Rathbones Group Plc · LSE:RAT
Rathbones — FY2020 Earnings Presentation
50 slides from Rathbones's earnings presentation, Mar 4, 2021
Slide 1: 2020 Preliminary results
2020 Preliminary results Thinking, acting and investing responsibly 4 March 2021
Slide 2: Looking back at 2020
Rathbone Brothers Plc | Preliminary results Page 1 Looking back at 2020 Delivering FUMA Growth Volatile strategic change investment Enriching the client +8.5% markets Enriching the client and and adviser FTSE 100: -14.3% adviser proposition proposition and and experience experience Underlying PBT MS
Slide 3: Financial Results
Financial Results Jennifer Mathias Group Finance Director
Slide 4: A resilient 2020 performance
Rathbone Brothers Plc | Preliminary results Page 3 A resilient 2020 performance Operating income (£m) Underlying operating expenses (£m) Underlying PBT (£m) 366.1 273.6 88.7 92.5 348.1 259.4 25.5% 25.3% Underlying operating margin +5.2% +5.5% +4.3% 2019 2020 2019 2020 2019 2020 Underlying basic EPS
Slide 5: FUMA growth outpacing markets
Rathbone Brothers Plc | Preliminary results Page 4 FUMA growth outpacing markets FUMA (£bn) 34.2 39.1 44.1 50.4 8.5% 54.7 9.8 6.4 7.4 4 year 5.3 5.6 4.0 CAGR 12% 30.2 33.8 32.1 43.0 44.9 2016 2017 2018 2019 2020 Investment Management Funds S&J FUM movement if tracked MSCI PIMFA Total net flows (£bn)
Slide 6: FUMA growth in Investment Management
Rathbone Brothers Plc | Preliminary results Page 5 FUMA growth in Investment Management FUMA (£bn) 4 year 30.2 33.8 38.5 43.0 44.9 +4.4% CAGR 6.5 10% 5.3 6.1 1.6 1.9 — Growth in FUMA of 4.4% to £44.9bn 4.7 1.2 4.1 0.9 1.1 —Markets and investment performance of 3.0% 25.2 28.0 32.0 35.3 36.5 —Net grow
Slide 7: Another outstanding year in our funds business
Rathbone Brothers Plc | Preliminary results Page 6 Another outstanding year in our funds business FUM (£bn) 4.0 5.4 5.6 7.4 9.8 4 year CAGR +32.4% — FUM of £9.8bn, increasing 32.4% 1.7 25% 1.1 8.1 —Single strategy funds grew by 0.8 1.0 6.3 28.6% to £8.1bn, multi-asset funds 0.4 4.6 4.6 grew by 54.5%
Slide 8: Revenue growth despite weaker average markets
Rathbone Brothers Plc | Preliminary results Page 7 Revenue growth despite weaker average markets 2020 2019 % (£m) (£m) change Investment Management revenue margin2 (bps) Average FTSE 100 Index (on 5978 7456 (19.8) quarterly billing dates) 74.2 72.7 71.4 68.2 72.7 Average MSCI PIMFA index (on 2.5 2.4
Slide 9: Balancing strategic investment with disciplined cost control
Rathbone Brothers Plc | Preliminary results Page 8 Balancing strategic investment with disciplined cost control 2020 2019 % (£m) (£m) change Fixed staff costs 117.5 110.8 6.0 Fixed staff costs Average FTE1 employees 1,535 1,509 1.7 —2020 salary inflation of c.3% & net headcount +76 FTEs Actual FTE1
Slide 10: Profit before tax reflects acquisition-related costs
Rathbone Brothers Plc | Preliminary results Page 9 Profit before tax reflects acquisition-related costs 2020 2019 % (£m) (£m) change Speirs & Jeffrey acquisition-related costs Underlying profit before tax 92.5 88.7 4.3 Charges in relation to client —Includes £32.3m1 for both initial share considerat
Slide 11: Investing in digital and technology
Rathbone Brothers Plc | Preliminary results Page 10 Investing in digital and technology Capital expenditure (£’m) £11.6m £11.7m —Total capex spend consistent year-on-year 1.7 1.0 but with a change in focus 0.9 1.3 9.8 —Technology and other represents investment 8.6 in strategic initiatives to date:
Slide 12: Robust capital position
Rathbone Brothers Plc | Preliminary results Page 11 Robust capital position 2020 (£m) 2019 (£m) Pillar 1: Minimum requirement for capital — Expected losses across credit, market and operational risk requirements Total Risk Total Risk Pillar 2A: Additional requirement for firm- 99.9 Exposure 96.7 Exp
Slide 13: 2020 dividend reflects growing momentum
Rathbone Brothers Plc | Preliminary results Page 12 2020 dividend reflects growing momentum Interim dividend (p) Final dividend (p) Generally progressive dividend policy having 66 70 72 61 regard to: 55 57 45 47 42 39 — Current and forecast financial 34 36 performance — Level of distributable reserv
Slide 14: Financial outlook
Rathbone Brothers Plc | Preliminary results Page 13 Financial outlook – Continuing market volatility and low interest rates – Investment in the business continues, in line with strategic plans (capital and operating expenditure) – Maintaining mid-20’s underlying operating margin over the medium term
Slide 15: Strategic update
Strategic update Paul Stockton Chief Executive Officer
Slide 16: Our ambition is to be recognised as the UK's most responsible wealth manager
Rathbone Brothers Plc | Preliminary results Page 15 Our ambition is to be recognised as the UK’s most responsible wealth manager… Delivering a wide range of high quality and dynamic wealth management solutions, through multiple channels, leveraging a strong brand, to build long term value Enriching
Slide 17: Enriching the client and adviser experience
Rathbone Brothers Plc | Preliminary results Page 16 Enriching the client and adviser experience Ongoing initiatives Strong investment performance Client service recognition & awards Client experience survey2 based on c. 8,300 HNW Capital return1 (%) individuals across 12 wealth management firms – La
Slide 18: Completing our range of wealth management propositions
Rathbone Brothers Plc | Preliminary results Page 17 Completing our range of wealth management propositions Comprehensive wealth solutions to meet a range of client needs Fund Direct private client investment and other advice services £35.0bn — Rathbones Select solutions Portfolio service (execution
Slide 19: Leveraging our ESG capability
Rathbone Brothers Plc | Preliminary results Page 18 Leveraging on our environmental, social and governance (ESG) capability Comprehensive wealth solutions to meet a range of client needs Private client advice solutions — Building Greenbank capability Fund solutions — Responsible investment policy —
Slide 20: Establishing a lasting responsible investment strategy
Rathbone Brothers Plc | Preliminary results Page 19 Establishing a lasting responsible investment strategy ESG Engagement with Voting Transparency integration consequences with purpose We will consider environmental, We prioritise engagement where We actively vote across over We are committed to bei
Slide 21: Supporting and delivering growth
Rathbone Brothers Plc | Preliminary results Page 20 Supporting and delivering growth Delivering growth in 2020 – £7.5bn of gross inflows — Dedicated business — Enabling investment – Growth in specialist mandates development skills teams to grow – 23 new IM hires – Targets for S&J acquisition achieve
Slide 22: Inspiring our people
Rathbone Brothers Plc | Preliminary results Page 21 Inspiring our people As in many businesses, our people have faced a challenging year. A key priority was to ensure their safety and wellbeing. Supporting their ability to work remotely ensured that they remained engaged, productive and able to cont
Slide 23: Operating more efficiently
Rathbone Brothers Plc | Preliminary results Page 22 Operating more efficiently The pandemic presented opportunities to accelerate our plans to streamline processes, providing a boost to productivity and creating the time and resources to invest in future growth initiatives. Reorganising for efficien
Slide 24: A leading presence in Scotland through our Speirs & Jeffrey acquisition
Rathbone Brothers Plc | Preliminary results Page 23 A leading presence in Scotland through our Speirs & Jeffrey acquisition Integration Deferred Targets on track substantively consideration complete — Operational integration completed — First tranche of deferred — Targeting 2021 underlying EPS in Ju
Slide 25: 2021 priorities
Rathbone Brothers Plc | Preliminary results Page 24 2021 priorities 2021 will be the second year of our five year plan and will build on the foundations put in place in 2020 to drive profitable growth Enriching the client and Supporting and Inspiring Operating adviser proposition and delivering grow
Slide 26: Q&A
Q&A
Slide 27: Appendix
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Slide 28: Our target market is large and structurally growing
Rathbone Brothers Plc | Preliminary results Page 27 Our target market is large and structurally growing Several business models 2% 15% – The market is fragmented with different business models 35% – These business models are usually a product of the c£1.6tn different origins of the business Total si
Slide 29: Investment Management client base
Rathbone Brothers Plc | Preliminary results Page 28 Investment Management client base Analysis of funds under management¹ Service level by number Fund type by value 6.5% 3.0% Private clients 2.6% 8.9% ISAs Discretionary 8.5% 33.5% 2.3% Charities Advisory Pensions Execution-only Trusts 90.9% 43.8% Ot
Slide 30: Where our clients' assets are invested
Rathbone Brothers Plc | Preliminary results Page 29 Where our clients’ assets are invested¹ 6.0% 6.5% 6.9% 6.1% 5.5% 10.0% 9.7% 10.0% 8.8% 9.4% 31.8% 34.3% 34.5% 36.3% 41.8% 38.8% Direct holdings 36.4% 51% 35.3% 35.4% 30.6% 13.4% 13.1% 13.3% 13.4% 12.7% Collectives FY 2016 FY 2017 FY 2018 FY 2019 FY
Slide 31: Community investment
Rathbone Brothers Plc | Preliminary results Page 30 Community investment Rathbones community response to Ongoing support for local community COVID-19 projects We recognise the challenging time the We and our employees continue to support Over £70,000 communities in which we operate are facing local
Slide 32: Our future responsible investment approach
Rathbone Brothers Plc | Preliminary results Page 31 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 ES
Slide 33: Accessing the financial advice market
Rathbone Brothers Plc | Preliminary results Page 32 Accessing the financial advice market RFP — In-house Vision Independent Distribution of financial planning Financial Planning investment services to external IFAs — ‘Whole of market’ advice through 23 in- — Independent IFA network committed to — Co
Slide 34: Movement in funds under management and administration
Rathbone Brothers Plc | Preliminary results Page 33 Movement in funds under management and administration Investment Management business Funds business 2020 2019 2020 2019 (£bn) (£bn) (£bn) (£bn) Opening funds under management and Opening funds under management 7.4 5.6 43.0 38.5 administration Inflo
Slide 35: Investment management: Service level breakdown of FUMA
Rathbone Brothers Plc | Preliminary results Page 34 Investment management: Service level breakdown of FUMA 31 December 31 December % change 2020 £m 2019 £m Direct 33,678 31,013 8.6 Financial Adviser linked 9,347 8,735 7.0 Total discretionary 43,025 39,748 8.2 Non-Discretionary Investment Management
Slide 36: Strong investment performance across our larger funds
Rathbone Brothers Plc | Preliminary results Page 35 Strong investment performance across our larger single-strategy and multi-asset funds Rathbone funds performance Single strategy funds1 Sector target performance 1 year 3 year 5 year 40% 70% +32.18% 140% +44.59% +16.00% 30% 60% 120% 50% 100% 20% 40
Slide 37: Performance: single strategy funds
Rathbone Brothers Plc | Preliminary results Page 36 Performance: single strategy funds Performance¹ and Quartile Ranking at 31 December 2020 1 year 3 year 5 year 10 years Size of fund (£m)7 Rathbone Global Opportunities Fund I Acc4 31.27% 1 64.68% 1 130.93% 1 290.58% 1 3,201.96 Sector: IA Global 15.
Slide 38: Performance: multi-asset funds
Rathbone Brothers Plc | Preliminary results Page 37 Performance: multi-asset funds Discrete year performance1 at 31 December 2020 (S-class shares) 1 year 3 years 5 years 10 years Size of fund (£m)4 Rathbone Multi-Asset Total Return Portfolio S Inc2 5.06% 12.72% 23.60% 52.93% 285.70 Bank of England B
Slide 39: Analysis of operating income
Rathbone Brothers Plc | Preliminary results Page 38 Analysis of operating income Basis point return from fees Basis point return from commission 56.0 57.9 58.4 56.5 56.2 16.8 52.9 15.2 13.8 11.9 11.7 12.1 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 Basis point return from interest Ad
Slide 40: Total operating expenses
Rathbone Brothers Plc | Preliminary results Page 39 Total operating expenses 31 December 2020 31 December 2019 Staff — payroll 11% Staff — payroll (excluding variable) 11% (excluding variable) 2% Staff — variable 3% 2% Staff — variable 3% 4% Staff — other 36% 2% 36% Staff — other Property Property 1
Slide 41: Underlying profits before tax and EPS
Rathbone Brothers Plc | Preliminary results Page 40 Underlying profits before tax¹ (£m) and EPS (p) 68.3 51.1 43.2 41.6 35.7 24.5 36.1 20.4 25.8 13.5 35.3 39.6 74.9 43.3 44.2 87.5 48.3 43.3 91.6 46.6 42.1 88.7 46.0 46.5 92.5 2016 2017 2018 2019 2020 1st Half UPBT (£m) 2nd Half UPBT (£m) Full Year UP
Slide 42: Earnings per share
Rathbone Brothers Plc | Preliminary results Page 41 Earnings per share 2020 2019 Pre tax Post tax Pre tax Post tax EPS (p)1 EPS (p)2 (£m) (£m) (£m) (£m) Underlying profit attributable to shareholders 92.5 71.6 133.3 88.7 71.1 132.8 Charges in relation to client relationships and goodwill (14.3) (11.
Slide 43: Segmental results
Rathbone Brothers Plc | Preliminary results Page 42 Segmental results y/e 31 December 2020 Investment Management Funds Indirect Total (£m) (£m) (£m) (£m) Net investment management fee income 230.3 43.9 - 274.2 Net commission income 62.3 - - 62.3 Net interest income 8.4 - - 8.4 Fees from advisory ser
Slide 44: Analysing the balance sheet
Rathbone Brothers Plc | Preliminary results Page 43 Analysing the balance sheet 31/12/20 31/12/19 31/12/20 31/12/19 Assets (£’000) (£’000) Liabilities (£’000) (£’000) Cash and balances with central banks 1,802,706 1,932,997 Deposits by banks 893 28 Settlement balances 90,373 52,520 Settlement balanc
Slide 45: Reconciliation of equity to total own funds
Rathbone Brothers Plc | Preliminary results Page 44 Reconciliation of equity to total own funds 2019 restated 2020 (£m) (£m) Equity – Share capital and share premium 218.0 213.8 – Reserves 342.6 313.6 Less: – Own shares (46.7) (42.0) – Intangible assets1 (220.7) (218.9) Total common equity tier 1 ow
Slide 46: Shareholders at 31 December 2020
Rathbone Brothers Plc | Preliminary results Page 45 Shareholders at 31 December 2020 Lindsell Train 13% Current Rathbones staff Mawer 31% Heronbridge 10% MFS Blackrock Vanguard 7% Baillie Gifford Aberforth 2% Franklin Templeton 2% 7% Aviva Investors 3% Norges 3% 6% 3% Marathon 4% 4% 5% Other
Slide 47: Other information: Investment Management
Rathbone Brothers Plc | Preliminary results Page 46 Other information: Investment Management 2020 2019 Change Investment Management Total rate of net growth in funds under management 1.4% (0.9%) Revenue yield on FUM (excluding Charities and excluding S&J) (bps) 79.2 77.2 2bps Revenue yield on FUM (e
Slide 48: Number of investment managers and FUMA per office
Rathbone Brothers Plc | Preliminary results Page 47 Investment Management: Number of investment managers and FUMA per office Investment Management Number of funds under management investment and administration Office location managers¹ (£bn at 31/12/20) London 127 22.9 Glasgow 45 7.2 Liverpool 28 3.
Slide 49: Annual management fees for direct private clients
Rathbone Brothers Plc | Preliminary results Page 48 Investment Management: Annual management fees for direct private clients¹ Discretionary management fees (subject to VAT) Our fee is completely transparent Applied across Main Funds and we do not charge: and ISA funds (pa)² First £250,000 1.20% — Fi
Slide 50: Important information
Rathbone Brothers Plc | Preliminary results Page 49 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 exc