Rathbones Group Plc · LSE:RAT
Rathbones — Rathbone Brothers — H1 2014 Earnings Presentation
37 slides from Rathbones's earnings presentation, Jul 24, 2014
Slide 1: Interim Results to 30 June 2014
RATHBONE BROTHERS PLC | Air IS INTERIM RESULTS TO 30 JUNE 2014 ©) P 24 JULY 2014 RATHBONES Established 1742
Slide 2: Agenda
• Settlement of legal proceedings • Results highlights • Rathbone Unit Trust Management • Chief executive’s business review • Conclusion • Appendices 2
Slide 3: Results highlights
Underlying¹ profit before tax Rate of total net growth in Funds under management funds under management² + 13.4% + 8.6% £29.6m 14.3% £23.9bn £26.1m 9.4% £22.0bn H1 2013 H1 2014 H1 2013 H1 2014 FY 2013 H1 2014 Underlying¹ earnings per share Basic earnings per share Interim dividend per share + 13.6%
Slide 4: Underlying income and profit H1 2014
H1 2014 H1 2013 FY 2013 % change (£m) (£m) (£m) Average FTSE 100 Index 6720 6233 7.8 6419 Net investment management fee income 63.0 54.5 15.6 113.9 Net commission income 23.5 23.2 1.3 42.0 Net interest income 4.4 4.2 4.8 8.6 Fees from advisory services and other income 7.2 6.2 16.1 11.9 Underlying o
Slide 5: Underlying operating expenses
H1 2014 H1 2013 FY 2013 % change (£m) (£m) (£m) Fixed staff costs 30.7 28.6 7.3 56.9 Average FTE¹ employees during the period 853 821 3.9 833 Actual FTE¹ employees at the reporting period end 878 821 6.9 852 Variable staff costs 17.2 13.7 25.5 27.9 Other direct expenses² 20.6 19.7 4.6 41.1 Total und
Slide 6: Profit before tax and earnings per share
H1 2014 H1 2013 FY 2013 % change (£m) (£m) (£m) Underlying profit before tax 29.6 26.1 13.4 50.5 Gain on disposal of financial securities 5.9 - - Charges in relation to client relationships and goodwill (3.6) (2.9) 24.1 (6.3) Transaction costs (1.0) - - Profit before tax 30.9 23.2 33.2 44.2 Effectiv
Slide 7: Opportunities and risks
Opportunities Risks • Basis point return in rising market • Acquisitions • Commissions in flat markets • Bank of England base rate • Gain on Loan Notes (£0.6m) Operating Income • Ongoing legal costs • Headcount • Variable awards • Variable awards Operating Expenses ¹ Underlying profit before tax div
Slide 8: Balance sheet
30/06/14 30/06/13 Assets (£m) (£m) Balances with Bank of England 591.0 213.0 Other cash, deposits and investments 643.2 823.9 Loans and advances to customers¹ 91.8 81.1 Prepayments, accrued income and other assets 83.9 43.5 Property, plant and equipment 11.0 12.1 Intangible assets and investment in
Slide 9: Capital expenditure
10 9 8 7 £ million 6 5.2 5 1.7 4 0.9 0.7 3 2.3 1.7 1.6 0.1 1.9 2 0.8 1 1.7 1.7 1.7 1.4 1.3 0 2010 2011¹ 2012 2013 H1 2014 Property² IT and other² Purchased software ¹ Property expenditure in 2011 principally in respect of the London office relocation ² Property expenditure in general only includes s
Slide 10: Rathbone Unit Trust Management funds under management
2.5 60% Gross sales Net sales (£m) (£m) 50% 2010 140.21 (43.98) 2.0 2011 239.66 98.76 40% 2012 269.54 65.94 1.5 2013 572.74 331.27 £ billion 30% H1 2014 546.78 353.74 1.0 20% H1 2013 183.59 64.94 0.5 10% H2 2013 389.15 266.34 H1 2014 546.78 353.74 0.0 0% H1 2013 H1 2014 RUTM FUM RUTM FUM % Movement
Slide 11: Unit trust gross sales by fund
0.9 0.8 0.7 0.6 0.5 £ billion 0.4 0.3 0.2 0.1 0 2010 2011 2012 2013 H1 2014 Income fund Global Opportunities fund Other retail funds¹ Multi Asset funds Mandates² Bespoke funds ¹ From 13 July 2009, the Rathbone Special Situations Fund and the Rathbone Smaller Companies Fund merged and were relaunched
Slide 12: Industry trends and unit trust strategy
Industry trends Margin pressure Regulation • Buying concentration • Selective use of ‘s-class’ units • Dealing commissions and • Restricted vs independent • Remain alpha focused MiFID II • The rise of the consultant • Monitor capacity issues • Conflicts of interest • Risk rated vs risk targeted • Ma
Slide 13: Investment Management funds under management H1 2014
Investment Unit Trusts Total Total Management H1 2014 H1 2014 H1 2013 H1 2014 (£bn) (£bn) (£bn) (£bn) Opening funds under management 20.2 1.8 22.0 18.0 Inflows 1.9 0.5 2.4 1.7 - Organic¹ 1.1 0.5 1.6 1.2 - Purchased² 0.8 - 0.8 0.5 Outflow of money (0.7) (0.2) (0.9) (0.8) - Retained accounts (0.5) - C
Slide 14: Deutsche Asset & Wealth Management and Jupiter acquisitions
Deutsche Asset & Wealth Management Jupiter Asset Management • London-based private client team • London-based private client and charity team • Three month client migration period • Six month client migration period • Completion on 5 June 2014 • Transaction is due to complete 26 September 2014 • £61
Slide 15: Growth initiatives and operational efficiency
Growth initiatives Operational efficiency • Team approach to organic • London office restructured • Leverage front end • Circa 20% of trades now growth into four teams systems initiated via Asset • Expand IFA and professional • 39% of new business in Allocation Modelling intermediary universe and 20
Slide 16: Investment process and resource
Investment process Resource management • Strengthen our investment • Head of investment • Reinforce senior • Head of strategy and risk management capability process and risk recruited management to support organisation for scale strategic growth development recruited • Enhance investment • GIPS accr
Slide 17: Headcount movement
890 885 880 (5) 8 875 6 870 3 865 860 14 878 855 850 845 852 840 835 As at Acquisitions Fee Earners Administration Support Retirements As at 30 June 31 December 2014 2013 ¹ Actual number of full time equivalent employees 17
Slide 18: Conclusion and current trading
RATHBONE BROTHERS PLC CONCLUSION AND CURRENT TRADING “NOTWITHSTANDING RELATIVELY FLAT MARKETS THERE HAS BEEN CONTINUED MOMENTUM FROM BOTH ORGANIC AND ACQUIRED GROWTH. THE IMPACT OF RECENT ACQUISITIONS IS EXPECTED TO HAVE A POSITIVE EFFECT ON EARNINGS IN 2015. WE ARE CONTINUING TO INVEST CAREFULLY IN
Slide 19: Appendices
APPENDICES 19
Slide 20: Company objectives
By delivering outstanding client service and investment excellence, maintain our significant growth in funds under management over the next five years through a combination of organic growth, acquisition, recruitment and investment performance, while enhancing earnings. • To provide high quality inv
Slide 21: Consolidated balance sheet
30/06/14 30/06/13 30/06/14 30/06/13 Assets (£’000) (£’000) Liabilities (£’000) (£’000) Cash and balances with central banks 591,005 213,004 Deposits by banks 4,202 - Settlement balances 65,298 60,012 Settlement balances 39,893 44,157 Due to customers 1,084,295 928,952 Loans and advances to banks 110
Slide 22: Dividends per share
60 50 49 46 47 44 40 pence 30 19 20 10 0 2010 2011 2012 2013 2014 Interim Final/2nd interim Full year 22
Slide 23: Underlying PBT and EPS history
60 50 51.6 50 40 38.6 40 Underlying PBT (£m) 34.3 34.6 37.5 EPS (p) 30 32.4 31.9 30 25.5 20 24.3 20 10 10 18.1 20.4 38.5 24.2 22.0 46.2 23.1 21.7 44.8 26.1 24.4 50.5 29.6 0 0 2010 2011 2012 2013 H1 2014 1st Half PBT (£m) 2nd Half PBT (£m) Full Year PBT (£m) 1st Half EPS (p) 2nd Half EPS (p) 0.0 0.0
Slide 24: Shareholder analysis
Rathbone staff, directors and former staff Lindsell Train¹ 16.8% BlackRock Investment Management² MFS Investment Management³ 35.7% Heronbridge Investment Management 13.0% Troy Asset Management Aviva Investors Franklin Templeton Investment Management 9.7% Legal & General Investment Management 2.3% 2.
Slide 25: Board and executive directors
Mark Nicholls Chairman Executive directors Non-executive directors Philip Howell David Harrel¹ Chief Executive Officer Paul Stockton James Dean Finance Director Paul Chavasse Kathryn Matthews Head of Investment Management Philip Howell Paul Stockton Paul Chavasse Chief Executive Officer Finance Dire
Slide 26: Segmental results
Investment Indirect Management Unit Trusts expenses Total H1 2014 (£m) (£m) (£m) (£m) Net investment management fee income 56.8 6.2 63.0 Net commission income 23.5 - 23.5 Net interest income 4.4 - 4.4 Fees from advisory services and other income 6.1 1.1 7.2 Underlying operating income 90.8 7.3 98.1
Slide 27: Operating expenses breakdown
H1 2014 H1 2013 2%4% 3%4% 6% 4% 8% 8% 42% 44% 12% 13% 2% 3% 24% 21% £73.1m £64.9m Staff - payroll (excluding variable) Staff - variable Staff - other Property Depreciation, amortisation & impairment Professional Settlements IT 27
Slide 28: Income mix and client cost comparison
7% 4% Investment Management Commission² Interest³ Fees 24% Rathbones 100p 100p 100p 65% Cost to client 120p 100p 55p (or 72p) Net investment management fee income Net commission income Net interest income Fees from advisory services and other income ¹ Six months ended 30 June 2014 ² Allowable cost f
Slide 29: Basis point returns by income type
Basis point return from fees¹ Basis point return from commission 2010 2010 2011 2011 2012 2012 2013 2013 H1 2014 H1 2014 0 20 40 60 0 10 20 30 40 Basis point return from interest Advisory fee income (£m) 2010 2010 2011 2011 2012 2012 2013 2013 H1 H1 2014 H1 2014 H2 0 5 10 0 2 4 6 8 10 ¹ 2010 and 201
Slide 30: Investment Management results
H1 2014 H1 2013 FY 2013 % change (£m) (£m) (£m) Average FTSE 100 Index¹ 6720 6233 7.8 6419 Net investment management fee income 56.8 50.1 13.4 104.2 Net commission income 23.5 23.2 1.3 42.0 Net interest income 4.4 4.2 4.8 8.6 Fees from advisory services and other income 6.1 5.5 10.9 10.5 Net operati
Slide 31: Funds under management by service level and account type
Service level Account type Value of client relationship 1.9% 8.0% 10.7% 4.9% 16.7% 10.9% 14.7% 39.9% 7.7% 12.9% 18.2% 13.4% 32.0% 93.2% 14.9% Discretionary Private client <£250,000 Advisory £250,000 - £500,000 Execution Only ISAs Trust and settlements £500,000 - £1m Charities £1m - £5m Pensions (inc
Slide 32: Asset allocation
56.3% FY 2010 16.7% 46.7% 23.6% 8.1% 4.9% FY 2011 18.2% 45.4% 22.7% 7.9% 5.8% 43.7% 56.3% FY 2012 18.0% 45.0% 25.1% 7.2% 4.7% Direct holdings FY 2013 14.6% 47.4% 27.3% 6.5% 4.2% Collectives H1 2014 14.8% 45.9% 27.7% 6.8% 4.8% Fixed income UK equities Overseas equities Alternatives² Cash ¹ Including
Slide 33: Investment professionals and funds by office
Number of investment Funds under management UK offices professionals¹ (£bn at 30/06/14)² London 106 13.23 Liverpool 25 2.15 Edinburgh 23 2.04 Winchester 18 1.28 Bristol 18 1.18 Other UK offices³ 31 1.80 Offshore offices Jersey4 7 0.49 Total 228 22.17 ¹ As at 30 June 2014 excluding fund managers of R
Slide 34: Discretionary management fees and dealing charges
Discretionary Management fees (subject to VAT) Main funds (pa) ISA funds (pa) Fixed charge (not applicable for funds valued below £15,000) £100 £100 First £100,000 0.70% 1.00% Next £150,000 0.70% 0.70% Next £250,000 0.30% 0.30% Balance over £500,000 0.25% 0.25% Discretionary dealing charges UK equit
Slide 35: Fund performance and quartile ranking
Performance¹ and Quartile Ranking at Size of 1 year 3 year 5 year Since launch 30 June 2014 (I-Class Units) fund (£m) † FTSE 100 Index 12.35 N/A 26.65 N/A 89.57 N/A N/A Rathbone Income Fund 13.46 3 48.38 1 119.90 1 277.46 1 857.05 Rathbone Global Opportunities Fund 11.30 1 29.14 2 105.00 1 254.76 1
Slide 36: Discrete year fund performance
Discrete year performance and quartile ranking at 2014 2010 2011 2012 2013 30 June 2014 (I-Class Units) Year to date Rathbone Income Fund 20.87 1 22.60 2 3.51 1 26.35 1 13.46 3 Rathbone Global Opportunities Fund 23.59 2 28.45 1 -3.64 1 20.41 3 11.30 1 Rathbone Ethical Bond Fund 23.97 1 11.74 1 2.18
Slide 37: Contact details
Rathbone Brothers Plc 1 Curzon Street London W1J 5FB Telephone +44 (0)20 7399 0000 Facsimile +44 (0)20 7399 0011 www.rathbones.com Issued by Rathbone Brothers Plc for use by professional investors only. This presentation has been prepared for general information on matters of interest only and does