Brooks Macdonald Group Plc · LSE:BRK
Brooks Macdonald — FY2017 Earnings Presentation
34 slides from Brooks Macdonald's earnings presentation, September 2017
Slide 1: Final results for the 12 months ended 30 June 2017
Final results for the 12 months ended 30 June 2017 Caroline Connellan, Chief Executive; Simon Jackson, Finance Director; and Andrew Shepherd, Deputy Chief Executive
Slide 2: Caroline Connellan, Chief Executive
Caroline Connellan Chief Executive
Slide 3: Highlights – strong underlying business performance
Highlights – strong underlying business performance 2017 2016 Change • Strong FUM growth with 26% increase to £10.5bn, tripling FUM in last 5 years; good momentum continues Discretionary FUM £10.5bn £8.3bn 26% Revenue £91.7m £81.4m 13% • 19% increase in underlying PBT; for the first time all four bu
Slide 4: Andrew Shepherd, Deputy Chief Executive
Andrew Shepherd Deputy Chief Executive
Slide 5: FUM tripled in last 5 years – increased scale of business
FUM tripled in last 5 years – increased scale of business 11 10 9 8 7 £bn 6 5 4 3 2 1 0 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Year to Year to Year to Year to Year to Year to June ‘12 June ‘13 June ‘14 June ‘15 June ‘16 June ‘17 Total BM FUM (£m) 3,520 5,110 6,550 7,413 8,301 10,456 % Increment 1
Slide 6: Organic growth reflecting strength of core offering and relationships
Organic growth reflecting strength of core offering and relationships 2017 2016 Investment Investment £m Funds BMI Total Funds BMI Total management management Opening discretionary 6,158 796 1,348 8,301 5,589 663 1,161 7,413 FUM Net new 643 290 17 951 551 152 160 863 business Performance 968 72 163
Slide 7: The adviser market – direction of travel
The adviser market – direction of travel Outsourced adviser based DFM market 2013-16 (£bn) CAGR 200 +41% A regulatory and CAGR 17% +18% commercial tailwind has +19% driven outsourcing 150 Weak markets would drive further outsourcing 100 Brooks Macdonald has +15% built a strong brand and reputation i
Slide 8: The Opportunity for Brooks Macdonald
The Opportunity for Brooks Macdonald • Less than 45% of advisers estimated as outsourcing some part of their investment management Advisers outsourcing some part of their investment management • Overall target in the adviser market is: • to win more share of business from those who do outsource and
Slide 9: Simon Jackson, Finance Director
Simon Jackson Finance Director
Slide 10: Financial highlights
Financial highlights FY17 FY16 % Change Revenue £91.7m £81.4m 13% Underlying profit before taxation £18.4m £15.5m 19% Profit before taxation £8.0m £15.9m (49)% Underlying earnings per share 115.8p 87.9p 32% Basic earnings per share 43.0p 94.4p (55)% Interim dividend 15.0p 12.0p 25% Final dividend 26
Slide 11: Reconciliation of underlying profits to statutory
Reconciliation of underlying profits to statutory • Amortisation of intangible assets £’000 FY17 FY16 includes £2.5m relating to client contracts and £1.3m for software Underlying profit before tax 18,426 15,536 • £6.5m provision to deal with legacy matters relating to discretionary Amortisation of
Slide 12: Underlying profit before tax
Underlying profit before tax £’000s FY17 FY16 % Change Investment Management fee income 76,301 66,563 15% Fees from other advisory services and 14,364 12,126 18% other income Pre RDR payments to introducers 1,051 2,710 (61%) Underlying operating income 91,716 81,399 13% Underlying operating expenses
Slide 13: Underlying segmental results
Underlying segmental results Group and Investment Financial Property consolidation FY17 £’000 management planning Funds management International costs Total Revenue 65,717 4,989 5,505 2,922 12,583 - 91,716 Underlying profit 21,134 275 462 126 452 (4,023) 18,426 Margin 32% 5% 8% 4% 4% - 20% Revenue y
Slide 14: IT project update and overview of FY18 investment
IT project update and overview of FY18 investment Delivery of single Group portfolio FY18 IT investment management platform • Delivered migration from two legacy systems in • Total IT investment in software in the region of £3m BMI on to a single Group portfolio management p.a. for the last two fina
Slide 15: Planning for 2018 and beyond
Planning for 2018 and beyond • Investment in our risk management and operational framework, as announced at the trading statement, will result in an additional spend of c. £4m in FY18 with an ongoing spend in subsequent years of c. £2m • Context: – Business growing rapidly – trebling FUM and doublin
Slide 16: Cash bridge £'000
Cash bridge £’000 35,000 £24,521 £32,183 32,500 30,000 27,500 25,000 22,500 £19,478 £3,186 20,000 17,500 £3,543 15,000 £5,122 12,500 10,000 £1,580 £1,296 7,500 £786 £1,105 5,000 2,500 0 -2,500 Opening Tax paid Fixed, Dividends Deferred Purchase of Issue of new Proceeds of Cash Closing balance 1 July
Slide 17: Caroline Connellan, Chief Executive
Caroline Connellan Chief Executive
Slide 18: Strongly positioned to capture the market opportunity
Strongly positioned to capture the market opportunity Market opportunity Our positioning • Adviser focus: • Increasing wealth: – Uniquely strong branding and – Wealth forecast to continue to rise reputation in the adviser channel – Advice requirements growing – Strategic Alliances – Own in-house adv
Slide 19: External environment is changing fast
External environment is changing fast Technology • “Robo-advice” – Showing no signs of reaching profitable scale – US firms – ahead in lifecycle – moving to multi-channel Sector implications … however … • Digital playing increasingly important role • Agility to evolve – Essential part of client expe
Slide 20: Strong top-line growth built on a client-centric culture
Strong top-line growth built on a client-centric culture Observations • Strength of core business: Funds under management – High FUM growth in core growth – Client-centric culture – Strong adviser brand and relationships • Centralised investment process • Attractive Group revenue yield CAGR 20% Init
Slide 21: Investment required to support FUM growth and margin improvement
Investment required to support FUM growth and margin improvement Observations • High-touch client service Headcount mix • Focus on front office teams to meet increasing client and adviser requirements • Process complexity limiting scalability of model and driving high numbers of Ops & IT staff CAGR
Slide 22: Confidence in the medium-term outlook
Confidence in the medium-term outlook • Strong market position with unique brand in the adviser PBT and margin community, supported by client-centric culture CAGR 8% • Delivering value for our clients, partners and shareholders by: – Continuing to adapt to fast changing landscape – Enhancing the pro
Slide 23: Appendices
Appendices BM BROOKS MACDONALD
Slide 24: Appendices
Appendices • Disposal of Braemar Estates • Analysis of the balance sheet • Total administrative costs • Revenue and profit growth • EPS and dividend growth • Asset allocation • Performance • Industry recognition Final results for the year ended 30 June 2017 24
Slide 25: Disposal of Braemar Estates, supporting focus on core offerings
Disposal of Braemar Estates, supporting focus on core offerings • Agreed sale of Braemar Estates to Rendall & Rittner, an experienced operator in this sector. • Exchanging contracts on 20 September 2017, completion expected by year end (following TUPE consultation period) • Sale price of £1.9m with
Slide 26: Analysis of the balance sheet
Analysis of the balance sheet £m FY17 FY16 Assets Cash & liquid assets 33.4 20.5 Accrued income and other assets 24.6 26.6 Property plant and equipment 3.2 3.3 Intangible assets 62.6 65.8 Total assets 123.8 116.2 Liabilities Trade payables and accruals (21.2) (18.8) Current tax liabilities (2.1) (2.
Slide 27: Total administrative costs
Total administrative costs FY17 Staff numbers at 30 June 2017 Staff costs - payroll (fixed) Investment management 184 Staff costs - other (variable) BMI 70 6% Funds 22 14% Commission & fees Financial consulting 32 33% Investment administration Group and central functions Operations/ICT 94 5% £83.7m
Slide 28: Revenue and profits growth
Revenue and profits growth £m Underlying profit Revenue 95.00 91.7 90.00 85.00 81.4 80.00 77.7 75.00 69.1 70.00 65.00 62.9 60.00 52.18 53.3 55.00 50.00 45.00 40.00 35.1 35.00 30.00 25.00 18.43 20.00 15.08 15.54 13.45 13.32 15.00 7.60 9.03 10.00 5.68 5.00 0.00 FY10 FY11 FY12 FY13 FY14 FY 15 FY 16 FY
Slide 29: Underlying earnings per share, dividend growth and cover
Underlying earnings per share, dividend growth and cover 120 4 Underlying earnings per share (p) 3.52 3.54 Statutory EPS 3.28 100 3.2 94.41 2.99 Total Dividend (p) 3 2.82 80 Underlying Dividend cover 2.52 (multiple) 69.01 68.3 65.76 60 57.43 2 115.76 51.92 91.33 42.95 87.94 86.24 87.92 38.1 41 40 35
Slide 30: Asset allocation
Asset allocation Current guidance portfolios – September 2017 The investment managers’ tolerance limits: +/- 3% +/- 5% +/- 7% Low Growth, Low Income Low to Med Medium Med to High High Income & Growth UK FI 26 25 17 11 3 0 INT FI 20 17 11 3 2 0 UK Eq 7 7 14 22 29 32 North American Eq 2 2 8 12 16 19 E
Slide 31: Our performance v.s. ARC's PCI
Our performance v.s. ARC’s PCI • Over the last five years, BM has generally achieved strong relative performance compared to the ARC PCI. Rolling 12 months performance (%) Cumulative performance (%) 12 mths to 12 mths to 12 mths to 12 mths to 12 mths to 30.06.17 30.06.16 30.06.15 30.06.14 30.06.13 3
Slide 32: Recent awards
Recent awards • 2017 – Citywire Wealth Manager Regional Stars – Midlands and South East. • 2017 – 5 star rating for MPS, BPS and MPS platform (Defaqto). • 2017 – Gold Standard for DFM Service (Defaqto). • 2017 – PAM Top 40 Under 40. • 2016 – Citywire Wealth Manager Regional Stars – Scotland and Nort
Slide 33: Contacts
Contacts Caroline Connellan Simon Jackson Andrew Shepherd Group Chief Executive Group Finance Director Group Deputy Chief Executive 72 Welbeck Street 72 Welbeck Street 72 Welbeck Street London London London W1G 0AY W1G 0AY W1G 0AY T 020 7499 6424 T 020 7499 6424 T 020 7499 6424 D 020 7408 5577 D 020
Slide 34: Important information
Important information This presentation has been prepared for general information on matters of interest only and does not constitute an invitation to treat or a promotion, solicitation, or offer capable of acceptance and does not constitute professional advice of any kind. You should not act upon t
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