Tatton Asset Management Plc · LSE:TAM
Tatton Asset Management — H1 FY2024 Earnings Presentation
46 slides from Tatton Asset Management's earnings presentation, November 2023
Slide 1: Tatton Asset Management Investor and Analyst Presentation
TATTON ASSET MANAGEMENT INVESTOR AND ANALYST PRESENTATION NOVEMBER 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 Our Team 04 Key Highlights 07 Financial Performance 11 Strategic Update 18 Investment Management Update 31 Summary 42 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 Co-founder of Tatton Capital Board level in the financial Management plc as Group Limited in 2012 services sector CFO in May 2018 Ex CIO of Octopus. Has held Founder of Tatto
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 P
Slide 7: Key Highlights
KEY HIGHLIGHTS 7
Slide 8: Key financial and operational highlights
Key financial and operational highlights Financial Highlights Group Revenue Adjusted Adjusted operating Fully diluted Interim Dividend operating profit2 margin2 EPS3 £17.5m £8.9m 50.7% 10.52p 8.0p up 9.9% up 11.2% 2022: 50.1% Up 6.4% 2022: 4.5p Operational Highlights AUM/AUI1 Tatton IFA Firms Tatton
Slide 9: Strong Financial Performance Over a Sustained Period
STRONG FINANCIAL PERFORMANCE OVER A SUSTAINED PERIOD Group Revenue (£m) Adj Operating Profit1 (£m) £35.6m £18.0m 18% CAGR £32.3m £16.4m 24% CAGR £29.4m £14.5m £23.4m £21.4m £11.4m £17.5m £9.1m £15.5m £7.3m £11.9m £6.2m £4.5m Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Mar-17 Mar-18 Mar-1
Slide 10: Assets Under Management / Influence
ASSETS UNDER MANAGEMENT / INFLUENCE Tatton Assets Under Management / Influence1 in £ billion Fight on inflation 15.0 War in 12.5 Ukraine Global pandemic 10.0 Mar 2020 £ billion Market crash 7.5 5.0 2.5 2013 Tatton Incorporated 0.0 10 1. Assets Under Influence (AUI) 100% of the 8AM AUM
Slide 11: Financial Performance
FINANCIAL PERFORMANCE 11
Slide 12: Group Profit & Loss
GROUP PROFIT & LOSS Growth Sep-23 Sep-22 % £000’s £000’s • Group revenue increased 9.9% to £17.5m Revenue 9.9% 17,506 15,934 • Group adjusted operating profit1 increased 11.2% to £8.9m Adjusted Operating profit1 11.2% 8,872 7,982 • Adjusted operating margin1 increased to Margin % 50.7% 50.1% 50.7% S
Slide 13: Divisional Performance: Tatton
DIVISIONAL PERFORMANCE: TATTON AUM/I (£bn) Revenue (£m) o Strong underlying growth in AUM/I to £14.8bn, underpinned by: +13.4% £14.5m +19.8% £14.8bn £12.3bn £12.7m • Record net inflows in H1 of £910m, an average of £152m per month – equates annualised to 13.1% of opening AUM/I • Net inflows has been
Slide 14: Divisional Performance: Paradigm
DIVISIONAL PERFORMANCE: PARADIGM Mortgage Completions (£bn) Revenue (£m) o Mortgage firms increased 5.4% to 1,798 (Sep-22: 1,706) £7.3bn £6.9bn £3.2m £3.1m o Consulting member firms increasing to 437 (Sep-22: 424) o Mortgage completions remain strong for the period at £6.9bn, a 5.5% decrease on H1 F
Slide 15: Group Financial Strength
GROUP FINANCIAL STRENGTH Sep-23 Mar-23 Sep-23 £000’s £000’s Regulatory capital requirement £4.3m Goodwill & intangible assets 19,562 19,714 Tangible fixed assets 328 454 Total Shareholder funds £40.3m Trade & other receivables 4,441 3,905 Less: Foreseeable dividend (£4.8m) Less: Non-Qualifying asset
Slide 16: Group Cash Flow Bridge
GROUP CASH FLOW BRIDGE Cash generated from operations Purchase of own Shares Capex & lease & other sundry items Dividends paid relates to Mar FY23 final dividend of Sep 2023 10.0p 2023 FY24 Corporation tax payments on account 16
Slide 17: FY24 Financial Outlook
FY24 FINANCIAL OUTLOOK Net inflows have been On track to deliver full We will continue to invest consistent in H1, anticipated in year results in line with in people to support the same range c.£150m per the Board expectations growth month in H2 (+£150m Oct/Nov) H2 FY24 Anticipate Paradigm H2 Capita
Slide 18: Strategic Update
STRATEGIC UPDATE ~~ ' a a ce a i SR ||| ||
Slide 19: 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 FUNDS UNDER MANAGEMENT 2023 H1 – Sep 23 160 2022 £13.9bn £14.8bn 14.3% 2021 £11.3bn 13.4% 140 2019 2020 £9.0bn 13.9% Tatton 2018 £6.7bn 13.5% AUM/AUI £6.1bn 12.3% 120 £4.9bn 20237 % of on-platform 12.7% DF
Slide 20: Roadmap to Growth
ROADMAP TO GROWTH REMAIN ON TRACK TO ACHIEVE THE £15.0bn AUM/I TARGET SET IN FY21 • Targeted an additional £6.0bn of assets between FY21 to FY24 £15.0bn increasing AUM/I to £15.0bn +19% CAGR • Delivered £5.8bn or 97% of the original target, with six H1 FY24: £14.8bn AUM/AUI months remaining despite
Slide 21: MPS Proposition Remains Well Positioned
MPS Proposition remains well positioned 10.0% 3.0Bn Platforms Wealth Managers Asset Managers 8.0% 2.0Bn 6.0% 1.0Bn 4.0% 0.0Bn 2.0% Flows % AUM Flows £bn 0.0% (1.0Bn) (2.0%) (2.0Bn) (4.0%) (3.0Bn) (6.0%) (4.0Bn) (8.0%) (5.0Bn) (10.0%) (12.0%) (6.0Bn) 21 1. Asset Under Influence (AUI) 100% of the 8AM
Slide 22: Tatton AUM Growth by Firm Cohort
TATTON AUM GROWTH BY FIRM COHORT AUM growth over 10 years, showing assets generated from each year’s new firms (‘cohorts’) £15.0bn 914 869 900 Financial year 800 2024 £12.5bn 746 2023 668 700 2022 £10.0bn 595 600 2021 AUM (£bn) 2020 500 £7.5bn 445 2019 400 2018 341 2017 £5.0bn 300 237 2016 187 153 2
Slide 23: Tatton – Opportunity Update
TATTON – OPPORTUNITY UPDATE PROGRESSION Sep 2021 Sep 2022 Sep 2023 Number of firms 703 Number of firms 806 Number of firms 914 Direct firms Paradigm firms Direct firms Paradigm firms Direct firms Paradigm firms 535 / 76% 168 / 24% 638 / 79% 168 / 21% 752 / 82% 162 / 18% AUM £10.8bn AUM £11.3bn AUM £
Slide 24: 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 752 firms and 60% of AUM • Untapped opportunity to increase penetration of existing non- AUM (£bn) # of firms Paradigm firms 16.0 1,200 • Averag
Slide 25: Evolved MPS Offering
EVOLVED MPS OFFERING CO-BRANDED WHITE LABELLED APPOINTED INVESTMENT TATTON MPS TATTON MPS ADVISER (AIA) MPS 16 arrangements 9 arrangements 3 arrangements £997m AUM (Sep23) £873m AUM (Sep23) £195m AUM (Sep23) • Offering jointly branded client • Offering IFA firm branded • Offering a joint investment
Slide 26: Exceptional asset retention provides strong visibility
Exceptional asset retention provides strong visibility September 2023 – 6-month Period True Potential • 13 IFAs Tatton AUM £13.720bn 1.1% Attrition1 c.£78m Retention 98.9% Other Avellemy Consolidators • Ascot Lloyd 26 1. Annualised attrition of assets under management from consolidators
Slide 27: Impact of Consumer Duty
Impact of Consumer Duty Fair value of Helpful Customer Product & services Consumer products & service fit for purpose understanding services Tatton MPS Market Impact • Tatton MPS aligned to principles of consumer duty • Sets higher and clearer standards of consumer protection across financial servic
Slide 28: Clearly Defined Growth Strategy
CLEARLY DEFINED GROWTH STRATEGY Increase Tatton’s market share Deepen Tatton’s IFA relationships to through organic growth grow AUM/I • Significant opportunity to strengthen existing • MPS market continues to mature and is IFA relationships, particularly with non- forecast to grow from £103.5bn1 tod
Slide 29: Paradigm
PARADIGM Mem ership growth 01 0 Current market activity - FY24 recent activity / predictions • Increasing competition between Lenders both increasing choice of Protect products and helping reduce rates Current • Inflation proves more persistent in the UK driving interest rates Motgages Market expect
Slide 30: Independent specialist with critical scale and an exceptional brand
Independent specialist with critical scale and an exceptional brand – the market leader in the UK DFM MPS market with £14.8bn 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 record Wide distribution
Slide 31: Investment Management Update
INVESTMENT MANAGEMENT UPDATE 31
Slide 32: Proposition Enhancement – 2023: The Money Market MPS
PROPOSITION ENHANCEMENT – 2023 THE MONEY MARKET MPS BACKGROUND PURPOSE CONSTRUCTION RETURN BENEFITS Interest rates rises On platform “risk Comprised of the BOE base rate Clients remain and some profile 1 or 2” cash best-in-class Money benchmarked, less invested on platforms’ cash management for Mark
Slide 33: BOE Base Rate on Platform
BOE BASE RATE ON PLATFORM MM PORTFOLIO vs MPS RANGE Existing MPS range of risk profiles complemented y a “risk profile 1 or ” money market MPS Chart: Year to 30 September 2023 Money Market MPS in dark blue, UK CPI in yellow, Source: TattonIM and Morningstar, 30/09/2023 33
Slide 34: MPS Investment Portfolio Returns – 10 Years
MPS INVESTMENT PORTFOLIO RETURNS 10 years to 30 September 2023 Portfolio Performance (per cent.) - core product set annualised, after Risk Return - 10 Years to 30 September 2023 DFM charge and fund costs 8.0% ARC 7.0% Active Tracker Hybrid Peers1 6.0% Annualised Return Defensive 2.9 3.1 3.1 2.2 5.0%
Slide 35: MPS Investment Portfolio Returns – 5 Years
MPS INVESTMENT PORTFOLIO RETURNS 5 years to 30 September 2023 Portfolio Performance (per cent.) - core product set Risk Return - 5 Years to 30 September 2023 annualised, after DFM charge and fund costs 8.0% ARC 7.0% Active Tracker Hybrid Ethical Peers1 6.0% Annualised Return Defensive 0.8 1.1 1.0 1.
Slide 36: MPS Investment Portfolio Returns – 1 Year
MPS INVESTMENT PORTFOLIO RETURNS 1 year to 30 September 2023 Portfolio Performance (per cent.) - core product set Risk Return - 1 Year to 30 September 2023 annualised, after DFM charge and fund costs 10.0% 9.0% ARC Active Tracker Hybrid Ethical Peers1 8.0% 7.0% Annualised Return Defensive 1.9 3.7 2.
Slide 37: Ethical Investment Portfolio Returns
ETHICAL INVESTMENT PORTFOLIO RETURNS 5 years to 30 September 2023 Tatton Fund Performance (% - ethical product set, Risk Return - 5 Years to 30 September 2023 annualised, after DFM charge and fund costs 7.0% 6.0% ARC Ethical Peers1 5.0% Annualised Return Defensive 1.9 1.1 4.0% Cautious 3.2 1.7 3.0%
Slide 38: Distribution of AUM Across Proposition Matrix
DISTRIBUTION OF AUM ACROSS PROPOSITION MATRIX 45 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 39: Investment Backdrop – 2023
INVESTMENT BACKDROP – 2023 Surprising resilience of economy to high rates – STATUS QUO – China activity returning keeping earnings going Core inflation’s rapid decline BETTER THAN and inventory forced central bank’s pause contraction reversing EXPECTED Tight labour market Bond markets now doing AI d
Slide 40: 2023 Market Variables
Labour markets 2023 MARKET remain linchpin both for yields and VARIABLES Risks: for demand Wildcards: Higher rates default cycle risk China’s reopening BETWEEN SOFT LANDING vs. demand resilience stimulus, Energy prices Widening HY spreads AND CREEPING to be watched RECESSION UK: Balance: Better than
Slide 41: Investment Outlook – 2024
INVESTMENT OUTLOOK – 2024 Surplus liquidity still focused on ‘return on capital’, rather than FINELY BALANCED ‘return of capital’ CAPITAL MARKETS Neutral risk with regional tilts (+Japan, -USA, + long maturity bonds) Bonds at 4-6% with return contribution for first time in a decade Late cycle = equi
Slide 42: 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 43: Appendices
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Slide 44: 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 £115m
Slide 45: Tatton Share Price
TATTON SHARE PRICE COMPARISON TO PEER GROUP Share price performance comparison v peer group 45.0% 35.0% 25.0% 15.0% 5.0% -5.0% -15.0% 1 TAM PLC Peer Group Average FTSE AIM All Share 45 1. Selected peer group companies, including AJ Bell, Rathbones, Brooks Macdonald, Polar Capital, Jupiter Investment
Slide 46: Tatton Ecosystem
TATTON ECOSYSTEM Direct Tatton Ecosystem Nucleus Direct Firms Paradigm Firms Aviva Tenet Firms Fintel Firms TAM PLC (Group Propositions) Paradigm 8AM Firms Consulting Company Sep-23 Proposition Transact Other Strategic Partners Sesame Bankhall Tatton MPS £12.6bn AUM MPS Paradigm Tatton Mortgages MPS
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