Brooks Macdonald Group plc · LSE:BRK
Brooks Macdonald — FY2022 Earnings Presentation
46 slides from Brooks Macdonald's earnings presentation, Sep 15, 2022
Slide 1: Full year results for the year ended 30 June 2022
Full year results for the year ended 30 June 2022 Strong net flows, record underlying profit margin, and continued strategic delivery 15 September 2022 1
Slide 2: Speakers
Speakers Andrew Shepherd Ben Thorpe CEO CFO 2
Slide 3: Agenda
Andrew Shepherd 1 Introduction 2 Fundamental market opportunity 3 Update on strategy delivery 4 FY22 financial results 5 Moving forward with ambition 6 Q&A 3
Slide 4: Strong strategic progress underlined by excellent financial performance
Strong strategic progress underlined by excellent financial performance Underlying Excellent financial Positive net flows throughout profit margin (%) performance, with record the year, reaching 6.7% revenue, underlying profit annualised in the final quarter and underlying profit margin 28.2% 25.9%
Slide 5: Fundamental market opportunity
Andrew Shepherd 1 Introduction 2 Fundamental market opportunity 3 Update on strategy delivery 4 FY22 financial results 5 Moving forward with ambition 6 Q&A 5
Slide 6: Demographics and pension policy framework underpin the wealth management opportunity
Fundamental opportunity Demographics and pension policy framework underpin the wealth management opportunity Personal wealth is growing and expected to continue People are living longer to grow Actual and projected number of people aged 65 and Liquid savings & investments, £bn over in UK by age grou
Slide 7: Investors are increasingly working with financial advisers, our primary distribution channel
Fundamental opportunity Investors are increasingly working with financial advisers, our primary distribution channel More clients are establishing ongoing relationships The number of financial advisers has stayed broadly with financial advisers flat Number of individual advisers Number of ongoing cl
Slide 8: Advisers, particularly small and mid-sized ones, are outsourcing more
Fundamental opportunity Advisers, particularly small and mid-sized ones, are outsourcing more More advisers expect to increase rather They are doing this to spend more time More small and mid-sized firms than decrease the share of client assets with clients outsource to DFMs while bigger firms use t
Slide 9: FUM intermediated through advisers is rising across the board, with MPS growing fastest
Fundamental opportunity FUM intermediated through advisers is rising across the board, with MPS growing fastest FUM sold through IFAs is growing in all The proportion of advisers using one the main product groups, with MPS DFM is increasing, giving opportunities growing at over 30% CAGR for BMIS The
Slide 10: The industry is highly fragmented leaving a lot of opportunity to capture market share
Fundamental opportunity The industry is highly fragmented leaving a lot of opportunity to capture market share Top 25 Wealth Managers by FUM (£bn, end 2021) BM market share by product type (%) There are 120 100 80 60 11.8% 40 20 5.4% 0 1.8% 1.8% 0.6% Custody MPS Advised BPS Funds Platform MPS Privat
Slide 11: The fundamental opportunity for Brooks Macdonald is exciting
Fundamental opportunity The fundamental opportunity for Brooks Macdonald is exciting • The wealth management opportunity is underpinned by demographics and the pension policy framework • Investors are increasingly working with financial advisers, our primary distribution channel • Advisers, particul
Slide 12: Update on strategy delivery
12 Ben Thorpe 1 Introduction 2 Fundamental market opportunity 3 Update on strategy delivery 4 FY22 financial results 5 Moving forward with ambition 6 Q&A 12
Slide 13: Our ambitious growth strategy is delivering strong performance, giving us the capacity to invest
Strategy delivery Our ambitious growth strategy is delivering strong performance, giving us the capacity to invest for growth Our strategy is underpinned by three strategic value drivers People and Culture 1 2 3 Attracting, engaging and retaining Market-leading Service and operational Agile, high-qu
Slide 14: 1. Market-leading organic growth: we are making good progress
Strategy delivery 1. Market-leading organic growth: we are making good progress Five components underpin our ambition to deliver market-leading organic growth Annualised gross and net flows by half year (%) Of which due to Funds Can-do culture focused on making a difference for clients and advisers
Slide 15: Market-leading organic growth: Platform MPS
Strategy delivery 1. Market-leading organic growth: Platform MPS – an example of leveraging elements of the existing investment proposition to capture new market opportunities Brooks Macdonald Platform MPS FUM 2017-2022 (£m) Over FY20 and FY21, we increased the Since 1 October 2020 number of platfor
Slide 16: Market-leading organic growth: strong profit margin enables investment in multi-asset funds
Strategy Delivery 1. Market-leading organic growth: strong profit margin enables us to invest in building scale in our multi-asset funds propositions Net flows by year (£m) The Cornelian Risk Managed Funds (RMF) is a range of six multi-asset funds acquired by the Group in FY20 offering differing lev
Slide 17: Service and operational excellence: full infrastructure platform in place
Strategy delivery 2. Service and operational excellence: we now have in place the full infrastructure platform to support organic and inorganic growth, offering strong operational gearing Groupwide systems architecture Platform MPS / Our digital transformation will BPS Custody MPS BMIS Funds deliver
Slide 18: Agile, high-quality M&A delivered promised financial benefits
Strategy delivery 3. Agile, high-quality M&A: strengthened the overall proposition and delivered promised financial benefits New suite of funds providing Acquired relationships Underlying financial flexible solutions to advisers with strengthened, with 17 performance exceeding over 60 new IFAs intro
Slide 19: FY22 financial results
19 Ben Thorpe 1 Introduction 2 Fundamental market opportunity 3 Update on strategy delivery 4 FY22 financial results 5 Moving forward with ambition 6 Q&A 19
Slide 20: Strong financial performance
Financial results Strong financial performance Underlying profit Underlying profit Total revenue (£m) before tax (£m) margin before tax 122.2 25.9% 28.2% 118.2 34.5 30.6 21.2% 108.6 23.0 FY20 FY21 FY22 FY20 FY21 FY22 FY20 FY21 FY22 Statutory profit Underlying diluted Dividend per share (p) before ta
Slide 21: Non-fee income drop and change in mix driving yield reduction
Financial results Non-fee income drop and change in mix driving yield reduction Average FUM (%) and yields (bps) Yields on fee and non-fee income (bps) UKIM International 85.5 80.2 72.1 73.3 73.9bps (3.9bps) 18.2 14.4 17.7 16.6 70.0bps 98.1bps 4% 5% 103.0bps 67.3 65.8 54.4 56.7 72.1bps 11% 10% 73.3b
Slide 22: Underlying costs flat due to cost discipline and digital transformation
Financial results Underlying costs flat as a result of continued cost discipline and digital transformation £2.5m net reduction in FY22 from the digital transformation 22 22
Slide 23: Strong capital position to support growth and dividend enhancement
Financial results Strong capital position to support growth and dividend enhancement Annual dividend per share (p) CAGR 10.9% Own Funds1 Capital requirement including internal Attribution (£m) buffer 45.0 FY22 Final dividend 40.0 32.0 32.0 30.0 Surplus capital 21.0 23.0 26.0 17.0 19.0 24.7 FY18 FY19
Slide 24: FY23 outlook and guidance
Financial results FY23 outlook and guidance P&L • FY23 underlying profitability in line with current market expectations • Medium-term ambition for net flows is 8-10% p.a., and the Group expects that flows will remain positive despite ongoing short-term market uncertainty affecting client confidence
Slide 25: Moving forward with ambition
Andrew Shepherd 1 Introduction 2 Fundamental market opportunity 3 Update on strategy delivery 4 FY22 financial results 5 Moving forward with ambition 6 Q&A 25
Slide 26: Our medium-term ambition is to be a Top 5 wealth manager in the UK
Moving forward with ambition Our medium-term ambition is to be a Top 5 wealth manager in the UK and the Crown Dependencies Medium-term targets Organic growth driven by differentiation: • Strong culture Top 5 wealth • Robust Centralised Investment Process manager • Service and operational excellence
Slide 27: We are targeting acquisitions across different categories
Moving forward with ambition We are targeting acquisitions across different categories Category and rationale Investment managers • Scale play Acquisition • Adding FUM takes advantage of high operational criteria gearing in SS&C partnership • High quality business Advisers • Compelling strategic log
Slide 28: Our investment case
Moving forward with ambition Our investment case 1 Market opportunity Delivery capability 5 2 Strong culture and brand Distribution reach 6 3 Centralised Investment Service excellence 7 Process 4 Broad investment Quality of leadership team 8 proposition 28 28
Slide 29: FY22 was another year where we did what we said we would do
Moving forward with ambition FY22 was another year where we did what we said we would do, and we are confident in the future Delivered positive and Delivered record financial improving net flows performance Increased the dividend for Targeting 8-10% net flows and top the seventeenth quartile underly
Slide 30: Q&A
Q&A
Slide 31: Appendices
BM BROOKS MACDONALD
Slide 32: Leadership team
Leadership team Andrew Shepherd Ben Thorpe Lynsey Cross Caroline Abbondanza Sarah Ackland Simon Broomfield CEO CFO Chief Operating Officer Chief Technology Officer Global Head General Counsel of Distribution Robin Eggar Tom Emery Richard Hughes Alick Mackay Edward Park Priti Verma Managing Director,
Slide 33: Our guiding principles
Our guiding principles We do the right thing • We are worthy of our clients’, advisers’, partners’ and one anoother’s trust • We act with interity, honesty and fairness and we value diversity • We take responsibility for our actions and decisions We do the • We deal with issues and tackle hard decis
Slide 34: Our Centralised Investment Process has delivered robust performance
Our Centralised Investment Process has delivered robust performance over the medium term Cumulative performance (%) 1 year to 3 yrs to 5 yrs to 10 yrs to 30.06.22 30.06.22 30.06.22 30.06.22 BM Low Risk -6.96 0.17 5.50 39.88 Low Risk ARC Sterling Cautious PCI -5.46 3.07 7.01 32.62 Relative performanc
Slide 35: Our specialist BPS proposition
Our specialist BPS proposition Responsible Investment Service Decumulation Service Over • Environmental, Social & Governance offering which aims to deliver meaningful change to sustainability changes on behalf of investors • A new approach to retirement planning designed to help clients meet their i
Slide 36: Positive net flows in each quarter and annual rate of 4.8%
Financial results Positive net flows in each quarter and annual rate of 4.8% Total FUM for FY18 to FY22 (£bn) Organic and acquired net flows Q1 FY21 to Q4 FY22 (£m) 16.5 FY21: £(275)m 280 15.7 (-2.0%) 198 179 127 128 13.7 13.1 (35) 12.3 (106) FY22: £785m (+4.8%) (261) FY18 FY19 FY20 FY21 FY22 36
Slide 37: Increasing positive net flows driven by enhanced distribution capability
Financial results Increasing positive net flows driven by enhanced distribution capability and new relationships FY22 19% of BPS inflows generated by Organic net specialist products1, compared to flows Opening Closing (£m /annualised FUM (£m) Q1 Q2 Q3 Q4 FUM (£m) 17% in FY21 % growth) 6 51 30 1 BPS
Slide 38: Decline in non-fee income and change in book mix driving yield reduction
Decline in non-fee income and change in book mix mainly driving yield reduction Revenue Yields Avg FUM FY21 FY22 Change FY21 FY22 Change FY21 FY22 Change Notes on yields movement: £m £m % bps bps bps £m £m % BPS fees 58.7 59.9 2.0 67.3 65.8 (1.5) 8,722 9,108 4.4 UKIM BPS non-fees (transactional inco
Slide 39: Breakdown of underlying costs
Breakdown of underlying costs FY21 FY22 Change £m £m £ % Fixed staff costs 39.0 38.7 (0.3) (0.8) Variable staff costs 13.1 14.6 1.5 11.5 Acquired staff costs 1.1 2.0 0.9 81.8 Total staff costs 53.2 55.3 2.1 3.9 Non-staff costs 33.3 30.2 (3.1) (9.3) Acquired non-staff costs 1.1 2.2 1.1 100.0 Total no
Slide 40: Strong statutory profit due to improved underlying earnings
Strong statutory profit due to improved underlying earnings and flat adjusting items FY21 FY22 Notes on reconciliation to statutory profits: £m £m Underlying profit before tax 30.6 34.5 Amortisation of client relationships (£5.5m) Amortisation of client relationships (4.9) (5.5) Higher charge for th
Slide 41: Cash flows
Cash flows £m FY21 FY22 Opening cash 50.2 54.9 Cash flows from operating activities 35.2 38.0 Working capital movement 1.7 (4.7) Dividends paid (8.6) (10.3) EBT purchase net of shares issued (4.5) (2.7) Net tax paid (5.8) (5.3) Capital expenditure (3.7) (3.2) Deferred consideration paid (2.4) (6.0)
Slide 42: Growth in cash resources with cash profits offset by dividend, tax and investment
Growth in cash resources with cash profits offset by dividend, tax and investment in technology 42
Slide 43: Capital expenditure
Capital expenditure 7.0 0.9 1.0 4.9 0.6 3.7 3.2 £m 0.2 0.1 1.7 0.4 0.2 5.1 1.7 0.2 3.1 2.9 0.4 2.6 1.1 FY18 FY19 FY20 FY21 FY22 Infrastructure & Technology Property Related IT Equipment 43
Slide 44: Improved performance in UKIM, International lower due to weaker markets
Improved performance in UKIM, International lower due to weaker markets and investment in IOM UK Investment FY22 (£m) International Group1 Total Management Revenue 101.0 21.2 - 122.2 UKIM Direct costs (43.4) (14.0) (30.0) (87.4) UKIM which includes the Group’s Private Contribution 57.6 7.2 (30.0) 34
Slide 45: Contacts
Contacts Andrew Shepherd Ben Thorpe CEO CFO 21 Lombard Street 020 7659 3492 21 Lombard Street 020 7659 3492 London London EC3V 9AH info@brooksmacdonald.com EC3V 9AH info@brooksmacdonald.com John Welch Edward Berry Peel Hunt FTI Consulting Moor House 020 7418 8900 200 Aldersgate 020 3727 1046 120 Lon
Slide 46: Important information
Important information This presentation has been prepared for general information on ARC Private Client Indices (“PCI”) are based on historical matters of interest only and does not constitute an invitation to information and past performance is not indicative of future treat or a promotion, solicit
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