Rathbones Group Plc · LSE:RAT
Rathbones — Rathbone Brothers — H1 2019 Earnings Presentation
34 slides from Rathbones's earnings presentation, July 2019
Slide 1: 2019 Interim results
Rathbone Brothers Plc 2019 Interim results July 2019
Slide 2: Financial results
Rathbone Brothers Plc | Interim results Page 2 Financial results Jennifer Mathias Group Finance Director
Slide 3: A busy first half
Rathbone Brothers Plc | Interim results Page 3 A busy first half Increased funds under management and administration Total FUMA up 23.3% £49.2bn — Investment Management up 24.6% to £42.5bn Growth (30 June 2018: £34.1bn) S&J £7.1bn £39.9bn — Unit Trusts up 15.5% to £6.7bn (30 June 2018: £5.8bn) 23.3%
Slide 4: Funds under management and administration reach new high
Rathbone Brothers Plc | Interim results Page 4 Funds under management and administration reach new high Investment Unit Total Total Management Trusts H1 2019 H1 2018 Investment Management H1 2019 H1 2019 (£bn) (£bn) (£bn) (£bn) Inflows Opening funds under management — £1.9bn inflows in volatile mark
Slide 5: Income up 12.7% year-on-year
Rathbone Brothers Plc | Interim results Page 5 Income up 12.7% year-on-year Investment Management basis point return on H1 average funds under management¹ H1 2018 % FY 2018 2019¹ 74.9 71.4 69.0 (£m) change (£m) (£m) 3.2 3.2 3.1 12.6 11.7 13.2 Average FTSE 100 Index 7436 7418 0.2 7269 (on quarterly b
Slide 6: Continued investment in the business
Rathbone Brothers Plc | Interim results Page 6 Continued investment in the business H1 H1 Slower FTE headcount growth in 2019 % FY 2018 2019 2018 change (£m) (£m) (£m) 20 78 Fixed staff costs 56.4 46.8 20.5 96.0 156 Average FTE1 employees 1,505 1,225 22.9 1,329 1510 during the period 64 Actual FTE1
Slide 7: Reconciliation of underlying to statutory profit before tax
Rathbone Brothers Plc | Interim results Page 7 Reconciliation of underlying to statutory profit before tax H1 2019 H1 2018 % FY 2018 Operating margin (£m) (£m) change (£m) — largely reflects FSCS levy, cessation Underlying profit before tax 46.6 48.3 (3.5) 91.6 of box profits, acceleration of deferr
Slide 8: Strong balance sheet
Rathbone Brothers Plc | Interim results Page 8 Strong balance sheet 30/06/19 31/12/18 — increase in total own funds due to shares Assets (£m) (£m) being issued for deferred consideration in relation to S&J as well as other share schemes Total own funds1 269.3 251.4 — increase in RWA and Pillar 1 and
Slide 9: Business update
Rathbone Brothers Plc | Interim results Page 9 Business update Paul Stockton Chief Executive
Slide 10: Successful migration of Speirs & Jeffrey
Rathbone Brothers Plc | Interim results Page 10 Successful migration of Speirs & Jeffrey — £6.5 billion or 96% of FUMA — 30 work streams In migrated to Rathbones Working — strong collaboration and pooling of intellectual numbers — c.25,000 cash records converted together capital — leveraging our pre
Slide 11: An overview of the first half
Rathbone Brothers Plc | Interim results Page 11 An overview of the first half Investment management Unit trusts — supporting organic growth — positive momentum across our fund range — recruitment — continued industry recognition — restructuring business development — distribution of units trusts in
Slide 12: The second half and beyond
Rathbone Brothers Plc | Interim results Page 12 The second half and beyond Looking — improving service and productivity ahead — Speirs & Jeffrey synergies — inorganic opportunities — Investor day in October
Slide 13: Appendix
Rathbone Brothers Plc | Interim results Page 13 Appendix
Slide 14: The wealth management sector remains robust
Rathbone Brothers Plc | Interim results Page 14 The wealth management sector remains robust — UK wealth industry continues to grow, reaching nearly £1 trillion of assets — Rathbones own funds reached £49.2 billion, a c. 5% market share UK wealth industry assets Total Rathbones funds under management
Slide 15: UK private client wealth managers
Rathbone Brothers Plc | Interim results Page 15 UK private client wealth managers Top UK wealth managers by funds under management and administration (£bn)1 Client referrals Intermediaries Independent Part of a larger financial group Several business models 103.5 Distribution focused competitors AuM
Slide 16: Current growth strategy
Rathbone Brothers Plc Page 16 Current growth strategy Client referrals Intermediaries Specialist Unit Trusts Strategic Acquisitions services initiatives — new client — leveraging — charities — investment — Private Office — company or introductions relationship with — Greenbank performance and busine
Slide 17: Pooling intellectual capital across the firm
Rathbone Brothers Plc | Interim results Page 17 Pooling intellectual capital across the firm Investment committees: Research Asset allocation team UK equity Overseas equity Collectives RIM & RUTM investment Fixed income managers Stewardship External research Rathbones recommendations and stock lists
Slide 18: Analysing the balance sheet
Rathbone Brothers Plc | Interim results Page 18 Analysing the balance sheet 30/06/19 31/12/18 30/06/18 30/06/19 31/12/18 30/06/18 Assets (£’000) (£’000) (£’000) Liabilities (£’000) (£’000) (£’000) Cash and balances with central banks 1,271,512 1,198,479 1,306,881 Deposits by banks - 491 3,785 Settle
Slide 19: Underlying PBT (£m) / EPS (p)
Rathbone Brothers Plc | Interim results Page 19 Underlying profits before tax¹ (£m) and EPS (p) 90 80 68.3 70 Underlying PBT (£m) / EPS (p) 60 53.2 43.2 50 40 44.2 35.7 43.2 35.7 30 20 25.8 20.4 10 37.2 33.2 70.4 35.3 39.6 74.9 43.3 44.2 87.5 48.3 43.3 91.6 46.6 0 2 2015 2016 2017 2018 2019 1st Half
Slide 20: Earnings per share
Rathbone Brothers Plc | Interim results Page 20 Earnings per share H1 2019 H1 2018 Pre tax Post tax Pre tax Post tax EPS (p)1 EPS (p)² (£m) (£m) (£m) (£m) Underlying profit attributable to shareholders 46.6 38.1 71.4 48.3 38.7 76.1 Charges in relation to client relationships and goodwill (7.8) (6.3)
Slide 21: Shareholders at 30 June 2019
Rathbone Brothers Plc | Interim results Page 21 Shareholders at 30 June 2019 Lindsell Train Investment Mgt Mawer Investment Mgt Current Rathbones staff 14.4% MFS Investment Mgt¹ 26.1% Former Rathbones staff Blackrock 9.0% Vanguard Kabouter 2.2% 7.7% Baillie Gifford & Co 2.3% Heronbridge Investment M
Slide 22: Segmental results
Rathbone Brothers Plc | Interim results Page 22 Segmental results H1 2019 Investment Management Unit Trusts Indirect Total (£m) (£m) (£m) (£m) Net investment management fee income 110.6 16.9 - 127.5 Net commission income 27.7 - - 27.7 Net interest income 7.6 - - 7.6 Fees from advisory services and o
Slide 23: Reconciliation of equity to total own funds
Rathbone Brothers Plc | Interim results Page 23 Reconciliation of equity to total own funds HY 2019 FY 2018² H1 2018 (£m) (£m) % change (£m) Equity Share capital and share premium 211.7 208.0 1.8 207.3 Reserves 303.8 288.8 5.2 246.0 Less: - Unverified year to date earnings - - (23.8) - Own shares (3
Slide 24: Total operating expenses
Rathbone Brothers Plc | Interim results Page 24 Total operating expenses H1 2019 (inc. Speirs & Jeffrey) H1 2018 (exc. Speirs & Jeffrey) 5% 12% 4% 3% 4% 3% 9% 37% 2% 43% 10% £152.8m 9% £109.5m 3% 9% 2% 21% 24% Staff - payroll (excluding variable) Staff - variable Staff - other Property Depreciation
Slide 25: Capital expenditure
Rathbone Brothers Plc | Interim results Page 25 Capital expenditure 5 £4.6m 4.5 4 £3.7m 0.7 3.5 0.6 0.6 3 0.4 £ million 1.0 2.5 0.5 2 1.5 2.2 2.3 1 0.5 0 H1 2019 H1 2018 Purchased software IT & other Property¹ Internally developed software — FY2019 expenditure expected to be in line with FY2018 ¹ Pr
Slide 26: Analysis of operating income
Rathbone Brothers Plc | Interim results Page 26 Analysis of operating income Basis point return from fees Basis point return from commission 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 0.0 10.0 20.0 30.0 40.0 50.0 60.0 0.0 5.0 10.0 15.0 20.0 25.0 Basis point return from interest Advisory fee i
Slide 27: Investment Management service level breakdown
Rathbone Brothers Plc | Interim results Page 27 Investment Management service level breakdown 30 Jun 2019 31 Dec 2018 30 Jun 2018 Change 6 Change 12 (£bn) (£bn) (£bn) months (%) months (%) Direct 29.9 26.7 25.1 12.3 19.1 Financial Adviser linked¹ 8.4 7.5 7.9 12.3 6.4 Total Discretionary 38.3 34.2 33
Slide 28: Investment Management client base
Investment Management | Interim results Page 28 Investment Management client base Analysis of funds under management¹ 5.1% Service level Fund type 7.8% 10.2% Private clients Discretionary 11.7% ISAs Advisory 35.8% Trusts Execution-only Charities 13.6% Pensions 10.7% Other 87.1% 18.0% Size of client
Slide 29: Where our clients' assets are invested
Investment Management | Interim results Page 29 Where our clients’ assets are invested¹ Direct H1 2016 13.7% 39.1% 31.2% 9.4% 6.6% holdings FY 2016 13.4% 38.8% 31.8% 10.0% 6.0% 51.9% H1 2017 13.3% 36.9% 33.5% 9.2% 7.1% Collectives FY 2017 13.1% 36.4% 34.3% 9.7% 6.5% 48.1% H1 2018 12.8% 35.7% 35.3% 1
Slide 30: Annual management fees
Investment Management| Interim results Page 30 Annual management fees¹ Discretionary Management fees (subject to VAT) Applied across Main Funds and ISA funds (pa)² First £250,000 1.20% Next £500,000 1.00% Next £750,000 0.75% Balance over £1,500,000 0.50% Illustration of fees (how our management fees
Slide 31: Performance: retail funds
Rathbone Brothers Plc | Interim results Page 31 Performance: retail funds Performance¹ and quartile ranking at Since Size of fund YTD 2019 1 year 3 year 5 year 10 years 30 June 2019 (I-Class units) inception (£m)† Rathbone Global Opportunities Inst Acc in GB 22.51 1 9.37 2 64.53 1 118.2 1 338.47 1 -
Slide 32: Performance: outcome oriented funds
Rathbone Brothers Plc | Interim results Page 32 Performance: outcome oriented funds Discrete year performance1 at Size of fund 1 year 3 years 5 years 30 June 2019 (S-class shares) (£m)† Rathbone Multi Asset Total Return Portfolio S Inc TR in GB 2 4.88 12.70 23.65 250.6 Offset Instrument : LIBOR GBP
Slide 33: Corporate governance at Rathbones
Rathbone Brothers Plc | Interim results Page 33 Corporate governance at Rathbones We believe it is in the best interests of our clients for the companies in which we invest to adopt best practice in corporate governance. This provides a framework in which each company can be managed in the long-term
Slide 34: Important information
Rathbone Brothers Plc | Interim results Page 34 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