Brooks Macdonald Group Plc · LSE:BRK
Brooks Macdonald — FY2019 Earnings Presentation
40 slides from Brooks Macdonald's earnings presentation, September 2019
Slide 1: Full year results
Full year results Year ended 30 June 2019 Caroline Connellan, Chief Executive Ben Thorpe, Group Finance Director Andrew Shepherd, CEO International A year of value-enhancing growth
Slide 2: Caroline Connellan, Chief Executive
Caroline Connellan Chief Executive
Slide 3: Delivered good financial performance despite current headwinds
Delivered good financial performance despite current headwinds Organic net inflows (£m) FUM1 (£bn) Revenue1 (£m) +7% +7% -163 572 13.2 99.9 107.3 12.3 409 UKIM International Group FY18 FY19 FY18 FY19 5.4% -9.6% 3.3% Underlying1,2 PBT (£m) Underlying PBT margin (%) Total dividend (p) +9% +12% +0.8pts
Slide 4: Underlying trends positive despite near-term headwinds
Underlying trends positive despite near-term headwinds Positive underlying market trends… … despite the current, more uncertain, environment • Demographic trends remain supportive to wealth management, • Shorter-term, difficult market conditions alongside increasing public policy-driven and weak cli
Slide 5: Strategy agreed in 2017, based on three pillars of foundation, focus, growth
Strategy agreed in 2017, based on three pillars of “foundation, focus, growth” • Positive underlying trends, significant fundamental opportunity, despite macro and political uncertainty • Our strengths, plus the investment we are making through our strategy, position us well for the future • Deliver
Slide 6: Completed first phase during the year and now into phase two
Completed first phase during the year and now into phase two Phase two: Sept 2018 for ~2 years Increase value by enhancing what we do and how we do it Improved returns from sustainable and scalable business model Phase one: Sept 2017 – Sept 2018 Reinforce foundations and • Maximise growth opportunit
Slide 7: Significant progress on Channel Islands legacy matters
Significant progress on Channel Islands legacy matters • Legacy matters announced in July 2017: ‒ Related to a number of Jersey discretionary portfolios formerly managed by Spearpoint, and a Dublin-based fund for which Spearpoint acted as investment manager ‒ Deep commitment to treating customers fa
Slide 8: FY19: A year of value-enhancing growth
FY19: A year of value-enhancing growth • Record levels of funds under management at £13.2bn • Net new business remaining among the best in the sector, despite weaker client sentiment. Strength of offering and relationships supporting growth • Robust investment performance in volatile markets, suppor
Slide 9: Ben Thorpe, Finance Director
Ben Thorpe Finance Director BM BROOKS MACDONALD
Slide 10: Further progress on financial priorities
Further progress on financial priorities Underlying PBT (£m) Growing profitability +12% • Continued growth in FUM, ongoing shift to higher quality fee-based earnings • Efficiency improvements announced in January delivered slightly ahead of plan • Continued focus on cost discipline, with a number of
Slide 11: Continuing growth in funds under management
Continuing growth in funds under management 30 June 2018 Net flow Performance 30 June 2019 Net flows % £m BPS 7,699 303 251 8,254 3.9% MPS 1,488 161 56 1,705 10.8% UKIM discretionary 9,187 465 307 9,959 5.1% Funds 1,428 107 49 1,584 7.5% UKIM total 10,615 572 356 11,543 5.4% International 1,693 (163
Slide 12: UK Investment Management (UKIM) income up 9%
UK Investment Management (UKIM) income up 9% % BPS revenue yield FY18 FY19 change FY17 – FY19 (bps) Average MSCI Balanced on billing dates 1,567 1,579 0% 100 92.1 90.7 90.9 80 26.0 23.1 23.4 Average FUM on billing dates (£m) 60 BPS 7,279 7,847 8% 40 66.1 67.7 67.5 MPS 1,378 1,596 16% 20 Funds 1,290
Slide 13: Cost reduction initiatives now largely complete, cost growth now more restrained
Cost reduction initiatives now largely complete, cost growth now more restrained • Tight cost control with decisive action to FY18 FY19 % change streamline processes and eliminate duplication, driving efficiency and effectiveness Fixed staff costs 35.4 37.0 4% Non-staff costs 28.9 34.0 17% • Headcou
Slide 14: Profitability increasing in UKIM and International, FP operating review under way
Profitability increasing in UKIM and International, FP operating review under way UK Investment Financial All other FY19 (£m) management International planning segments Total Revenue 89.1 14.6 3.6 0.0 107.3 Direct cost (45.1) (9.2) (2.9) (29.0) (86.3) Internal cost recharges (19.2) (3.2) (2.5) 24.8
Slide 15: Statutory PBT reconciliation – No new items in H2
Statutory PBT reconciliation – No new items in H2 • No new exceptional items in £m FY18 FY19 H2 Underlying profit before tax, continuing operations 18.8 21.0 • H1 recap: Amortisation of client relationships (2.4) (2.2) o Reduction in goodwill Changes in fair value of deferred consideration & other (
Slide 16: Strong cash generation with outflows from exceptional items due to fall away
Strong cash generation with outflows from exceptional items due to fall away Cash movements for 12 months to 30 June 2019 (£m) 60.0 1.2 0.6 ( 7.7) 23.4 50.0 (6.7) Exceptional items: Legacy matters = £5.6m (2.1) Restructuring = £2.1m (2.0) 40.0 (1.7) (1.3) (0.1) 34.6 30.9 30.0 Capital expenditure: Co
Slide 17: Good progress, well placed to deliver value-enhancing growth
Good progress, well placed to deliver value-enhancing growth % £m, continuing operations1 FY18 FY19 Change 1 All figures on continuing operations basis, excluding Braemar Estates (sold December 2017), Employee Benefits (sold December 2018) and activities relating to Investment Management Agreement f
Slide 18: Andrew Shepherd, CEO International
Andrew Shepherd CEO International
Slide 19: The nature of the business has changed in International
The nature of the business has changed in International FUM by service type (£m, 2016 and 2019) • International business initiated with purchase +18% of Spearpoint in 2012, followed by DPZ in 2014 1,584 1,348 • Business has gone through material change: o At time of purchase, client assets were 40%
Slide 20: Today, we have a material opportunity in all three channels
Today, we have a material opportunity in all three channels New business by channel (%) 4.5% 23.8% • Significant Channel Islands market at c.£1 trillion Trust • Despite impact of legacy issues, relationships still (fiduciary) strong in many cases, discussions picking up about new 50.6% business oppo
Slide 21: Focus now on revitalising International and capturing the opportunity
Focus now on revitalising International and capturing the opportunity Being clear on our target audiences; having the right Launching a distribution and Reviewing the pricing of our products and services that marketing plan to support products and services to differentiate us targeted channel strate
Slide 22: Caroline Connellan, Chief Executive
Caroline Connellan Chief Executive
Slide 23: Delivering today, confident in the future
Delivering today, confident in the future Done what we said we would do Looking forward • Leveraged our strengths to support ongoing • Clear on strategy: building on our strengths, growth targeted investment • Focused, de-risked wealth management • Well positioned: despite current headwinds, busines
Slide 24: Appendices
Appendices BM BROOKS MACDONALD
Slide 25: Who we are
Who we are Protecting and enhancing our clients’ wealth through the provision of investment management and advice alongside exceptional service Our strengths • Client centric culture • Uniquely strong brand and reputation in the adviser channel • Strong centralised investment process Three core busi
Slide 26: Our history
Our history Full year results for the year ended 30 June 2019 26
Slide 27: Recent awards
Recent awards Brooks Macdonald services have achieved a 5 Star Rating in every category of DFM Rating produced by Defaqto. 2019 • Defaqto: 5 star rating for MPS, BPS and MPS platform • Defaqto: Gold Standard for DFM Service • Defaqto: 4 or 5 Diamond rating in Multi-Manager Return Focused section (Ba
Slide 28: Adviser market trends
Adviser market trends Adviser use of outsourcing 2017-18 50% 2017 2018 40% 30% 20% 39% 37% 28% 10% 20% 0% Proportion of advisers who Of those outsourcing, currently outsource any proportion who currently investment management outsource more than 50% activities to a DFM of client portfolios Opportuni
Slide 29: Funds under management breakdown FY15 – FY19
Funds under management breakdown FY15 – FY19 14 1 FUM £bn 12 CAGR 15.4% 10 8 13.2 6 12.3 10.5 4 8.3 7.4 2 0 Year to June ‘15 Year to June ‘16 Year to June ‘17 Year to June ‘18 Year to June ’19 Growth 13.2% 12.0% 25.9% 19.2% 6.8% Net new business 9.8% 11.6% 11.5% 13.2% 3.3% Investment performance 3.3
Slide 30: Funds under management breakdown FY19 vs. FY18
Funds under management breakdown FY19 vs. FY18 % Change 30 June Net flows Performance 30 June over 12 2018 FY19 FY19 2019 £m months BPS 7,699 303 251 8,254 7.2% MPS 1,488 161 56 1,705 14.6% UKIM discretionary 9,187 465 307 9,959 8.4% Funds 1,428 107 49 1,584 10.9% UKIM total 10,615 572 356 11,543 8.
Slide 31: Investment performance
Investment performance Cumulative performance (%) YTD (6 mths to 1 year to 3 year to 5 year to 10 year to 30.06.19) 30.06.19 30.06.19 30.06.19 30.06.19 BM Low Risk 6.73 3.29 14.25 20.52 70.92 Low Risk ARC Sterling Cautious PCI 5.68 2.37 10.59 16.05 48.98 Relative performance 1.04 0.92 3.66 4.47 21.9
Slide 32: Asset allocation guidance
Asset allocation guidance Current guidance portfolios – September 2019 The investment managers’ tolerance limits: +/-3 +/-5 +/-7 Low-to- Medium-to- Low Medium High Medium High UK fixed income 33 22 12 4 0 International fixed income 17 11 3 2 0 UK equities 7 14 20 25 29 North American equities 2 6 10
Slide 33: Our guiding principles
Our guiding principles … underpin everything we do and the way we do it Full year results for the year ended 30 June 2019 33
Slide 34: Leadership team
Leadership team Caroline Connellan Robin Eggar John Wallace Andrew Shepherd Adrian Keane-Munday Chief Executive Officer Co-Head UKIM Co-Head UKIM CEO International MD Financial Planning, Deputy Group CEO Marketing & Proposition Director Ben Thorpe Richard Spencer Priti Verma Jason Wood Tom Emery Fin
Slide 35: Cash flows
Cash flows £m FY18 FY19 Opening cash 32.2 30.9 Continuing EBITDA 21.2 23.4 Capital expenditure (6.9) (1.7) Working capital (0.7) 0.6 Disposal of investment - 1.2 Deferred consideration and disposal of investment (1.9) (1.3) Tax and interest (2.6) (2.1) Dilution management 1.3 (2.0) Dividends (5.8) (
Slide 36: Income and yield breakdown FY19 vs. FY18
Income and yield breakdown FY19 vs. FY18 Income (£m) Yields (bps) FY18 FY19 FY18 FY19 BPS • Fees 50.1 53.8 67.7 67.5 • Non Fee 16.8 18.3 23.1 23.4 Total 66.9 72.1 90.7 90.9 MPS 7.6 8.2 53.2 51.1 UKIM Discretionary 74.5 80.3 84.8 84.2 Funds 6.8 8.1 49.8 49.7 Other 0.5 0.7 UKIM Total 81.8 89.1 Interna
Slide 37: Capital expenditure
Capital expenditure Capital expenditure FY17 – FY19 (£m) 8.0 7.0 7.0 0.9 6.0 1.0 5.0 4.0 3.5 0.6 3.0 0.5 5.1 2.0 1.7 0.2 2.4 0.4 1.0 1.1 0.0 FY17 FY18 FY19 Computer Software Property Related IT Equipment Full year results for the year ended 30 June 2019 37
Slide 38: Interim and final dividend
Interim and final dividend Underlying 120 125.8 115.8 117.7 100 80 91.3 87.9 60 51.0 47.0 41.0 40 30.5 35.0 20 0 FY15 FY16 FY17 FY18 FY19 Cover: 3.0 2.5 2.8 2.5 2.5 Underlying earnings per share1(p) Total dividend (p) Statutory 100 94.4 80 60 68.3 51.0 47.0 41.0 40 30.5 35.0 43.0 39.4 41.7 20 0 FY15
Slide 39: Contacts
Contacts Caroline Connellan Ben Thorpe Chief Executive Group Finance Director 72 Welbeck Street 72 Welbeck Street London London W1G 0AY W1G 0AY T 020 7408 5577 T 020 7927 4955 F 020 7499 5718 F 020 7499 5718 E caroline.connellan@brooksmacdonald.com E ben.thorpe@brooksmacdonald.com Guy Wiehahn Reg Ho
Slide 40: 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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