Schroder Asian Total Return Investment Company plc · LSE:ATR
Schroder Asian Total Return Investment — Henderson Group — H1 2015 Earnings Presentation
52 slides from Schroder Asian Total Return Investment's earnings presentation, Jul 30, 2015
Slide 1: 1H15 interim results
1H15 interim results Thursday 30 July 2015 Andrew Formica Chief Executive Roger Thompson Chief Financial Officer
Slide 2: Agenda
Agenda • 1H15 highlights • 1H15 financial results • Market backdrop, regulatory environment and outlook 2
Slide 3: 1H15 interim results: Highlights
1H15 interim results Highlights Andrew Formica Chief Executive
Slide 4: Highlights
Highlights Strong investment performance 1H15 1H14 Change Net inflows of £5.6bn 3 year investment 83% 86% performance¹ AUM increased to £82.1bn Net flows £5.6bn £5.0bn Increased underlying profit and EPS Total AUM £82.1bn £74.7bn Share buyback launched to deploy Underlying PBT² £117.4m £90
Slide 5: 1H15 AUM movements
1H15 AUM movements Volatile markets; strong flows; business re-shaped £bn 100 Perennial pro forma £5.5bn Pro forma 90 £5.6bn (£6.8bn) £87.6bn £1.5bn £0.6bn £81.2bn 80 Sale of stake in Old Mutual & £82.1bn TH Real Estate 90 West (£5.7bn) 70 Richard Pease departure (£1.0bn) 60 50 40 1 Jan 15 Market/FX
Slide 6: Consistently strong investment performance
Consistently strong investment performance 83% of funds outperformed over three years Core capabilities AUM 1 year1 3 years1 European Equities £18.2bn 90% 91% Global Equities £26.0bn 79% 69% Global Fixed Income £20.6bn 54% 80% Multi-Asset £5.1bn 70% 93% Alternatives £12.2bn 87% 100% Total £82.1bn 76
Slide 7: Henderson net client flows
Henderson net client flows 1H15 annualised net new money growth ahead of 6-8% target 14% annualised NNM growth Institutional over 1H15¹,² US Retail 3,554 Retail SICAVs 2,988 2,701 UK Retail 2,042 2,040 Retail quarterly average³ 1,366 £1.6bn 1,241 742 £m (182) (1,269) 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q
Slide 8: Institutional net flows
Institutional net flows Steady progress 1H15 flow drivers Looking forward Fixed income client trends: diversification of credit Momentum building steadily, broadening from a exposure and reduction in duration predominantly UK base Client base continues to globalise: flows from France, Scandinavia, A
Slide 9: UK Retail net flows
UK Retail net flows Investment Week: 2015 Global Group of the Year 1H15 flow drivers Looking forward Strong gross sales, but clients are also taking profits Continuing client demand for property, absolute return, European equities and high yield Richard Pease departure handled well 909 European Equi
Slide 10: SICAV Retail net flows
SICAV Retail net flows Broad range of products and clients 1H15 flow drivers Looking forward Net sales >£0.5bn: Henderson Gartmore Continental Diversified product range offers protection in volatile European, Henderson Gartmore UK Absolute Return markets and Henderson Horizon European Corporate Bond
Slide 11: US Mutuals net flows
US Mutuals net flows Broadening beyond European Equities 1H15 flow drivers Looking forward Top 3 active fund family on two major networks Three year track records for new funds: 2015 - Dividend and Income Builder, All Asset Geneva excess returns as at 30 Jun 15 YTD 2016 - High Yield Opportunities, U
Slide 12: Net flows by capability
Net flows by capability Capabilities at different stages of development £bn 3.0 £2.7bn 2.5 £1.9bn £2.0bn 2.0 1H15 net flows 1.5 1.0 0.5 0.0 (0.5) -0.5 (£0.2bn) (1) -1.0 (£0.8bn) European Equities Global Equities Global Fixed Income Multi-Asset Alternatives¹ AUM (£bn) Retail 16.1 18.9 6.7 2.0 7.8 Ins
Slide 13: Strategy is delivering
Strategy is delivering • Above industry net new money growth £bn 140 AUM doubled • Strong investment performance 120 Target: 2-4% pa • Carefully targeted investment 100 18mths to Jun 15: 1% pa • Investment management capabilities Target: 4-6% pa • Client relationships 80 18mths to Jun 15: 6% pa • Gl
Slide 14: 1H15 interim results: Financial results
1H15 interim results Financial results Roger Thompson Chief Financial Officer
Slide 15: Financial highlights
Financial highlights Strong income and profit growth 1H15 1H14 Change £m £m Management fees (net of commissions) 230.4 193.7 +19% Performance fees 48.8 45.2 +8% Other income 16.9 15.8 +7% Net fee income 296.1 254.7 +16% Income from associates and joint ventures 0.4 2.0 (80%) Finance income 15.3 5.2
Slide 16: Management fee margins
Management fee margins bps 80.0 FY11 FY12 70.0 FY13 60.0 FY14 1H15 50.0 40.0 75.0 75.0 74.0 74.0 74.1 30.0 55.1 56.5 56.3 57.8 56.7 20.0 38.9 33.8 29.5 30.2 27.9 10.0 0.0 Total management fee margin Management fee margin - Retail Management fee margin - Institutional Note: Management fees and margin
Slide 17: Performance fees
Performance fees Diversity of fees by strategy and product • Funds generating a performance fee: 32 • Performance fee as a percentage of net fee income: 16% 1H15 1H14 £m £m SICAVs 26.6 10.7 Offshore Absolute Return funds 7.8 18.4 Segregated Mandates 1.6 8.4 UK OEICs & Unit Trusts 8.0 5.1 Investment
Slide 18: Cost drivers
Cost drivers Cost growth tracking to full year guidance 1H15 1H14 Change £m £m Fixed staff expenses 47.6 43.0 +11% Variable staff expenses 84.3 71.0 +19% Total staff expenses 131.9 114.0 +16% Non-staff operating expenses 56.7 51.6 +10% Total operating expenses 188.6 165.6 +14% Finance expenses 5.8 5
Slide 19: Operating margin and compensation ratio
Operating margin and compensation ratio Operating leverage starting to come through % 50 Compensation ratio¹, ² Operating margin³ 45.4 44.8 44.7 44.5 45 42.4 41.4 40 35.7 36.3 35.0 35.5 34.8 35 34.1 30 25 FY11 FY12 FY13 1H14 FY14 1H15 1 All prior periods have been restated to reflect the exclusion o
Slide 20: Tax, EPS and dividend
Tax, EPS and dividend Dividend increase reflects sustainable elements of 1H15 profit growth 1H15 1H14 Change Underlying profit before tax from continuing operations £117.4m £90.7m +29% Underlying profit before tax from discontinued operations - £6.3m (100%) Total underlying profit before tax £117.4m
Slide 21: Cash and capital
Cash and capital Continued improvement in our cash and capital position 30 Jun 15 31 Dec 14 £m £m Net cash 119.1 77.7 Total capital 283 208 Group capital requirement1 (170) (164) Surplus capital 113 44 • £150m senior notes maturing March 2016 will be repaid from cash resources 1 Calculated based on
Slide 22: Capital management
Capital management • Active management of our cash and capital resources • Options for capital deployment • Invest organically in growth • Invest in inorganic growth • Return capital to shareholders • Initiation of share buyback programme in 2H15, based on strong cash flows and capital strength • Sh
Slide 23: 1H15 interim results: Summary and outlook
1H15 interim results Summary and outlook Andrew Formica Chief Executive
Slide 24: Market backdrop and regulatory environment
Market backdrop and regulatory environment Market backdrop Regulatory environment • Market fundamentals relatively • Increased scrutiny of asset positive managers, specifically in Europe • Investor confidence remains • Implementation of far-reaching fragile regulatory change • Key issues for clients
Slide 25: Outlook
Outlook • Improving flows in July • Cautious outlook for industry flows in 3Q15, if investor caution lingers during the northern hemisphere summer • Henderson remains well positioned • Active investment management philosophy delivering excellent investment performance for clients • Increasingly dive
Slide 26: Lipper Fund Awards 2015
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Slide 27: Appendix
Appendix SHARED - KNOWLEDGE. GROUP PLE
Slide 28: AUM and fund flows
AUM and fund flows £m 1H15 Opening AUM Net flows Market /FX Acquisitions & Closing AUM Closing AUM net 1 Jan 15 disposals1 30 Jun 15 mgmt fee2 (bps) UK OEICs/Unit Trusts/Other3 20,615 703 736 (571) 21,483 SICAVs 14,171 2,585 43 - 16,799 US Mutuals 6,005 1,346 301 - 7,652 Investment Trusts 5,216 55 2
Slide 29: AUM and fund flows by asset class
AUM and fund flows By asset class £m 1H15 Opening AUM Net flows Market /FX Acquisitions & Closing AUM Closing AUM net 1 Jan 15 disposals 30 Jun 15 mgmt fee1 (bps) Equity 50,706 3,049 2,187 (950) 54,992 69 Fixed Income 21,322 2,035 (484) - 22,873 32 Property 8,295 637 14 (5,247) 3,699 n/a Private Equ
Slide 30: Number of Henderson funds
Diversification and scale 20 FY12 18 18 FY13 1H14 16 16 15 Number of Henderson funds FY14 14 14 1H15 13 13 12 12 12 10 8 6 6 5 4 2 0 Retail funds with net flows >£100m Retail funds with AUM >£1bn Note: Excludes Cirilium funds for all periods. The 1H15 figure for retail funds with AUM >£1bn reflects
Slide 31: Retail funds with net flows of £100m+ in 1H15
13 Retail funds with net flows of £100m+ in 1H15 Fund Fund range Capability 1H15 net flows AUM Henderson Gartmore Continental European SICAV European Equities £1,028m £3.1bn European Focus US Mutual European Equities £739m £2.2bn Henderson Gartmore UK Absolute Return SICAV Alternatives £638m £1.7bn
Slide 32: Retail funds with AUM of £1bn+ at 30 Jun 15
14 Retail funds with AUM of £1bn+ at 30 Jun 15 Fund Fund range Capability 1H15 net flows AUM Henderson UK Property OEIC UK OEIC/UT Alternatives £483m £3.7bn Henderson Horizon Pan European Equity SICAV European Equities £328m £3.1bn Henderson Gartmore Continental European SICAV European Equities £1,0
Slide 33: Investment management capabilities
Investment management capabilities Increasingly diverse capability set European Equities Alternatives • Diverse, high performance business £12.2bn European Equities Institutional £18.2bn Global Equities Retail Retail • Strong specialist franchises, building high Multi-Asset capacity global products
Slide 34: European Equities
European Equities Diverse, high performance business AUM: £18.2bn (Retail £16.1bn; Institutional: £2.1bn) 1 year outperformance: 90% 1H15 net flows: £2.7bn 3 years outperformance: 91% Key funds Product Investment Fund 1H15 performance AUM net flows 1 year 3 years Hn Horizon Pan European Equity SICAV
Slide 35: Global Equities
Global Equities Strong specialist franchises, building high capacity global products AUM: £26.0bn (Retail £18.9bn; Institutional £7.1bn) 1 year outperformance: 79% 1H15 net flows: (£0.8bn) 3 years outperformance: 69% Selected key Desk Key funds Product Investment Fund 1H15 desks AUM performance AUM
Slide 36: Global Fixed Income
Global Fixed Income Regional franchises with increasing global exposure AUM: £20.6bn (Retail £6.7bn; Institutional £13.9bn) 1 year outperformance: 54% 1H15 net flows: £1.9bn 3 years outperformance: 80% Selected key desks Desk 1H15 Key funds Product Investment AUM net flows performance 1 year 3 years
Slide 37: Multi-Asset
Multi-Asset Dual track approach to serve retail and institutional markets AUM: £5.1bn (Retail £2.0bn; Institutional £3.1bn) 1 year outperformance: 70% 1H15 net flows: (£0.2bn) 3 years outperformance: 93% Selected key funds Product Investment Fund 1H15 performance AUM net flows 1 year 3 years Institu
Slide 38: Alternatives
Alternatives Expanding in liquid alternatives alongside traditional hedge funds AUM: £12.2bn (Retail £7.8bn; Institutional £4.4bn) 1 year outperformance: 87% 1H15 net flows: £2.0bn 3 years outperformance: 100% Selected key desks Desk Key funds Product Investment Fund 1H15 AUM performance AUM net flo
Slide 39: Profit and loss
Profit and loss £m 1H15 1H14 Change 2H14 FY14 Management fees (net of commissions) 230.4 193.7 +19% 209.8 403.5 Performance fees 48.8 45.2 +8% 37.6 82.8 Other income 16.9 15.8 +7% 16.7 32.5 Net fee income 296.1 254.7 +16% 264.1 518.8 Income from associates and joint ventures 0.4 2.0 (80%) 3.1 5.1 Fi
Slide 40: Performance fees
Performance fees UK OEICs & SICAVs Investment Offshore Segregated Non Total Unit Trusts Trusts Absolute Mandates/ Performance Return¹ Managed CDOs/ Fee fund Private Equity ranges/Other² AUM 30 Jun 15 (£bn) 30.3 18.4 5.6 2.3 17.9 7.6 82.1 Number of funds with performance fee potential 5 25 8 27 59 -
Slide 41: Non-staff operating expenses
Non-staff operating expenses 1H15 1H14 Change Change £m £m £m Investment administration 15.4 15.0 0.4 +3% Information technology 9.8 8.2 1.6 +20% Office expenses 8.1 7.0 1.1 +16% Depreciation 2.6 2.2 0.4 +18% Other expenses¹ 20.8 19.2 1.6 +8% Non-staff operating expenses 56.7 51.6 5.1 +10% 1 Certain
Slide 42: EPS calculation
EPS calculation 1H15 1H14 2H14 FY14 Continuing underlying profit before tax £117.4m £90.7m £97.1m £187.8m Discontinued operation underlying profit before tax - £6.3m £1.3m £7.6m Less: tax on continuing underlying profit (£15.6m) (£12.7m) (£7.9m) (£20.6m) Less: tax on discontinued underlying profit -
Slide 43: Net cash generation
Net cash generation Strong free cash flows despite 1H15 bonus and dividend payments £m 180 17.3 (50.5) 160 91.3 140 54.2 (70.9) 119.1 120 100 77.7 80 60 40 20 0 31 Dec 14¹ Operating cash Dividends Acquisitions Net seed capital Purchase of 30 Jun 15¹ flows paid and disposals² investments own shares 1
Slide 44: Australian acquisitions – June 2015
Australian acquisitions – June 2015 Acceleration of our Australian growth plans Australia AUM £8.1bn • More than trebles AUM in Australia (A$15.7bn) • Henderson within Top 30 Australian asset managers • Participation in domestic markets to complement global offerings • Significantly increases Austra
Slide 45: Strategic importance of the Australian market
Strategic importance of the Australian market Henderson has built strong foundations since launch in 2013 Global pension assets and 10 year CAGR¹ Biggest asset classes in Australia² 10yr US$bn CAGR 25% 12,000 22,000 14.0% 11.7% 12.0% 20% 10,000 20,000 10.0% 15% 8,000 8,000 7.3% 7.0% 8.0% 6.6 % 6.5%
Slide 46: Further diversification by product and geography
Further diversification by product and geography Focus remains on organic growth, supported by relatively small acquisitions Group AUM by product Group AUM by geography Alternatives Alternatives Pan Asia 5% Pan Asia 13% 12% 11% Europe, Multi-Asset 6% Multi-Asset 6% LatAm & Other Europe, 21% LatAm &
Slide 47: Perennial Fixed Interest (PFI) and Perennial Growth Management (PGM)
Perennial Fixed Interest (PFI) and Perennial Growth Management (PGM) Why PFI and PGM? • Quality fixed income franchise Growth £1.3bn • Equities business has potential under new (A$2.6bn) ownership Total • Good cultural fit • Key people have signed long-term contracts £5.5bn (A$10.7bn) with Henderson
Slide 48: Perennial Fixed Interest
Perennial Fixed Interest High quality business AUM 2011 – 31 Mar 15 (£bn) Investment performance¹ Annualised net performance Incep. 1 year 3 year 5 year 4.2 Aus Fixed Interest 4.9% 5.8% 6.8% Aug Benchmark 5.6% 4.8% 6.4% 2002 Net excess return (0.7%) 1.0% 0.4% 2011 2012 2013 31 Mar 15 Tactical Income
Slide 49: Perennial Growth Management
Perennial Growth Management Potential for growth under new ownership; deal structure limits downside AUM 2011 – 31 Mar 15 (£bn) Investment performance¹ Annualised net performance Incep. 1 year 3 year 5 year 1.3 Aus Growth Shares Trust 2.1% 14.1% 8.1% Mar 2011 2012 2013 31 Mar 15 Benchmark 5.6% 14.7%
Slide 50: 90 West
90 West To benefit from institutionalisation, scale and investment • Henderson took a 32% stake in 2013; Global Natural Resources strategy increased to 41% in 2014 Inception date July 2012 • Core capability is Global Natural Resources Style Long Only Global Natural Resource Sector strategy Portfolio
Slide 51: Contacts
Contacts Investor enquiries Miriam McKay +44 (0) 20 7818 2106 Head of Investor Relations miriam.mckay@henderson.com Louise Curran +44 (0) 20 7818 5927 Investor Relations Manager louise.curran@henderson.com Investor Relations +44 (0) 20 7818 5310 investor.relations@henderson.com Media enquiries Angel
Slide 52: Important information
Henderson Group plc 201 Bishopsgate, London EC2M 3AE Important information This presentation issued by Henderson Group plc (or the “Group”) is a summary of certain information contained in the stock exchange announcements dated 30 July 2015 (relating to the Group’s interim results to 30 June 2015) a