str
Slide 15: Saunderson House - filling a strategic gap
Rathbone Brothers Plc | Interim results Page 14 Saunderson House - filling a strategic gap Growth Proposition People Efficiency Increases capacity to Further broaden Rathbones' Strong cultural fit, adding Adds scale and presents source new business financial planning capability broader community of
Slide 16: Delivering on our commitments (2/3)
Rathbone Brothers Plc | Interim results Page 15 Delivering on our commitments (2/3) Multi-Asset Funds growth (£bn) Proposition 2.3 – Multi asset products lead a compelling B2B offering 1.7 – Targeted product and service to – Rathbone Greenbank Portfolio 1.1 both client and adviser Range; 4 funds – D
Slide 17: MyRathbones
Rathbone Brothers Plc | Interim results Page 16 MyRathbones – Web portal and mobile app fully launched to all users in Q1 2021 – Migration of clients from old system to new portal ongoing – 13k active users to date, rising rapidly by year end – Enhanced client/adviser experience via digital – Effect
Slide 18: Delivering on our commitments (3/3)
Rathbone Brothers Plc | Interim results Page 17 Delivering on our commitments (3/3) People Efficiency – Upgraded client – Employee survey reporting packs – Employee engagement – Process improvement – New Chief People Officer – Digitised and simplified programme – Building skills and onboarding proce
Slide 19: Priorities for H2
Rathbone Brothers Plc | Interim results Page 18 Priorities for H2 – Completion of Saunderson House and associated integration – Client lifecycle management process improvement and technology – Driving growth – Return to office model
Slide 20: Q&A
Q&A
Slide 21: Appendix
Appendix
Slide 22: Our target market is large and structurally growing
Rathbone Brothers Plc | Interim results Page 21 Our target market is large and structurally growing Several business models 2% 15% – The market is fragmented with different business models 35% – These business models are usually a product of the c£1.6tn different origins of the business Total size o
Slide 23: Investment Management client base
Rathbone Brothers Plc | Interim results Page 22 Investment Management client base Analysis of funds under management¹ Service level by number Fund type by value 7.5% 10.8% Private clients 1.8% ISAs 10.0% 33.5% Discretionary Charities Advisory 12.2% Pensions Execution-only Trusts 13.8% 90.7% 19.7% Ot
Slide 24: Where our clients' assets are invested
Rathbone Brothers Plc | Interim results Page 23 Where our clients’ assets are invested¹ 6.7% 6.1% 7.2% 5.5% 4.4% 10.0% 8.8% 9.4% 9.8% 9.5% 36.3% 41.8% 43.9% 36.3% 39.1% Direct holdings 52% 33.7% 35.4% 30.5% 30.6% 30.2% 13.3% 13.4% 13.7% 12.7% 11.7% Collectives H1 2019 FY 2019 H1 2020 FY 2020 H1 2021
Slide 25: Community investment
Rathbone Brothers Plc | Interim results Page 24 Community investment Rathbones community response to Ongoing support for local community COVID-19 projects We recognise the challenging time the We and our employees continue to support Over £140,000 communities in which we operate are facing local pro
Slide 26: Our future responsible investment approach
Rathbone Brothers Plc | Interim results Page 25 Our future responsible investment approach Our ambition is to cater to the needs of all clients – whether their interest in ESG factors is driven simply by financial materiality or by specific sustainability preferences. High ESG integration Low ESG in
Slide 27: Accessing the financial advice market
Rathbone Brothers Plc | Interim results Page 26 Accessing the financial advice market RFP — In-house Vision Independent Distribution of financial planning Financial Planning investment services to external IFAs — ‘Whole of market’ advice through in- — Independent IFA network committed to — Combined
Slide 28: Saunderson House financials
Rathbone Brothers Plc | Interim results Page 27 Saunderson House financials ‒ Funded by a combination of internal cash resources and £50m placing Initial ‒ Includes repayment of £45m of existing debt £135.1m¹ ‒ Management and employee shareholders will hold a significant proportion of their consider
Slide 29: Investment management: Service level breakdown of FUMA
Rathbone Brothers Plc | Interim results Page 28 Investment management: Service level breakdown of FUMA 30 June 30 June % change 2021 £m 2020 £m Direct 35,982 30,355 18.5 Financial Adviser linked 10,246 8,524 20.2 Total discretionary 46,228 38,879 18.9 Non-Discretionary Investment Management 1,114 1,
Slide 30: Performance: single strategy funds
Rathbone Brothers Plc | Interim results Page 29 Performance: single strategy funds Performance¹ and Quartile Ranking at 30 June 2021 1 year 3 year 5 year 10 years Size of fund (£m)7 Rathbone Global Opportunities Fund I Acc4 24.05% 3 61.46% 1 142.89% 1 313.91% 1 3693.19 Sector: IA Global 25.92% 42.61
Slide 31: Performance: multi-asset funds
Rathbone Brothers Plc | Interim results Page 30 Performance: multi-asset funds Discrete year performance1 at 30 June 2021 (S-class shares) 1 year 3 years 5 years 10 years Size of fund (£m)4 Rathbone Multi-Asset Total Return Portfolio S Inc2 8.46% 16.16% 24.82% 55.89% 318.9 Bank of England Base Rate
Slide 32: Analysis of operating income
Rathbone Brothers Plc | Interim results Page 31 Analysis of operating income Basis point return from fees Basis point return from commission 15.2 60.4 13.8 13.4 58.4 11.9 11.7 12.1 57.9 56.5 56.2 52.9 2016 2017 2018 2019 2020 H1 2021 2016 2017 2018 2019 2020 H1 2021 Basis point return from interest
Slide 33: Total operating expenses
Rathbone Brothers Plc | Interim results Page 32 Total operating expenses 30 June 2021 30 June 2020 Staff — payroll 8% Staff — payroll 3%2%4% (excluding variable) 3% (excluding variable) 3% Staff — variable Staff — variable 10% 10% Staff — other Staff — other 39% 38% Property £164.7m £151.8m 9% Prope
Slide 34: Capital expenditure
Rathbone Brothers Plc | Interim results Page 33 Capital expenditure Capital expenditure (£’m) £4.6m £4.9m —Technology and other represents ongoing 0.2 investment in strategic initiatives to date: 0.3 0.9 4.7 —MyRathbones new portal 3.4 —MyRathbones App —Hybrid working —FY 21 capex expected to be in
Slide 35: Underlying profits before tax (£m) and EPS (p)
Rathbone Brothers Plc | Interim results Page 34 Underlying profits before tax¹ (£m) and EPS (p) 68.3 69.9 51.1 43.2 41.6 35.7 24.5 36.1 20.4 25.8 13.5 35.3 39.6 74.9 43.3 44.2 87.5 48.3 43.3 91.6 46.6 42.1 88.7 46.0 46.5 92.5 62.9 2016 2017 2018 2019 2020 H1 2021 1st Half UPBT (£m) 2nd Half UPBT (£m
Slide 36: Earnings per share
Rathbone Brothers Plc | Interim results Page 35 Earnings per share H1 2021 H1 2020 Pre tax Post tax Pre tax Post tax EPS (p)1 EPS (p)2 (£m) (£m) (£m) (£m) Underlying profit attributable to shareholders 62.9 50.3 92.5 46.0 36.2 67.5 Charges in relation to client relationships and goodwill (7.2) (5.8)
Slide 37: Segmental results
Rathbone Brothers Plc | Interim results Page 36 Segmental results 30 June 2021 Investment Management Funds Indirect Total (£m) (£m) (£m) (£m) Net investment management fee income 140.7 27.8 - 168.5 Net commission income 31.2 - - 31.2 Net interest income 2.3 - - 2.3 Fees from advisory services and ot
Slide 38: Analysing the balance sheet
Rathbone Brothers Plc | Interim results Page 37 Analysing the balance sheet 30/06/21 30/06/20 30/06/21 30/06/20 Assets (£’000) (£’000) Liabilities (£’000) (£’000) Cash and balances with central banks 1,414,086 2,303,875 Deposits by banks 1,604 3 Settlement balances 127,818 178,416 Settlement balance
Slide 39: Reconciliation of equity to total own funds
Rathbone Brothers Plc | Interim results Page 38 Reconciliation of equity to total own funds H1 2021 H1 2020 FY 2020 (£m) (£m) (£m) Equity – Share capital and share premium 292.2 216.0 218.0 – Reserves 320.7 308.7 342.6 Less: – Own shares (48.4) (46.1) (46.7) – Intangible assets1 (215.9) (225.8) (220
Slide 40: Shareholders at June 2021
Rathbone Brothers Plc | Interim results Page 39 Shareholders at 30 June 2021 11% Lindsell Train Current Rathbones staff Heronbridge 9% Aviva Investors 41% Franklin Templeton 6% Aberforth Blackrock 5% Baillie Gifford Vanguard 5% MFS Montanaro 4% 2% Marathon 2% 4% 3% 4% 4% Other
Slide 41: Other information: Investment Management
Rathbone Brothers Plc | Interim results Page 40 Other information: Investment Management H1 2021 FY 2020 Change Investment Management Total rate of net growth in funds under management 2.1% 1.4% Revenue yield on FUM (excluding Charities and excluding S&J) (bps) 78.2 79.2 (1.0)bps Revenue yield on FU
Slide 42: Investment Management: Number of investment managers and FUMA per office
Rathbone Brothers Plc | Interim results Page 41 Investment Management: Number of investment managers and FUMA per office Investment Management Number of funds under management investment and administration Office location managers¹ (£bn at 30/06/21) London 136 24.4 Glasgow 43 7.5 Liverpool 28 3.3 Ed
Slide 43: Investment Management: Annual management fees for direct private clients
Rathbone Brothers Plc | Interim results Page 42 Investment Management: Annual management fees for direct private clients¹ Discretionary management fees (subject to VAT) Our fee is completely transparent Applied across Main Funds and we do not charge: and ISA funds (pa)² First £250,000 1.20% — Fixed
Slide 44: Important information
Rathbone Brothers Plc | Interim results Page 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 exchang