Tatton Asset Management Plc · LSE:TAM
Tatton Asset Management — FY2023 Earnings Presentation
40 slides from Tatton Asset Management's earnings presentation, June 2023
Slide 1: Tatton Asset Management plc Investor and Analyst Presentation
TATTON ASSET MANAGEMENT PLC INVESTOR AND ANALYST PRESENTATION June 2023 1
Slide 2: Disclaimer
DISCLAIMER The information contained in this document (“Presentation”) has been prepared by Tatton Asset Management plc (the “Company”). The content of this Presentation has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000. The Slides are be
Slide 3: Agenda
Agenda • Introduction to the team • Key highlights • Financial performance • Strategic update • Investment and fund update • Summary 3
Slide 4: Introduction to the team
INTRODUCTION TO THE TEAM 4
Slide 5: Introduction to the team
Introduction to the team Paul Hogarth Paul Edwards Lothar Mentel CEO CFO CIO – Over 40 years’ experience at – Joined Tatton Asset Management – Co-founder of Tatton Capital Board level in the financial plc as Group CFO in May 2018 Limited in 2012 services sector – Previously Group Finance Director –
Slide 6: Divisional structure
DIVISIONAL STRUCTURE Tatton Asset Management plc (“TAM” or “Group”) Investment Management Division IFA Support Services Division (“Tatton”) (“Paradigm”) • Tatton Investment Management offers on-platform model DFM MPS, the fastest-growing segment of the wealth management market Paradigm Consulting Pa
Slide 7: Key highlights
KEY HIGHLIGHTS 7
Slide 8: Key financial and operational highlights
Key financial and operational highlights AUM/I1 Number of IFA firms Number of accounts Paradigm Mortgage members Scale £13.9bn 869 107,010 1,751 up 22.3% up 16.5% up 19.2% up 4.6% Organic Net Inflows Flows from Fintel Group Revenue Strategic Partnership Growth £1.8bn £0.5bn £32.3m 15.8% of opening A
Slide 9: Strong financial performance over a sustained period
Strong financial performance over a sustained period AUM/I (£bn) Organic Net Inflows (£bn) £13.9bn % of Opening AUM 24% CAGR £11.3bn 38% 26% 23% 19% 11% 14% 16% £1.8bn £9.0bn £6.7bn £1.3bn £6.1bn £1.1bn £1.1bn £1.0bn £1.0bn £4.9bn £3.9bn £0.8bn Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-17
Slide 10: Financial performance
FINANCIAL PERFORMANCE 10
Slide 11: Group profit & loss
Group profit & loss Mar-23 Mar-22 Growth £000’s £000’s % • Group revenue increased 10.1% to £32.3m Revenue 32,327 29,356 10.1% 1 • Group adjusted operating profit1 increased Admin expenses -16085 -14830 12.9% to £16.4m 1 Adjusted Operating profit 16,402 14,526 12.9% Margin % 50.7% 49.5% • Adjusted o
Slide 12: Divisional performance: Tatton
Divisional performance: Tatton PERFORMANCE o Strong underlying growth in AUM/I to £13.9bn, underpinned by: • Record net inflows of £1.8bn or average of £150m per month – AUM/I (£bn) Revenue (£m) equates to 15.8% of opening AUM +22% £13.9bn • Acquisition of 8AM Global, adding £1.1bn of AUM/I +11% £25
Slide 13: Divisional performance: Paradigm
Divisional performance: Paradigm PERFORMANCE Mortgage Completions (£bn) Revenue (£m) o Mortgage firms increased 4.6% to 1,751 (Mar-22: 1,674) +10% £14.5bn +7% £6.4m £13.2bn £6.0m o Consulting member firms increasing to 431 (Mar-22: 421) o Mortgage completions reached a record £14.5bn Mar-22 Mar-23 M
Slide 14: Group financial strength
Group financial strength Group Balance Sheet Mar-23 Mar-22 Capital Adequacy Mar Mar £000’s £000’s 2023 2022 Capital Investments in joint ventures 6,762 - Total Shareholder funds £41.8m £31.0m resource Goodwill & intangible assets 12,952 13,384 Less: Foreseeable dividend (£6.0m) (£5.1m) requirement L
Slide 15: Group cash flow bridge
Group cash flow bridge Cash generated from operations* FY23 Corporation tax payments Capex & other in Tatton system development and premises lease costs (IFRS 16) Dividends paid relates to FY22 final 8.0p and FY23 Acquisition related costs, Interim 4.5p exceptional items of £0.4m relating Mar to the
Slide 16: Key drivers & outlook
Key drivers & outlook IMPACTS OF THE VOLATILE ENVIRONMENT FY22/23 FY24 OUTLOOK • Average AUM of £11.7bn v £10.5bn in FY22 • Net inflows £350m after 10 weeks normalised to +£150m per month • Record net inflows of £1,794m offset by; REVENUE TATTON • Markets remain uncertain and volatility remains but
Slide 17: Strategic update
STRATEGIC UPDATE 17
Slide 18: Remain on track to achieve the £15bn AUM/I target set in FY21
Remain on track to achieve the £15bn AUM/I target set in FY21 Original Target Actual Performance £1.1bn required to achieve target £15.0bn £15.0bn £1.0bn £1.1bn £1.0bn £1.1bn £13.9bn £13.0bn £1.0bn £1.8bn £11.0bn £1.0bn £11.3bn £1.0bn £0.7bn £0.4bn £(0.4)bn £1.0bn £1.3bn £9.0bn £9.0bn FY21 Net Flows
Slide 19: Clearly defined growth strategy
Clearly defined growth strategy ✓ Increase share o MPS market continues to mature and is forecast to grow from £103.5bn1 today to £200bn by 2027 of Tatton’s respective markets o Maintain new firm growth through marketing and account management, leveraging Tatton’s distribution footprint ✓ o Signific
Slide 20: Largest participant in the fastest growing segment of the market
Largest participant in the fastest growing segment of the market 180 MARKET GROWTH – ON PLATFORM FUM 2023 £13.9bn 2022 160 2021 2020 £11.3bn 13.4% 140 2019 £9.0bn 13.9% 2018 £6.7bn 13.5% Tatton £6.1bn 120 AUM/AUI £4.9bn 12.3% 20237 12.7% % of on-platform 11.8% 20226 Size: DFM FUM 20215 Size: £646.8b
Slide 21: Tatton – Opportunity update
TATTON – OPPORTUNITY UPDATE PROGRESSION Mar21 Mar22 Mar23 AUM £9.0bn AUM £11.3bn AUM £12.7bn Direct Firms Paradigm Firms Direct Firms Paradigm Firms Direct Firms Paradigm Firms £5.1bn / 40% £4.0bn / 44% £6.2bn / 54% £5.2bn / 46% £7.6bn / 60% £5.0bn / 56% Number of Firms 668 Number of Firms 746 Numbe
Slide 22: Strong growth through accelerating number of non-Paradigm IFA relationships
Strong growth through accelerating number of non-Paradigm IFA relationships, with sizeable opportunity for further growth Non-Paradigm firms now represents 703 firms and over 60% of AUM AUM (£bn) # of firms o Untapped opportunity to increase penetration of existing non- 16 Paradigm firms 1200 o Aver
Slide 23: Evolved MPS offering
Evolved MPS offering White labelled Appointed Investment Co-branded Tatton MPS Adviser (AIA) MPS Tatton MPS 14 arrangements 8 arrangements 2 arrangements £898m AUM (Mar23) £724m AUM (Mar23) £82m AUM (Mar23) • Offering jointly branded client • Offering IFA firm branded • Offering a joint investment f
Slide 24: Exceptional asset retention provides strong visibility
Exceptional asset retention provides strong visibility March 2023 – 12month period True Potential • 12 IFAs Tatton AUM £12.735bn 1.8% Attrition c.£225m Retention 98.2% Other Avellamy Consolidators • Ascot Lloyd 24
Slide 25: Paradigm
Paradigm Current market activity • FY24 recent activity / predictions • Lenders recently again withdrawing products causing instability • Inflation proves more persistent in the UK driving interest rates expectations • Applications early 2023 20% below prior year and new gross lending down 20% on no
Slide 26: Investment Case
Investment Case ✓ Independent specialist with critical scale and an exceptional brand – the market leader in the UK DFM MPS market with £13.9bn of AUM/I ✓ Operating in the fastest growing segment of the UK wealth market ✓ Breadth of investment and service offering with 10-year+ investment track reco
Slide 27: Investment & fund update
INVESTMENT & FUND UPDATE 27
Slide 28: MPS investment portfolio returns: 10 years
MPS INVESTMENT PORTFOLIO RETURNS 10 years to 31 March 2023 Portfolio Performance (per cent.) - core product set Risk Return - 10 Years to 31st March 2023 annualised, after DFM charge and fund costs 9.0% ARC 8.0% Active Tracker Hybrid Peers1 7.0% Defensive 3.0 3.1 3.0 2.1 6.0% Annualised Return 5.0%
Slide 29: MPS investment portfolio returns: 5 years
MPS INVESTMENT PORTFOLIO RETURNS 5 years to 31 March 2023 Portfolio Performance (per cent.) - core product set Risk Return - 5 Years to 31st March 2023 annualised, after DFM charge and fund costs 9.0% ARC 8.0% Active Tracker Hybrid Ethical Peers1 7.0% 6.0% Annualised Return Defensive 1.5 1.6 1.6 2.1
Slide 30: MPS investment portfolio returns: 1 year
MPS INVESTMENT PORTFOLIO RETURNS 1 year to 31 March 2023 Portfolio Performance (per cent.) - core product set Risk Return - 1 Year to 31st March 2023 annualised, after DFM charge and fund costs 0.0% ARC -0.5% Active Tracker Hybrid Ethical Peers1 -1.0% -1.5% Defensive -5.0 -4.1 -4.5 -6.7 -4.3 Annuali
Slide 31: Ethical investment portfolio returns
ETHICAL INVESTMENT PORTFOLIO RETURNS 5 years to 31 March 2023 Risk Return - 5 Years to 31st March 2023 Tatton Fund Performance (% - ethical product set, 9.0% annualised, after DFM charge and fund costs 8.0% ARC 7.0% Ethical Peers1 6.0% Annualised Return Defensive 2.1 1.5 5.0% Cautious 3.8 2.5 4.0% 3
Slide 32: Distribution of AUM across proposition matrix
DISTRIBUTION OF AUM ACROSS PROPOSITION MATRIX 44 multi-asset portfolio choices that satisfy multi-manager, index tracker, income drawdown and ethical investment choices across 6 standard UK risk profiles (3-8 out of 1-10) and a UK home bias set as well as a global market capitalisation weighted set
Slide 33: Investment view – status quo
INVESTMENT VIEW – STATUS QUO • Energy crisis (Europe) averted – no production collapse • Job market tightness easing (US) – rates plateauing expected • China emerging from Zero Covid, but so far disappointing • AI potential to growth replaces CO2 mitigation as beacon of hope • Recession not (yet) ma
Slide 34: Investment view – 2023 – still on a narrow path to a soft landing
INVESTMENT VIEW – 2023 – STILL ON A NARROW PATH TO A SOFT LANDING Higher rates risk default cycle Labour markets remain linchpin and ‘cost of mortgage crisis’ for interest rates Wildcards: China’s reopening stimulus, Russia instability / oil UK lagging, not crashing Corporate earnings (profits) dent
Slide 35: Investment outlook – 2023 – finely balanced capital markets
INVESTMENT OUTLOOK – 2023 – FINELY BALANCED CAPITAL MARKETS Surplus liquidity still focused on Neutral equity with regional ‘return on capital’, rather than tilts ( +Japan, -USA ) ‘return of capital’ Bonds at 4-6% with return Late cycle = contribution for first time in a style rotation opportunities
Slide 36: Summary
Summary Growing the IFA relationships to grow AUM • Strategic direction and Roadmap to Growth on track and delivering • Continued organic growth, white labelling & back book migration arrangements • Further disciplined M&A activity to support AUM growth • Developing additional strategic IFA partners
Slide 37: Appendices
Appendices 37
Slide 38: Maximising shareholder value
Maximising shareholder value • The Group has continued its growth trajectory and delivered against its financial performance targets • Earnings generated from the business are issued to shareholders as dividends or reinvested in the business to drive future growth to maximise shareholder value £115.
Slide 39: Tatton share price
Tatton share price COMPARISON TO PEER GROUP Share price performance comparison v peer group 25.0% 15.0% 5.0% -5.0% -15.0% -25.0% -35.0% -45.0% 1 TAM PLC Peer Group Average FTSE AIM All Share 1. Selected peer group companies, including AJ Bell, Rathbones, Brooks Macdonald, Polar Capital, Jupiter Inve
Slide 40: Tatton ecosystem
Tatton ecosystem Direct Tatton Ecosystem Nucleus Aviva Direct Firms TAM plc (Group Propositions) Paradigm Firms Paradigm Tenet Firms Consulting COMPANY Mar-23 Proposition Transact Fintel Firms Sesame Bankhall TATTON £11.6bn MPS xxx x Paradigm 8AM Firms AUM Tatton MPS xx x Mortgages MPS Other Strateg
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