Rathbones Group Plc · LSE:RAT
Rathbones — Rathbone Brothers — H1 2020 Earnings Presentation
40 slides from Rathbones's earnings presentation, July 2020
Slide 1: 2020 Interim results
Rathbone Brothers Ple = 2020 Interim results July 2020 Rathbones Look forward
Slide 2: Financial results
Rathbone Brothers Plc | Interim results 2020 Page 2 Financial results Jennifer Mathias Group Finance Director
Slide 3: A strong first half
Rathbone Brothers Plc | Interim results 2020 Page 3 A strong first half FUMA — FUMA down 2.0%, outperforming FTSE Funds under management and administration 100 and MSCI PIMFA Private Investor FTSE 100 outperformed 75423 FTSE 100 Balanced decreases of 18.2% and 6.3% 61703 market respectively £50.4bn
Slide 4: Funds under management and administration growth offsets market falls
Rathbone Brothers Plc | Interim results 2020 Page 4 Funds under management and administration growth offsets market falls Investment Unit Total Total Investment Management Inflows Management Trusts H1 2020 H1 2019 H1 2020 H1 2020 — £1.9bn organic gross inflows (H1 2019: £1.7bn) (£bn) (£bn) (£bn) (£b
Slide 5: Income growth and margin improvement reflects market volatility
Rathbone Brothers Plc | Interim results 2020 Page 5 Income growth and margin improvement reflects market volatility Investment Management bps return on H1 2020 H1 2019 % FY 2019 average funds under management¹ (£m) (£m) change (£m) 76.6 69.0 68.2 2.2 3.1 3.2 19.2 13.2 12.1 Average FTSE 100 Index 579
Slide 6: Targeted investment, controlling costs
Rathbone Brothers Plc | Interim results 2020 Page 6 Targeted investment, controlling costs H1 2020 H1 2019 % FY 2019 Headcount (£m) (£m) change (£m) — Selective hiring to support strategy Fixed staff costs Fixed staff costs 59.3 56.4 5.1 110.8 — Salary inflation c.3.3% Average FTE1 employees during
Slide 7: Resilient underlying and statutory profit
Rathbone Brothers Plc | Interim results 2020 Page 7 Resilient underlying and statutory profit H1 2020 H1 2019 % FY 2019 Acquisition-related costs (£m) (£m) change (£m) — Anticipated non-underlying items in Underlying profit before tax 46.0 46.6 (1.3) 88.7 relation to S&J acquisition — FY2020 costs o
Slide 8: Robust capital position
Rathbone Brothers Plc | Interim results 2020 Page 8 Robust capital position 30/06/20 31/12/19 Pillar 2A requirement Assets (£m) (£m) — Lower risk-weighted assets Total own funds1 264.7 282.2 Pillar 2B requirement Pillar 1 own funds requirement 95.0 96.7 Capital conservation buffer — 2.5% of RWAs Sur
Slide 9: Business review
Rathbone Brothers Plc | Interim results 2020 Page 9 Business review Paul Stockton Chief Executive
Slide 10: Emerging stronger from the pandemic
Rathbone Brothers Plc | Interim results 2020 Page 10 Emerging stronger from the pandemic COVID objectives Strategic priorities Emerging stronger Employee Enriching the client Quality advice well-being and adviser proposition and supported digitally experience Supporting and delivering growth Client
Slide 11: Quality advice supported digitally
Rathbone Brothers Plc | Interim results 2020 Page 11 Quality advice supported digitally ― Client communication and digital Enriching the client ― ‘MyRathbones’ portal upgrade and app and adviser proposition and experience ― Investment skills, ESG and research output ― Rathbones Select Portfolio Enha
Slide 12: Growth opportunity and culture
Rathbone Brothers Plc | Interim results 2020 Page 12 Growth opportunity and culture ― Investment manager recruitment Supporting and delivering ― Strong momentum in RUTM and Greenbank growth ― Barclays personal injury team ― Integrated approach to the advice market ― ‘Blueprint for growth’ Penetratin
Slide 13: Leveraging technology
Rathbone Brothers Plc | Interim results 2020 Page 13 Leveraging technology ― Flexible working Inspiring our people ― Communication, training and well-being ― Chief People Officer 5 Our culture and values ― Diversity and inclusion ― Momentum behind digital Operating more efficiently ― Employee produc
Slide 14: Summary
Rathbone Brothers Plc | Interim results 2020 Page 14 Summary — Looking Strong first half performance ahead — Agile and adaptable business model — Robust balance sheet and capital position — Emerging stronger
Slide 15: Q&A
Rathbone Brothers Plc | Interim results 2020 Page 15 Q&A
Slide 16: Appendix
Rathbone Brothers Plc | Interim results 2020 Page 16 Appendix
Slide 17: Analysing the balance sheet
Rathbone Brothers Plc | Interim results 2020 Page 17 Analysing the balance sheet 30/06/20 31/12/19 30/06/19 30/06/20 31/12/19 30/06/19 Assets (£’000) (£’000) (£’000) Liabilities (£’000) (£’000) (£’000) Cash and balances with central banks 2,303,875 1,932,997 1,271,512 Deposits by banks 3 28 - Settle
Slide 18: Underlying PBT (£m) / EPS (p)
Rathbone Brothers Plc | Interim results 2020 Page 18 Underlying profits before tax¹ (£m) and basic EPS (p) 90 80 68.3 Underlying PBT (£m) / EPS (p) 70 60 51.1 50 43.2 40 41.6 30 35.7 25.8 36.1 20 24.5 20.4 10 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 0 2016 2017 2018 2019 2020
Slide 19: Earnings per share
Rathbone Brothers Plc | Interim results 2020 Page 19 Earnings per share H1 2020 H1 2019 Pre tax Post tax Pre tax Post tax EPS (p)1 EPS (p)² (£m) (£m) (£m) (£m) Underlying profit attributable to shareholders 46.0 36.2 67.5 46.6 38.1 71.4 Charges in relation to client relationships and goodwill (7.0)
Slide 20: Segmental results
Rathbone Brothers Plc | Interim results 2020 Page 20 Segmental results H1 2020 Investment Management Unit Trusts Indirect Total (£m) (£m) (£m) (£m) Net investment management fee income 106.4 19.9 - 126.3 Net commission income 37.3 - - 37.3 Net interest income 4.8 - - 4.8 Fees from advisory services
Slide 21: Reconciliation of equity to total own funds
Rathbone Brothers Plc | Interim results 2020 Page 21 Reconciliation of equity to total own funds H1 2020 FY 2019 H1 2019 (£m) (£m) (£m) Equity Share capital and share premium 216.0 213.8 211.7 Reserves 308.7 313.6 303.8 Less: - Own shares (46.1) (42.0) (36.8) - Intangible assets1 (225.8) (218.9) (22
Slide 22: Total operating expenses
Rathbone Brothers Plc | Interim results 2020 Page 22 Total operating expenses H1 2020 H1 2019 Staff - payroll (excluding variable) Staff - payroll (excluding variable) 8% 12% 3% Staff - variable Staff - variable 3% 4% Staff - other Staff - other 10% 39% 3% 37% 2% Property Property 10% £151.8m Deprec
Slide 23: Capital expenditure
Rathbone Brothers Plc | Interim results 2020 Page 23 Capital expenditure 5 £4.6m 4.5 0.9 £3.7m 4 3.5 0.6 0.9 3 £ million 0.4 2.5 0.6 0.5 2 1.5 1 2.2 2.2 0.5 0 H1 2020 H1 2019 Purchased software IT & other Property¹ Internally developed software FY2020 and FY2021 expenditure expected to be in line wi
Slide 24: Investment management service level breakdown
Rathbone Brothers Plc | Interim results 2020 Page 24 Investment management service level breakdown 30 Jun 2020 31 Dec 2019 30 Jun 2019 Change 6 Change 12 (£m) (£m) (£m) months (%) months (%) Direct 30,355 31,013 29,906 (2.1) 1.5 Financial Adviser linked¹ 8,524 8,735 8,440 (2.4) 1.0 Total Discretiona
Slide 25: Rathbones has the platform to succeed…
Rathbone Brothers Plc | Interim results 2020 Page 25 Rathbones has the platform to succeed…
Slide 26: …with a robust business model…
Rathbone Brothers Plc | Interim results 2020 Page 26 …with a robust business model… Owned infrastructure + Deep expertise + Relevant solutions Trusted relationships Discretionary investment Scalable Individual Charity/Greenbank/Specialist Private operating investment clients, platform management Mul
Slide 27: …and product offerings suitable for the clients of today and tomorrow
Rathbone Brothers Plc | Interim results 2020 Page 27 …and product offerings suitable for the clients of today and tomorrow DFM¹ ✓ Afinancial product range that is suitable for clients, advisers and intermediaries Personalised investment management ✓ Provides a cost effective solution for wealth mana
Slide 28: Building on our ESG capability
Rathbone Brothers Plc | Interim results 2020 Page 28 Building on our ESG capability ― £1.7 billion in Rathbone Greenbank Investments PRI annual survey results (30 June 2019: £1.5 billion) ― £1.7 billion in Ethical Bond Fund Strategy and governance (30 June 2019: £1.4 billion) A+ Median score: A ― La
Slide 29: Accessing the financial advice market
Rathbone Brothers Plc | Interim results 2020 Page 29 Accessing the financial advice market Distribution of RFP - in-house financial Vision Independent investment services planning Financial Planning to external IFAs — Whole of market advice — Independent IFA network — Combined RIM/RUTM through 21 in
Slide 30: Dividends
Rathbone Brothers Plc | Interim results 2020 Page 30 Dividends 70 66 61 57 55 Final dividend (p) 45 Interim dividend (p) 42 39 34 36 21 21 22 24 25 25 2015 2016 2017 2018 2019 H1 2020 Dividend cover 2.1x 2.1x 2.3x 2.2x 1.9x 2.7x (underlying EPS) Dividend Cover 1.8x 1.4x 1.5x 1.3x 0.7x 1.4x (Basic EP
Slide 31: Analysis of operating income
Rathbone Brothers Plc | Interim results 2020 Page 31 Analysis of operating income Basis point return from fees Basis point return from commission 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 55.2 2020 19.2 0.0 10.0 20.0 30.0 40.0 50.0 60.0 0 5 10 15 20 25 Basis point return from interest A
Slide 32: Investment management client base
Rathbone Brothers Plc | Interim results 2020 Page 32 Investment management client base Analysis of funds under management 5.2% Service level1 Fund type1 4.6% 10.6% Private clients Discretionary 10.5% ISAs Advisory 34.1% Charities Execution-only 11.8% Pensions Trusts 13.9% Other 90.2% 19.1% Size of c
Slide 33: Where our clients' assets are invested
Rathbone Brothers Plc | Interim results 2020 Page 33 Where our clients’ assets are invested¹ H1 2017 13.3% 36.9% 33.5% 9.2% 7.1% Direct holdings FY 2017 13.1% 36.4% 34.3% 9.7% 6.5% 52.2% H1 2018 12.8% 35.7% 35.3% 10.0% 6.2% Collectives (funds) FY 2018 13.3% 35.3% 34.5% 10.0% 6.9% 47.8% H1 2019 13.3%
Slide 34: Shareholders at 30 June 2020
Rathbone Brothers Plc | Interim results 2020 Page 34 Shareholders at 30 June 2020 Lindsell Train Current Rathbones staff 14% Mawer Heronbridge 28% MFS¹ 9% Blackrock Vanguard Baillie Gifford 8% Aberforth Partners 2% Aviva Investors 2% Franklin Templeton 2% 2% 7% Legal & General Investment Mgt 2% 3% N
Slide 35: Performance: retail funds
Rathbone Brothers Plc | Interim results 2020 Page 35 Performance: retail funds Performance¹ and Quartile Ranking at Size of fund 1 year 3 year 5 year 10 years 30 June 2020 (£m)7 Rathbone Global Opportunities Fund I Acc4 19.01% 1 55.82% 1 122.59% 1 325.39% 1 2,503.56 Sector: IA Global 5.36% 23.58% 63
Slide 36: Performance: outcome oriented funds
Rathbone Brothers Plc | Interim results 2020 Page 36 Performance: outcome oriented funds Discrete year performance1 at 30 June 2020 (S-class 1 year 3 years 5 years 10 years Size of fund (£m)4 shares) Rathbone Multi-Asset Total Return Portfolio S Inc2 2.12% 8.90% 19.77% 54.59% 266.35 Bank of England
Slide 37: Charitable giving
Rathbone Brothers Plc | Interim results 2020 Page 37 Charitable giving Rathbones charitable response to COVID-19 We recognise the challenging time the communities in which we operate are facing and therefore Rathbones employees have chosen to support two charities during the pandemic by: — Raising f
Slide 38: Annual management fees
Rathbone Brothers Plc | Interim results 2020 Page 38 Annual management fees¹ Discretionary management fees (subject to VAT) Our fee is completely transparent and we do not charge: Applied across Main Funds and ISA funds (pa)² — fixed and minimum fees First £250,000 1.20% — dealing and commission cha
Slide 39: Corporate governance at Rathbones
Rathbone Brothers Plc | Interim results 2020 Page 39 Corporate governance at Rathbones We believe it is in the best interests of our clients for the companies in which we invest to adopt best practice in corporate governance. This provides a framework in which each company can be managed in the long
Slide 40: Important information
Rathbone Brothers Plc | Interim results 2020 Page 40 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 ex