Rathbones Group Plc · LSE:RAT
Rathbones — H1 2022 Earnings Presentation
42 slides from Rathbones's earnings presentation, Jul 28, 2022
Slide 1: Interim results 2022
Rathbones Group Plc 2022 Interim results 28 July 2022 Page 1
Slide 2: Presenters and agenda
Rathbones Group Plc | Interim results Presenters and agenda Agenda Page Business update 3 Financial update 9 Paul Stockton Jennifer Mathias Outlook 17 Group Chief Executive Group Chief Financial Appendix 21 Officer Officer Page 2
Slide 3: Business update
Business update Paul Stockton Chief Executive Page 3
Slide 4: Current market conditions have created headwinds…
Rathbones Group Plc | Interim results Our market Current market conditions have created headwinds… Total FUMA (£bn) The UK market saw net outflows in retail sales 2022 YTD… 68.2 59.2 58.9 Net retail UK fund sales (£m)¹ 1,863 2,535 2,289 610 H1 2021 FY 2021 H1 2022 -1,160 -822 -2,487 -3,495 Oct-21 No
Slide 5: Client behaviours can change in a volatile market environment…
Rathbones Group Plc | Interim results Client behaviours can change in a volatile market environment… The threat of recession means clients can be slower to commit …but Rathbones’ model is well placed to: new money to portfolios… — Engage with clients regularly QoQ% UK GDP Growth¹ — Provide advice an
Slide 6: We continue to develop our propositions
Rathbones Group Plc | Interim results Our propositions We continue to develop our propositions …that meet the wide spectrum of client demands: Wealth Financial Asset planning management — Bespoke discretionary services to fund-based solutions management and advice (Funds) — Investment solutions incl
Slide 7: Digital plans have progressed well and remain critical to future growth
Rathbones Group Plc | Interim results Our digital plans Digital plans have progressed well and remain critical to future growth What we said What we’ve done By end 2022 Status at HY22 Delivery outcomes will support — Client prospecting, onboarding — On track to deliver first InvestCloud financial pe
Slide 8: Skills and resources underpin our growth
Rathbones Group Plc | Interim results Our people Skills and resources underpin our growth Targeted headcount growth supports our change agenda …with a culture that fosters flexibility and longevity: and growth (FTE) Employee survey engagement scores 34 188 8/10 employee 8.3/10 would engagement score
Slide 9: Financial results
Financial results Jennifer Mathias Group Chief Financial Officer Page 9
Slide 10: H1 2022 financial highlights
Rathbones Group Plc | Interim results H1 2022 financial highlights Operating income (£m) Underlying operating expenses (£m) Underlying PBT (£m) 182.0 62.9 231.9 213.5 150.7 50.0 179.0 133.1 46.0 +9% +21% (21%) y-o-y y-o-y y-o-y H1 20 H1 21 H1 22 H1 20 H1 21 H1 22 H1 20 H1 21 H1 22 Income resilience
Slide 11: Positive net inflows despite declining markets
Rathbones Group Plc | Interim results Funds and FUMA Positive net inflows despite declining markets Total FUMA (£bn) Discretionary and managed net inflows (£m) 49.2 49.4 59.2 68.2 58.9 Total 431 908 1,005 818 598 Total (£bn) (£m) 2.5% 4.4% 4.5% 3.4% 2.3% 4.9 Ann. growth rate 13.0 4.2 11.4 10.9 35 29
Slide 12: Diversified income streams
Rathbones Group Plc | Interim results Quality of earnings Diversified income streams H1 2022 H1 2021 % Consistently high FUMA quality (£m) (£m) change — Fee income growth ahead of MSCI PIMFA Average FTSE 100 Index (on quarterly billing dates) 7392 6887 7 — Reduced commissions, rising interest rates²
Slide 13: Resilient fee margin
Rathbones Group Plc | Interim results Quality of earnings Resilient fee margin Basis point return from fees (Investment Mgmt) Advisory fee income (£m) 60.8 26.9 59.9 H1 H2 15.8 56.5 56.2 9.1 8.4 8.1 52.9 9.7 8.1 8.4 8.6 2018 2019 2020 2021 H1 2022 2018 2019 2020 2021 H1 2022 Basis point return from
Slide 14: Expense growth supports strategy
Rathbones Group Plc | Interim results Costs Expense growth supports strategy H1 H1 Cost growth (£m) 1.5 % 2022 2021 3.9 change (£m) (£m) 0.3 6.8 9.6 Fixed staff costs 79.6 62.9 27 182.0 Variable staff costs¹ 44.2 41.9 5 8.2 1.0 Other operating expenses 58.2 45.9 27 150.7 Total underlying operating e
Slide 15: Underlying profit before tax
Rathbones Group Plc | Interim results Underlying profit before tax H1 2022 H1 2021 % Underlying profit before tax (£m) (£m) change Underlying profit before tax 50.0 62.9 (21) — commitment to planned spend to support future growth Charges in relation to client relationships (9.9) (7.2) 38 Acquisition
Slide 16: Strong capital position, stable dividend
Rathbones Group Plc | Interim results Strong capital position, stable dividend 30 June 2022 (£m) Surplus capital Total: — Remain a highly cash generative business £302.4m Surplus: — CET ratio of 16.7% 40.0 £96.7m — Inorganic opportunities 262.4 Tier 2 205.7 Capital requirement Tier 1 — FPC announcem
Slide 17: Financial outlook for H2 2022
Rathbones Group Plc | Interim results Financial outlook for H2 2022 Revenues — Expect normal commission seasonality — Rising Bank of England base rate to positively impact net interest income Costs — Digital costs for 2022 in line with earlier guidance of £20m — Planned acquisition costs in 2022 to
Slide 18: Looking ahead
Looking ahead Paul Stockton Chief Executive Page 18
Slide 19: A resilient business that is well positioned in uncertain markets
Rathbones Group Plc | Interim results A resilient business that is well positioned in uncertain markets Page 19
Slide 20: Q&A
Q&A Page 20
Slide 21: Appendix
Appendix Page 21
Slide 22: Accessing the financial advice market
Rathbones Group Plc | Interim results Accessing the financial advice market RFP Vision Independent Distribution of investment In-house financial planning Financial Planning services to external IFAs — ‘Whole of market’ advice through — Independent IFA network — Combined RIM/RUTM sales team in-house
Slide 23: Breakdown of flows by service level (H1 2022)
Rathbones Group Plc | Interim results Breakdown of flows by service level (H1 2022) Opening Service level Market Ann net Inflows Outflows Net flows Closing FUM Service level FUM transfers movement growth (£m) (£m) (£m) (£m) (£m) (£m) (£m) (%) Discretionary service Bespoke portfolios 47,986 1,563 (1,
Slide 24: Breakdown of flows by service level (H1 2021)
Rathbones Group Plc | Interim results Breakdown of flows by service level (H1 2021) Opening Service level Market Ann net Inflows Outflows Net flows Closing FUM Service level FUM transfers movement growth (£m) (£m) (£m) (£m) (£m) (£m) (£m) (%) Discretionary service Bespoke Portfolios 42,508 2,127 (1,
Slide 25: Breakdown of inflows by channel
Rathbones Group Plc | Interim results Breakdown of inflows by channel Opening Service level Market Ann net Inflows Outflows Net flows Closing FUM H1 2022 FUM transfers movement growth (£m) (£m) (£m) (£m) (£m) (£m) (£m) (%) Total direct 37,800 1,097 (1,005) 92 (104) (4,975) 32,814 0.5% Total indirect
Slide 26: Investment management client base
Rathbones Group Plc | Interim results Investment management client base Analysis of funds under management¹ Service level by number Fund type by value 1.2% 10.3% Discretionary 11.3% Private clients Advisory 9.6% 32.8% ISAs Charities Execution-only 12.6% Pensions Trusts 88.5% 13.5% 20.2% Other Size o
Slide 27: Where our clients’ assets are invested
Rathbones Group Plc | Interim results Where our clients’ assets are invested¹ 6.9% 6.1% 5.5% 4.4% 5.5% Direct holdings 10.0% 34.5% 8.8% 36.3% 9.4% 41.8% 10.5% 44.6% 12.4% 42.4% 55% Collectives 35.3% 35.4% 30.6% 29.4% 28.8% 45% 13.3% 13.4% 12.7% 11.1% 10.9% FY 2018 FY 2019 FY 2020 FY 2021 HY 2022 Fix
Slide 28: Performance – single strategy funds
Rathbones Group Plc | Interim results Performance – single strategy funds Performance¹ and quartile ranking at 30 June 2022 1 year 3 year 5 year 10 years Size of fund (£m)5 Rathbone Global Opportunities Fund I Acc -17.73% 4 21.46% 3 59.03% 1 255.18% 1 3,245.48 Sector: IA Global -8.77% 21.03% 41.96%
Slide 29: Performance – multi-asset funds
Rathbones Group Plc | Interim results Performance – multi-asset funds Discrete year performance1 at 30 June 2022 1 year 3 years 5 years 10 years Size of fund (£m)5 2 Rathbone Multi-Asset Total Return Portfolio S Inc -2.33% 8.18% 15.36% 49.48% 379.53 Bank of England Base Rate +2% 2.41% 7.26% 12.85% 2
Slide 30: Performance- Greenbank multi-asset funds
Rathbones Group Plc | Interim results Performance- Greenbank multi-asset funds Discrete year performance1 at 30 June 2022 1 year 3 years 5 years 10 years Size of fund (£m)5 Rathbone Greenbank Multi-Asset Total Return Portfolio S Acc3 -5.72% 15.35 Bank of England Base Rate +2% 2.41% Rathbone Greenban
Slide 31: Total capital expenditure
Rathbones Group Plc | Interim results Total capital expenditure Capital expenditure (£m) Technology and other — Proportion that can be capitalised is reducing as we 4.9m transition to modern, cloud based solutions 4.8m 0.2 Property 1.8 — H2 22 will increase as we develop hybrid capability and accoun
Slide 32: Earnings per share
Rathbones Group Plc | Interim results Earnings per share H1 2022 H1 2021 Pre tax Post tax Pre tax Post tax EPS (p)1 EPS (p)2 (£m) (£m) (£m) (£m) Underlying profit attributable to shareholders 50.0 39.6 67.6 62.9 50.3 92.5 Charges in relation to client relationships and goodwill (9.9) (8.0) (13.7) (7
Slide 33: Segmental results
Rathbones Group Plc | Interim results Segmental results 30 June 2022 Investment Management (£m) Funds (£m) Indirect (£m) Total (£m) Net investment management fee income 139.4 32.1 - 171.5 Net commission income 26.9 - - 26.9 Net interest income 6.1 - - 6.1 Fees from advisory services and other income
Slide 34: Analysing the balance sheet
Rathbones Group Plc | Interim results Analysing the balance sheet 30/06/22 30/06/21 30/06/22 30/06/21 Assets Liabilities (£’000) (£’000) (£’000) (£’000) Deposits by banks 19,587 1,604 Cash and balances with central banks 1,683,670 1,414,086 Settlement balances 139,916 152,745 Settlement balances 137
Slide 35: Other information – investment management
Rathbones Group Plc | Interim results Other information – investment management H1 2022 H1 2021 Change Investment Management Operating income1 per investment manager (£m) 0.5 0.5 - Average FUM per investment manager (£m) 142.2 151.7 (6.3)% Operations and support staff2 to investment manager ratio 2.
Slide 36: Investment management – number of investment managers and FUMA per office
Rathbones Group Plc | Interim results Investment management – number of investment managers and FUMA per office Investment management Number of funds under management Office location investment and administration managers¹ (£bn at 30/06/22) London 143 23.8 Glasgow 51 6.6 Liverpool 29 3.1 Edinburgh 2
Slide 37: Our future responsible investment approach
Rathbones Group Plc | Interim results Our future responsible investment approach Our ambition is to cater to the needs of all clients – whether their interest in ESG factors is driven simply by financial materiality or by specific sustainability preferences. High ESG integration Low ESG integration
Slide 38: Responsible business at Rathbones
Rathbones Group Plc | Interim results Responsible business at Rathbones Our alignment with the Sustainable Development Goals Our responsible business programme consists of four pillars. Pillar Highlights from H1 2022 Responsible — Published responsible investment report investment — Listed as a sign
Slide 39: Responsible business at Rathbones
Rathbones Group Plc | Interim results Responsible business at Rathbones Our alignment with the Sustainable Development Goals Our responsible business programme consists of four pillars. Pillar Highlights from H1 2022 Our people — Updated our diversity, equality and inclusion plan — Gender Pay Gap Re
Slide 40: Shareholders at 30 June 2022
Rathbones Group Plc | Interim results Shareholders at 30 June 2022 Lindsell Train 11% Current Rathbones staff Franklin Resources 9% Heronbridge Aviva Investors 6% 48% Blackrock 5% Aberforth 5% Slater Investments 4% Vanguard Group 4% 2% 4% 2% Montanaro Other Page 40
Slide 41: Investment management – annual management fees for direct private clients
Rathbones Group Plc | Interim results Investment management – annual management fees for direct private clients¹ Discretionary management fees Applied across main funds and ISA Our fee is completely transparent (subject to VAT) funds (pa)² and we do not charge: First £250,000 1.20% Next £500,000 1.0
Slide 42: Important information
Rathbones Group Plc | Interim results 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