Slide 1: Treasury Group Full Year Results - 30 June 2012 Overview
Wednesday 22 August 2012 TREASURY GROUP LIMITED FULL YEAR RESULTS - 30 JUNE 2012 Overview Treasury Group (ASX:TRG) today announced a consolidated profit after tax of $6.75 million for the year ended 30 June 2012, down by 32.5% from $10.05 million reported the previous year. Underlying net profit aft
Slide 2: Funds Under Management
IML winning major institutional mandates which funded in June 2012 with further potential institutional inflows expected in the next financial year. Celeste Funds Management continues to show positive inflows from both retail and institutional investors and achieved outstanding investment performanc
Slide 3: Net new funds flow and FUM by investor type
Fund flows were positive overall for the year. The first half saw net out flows at IML, Orion and GVI while RARE and Trilogy were the main sources of net inflows. The second half showed positive inflows, primarily at IML and RARE which were mostly offset by outflows at Orion: TRG Net new funds flow
Slide 4: Composition of FUM by Product Type and Investor Location
The composition of Treasury Group FUM by product has also changed over time. There has been a shift towards Alternatives away from Domestic Equities as is illustrated in the chart below: Composition of FUM by Product Type 100% 80% Alternatives 60% International 40% Equities Australian 20% Equities 0
Slide 5: Market Conditions and Outlook
Market Conditions and Outlook There has been an increased level of caution among retail investors. Businesses including IML and GVI which have a predominantly retail clientele, suffered net outflows as a result of this continued uncertainty and flight to perceived lower risk asset classes. Benefitti
Slide 6: Detailed Financial Analysis
Detailed Financial Analysis Underlying Earnings The underlying performance of Treasury Group’s business can only be understood after consideration of earnings adjusting for items not considering as forming part of the underlying profit. The Company’s results in 2012 were impacted by two restructures
Slide 7: Dividend and Detailed Disclosure of Business Profit and Loss
funds. This is seen as an important step in the business development plan of the Treasury Group boutiques. Treasury Group also has $4.0 million in loans outstanding to Group boutiques. These will be repaid according to agreed schedules over the loan periods. Another important component of the balanc
Slide 8: Treasury Group Income Statement
¹ Current year expenses include the one-off effects of restructuring costs in the GVI business and the related effect of the sale of IML’s equity holding in GVI. These effects are added back to display an underlying aggregated profit. The boutique asset managers do not have any external borrowings.
Slide 9: Funds Under Management (FUM)
Funds Under Management (FUM) The proportion of Group FUM within International Equities and Alternatives increased during the year while the proportion in Domestic Equities decreased. Asset Class 2012 % 2011 % Australian 6,956,401,283 42.46 8,180,996,267 48.81 Equities International 4,385,778,604 26.
Slide 10: Treasury Group Limited Results Presentation June 2012
Treasury Group Limited Results Presentation 30 June 2012
Slide 11: Agenda
Agenda 1. Overview 2. FUM & Performance 3. Financial Results 4. Strategy 5. Summary 2
Slide 12: Overview - re-focused strategy, tough decisions taken
1. Overview - re-focused strategy, tough decisions taken • Actions taken following the strategic review earlier in the year: - Restructuring of GVI and AR Capital - PRV to be restructured delivering strategic benefits for TRG (details p.17) - Focus on efficiency and costs at Treasury Group. Headcoun
Slide 13: Overview – underlying earnings down in a falling market
1. Overview – underlying earnings down in a falling market • Mixed performance from boutiques in falling equities markets - FUM down 2.3% - Strong performance from IML, RARE and Celeste - Average margin from TRG boutiques marginally higher (reversing prior 6 year trend) • TRG financial result down,
Slide 14: Overview – underlying profit at top of recently announced range
1. Overview – underlying profit at top of recently announced range % $ Change • Funds inflows of $445m offset by market Year end FUM ($bn) 16.4 -2.3 value declines Aggregate Boutique Mgmt Fees ($m) 71.0 -5.2 • TRG Underlying NPAT down due Reported NPAT ($m) 6.8 -32.5 primarily to lower TRG share of
Slide 15: Overview – drivers of financial performance were mixed
1. Overview – drivers of financial performance were mixed Drivers of Treasury Group NPAT 2012 Impact Primary • Funds flows credible in a difficult market • Institutional flows positive at RARE, FUM IML and Celeste Investor/Product/TRG Ownership mix • Retail investor confidence remains weak Avera
Slide 16: The Australian funds management industry experienced outflows during FY12
2. FUM and Performance – the Australian funds management industry experienced outflows during FY12 Australian Managed Funds Industry – Quarterly Funds Flows $bn Source: Morningstar 7
Slide 17: Investors continuing to prefer defensive asset classes
2. FUM & Performance – investors continuing to prefer defensive asset classes FUM for TRG Boutiques as at 30 June 2012 • TRG continues to diversify assets Investors Mutual across managers 4% 22% Orion • Net fund outflows over the year of Celeste $244m for TRG boutiques (net fund 38% inflows of $445m
Slide 18: Average margin for TRG boutiques marginally higher
2. FUM & Performance – average margin for TRG boutiques marginally higher Composition of Average FUM vs Average Margin 16 80 14 70 12 60 Evergreen & AR Capital 10 50 Celeste TAAM Avg Margin FUM 8 40 Aubrey & GVI (bps) $bn RARE Infrastructure 6 30 Orion Investors Mutual 4 20 % incl Trilogy % excl Tri
Slide 19: Continued diversification away from Australian Equities
2. FUM Performance – continued diversification away from Australian Equities, toward International investors and toward Institutional investors FUM by Asset Class 2012 2011 2010 2009 2008 Australian Equities 42% 49% 56% 64% 74% International Equities 27% 25% 26% 27% 20% Alternatives 31% 26% 18% 9% 6
Slide 20: Superior long term performance
2. FUM & Performance – superior long term performance Performance Relative to Comparative Indices (%pa) – Net of Fees to end June 2012 1 Year 3 Year 5 Year Since Inception Excess Excess Excess Sample Ratings Inception Date Returns Returns Returns Aubrey Global Conviction(GBP) -6.6 2.1 -- 0.7 Jan 200
Slide 21: Net margin steady, costs controlled
3. Financial Results – net margin steady, costs controlled % Aggregate P&L of TRG Boutiques ($m) 2012 2011 Change Year end FUM ($bn) 16.4 16.7 -2.3 • Management fees lower due to Management Fees 71.0 74.9 -5.2 lower performance fees Other Income 2.9 4.6 -36.7 • Other income lower due to prior year g
Slide 22: Normalised net profit was lower due to lower equity share of associates
3. Financial Results – normalised net profit was lower due primarily to lower Equity Share of Associates NPAT Treasury Group P&L ($m) 2012 2011 % Change • TRG Revenues lower due to lower interest income and Revenue 3.945 4.493 -12.2 reduction in service fee income Expenses 8.902 8.680 +2.6 Equity Sh
Slide 23: Alternatives delivered increased earnings whilst Australian Equities was lower
3. Financial Results – alternatives (incl.RARE ) delivered increased earnings during the year whilst Australian Equities (incl. Orion) was lower Contribution to FY12 NPAT by Business Segment 12.0 10.005 10.0 0.707 8.0 0.024 (0.479) 6.752 (2.545) (1.324) $m 6.0 4.0 2.0 0.0 FY11 Australian Internation
Slide 24: Increased payout ratio maintains a strong dividend yield
3. Financial Results – an increased payout ratio this year maintains a strong dividend yield • Final fully franked dividend of 20 cps Dividend History • Full year dividends of 34 cps fully 70 60 franked 50 • Dividend yield of 7.8% fully franked 40 (based on 20/8/12 share price) cps 30 • 2012 Payout
Slide 25: How did we perform versus opportunities nominated last year?
4. Strategy – how did we perform verses opportunities nominated last year? • Expand and diversify portfolio of boutiques • Invest in Distribution and Marketing capability • Pursue efficiency and returns from Support Services • Optimise investment structures where possible (operational, tax)
Slide 26: Proposed restructure of PRV
4. Strategy – proposed restructure of PRV • Restructure initiated by TRG and developed together with PRV board • Off market buyback of up to 75% at price of NTA less costs (est. 78.9cents), subject to approval of PRV shareholders • Various issues with existing PRV model: - trades consistently at sig
Slide 27: Address opportunities
4. Strategy– address opportunities • Expand and diversify portfolio of boutiques • Invest in Distribution and Marketing capabilities • Optimise investment structures where possible • Improve capacity to provide seed funding • Pursue M&A opportunities at corporate level • Seek limited number of third
Slide 28: Summary
5. Summary • Investor confidence remains fragile • Low risk asset classes favoured by investors • Cyclical swing away from Growth style towards Value and Alternatives • Retail investors remain very cautious globally – net outflows • Long term fundamentals for funds management are positive • Year of
Slide 29: Partnering with outstanding investment professionals
Partnering with outstanding investment professionals to deliver superior investment performance to clients Superior alignment of investment team incentives to client outcomes Equity ownership delivers greater team stability Treasury Group value add: • Distribution and marketing capability • Efficien