Tatton Asset Management PLC · LSE:TAM
Tatton Asset Management — H1 FY2023 Earnings Presentation
45 slides from Tatton Asset Management's earnings presentation, November 2022
Slide 1: Tatton Asset Management Plc Investor and Analyst Presentation
TATTON ASSET MANAGEMENT PLC INVESTOR AND ANALYST PRESENTATION November 2022 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 30 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 Highlights - Financial
KEY HIGHLIGHTS FINANCIAL Group Revenue Adjusted operating profit1 Adjusted operating margin1 £15.9m £8.0m 50.1% up 15.1% up 15.1% 2021: 50.1% Fully diluted EPS2 Interim Dividend Interim Dividend yield3 9.89p 4.5p 2.4% up 12.9% up 12.5% Net Assets AUM / AUI4 Net Cash £35.7m £12.343bn £21.6m up 29.5%
Slide 9: Key Highlights - Operational
KEY HIGHLIGHTS OPERATIONAL Organic Net Inflows Flows from Fintel Strategic Partnership £907m £298m Acquisition of 50% Share Capital up 39.1% Non-MPS Propositions AUM Number of IFA firms Increased IFA engagement £1.1bn 806 up 14.7% Number of accounts Paradigm Mortgage completions Paradigm Consulting
Slide 10: Growth in Assets Under Management
GROWTH IN ASSETS UNDER MANAGEMENT Assets under management Tatton Assets Under Management in £ billion War in Ukraine 12.0 Global Economic volatility 11.0 Global 10.0 pandemic 9.0 Mar 2020 Market crash 8.0 £ billion 7.0 6.0 5.0 4.0 3.0 2013 Tatton 2.0 Incorporated 1.0 0.0 10
Slide 11: Financial Performance
FINANCIAL PERFORMANCE 11
Slide 12: Group Profit & Loss
GROUP PROFIT & LOSS Sep-22 Sep-21 Growth • Group revenue increased 15.1% to £15.9m £000’s £000’s % Revenue 15,934 13,847 15.1% • Group adjusted operating profit1 increased 15.1% to £8.0m Adjusted Operating profit1 7,982 6,934 15.1% Margin % 50.1% 50.1% • Adjusted operating margin1 maintained at Shar
Slide 13: Group Balance Sheet Highlights
GROUP BALANCE SHEET HIGHLIGHTS Sep-22 Mar-22 £000’s £000’s • Robust balance sheet - Net assets increased +14.9% to £35.7m Goodwill & intangible assets 20,164 13,384 • Intangible and Tangible assets Increase in intangible assets following the acquisition of Tangible fixed assets 593 749 50% of 8AM Gl
Slide 14: Group Cash Flow Bridge
GROUP CASH FLOW BRIDGE FY23 Corporation Cash generated tax payments from operations* Capex & other in Tatton system development and premises lease costs (IFRS 16) Dividends paid relates to FY22 final dividend of 8.0p Mar Acquisition related costs, Sep exceptional items of £0.352m 2022 relating to th
Slide 15: Divisional Performance
DIVISIONAL PERFORMANCE PERFORMANCE COMMENTARY ANALYSIS • Revenue and Adj Operating Profit1 delivered Sep Sep Change double digit growth, driven by: Tatton % o Net inflows £907m or 8.0% of opening AUM 2022 2021 (2021: net inflows £652m), averaging £151m Revenue £12.7m £10.9m 17.0% per month (2021: £1
Slide 16: Key Drivers & Outlook
KEY DRIVERS & OUTLOOK IMPACTS OF THE VOLATILE ENVIRONMENT H1 - FY22/23 H2 - FY23 OUTLOOK • Average AUM of £11.2bn v £11.0bn in H2 FY22 despite; • Net inflows normalise to +£100m per month • Record net inflows of £907m offset by; • H1 negative markets now “Baked In” REVENUE TATTON • Volatile Markets
Slide 17: Strategic Update
STRATEGIC UPDATE 17
Slide 18: Roadmap to Growth
ROADMAP TO GROWTH TWO THIRDS OF THE WAY AFTER THE FIRST YEAR Targeting an additional £6.0bn of assets from FY21 to FY24, to £15.0bn £15.0bn • We have delivered £3.3bn or 55% of the target, halfway through the 3 years +19% CAGR • Organic growth target £1.0bn per year – Delivered £1.7bn in first 18 mo
Slide 19: Four Fundamental Characteristics
FOUR FUNDAMENTAL CHARACTERISTICS DFM MPS COMES OF AGE • On platform DFM MPS market continues to grow GROWTH • Tatton current market share 13.9% of £81.4bn • Market forecast to grow 25% per annum to £200bn2 over the next 4 years • Fastest growing segment of the wealth management market2 • Largest MPS
Slide 20: Our Market Share
OUR MARKET SHARE MARKET GROWTH – ON PLATFORM FUM 180 180 2022 £11.3bn 2021 160 160 2020 2019 £9.0bn 13.9% 140 140 2018 £6.7bn 13.5% Tatton AUM £6.1bn 12.3% 120 % of on-platform £4.9bn 12.7% 20226 120 11.8% DFM FUM 20215 Size: 100 100 20193 20204 Size: £680.1bn 20182 Total On- platform 20171 Size: Si
Slide 21: Tatton - Opportunity Update
TATTON – OPPORTUNITY UPDATE PROGRESSION Sep18 Sep19 Sep20 Sep21 Sep22 AUM £5.7bn AUM £7.0bn AUM £7.8bn AUM £10.8bn AUM £11.3bn Direct Firms £1.2bn / 21% Direct Firms Direct Firms £2.4bn / 34% Paradigm Firms Direct Firms Paradigm Firms £3.0bn / 39% Direct Firms Paradigm Firms Paradigm Firms £5.2bn /
Slide 22: Tatton - Opportunity Update
TATTON – OPPORTUNITY UPDATE AUM £11.3bn • £680.1bn1 Assets held on platform • £81.4bn1 Assets held in DFM and growing • Tatton £11.34bn from 806 firms Direct Firms Paradigm Firms • Paradigm firms = 168 or 21% firms = £4.9bn AUM or 44% £6.4bn / 56% £4.9bn / 44% • Non-Paradigm firms = 638 or 79% firms
Slide 23: Strategic Partnerships
STRATEGIC PARTNERSHIPS TOP UK DISTRIBUTORS Partnership Distribution Reach Source Type Fintel plc / Simply Biz +10,000 financial intermediaries using Fintel services or technology Co. Annual Report Partnering Sesame Bankhall +10,000 Advisers, +800 directly regulated financial services firms Co. Websi
Slide 24: Evolved MPS Service Offering
EVOLVED MPS SERVICE OFFERING White labelled Appointed Investment Co-branded Tatton MPS Adviser (AIA) MPS Tatton MPS 9 arrangements 6 arrangements 1 arrangement £597m AUM (Sep22) £612m AUM (Sep22) £33m AUM (Sep22) • Offering jointly branded client • Offering IFA firm branded • Offering a joint invest
Slide 25: A Changing Landscape
A CHANGING LANDSCAPE 0.30% 0.25% Tatton AMC bps1 % 2 Brewin Dolphin 0.20% Brooks Macdonald LGT Vestra FE Investments 0.15% Schroders 2 2 AJ Bell 0.10% - £2.0bn £4.0bn £6.0bn £8.0bn £10.0bn £12.0bn MPS Assets Under Management3 1. AMC Source: Platforum - July 2021 3. AUM Source: Platforum July 2021, h
Slide 26: Attrition from IFA Consolidation
ATTRITION FROM IFA CONSOLIDATION September 2022 – 6month period True Potential • 8 IFAs Tatton AUM £11.34bn 2% Attrition1 c.£125m Retention 98% Other Avellamy Consolidators • Ascot Lloyd 26 1. Annualised attrition of assets under management from consolidators
Slide 27: Tatton Strategic Direction Examples
TATTON STRATEGIC DIRECTION EXAMPLES • Organic growth through net inflows, Organic Growth tailored solutions (white labels), and & ‘back book’ migration • Panel with nationals, networks and Strategic consolidators Partnerships • IFA distribution partnerships Mergers and • Strategically relevant Acqui
Slide 28: Paradigm
PARADIGM Current market activity • 2022 market projected c.£305bn plus PTs of c.£230bn, with a record £50bn BTL • 2023 predictions • Slow down in all areas other than PT’s • Lenders largely over their operational/service issues and more stability in terms of pricing • Protection market falling but P
Slide 29: Investment & Fund Update
INVESTMENT & FUND UPDATE 29
Slide 30: Tatton's Sales Proposition to Advisers
TATTON’s SALES PROPOSITION TO ADVISERS Low cost – places the adviser at the heart of the value chain, 0.15% DFM fee Agnostic on platform, risk profiler, investment style, charging structure – you decide “how” Non compete with adviser, platform only, IFA only, no D2C, Service Excellence Breadth of Of
Slide 31: Tatton's MPS DFM
TATTON’s MPS DFM Managed Portfolio Service – available with Global and classic UK biased allocations Risk profile compatibility Two strategic asset allocations: Classic with a higher allocation to UK based investments and Global which exploits the opportunity of the wider global economy Access on 20
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: MPS Investment Portfolio Returns
MPS INVESTMENT PORTFOLIO RETURNS 5 years to 30 September 2022 Portfolio Performance (per cent.) - core product set annualised, after DFM charge and fund costs) ARC Active Tracker Hybrid Income Ethical Peers1 Defensive 0.8 0.7 0.8 0.4 - 0.3 Cautious 2.3 2.1 2.2 1.6 - 1.1 Balanced 3.3 3.0 3.1 2.2 3.7
Slide 34: MPS Investment Portfolio Returns
MPS INVESTMENT PORTFOLIO RETURNS 3 years to 30 September 2022 Portfolio Performance (per cent.) - core product set annualised, after DFM Risk Return - 3 Years to 30 September 2022 charge and fund costs) 8.0% ARC 7.0% Active Tracker Hybrid Income Ethical Peers1 6.0% Defensive (1.0) (1.5) (1.3) (1.6)
Slide 35: Tatton's Ethical - Communication
TATTON’S ETHICAL - COMMUNICATION • Informative, educative communications • Blogs, analysis, video and technical • Transparent about the challenges of ESG investing • Developments and controversies to keep motivated investors informed • Combined weekly audience of 6,000 subscribers 35
Slide 36: Tatton Portal - A Business Hub for Advisers
TATTON PORTAL – A BUSINESS HUB FOR ADVISERS • Online real time MI for advisers and Tatton • Embeds Tatton operationally into IFAs’ day to day business • IFA tools: • Personalised Investment Proposal • E-signing • Adviser dashboards • Document resource library and factsheets • Platform availability •
Slide 37: 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 38: Appendices
Appendices 38
Slide 39: Financial Progress Since IPO
FINANCIAL PROGRESS SINCE IPO Revenue £m Adj Operating Profit1 £m £31.8m £29.4m £16.1m CAGR 17.9% £14.5m CAGR 23.7% £23.4m £21.4m £11.4m £17.5m £15.5m £9.1m £7.3m £11.9m £6.2m £4.5m Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Consensus Mar-18 adju
Slide 40: 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 41: 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% TAM PLC 1 -35.0% Peer Group Average FTSE AIM All Share -45.0% 1. Selected peer group companies, including AJ Bell, Rathbones, Brooks Macdonald, Mattioli Woods, Polar Capit
Slide 42: DFM MPS Assets on Platform
DFM MPS ASSETS ON PLATFORM Wealth Manager Dec -1 9 Dec -2 0 Dec -2 1 Market Share • At Dec20 £66.6bn on platform DFM funds Tatton Investment Management £ 7 .0 5 bn £ 8 .1 0 bn £ 1 0 .1 0 bn 1 2 .4 % Quilter WealthSelect £6.70bn £7.90bn £9.65bn 11.9% under management (“FUM”), Dec21 increased Parmenio
Slide 43: Capital Adequacy Requirements
CAPITAL ADEQUACY REQUIREMENTS INVESTMENT FIRM PRUDENTIAL REGIME “IFPR” The FCA’s IFPR focuses on the prudential requirements as to the potential harm to clients and the market. It includes the amount of capital and liquid assets a firm should hold to IFPR enable it to wind down in an orderly way if
Slide 44: Tatton Ecosystem
TATTON ECOSYSTEM Direct Tatton Ecosystem Nucleus Aviva Direct Firms TAM plc (Group Propositions) Paradigm Firms Paradigm Tenet Firms Consulting Transact COMPANY Sep-22 Proposition Fintel Firms Sesame Bankhall TATTON £10.2bn MPS xxx x Paradigm 8AM Firms AUM Tatton MPS xx x Mortgages MPS Abrdn Other S
Slide 45: Defensive Moat
DEFENSIVE MOAT COMPETITIVE POSITION & BARRIERS TO ENTRY MPS SIZE PERFORMANCE PRICE SERVICE DISTRIBUTION IFA only Consistent c.10yr £10.2bn Investment 15bps Tatton Portal, MPS Specialist Sep22 Dedicated support, performance Investment Webinars 20 Platforms £6.5bn5 2009 Launch2 20-30bps1 BPS / MPS / M
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