Rathbones Group Plc · LSE:RAT
Rathbones — Rathbone Brothers — FY2017 Earnings Presentation
40 slides from Rathbones's earnings presentation, December 2017
Slide 1: Rathbone Brothers Plc 2017 Preliminary results
CHANGE Rathbone Brothers Plc 2017 Preliminary results Progress and delivery
Slide 2: 2017 in context
Rathbone Brothers Plc | Preliminary results Page 1 2017 in context — UK and global markets strong during the year — investor sentiment mixed against backdrop of political change — considerable regulatory change continues — results ahead of expectations benefitting from positive investment markets an
Slide 3: Financial results
Rathbone Brothers Plc | Preliminary results Page 2 Financial results Paul Stockton Finance Director
Slide 4: A strong 2017
Rathbone Brothers Plc | Preliminary results Page 3 A strong 2017 Funds under management FTSE100 FTSE100 7143 7688 — Funds under management of £39.1 billion up 14.3% from £34.2 billion, while WMA Growth Balanced and FTSE 100 increased 7.2% £34.2 bn +14.3% £39.1 bn and 7.6% year on year respectively 2
Slide 5: Growth in funds under management
Rathbone Brothers Plc | Preliminary results Page 4 Growth in funds under management Investment Unit Investment Management Management Trusts Total Total FY 2017 FY 2017 FY 2017 FY 2016 (£bn) (£bn) (£bn) (£bn) — Net organic growth totalled 3.0% Opening funds under — Outflows increased marginally but i
Slide 6: Income quality
Rathbone Brothers Plc | Preliminary results Page 5 Income quality Investment Management basis point return on average funds under management¹ 76.2 74.2 72.7 3.4 2.5 2.4 FY 2017 FY 2016 % 16.8 13.8 11.9 (£m) (£m) change 56.0 57.9 58.4 Average FTSE 100 Index (on 2015 2016 2017 7426 6659 11.5 quarterly
Slide 7: Managing expenditure
Rathbone Brothers Plc | Preliminary results Page 6 Managing expenditure Expense growth as planned (FTE headcount growth) 24 1,192 FY 2017 FY 2016 % (£m) (£m) change 17 12 Fixed staff costs 87.8 79.8 10.0 16 Average FTE1 employees 22 1,147 1,066 7.6 during the year 1,101 Actual FTE1 employees at the
Slide 8: Profit before tax
Rathbone Brothers Plc | Preliminary results Page 7 Profit before tax FY 2017 FY 2016 % (£m) (£m) change Underlying profit before tax 87.5 74.9 16.8 Non-underlying items reflect specific actions Charges in relation to client relationships and (11.7) (11.8) (0.8) goodwill — closure of defined benefit
Slide 9: Capital expenditure
Rathbone Brothers Plc | Preliminary results Page 8 Capital expenditure 16 £14.6m Capital expenditure is lower in 2017, but more money has been 14 directed towards systems and regulatory projects 12 £10.4m — 2016 costs largely reflect the fit out 10 of the London head office 9.7 1.9 £ million — 2017
Slide 10: Balance sheet management
Rathbone Brothers Plc | Preliminary results Page 9 Balance sheet management 31/12/17 31/12/16 Sources Uses Assets (£m) (£m) Total own funds1 216.8 174.2 Higher capital requirement £32.9m Pillar 1 own funds requirement 78.3 71.5 Profit after tax Surplus before Pillar 2 138.5 102.7 (pre amort'n) £61.9
Slide 11: A progressive dividend
Rathbone Brothers Plc | Preliminary results Page 10 A progressive dividend Growing profitability Distributable reserves Underlying earnings per share (p) Pension deficit (£m)¹ 9.3 1.6 138.8 117 122.1 (4.5) 102.4 (3.7) (10.8) Dividend per share (p) 86.7 (13.7) (15.6) (20.0) (32.0) 61 55 57 (39.5) 52
Slide 12: Progress and delivery
Rathbone Brothers Plc | Preliminary results Page 11 Progress and delivery Philip Howell Chief Executive
Slide 13: We are close to reaching our £40 billion funds under management aspiration
Rathbone Brothers Plc | Preliminary results Page 12 We are close to reaching our £40 billion funds under management aspiration Private client investment management How are we doing? — improve team structures 40 38 — simplify pricing structures 36 34 — grow charities and specialist services 32
Slide 14: Positive progress on our strategy in 2017
Rathbone Brothers Plc | Preliminary results Page 13 Positive progress on our strategy in 2017 Initiative What we delivered in 2017 2018 milestones — Team structures and performance management Private client/ — Process improvement and automation — Digital capture of client attitudes to specialist ser
Slide 15: Supporting our strategy in 2018
Rathbone Brothers Plc | Preliminary results Page 14 Supporting our strategy in 2018 2017 2018 Total 2018 potential Client relationship system Development of CRM system Client service capital spend as expected financial impacts Selectively add administrative Client “journey” support to investment tea
Slide 16: Our outlook
Rathbone Brothers Plc | Preliminary results Page 15 Our outlook We enter 2018 in a good position, with industry-leading operating margins and a strong balance sheet. We will continue to look for accretive acquisition opportunities and to invest in our future with discipline.
Slide 17: Appendix
Rathbone Brothers Plc | Preliminary results Page 16 Appendix
Slide 18: Rathbones at a glance
Rathbone Brothers Plc | Preliminary results Page 17 Rathbones at a glance Rathbone Brothers Plc, through its subsidiaries, is a leading provider of high-quality, personalised investment and wealth management services for private clients, charities and trustees. Our services include discretionary inv
Slide 19: Our business model
Rathbone Brothers Plc | Preliminary results Page 18 Our business model What makes us different How we do it What makes us different A sound investment case Individual relationships with clients For investors — a relationship based approach — our service is delivered directly though investment manage
Slide 20: Leading UK private client wealth managers
Rathbone Brothers Plc | Preliminary results Page 19 Leading UK private client wealth managers Private client AUM (£m) Private client AUM (£m) Total Disc. Adv. Total Disc. Adv. 1 St. James's Place Wealth Management 75,300 1,506 73,794 21 Pictet & Cie (Europe) S.A., London Branch 12,756 6,378 6,378 2
Slide 21: Current growth strategy
Rathbone Brothers Plc | Preliminary results Page 20 Current growth strategy Client referrals Intermediaries Specialist Unit Trust Strategic Acquisitions services initiatives — new client — leveraging vision — charities — investment — Private Office — company or introductions — B2B panels - — Greenba
Slide 22: Analysing the balance sheet
Rathbone Brothers Plc | Preliminary results Page 21 Analysing the balance sheet 31/12/17 31/12/16 31/12/17 31/12/16 Assets (£’000) (£’000) Liabilities (£’000) (£’000) Cash and balances with central banks 1,375,382 1,075,673 Deposits by banks 1,338 294 Settlement balances 46,784 37,787 Settlement bal
Slide 23: Dividend and earnings per share
Rathbone Brothers Plc | Preliminary results Page 22 Dividend and earnings per share 120 100 97.4p 92.7p 80 78.9p pence 76.1p 76.0p 60 61.0p 55.0p 57.0p 49.0p 52.0p 40 20 0 2013 2014 2015 2016 2017 Basic EPS Dividend per share Dividend cover 1.6x 1.5x 1.8x 1.4x 1.5x Dividend payout ratio 64% 68% 56%
Slide 24: Underlying PBT (£m) / EPS (p)
Rathbone Brothers Plc | Preliminary results Page 23 Underlying profits before tax¹ (£m) and EPS (p) 70 60 53.2 Underlying PBT (£m) / EPS (p) 51.2 51.1 50 43.2 38.6 40 44.2 41.6 37.5 30 35.7 20 24.8 10 26.1 24.4 50.5 29.3 32.3 61.6 37.2 33.2 70.4 35.3 39.6 74.9 43.3 44.2 87.5 0 2 2013 2014 2015 2016
Slide 25: Earnings per share
Rathbone Brothers Plc | Preliminary results Page 24 Earnings per share FY 2017 FY 2016 Pre tax Post tax Pre tax Post tax EPS (p)1 EPS (p)1 (£m) (£m) (£m) (£m) Underlying profit attributable to shareholders 87.5 70.1 138.8 74.9 59.1 122.1 Charges in relation to client relationships and goodwill (11.7
Slide 26: Shareholders at 31 December 2017
Rathbone Brothers Plc | Preliminary results Page 25 Shareholders at 31 December 2017 Rathbones staff, former staff & directors Lindsell Train Investment Mgt¹ 14.1% MFS Investment Mgt² 25.1% Mawer Investment Mgt Aviva Investors Troy Asset Mgt 13.8% Blackrock Heronbridge Investment Mgt Vanguard 2.0% K
Slide 27: Segmental results
Rathbone Brothers Plc | Preliminary results Page 26 Segmental results y/e 31 December 2017 Investment Management Unit Trusts Indirect Total (£m) (£m) (£m) (£m) Net investment management fee income 189.5 28.0 - 217.5 Net commission income 38.7 - - 38.7 Net interest income 11.6 - - 11.6 Fees from advi
Slide 28: Reconciliation of equity to total own funds
Rathbone Brothers Plc | Preliminary results Page 27 Reconciliation of equity to total own funds FY 2017 FY 2016 (£m) (£m) % change Equity Share capital and share premium 145.7 142.5 2.2 Reserves 222.5 188.5 18.0 Less: - Own shares (4.9) (6.2) (21.0) - Intangible assets1 (161.3) (166.4) (3.1) Total C
Slide 29: Total operating expenses
Rathbone Brothers Plc | Preliminary results Page 28 Total operating expenses 31 December 2017 31 December 2016 4% 3% 2% 4% 5% 4% 9% 8% 38% 40% £232.7m 14% £201.2m 17% 2% 2% 23% 25% Staff - payroll (excluding variable) Staff - variable Staff - other Property Depreciation & amortisation Professional S
Slide 30: Other information
Rathbone Brothers Plc | Preliminary results Page 29 Other information FY 2017 FY 2016 % change Investment Management Total rate of net growth in funds under management 3.9% 4.5% Revenue margin on FUM (excluding Charities team) (bps) 75.5 77.3 (2.3) Revenue margin on Charities team FUM (bps) 47.5 46.
Slide 31: Analysis of operating income
Rathbone Brothers Plc | Preliminary results Page 30 Analysis of operating income Basis point return from fees Basis point return from commission 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 0 10 20 30 40 50 60 0.0 5.0 10.0 15.0 20.0 25.0 Basis point return from interest Advisory fee income (£m)
Slide 32: Investment Management client base
Investment Management | Preliminary results Page 31 Investment Management client base Analysis of funds under management¹ 3.4% Service level Service level 3.8% 9.4% Private clients Discretionary 12.5% ISAs Advisory 36.8% Trusts Execution-only Charities 13.4% Pensions 11.4% Other 92.8% 16.5% Size of
Slide 33: Where our clients' assets are invested
Rathbone Brothers Plc | Preliminary results Page 32 Where our clients’ assets are invested¹ Direct H1 2015 13.5% 43.0% 29.5% 8.4% 5.6% holdings 51.8% FY 2015 13.1% 42.6% 30.3% 8.9% 5.1% Collectives H1 2016 13.7% 39.1% 31.2% 9.4% 6.6% 48.2% FY 2016 13.4% 38.8% 31.8% 10.0% 6.0% H1 2017 13.3% 36.9% 33.
Slide 34: Offices
Rathbone Brothers Plc | Preliminary results Page 33 Offices Funds under Number of investment Office location management professionals¹ (£bn at 31/12/17)² London 133 18.3 Liverpool 26 2.2 Edinburgh 26 2.6 Other offices³ 92 11.8 Total 277 34.9 ¹ As at 31 December 2017 excluding 13 fund managers in Rat
Slide 35: Annual management fees
Rathbone Brothers Plc | Preliminary results Page 34 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
Slide 36: Performance: retail funds
Unit Trusts| Preliminary results Page 35 Performance: retail funds Performance¹ and Quartile Ranking at Size of fund YTD 2018 1 year 3 year 5 year 10 years 31 December 2017 (I-Class units) (£m)† Rathbone Global Opportunities Inst Acc in GB 2.98 1 20.07 1 62.10 1 125.62 1 151.08 1 1,168.0 Sector : IA
Slide 37: Performance: outcome oriented funds
Unit Trusts| Preliminary results Page 36 Performance: outcome oriented funds Discrete year performance1 at Size of fund 1 year 3 years 5 years 31 December 2017 (S-class shares) (£m)† Rathbone Multi Asset Total Return Portfolio S Inc TR in GB 2 3.32 13.40 27.58 268.4 Offset Instrument : LIBOR GBP 6m
Slide 38: Reference sheet
Rathbone Brothers Plc | Preliminary results Page 37 Reference sheet Common Equity Common Equity Tier 1 capital as a proportion of total risk Tier 1 ratio: exposure amount Leverage ratio: Tier 1 capital resources as a percentage of total assets, excluding intangible assets and investment in associate
Slide 39: Corporate governance at Rathbones
Rathbone Brothers Plc | Preliminary results Page 38 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-
Slide 40: Important information
Rathbone Brothers Plc Page 39 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 exchange between currenci