Brooks Macdonald Group Plc · LSE:BRK
Brooks Macdonald — FY2021 Earnings Presentation
42 slides from Brooks Macdonald's earnings presentation, Sep 16, 2021
Slide 1: Full year results for the year ended 30 June 2021
Full year results for the year ended 30 June 2021 Strong strategic progress, excellent financial performance Return to positive net flows with momentum growing 16 September 2021
Slide 2: Speakers
Speakers v Andrew Ben Shepherd Thorpe CEO designate Chief Financial Officer
Slide 3: Agenda
Agenda 1 Context and introduction 2 Financial results and achievements 3 Opportunity and outlook 4 Q&A 5 Appendices
Slide 4: Context and introduction
Andrew Shepherd 1 Context and introduction 2 Financial results and achievements 3 Opportunity and outlook 4 Q&A 5 Appendices
Slide 5: Strong strategic progress underlined by excellent financial performance
Strong strategic progress underlined by excellent financial performance • Excellent financial performance, with record revenue, underlying Underlying profit margin (%) profit and underlying profit margin, in line with commitment 18.8% 19.6% 21.2% 25.9% • Completed successful integration of the acqui
Slide 6: Financial results and achievements
Ben Thorpe 1 Context and introduction 2 Financial results and achievements 3 Opportunity and outlook 4 Q&A 5 Appendices
Slide 7: Strong financial progress, another year of record delivery
Strong financial progress, another year of record delivery Total revenue (£m) Underlying profit before tax Underlying profit margin before (£m) tax (%) +8.8% +4.7pts +33.0% 118.2 25.9% 108.6 30.6 21.2% 105.7 23.0 19.6% 20.7 FY19 FY20 FY21 FY19 FY20 FY21 FY19 FY20 FY21 Statutory profit before tax (£m
Slide 8: Record FUM of £16.5bn, organic net flows turn positive in Q4
Record FUM of £16.5bn, organic net flows turn positive in Q4 as expected Total FUM for FY17 to FY21 Organic and acquired net flows Q1 FY20 to Q4 FY21 (£bn) (£m) 16.5 Net +977 Net +776 CAGR 1,181 12.5% 882 13.7 0 13.1 127 0 12.3 (28) (64) (35) (106) (204) (261) (478) H2: £92m 10.3 FY17 FY18 FY19 FY20
Slide 9: Positive momentum in net flows, enhanced distribution capability
Positive momentum in net flows, enhanced distribution capability making a difference Organic net flows FY21 Closing (£m / annualised FUM % growth) Q1 Q2 Q3 Q4 (£m) 17% of BPS inflows Over 450 IFAs generated by added funds to BPS BPS (119) (43) (26) 28 9,460 specialist products1, during FY21 (5.5%) (
Slide 10: Acquisitions successfully integrated with accretion well ahead of expectations
Acquisitions successfully integrated with accretion well ahead of initial expectations Acquisition criteria: (i) high quality business; (ii) compelling strategic and cultural fit; (iii) value-adding through strong EPS accretion • New suite of funds providing flexible solutions to • Closed a gap in t
Slide 11: Quality of income improved, margin enhancement delivered
Quality of income improved, margin enhancement delivered Revenue (£m) by type (% of total) +8.8% 118.2 +7.2% +2.7% 108.6 +7.5% 105.7 15.1% 98.6 91.7 16.9% 18.6% 17.2% Interest income 29.7% Non-fee income 83.5% Fee income1 78.6% 77.4% 77.7% 68.5% FY17 FY18 FY19 FY20 FY21 Margin composition and operat
Slide 12: Non-fee income drop and change in mix driving yield reduction
Non-fee income drop and change in mix driving yield reduction Average FUM (%) and yields (bps) BPS annualised income yield International annualised income FY20 vs FY21 (bps) yield FY20 vs FY21 (bps) (5.3bps) 91.8 79.2bps 85.5 79.0 73.9bps 24.0 72.1 18.2 24.9 17.7 12% 79.0bps 4% 98.1bps 67.8 67.3 11%
Slide 13: Continued cost discipline whilst investing for growth
Continued cost discipline whilst investing for growth, costs down 2.6% ex acquisitions FY20 FY21 Change Key movements in core underlying costs: £m £m £ % • Fixed staff costs are down by 3.8% mainly due to: Fixed staff costs 39.0 37.5 (1.5) (3.8) • £2.0m additional staff costs from net new hires Vari
Slide 14: Improved performance in all divisions, International margin now 24.7%
Improved performance in all divisions, International margin now 24.7% UK Investment FY21 (£m) International Group1 Total Management Revenue 100.0 18.2 - 118.2 Direct costs (45.7) (10.8) (30.9) (87.4) Contribution 54.3 7.4 (30.9) 30.8 Indirect cost recharges (25.3) (2.9) 28.0 (0.2) Underlying profit
Slide 15: Strong capital position to support growth and dividend enhancement
Strong capital position to support growth and dividend enhancement Annual dividend per share (p) Own Funds1 Attribution (£m) CAGR 11.1% 63.0 +19% Post Lloyds net 53.0 consideration paid of 51.0 £5.3m 47.0 41.0 40.0 +25% 10.6 32.0 32.0 30.0 26.0 Total 15.0 17.0 19.0 21.0 23.0 +10% 6.2 £52.6m FY17 FY1
Slide 16: FY22 guidance points
FY22 guidance points • Group moving back into positive net flows – first two months of FY22 both positive at Group level • UKIM pipeline strong and growing, particularly for MPS Platform, BM Investment Solutions, and BPS FUM specialist products • International expected to return to positive net flow
Slide 17: Opportunity and outlook
Andrew Shepherd 1 Context and introduction 2 Financial results and achievements 3 Opportunity and outlook 4 Q&A 5 Appendices
Slide 18: The fundamental opportunity for our intermediary-focused strategy is strong
The fundamental opportunity for our intermediary-focused strategy is strong Wealth is growing in the UK and policy is favourable The number of advisers continues to grow Forecast UK assets by wealth band Policy Number of advisers in directly authorised firms (£trn) framework (‘000) 4.0 • Increasing
Slide 19: Our bold vision for Brooks Macdonald
Our bold vision for Brooks Macdonald is as the leading investment manager for intermediaries, grounded in our purpose of realising ambitions and securing futures Market-leading organic growth People and Culture Best-in-class adviser experience and excellent client service, rigorous Centralised Inves
Slide 20: Our digital transformation is progressing well
Our digital transformation is progressing well, making Brooks Macdonald easy to do business with Delivered already An intuitive, adaptive digital onboarding journey for clients and Administrative advisers encompassing all products and services, integrating processes with key intermediary platforms f
Slide 21: Our investment proposition is evolving to meet changing market demands
Our investment proposition is evolving to meet the changing demands of the market Client focus • We have four specialist products within our overall Bespoke Portfolio Service – the AIM Portfolio Specialist Specialist offering, BPS Service, Responsible Investment, Decumulation and Court of Protection
Slide 22: Centralised Investment Process has delivered consistently strong investment performance
Our Centralised Investment Process has delivered consistently strong investment performance 1 year to 3 yrs to 5 yrs to 10 yrs to 30.06.21 30.06.21 30.06.21 30.06.21 BM Low Risk 7.93 11.20 23.00 52.23 Low Risk ARC Sterling Cautious PCI 7.25 11.61 20.58 40.71 Relative performance 0.68 -0.41 2.42 11.5
Slide 23: Our purpose applies to our people as much as anyone
Our purpose of Securing Futures and Realising Ambitions applies to our people as much as anyone People agenda: • Our Promise – our commitment to our people of what they can expect from the Group in return for their hard work and commitment Connected Working: • Introduced our flexible working policy
Slide 24: We are a responsible corporate citizen
We are a responsible corporate citizen Full year results for the year ended 30 June 2021 24
Slide 25: We are primed for growth
We are primed for growth, confident in our ability to deliver our ambitious growth agenda • Fundamental opportunity for Brooks Macdonald is strong, with focus on intermediaries to leverage our strengths and unique position in the market • We have a strong team in place – energised, ambitious and exc
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Slide 28: Leadership team
Leadership team Andrew Shepherd Ben Thorpe Lynsey Cross Robin Eggar Tom Emery Group CEO designate Chief Financial Officer Chief Operating Officer Managing Director, UKIM HR Director Richard Hughes Alick Mackay Edward Park Priti Verma CEO International Director, Strategy & Chief Investment Chief Risk
Slide 29: Our guiding principles
Our guiding principles … underpin everything we do and the way we do it Full year results for the year ended 30 June 2021 29
Slide 30: 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 50% c.26m £1.9tn • Supportive policy environment: p
Slide 31: 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 32: 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 33: Driving organic growth going forward
Driving organic growth going forward 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 investm
Slide 34: 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 35: Fundamental opportunity – IFA outsourcing
Fundamental opportunity – IFA outsourcing The trend for IFAs to outsource investment IFAs decide to outsource to let them focus and management to DFMs is continuing, with the reduce their administrative and compliance proportion of model portfolios and funds in the burden, but choice of DFM depends
Slide 36: Higher statutory profit with adjusting items
Higher statutory profit with adjusting items relating to acquisitions and platform transformation FY20 FY21 £m £m Notes on reconciliation to statutory profits: Underlying profit before tax 23.0 30.6 Acquisition related costs: Acquisition related costs +£2.3m: i. Gain on purchase (+£5.0m) in relation
Slide 37: Higher average FUM, growth in revenue and slight drop in yields
Higher average FUM, growth in revenue and slight drop in yields due to mix change Revenue Yields Avg FUM Notes on yields movement: FY20 FY21 Change FY20 FY21 Change FY20 FY21 Change £m £m % bps bps Bps £m £m % UKIM: BPS fees 53.8 58.7 9.1 67.8 67.3 (0.5) 7,932 8,722 10.0 BPS fee yield – down slightl
Slide 38: Cash flows
Cash flows £m FY20 FY21 Opening cash 34.6 50.2 Cash flows from operating activities 28.8 32.5 Working capital movements 3.1 4.4 Net interest received 0.3 - Proceeds from share placing 29.4 - Cash paid on purchase of subsidiary (20.4) (5.3) Dividends paid (7.7) (8.6) Net tax paid (5.9) (5.8) Purchase
Slide 39: Strong cash generation, Lloyds acquisition funded from own funds
Strong cash generation, Lloyds acquisition funded from own funds Consideration paid 8.3m Capital acquired (3.0m) Full year results for the year ended 30 June 2021 39
Slide 40: Capital expenditure trend
Capital expenditure trend Capital expenditure FY17 – FY21 (£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 5.1 1.7 0.2 3.1 2.6 0.4 2.6 1.1 FY17 FY18 FY19 FY20 FY21 Infrastructure & Technology Property Related IT Equipment Full year results for the year ended 30 June 2021 40
Slide 41: Contacts
Contacts Andrew Shepherd Ben Thorpe CEO designate 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
Slide 42: 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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