Brooks Macdonald Group plc · LSE:BRK
Brooks Macdonald — FY2023 Earnings Presentation
36 slides from Brooks Macdonald's earnings presentation, Sep 14, 2023
Slide 1: Full year results for the year ended 30 June 2023
Full year results for the year ended 30 June 2023 Strategic progress and solid financial performance 14 September 2023
Slide 2: Presenters & Agenda
Presenters & Agenda Andrew Shepherd, CEO 1 Introduction 2 FY23 financial results 3 Update on strategy delivery 4 Q&A 2 Andrea Montague, CFO
Slide 3: Introduction – Andrew Shepherd, CEO
Andrew Shepherd CEO 1 Introduction 2 FY23 financial results 3 Update on strategy delivery 4 Q&A 3
Slide 4: Continuing strategic progress underlined by solid financial performance
Continuing strategic progress underlined by solid financial performance Underlying Solid financial Continuing positive net flows, profit margin (%) performance, with robust 5.2% annualised for the full underlying profit margin year despite uncertain macroeconomic backdrop 28.2% 25.9% 24.5% Well posi
Slide 5: FY23 financial results – Andrea Montague, CFO
Andrea Montague CFO 1 Introduction 2 FY23 financial results 3 Update on strategy delivery 4 Q&A 5
Slide 6: Solid financial performance despite challenging market conditions
Solid financial performance despite challenging market conditions Underlying1 profit Underlying1 profit Statutory2 profit Total revenue (£m) before tax (£m) margin before tax (%) before tax (£m) 122.2 123.8 34.5 28.2 118.2 30.6 30.3 25.9 24.5 29.5 25.1 22.2 FY21 FY22 FY23 FY21 FY22 FY23 FY21 FY22 FY
Slide 7: Robust underlying profit margin of 24.5% despite headwinds in the year
Robust underlying profit margin of 24.5% despite headwinds in the year Notes Summary financial performance P&L (£m) FY22 FY23 Change Average FUM down 2.3% against £m £m £m % 1 markets decline of 6.1%, reflecting Closing MSCI PIMFA 1,665 1,692 27 1.6% 1 strong investment performance Average MSCI PIMF
Slide 8: Achieved annual growth rate of 5.2% with positive net flows in each quarter
Achieved annual growth rate of 5.2% with positive net flows in each quarter Total FUM for FY19 to FY23 (£bn) Organic net flows Q1 FY22 to Q4 FY23 (£m) 16.8 16.5 FY23: £817m (+5.2%) 15.7 FY22: £785m (+4.8%) 373 13.7 13.1 280 198 191 156 128 FY19 FY20 FY21 FY22 FY23 179 97 Closing MSCI1 mvmt. 2.2% (3.
Slide 9: Non-fee income driving yield increase partly offset by change in mix
Non-fee income driving yield increase partly offset by change in mix Average FUM (%) and yields (bps) Total yield bridge between FY22 and FY23 (bps) Total yield change +1.2bps +1.2bps Fee only (3.9bps) Fee only 71.6bps yields yields 70.4bps FY23 FY22 14% 15% 65.1bps 65.8bps 12% 48.3bps 57.8bps 13% 1
Slide 10: Net increase in underlying costs driven by investment spend
Net increase in underlying costs driven by investment spend FY22 FY23 Change Total underlying costs movement £m £m £ % FY22 to FY23 (£m) Fixed staff costs 40.5 43.6 3.1 7.7 Other includes: Variable staff costs 14.8 10.9 (3.9) (26.4) Investment T&E: £0.4m Acquired staff costs - 1.6 1.6 n/a net £5.8m
Slide 11: Strong capital position supports dividend increase and future growth
Strong capital position support dividend increase and future growth opportunities Own Funds1 FY23 Attribution (£m) FY22 15.2 The decrease in the Group’s Total capital regulatory capital surplus resources from £24.8m to £15.2m 24.8 £64.6m represents the use of own Total capital 7.4 capital resources
Slide 12: Strong cash generation offset by acquisitions and dividend distribution
Strong cash generation offset by acquisitions funded by internal resources and dividend distribution 12
Slide 13: Update on strategy delivery – Andrew Shepherd, CEO
Andrew Shepherd CEO 1 Introduction 2 FY23 financial results 3 Update on strategy delivery 4 Q&A 13
Slide 14: The structural industry opportunity is strong
The structural industry opportunity is strong Investors are increasingly recognising the value of Wealth is growing in the UK advice Liquid savings & investments, £bn Number of ongoing clients with IFAs (million) 6,000 3 4,000 2 2,000 1 0 2022 2023 2024 2025 2026 0 Mass Market Affluent HNW 2016 2017
Slide 15: Ambitious growth strategy underpinned by three strategic value drivers
We have an ambitious growth strategy, underpinned by three strategic value drivers 1 2 3 Market-leading Service and Agile, high-quality organic growth operational excellence M&A Committed to top quartile underlying profit margin over the medium term 15
Slide 16: 1. Market-leading organic growth: good progress
1. Market-leading organic growth: good progress Five components underpin our ambition Annualised gross and net flows by half year (%) to deliver market-leading organic growth Partnership culture 19.3 15.5 14.6 15.2 14.8 11.3 12.0 11.3 5.3 5.8 Compelling investment proposition 4.0 4.4 1.2 (4.1) (5.4)
Slide 17: 1. Market-leading organic growth: exceptional growth in Platform MPS
1. Market-leading organic growth: exceptional growth in Platform MPS Brooks Macdonald Platform MPS FUM 2019-2023 (£m) • IFA demand for model portfolio solutions growing rapidly in 3,500 recognition of value and suitability for many clients during 3,000 accumulation • BM growing faster than market, 2
Slide 18: 2. Service and operational excellence: completed migration to SS&C
2. Service and operational excellence: completed migration to SS&C, a critical enabler of the strategy Objectives of the partnership Enabling all three value drivers of the strategy Administrative processes transferred to SS&C Adviser Efficiency & Retained experience & resilience Operational staff c
Slide 19: 3. Agile, high-quality M&A: we will continue to buy high-quality firms
3. Agile, high-quality M&A: we will continue to buy high-quality firms Attraction of Bought two advice firms in FY23, strong Building scale of advice firms profitability and growth potential Private Clients Private Clients Assets under Management or Advice (£bn) • Successful and rapidly growing, • B
Slide 20: Our culture positions us well for Consumer Duty
Our culture, built on our Guiding Principles, positions us well for Consumer Duty Our Guiding Principles… We welcome the FCA’s new We published on our website Consumer Duty Principle, our updated target market requiring firms to deliver guide and our Value good outcomes for retail Assessments for ou
Slide 21: FY24 guidance
FY24 guidance • Net flows expected to remain positive for full year FY24 • Gross inflows expected to remain robust, particularly in Platform MPS • Short term headwinds expected to affect net flows, with Q1 net flows likely to be negative, driven by high interest rates prompting investors to repay de
Slide 22: Looking ahead – medium term
Looking ahead – medium term • Targets – Committed to top quartile underlying profit margin – Targeting 8-10% net flows, timing potentially affected by short- term headwinds – Medium-term ambition to be a Top 5 wealth manager in the UK and Crown Dependencies • Management agenda – Driving operational
Slide 23: Q&A
Q&A 23
Slide 24: Appendices
Appendices 24
Slide 25: Strong investment case
Strong 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 25
Slide 26: High-quality leadership team with broad experience
High-quality leadership team with broad experience Andrew Shepherd Andrea Montague Caroline Abbondanza Sarah Ackland Simon Broomfield CEO CFO Chief Operating Officer Global Head of General Counsel & Distribution and Chief People Officer Marketing Robin Eggar Richard Hughes Alick Mackay Edward Park L
Slide 27: Our Centralised Investment Process has delivered robust performance
Our Centralised Investment Process has delivered robust performance Cumulative performance (%) 3 months to 1 year to 3 years to 5 years to 10 years to 30.06.23 30.06.23 30.06.23 30.06.23 30.06.23 BM Low Risk -0.85 -0.34 0.08 3.11 27.52 Low Risk ARC Sterling Cautious PCI -0.84 -0.37 1.02 5.12 24.33 R
Slide 28: Higher positive net flows driven by enhanced distribution capability
Higher positive net flows driven by enhanced distribution capability and new relationships FY23 Gross inflows for MPS platform Organic net flows Opening Closing (including BMIS) up by 60% YoY (£m/annualised FUM Q1 Q2 Q3 Q4 Total Inv. perf. FUM % growth) (£m) (£m) (6) (82) (43) (76) (207) 153 BPS 8,5
Slide 29: Statutory profit down in line with underlying earnings and impact of PY credit
Statutory profit down in line with underlying earnings and impact of PY credit FY22 FY23 Notes on reconciliation to statutory profits: £m £m Underlying profit before tax 34.5 30.3 Amortisation of client relationships (£5.7m) Amortisation of client relationships (5.5) (5.7) The increase in the charge
Slide 30: UKIM & International performance impacted by weaker markets
UKIM & International performance impacted by weaker markets UK Investment FY23 (£m) International Group Total Management UKIM Revenue 103.5 20.3 - 123.8 UKIM reported a 2.5% increase in Direct costs (47.4) (13.6) (33.4) (94.4) revenue driven by higher financial Contribution 56.1 6.7 (33.4) 29.4 plan
Slide 31: Positive movement in yield mainly driven by non-fee income
Positive movement in yield mainly driven by non-fee income Revenue Yields Avg FUM Notes on yields movement FY22 FY23 Change FY22 FY23 Change FY22 FY23 Change £m £m % bps bps bps £m £m % UKIM BPS fees 59.9 54.2 (9.5) 65.8 65.1 (0.7) 9,108 8,318 (8.7) BPS fee yield – down by 0.7bps driven by fee press
Slide 32: Balance sheet
Balance sheet Annual dividend per share (p) Balance sheet (£m) FY22 FY23 Change Non-current assets 93.5 107.5 14.0 CAGR 10.1% Current assets 92.6 87.7 (4.9) Total assets 186.1 195.3 9.1 Non-current liabilities (9.9) (10.3) (0.4) 47.0 45.0 Current liabilities (27.8) (27.6) 0.2 40.0 32.0 32.0 Total li
Slide 33: Capital expenditure
Capital expenditure 7.0 0.9 1.0 4.9 0.6 3.7 3.7 0.2 3.2 0.2 1.7 0.4 0.5 £m 0.1 5.1 0.2 2.3 1.7 0.4 0.2 3.1 1.4 2.9 3.0 0.4 2.6 0.2 1.9 0.1 1.1 1.1 FY18 FY19 FY20 FY21 FY22 FY23 H1 FY23 H2 FY23 Infrastructure & Technology Property Related IT Equipment 33
Slide 34: FY24 detailed guidance
FY24 detailed guidance Cash flows • Capital expenditure in FY23 of c. £3m • EBT purchases for FY23 of c. £2.5m evenly phased over the year Effective tax rate • Underlying effective tax rate of 26% expected for FY24, in line with the increase in UK corporation tax rate Share count • Actual number of
Slide 35: Contact
Contact Andrew Shepherd Andrea Montague CEO Chief Financial Officer 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 100 Liverpool Street 020 7418 8900 20
Slide 36: 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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