Tatton Asset Management PLC · LSE:TAM
Tatton Asset Management — H1 FY2021 Earnings Presentation
41 slides from Tatton Asset Management's earnings presentation, November 2020
Slide 1: Tatton Asset Management Interim Results September 2020
TATTON ASSET MANAGEMENT INVESTOR AND ANALYST PRESENTATION INTERIM RESULTS FOR THE SIX-MONTH PERIOD ENDING 30 SEPTEMBER 2020 November 2020
Slide 2: Disclaimer
DISCLAIMER The information contained in this document (“Presentation”) has been prepared by Tatton Asset Management plc (the “Company”). The content of this Presentation has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000. The Slides are be
Slide 3: Agenda
AGENDA • Introduction to the team • Key highlights • Financial performance • Market overview • Investment and fund update • Summary 3
Slide 4: Introduction to the Team
INTRODUCTION TO THE TEAM 3 Tatton
Slide 5: Introduction to the Team
INTRODUCTION TO THE TEAM Paul Hogarth Lothar Mentel Paul Edwards CEO CIO CFO – Over 30 years’ experience at Board – Co-founder of Tatton Capital – Joined Tatton Asset Management level in the financial services sector Limited in 2012 plc as Group CFO in May 2018 – Founder of Tatton Asset – Ex CIO of
Slide 6: Divisional Structure
DIVISIONAL STRUCTURE Tatton Asset Management plc (“TAM” or “Group”) Investment Management Division IFA Support Services Division (“Tatton”) (“Paradigm”) • Tatton Investment Management offers on-platform only challenger model DFM MPS • Low charges - MiFID II alignment Paradigm Consulting Paradigm Mor
Slide 7: Key Highlights
KEY HIGHLIGHTS 3 Tatton
Slide 8: Interim Results - Key Highlights (Financial)
INTERIM RESULTS - KEY HIGHLIGHTS FINANCIAL • Group revenue increased 12.6% to £10.956m (Sep 2019: £9.729m) • Adjusted operating profit1 up 21.9% to £5.030m (Sep 2019: £4.126m) • Adjusted operating profit1 margin 45.9% (Sep 2019: 42.4%) • Reported profit before tax £3.074m (Sep 2019: £3.610m) • Adjus
Slide 9: Interim Results - Key Highlights (Operational)
INTERIM RESULTS - KEY HIGHLIGHTS OPERATIONAL • Assets Under Management (AUM) increased 17.4% to £7.811 billion (31 Mar 2020: £6.651 billion) an increase of £1.160 billion for the six-month period. Latest AUM mid- November 2020 is £8.134 billion • Net inflows for the six months to September 2020 were
Slide 10: Financial Performance
FINANCIAL PERFORMANCE 3 Tatton
Slide 11: Group Profit & Loss
GROUP PROFIT & LOSS Six months Six months Sep-20 Sep-19 Growth • Group revenue increased 12.6% to £11.0m £000's £000's % • Group adjusted operating profit1 increased +21.9% Revenue 10,956 9,729 12.6% to £5.0m Adjusted operating profit¹ 5,030 4,126 21.9% • H1:H2 split 50:50 v historical 46:54 split M
Slide 12: Group Balance Sheet Highlights
GROUP BALANCE SHEET HIGHLIGHTS Sep-20 Mar-20 • Robust balance sheet - Net assets increased +12.7% to £20m £000's £000's • Cash & new facility • Net cash £13.3m Goodwill & Intangibles 7,693 7,749 • Strong financial liquidity position • New committed £10m RCF plus uncommitted Tangible fixed assets 1,1
Slide 13: Group Cash Flow Bridge
GROUP CASH FLOW BRIDGE • Cash generated from operations £4.2m, before exceptional • Two quarterly instalments for FY21 Corporation tax items was £4.4m • Borrowing transaction costs relate to facility • Proceeds from share issue £1.4m on exercise of employee arrangement fees share options • Capex inv
Slide 14: Divisional Financial Performance
DIVISIONAL FINANCIAL PERFORMANCE Performance Commentary Growth trend • Revenue and Adj Operating Profit delivered double digit growth CAGR Revenue 19.7% • Firm numbers increased 4.9% to 624 (Mar 20: 595) • Net inflows in the last six months £328m, net inflows in the last year £1,017m • The Tenet par
Slide 15: Case Study: Impact of COVID-19 on Paradigm Mortgages
CASE STUDY: IMPACT OF COVID-19 ON PARADIGM MORTGAGES • Strong customer growth and an increase in Lending in the six month period • Despite this, Mortgages revenue fell by 15.4%, £219k due to the impact of COVID-19 on the different income streams • Income from Gross Lending (Procuration fees) fell sl
Slide 16: Market Overview
MARKET OVERVIEW 3 Tatton
Slide 17: IFA Activity During Lockdown
IFA ACTIVITY DURING LOCKDOWN TIML Sales Activity February to September 2020 Start of Lockdown 1 Gentle recovery out of Increased engagement lockdown into more Impact normal trading conditions, 35 - Reduced engagement followed by summer - Migration to online holiday period - Supporting NUMBER OF MEET
Slide 18: Market Growth – On-Platform FUM
MARKET GROWTH – ON-PLATFORM FUM Tatton CAGR +21% 2020 2019 2018 £540.8bn1 £495.9bn2 2017 £490.5bn3 £54.5bn1 £449.8bn4 £48.1bn2 10.1% 9.7% £41.6bn3 8.4% £25bn4 5.5% Tatton AUM Tatton AUM £7.8bn Tatton AUM £7.0bn 14.3% share Tatton AUM £5.7bn 14.6% share +11.4% growth £4.4bn 13.7% share +22.8% growth
Slide 19: Tatton – Opportunity Update
TATTON – OPPORTUNITY UPDATE Total AUM £7.8bn • £540.8bn1 Assets held on platform and growing • £54.5bn1 Assets held in DFM and growing Direct AUM • Tatton £7.8bn from 624 firms £3.0bn or Paradigm 39% AUM £4.8bn • Paradigm firms = 182 or 29% firms = £4.8bn AUM or 61% or 61% • Non-Paradigm firms = 442
Slide 20: Top UK Wealth Management Companies
TOP 25 UK WEALTH MANAGEMENT COMPANIES Distribution channels £596bn in the top 25 “Our Competition” 20 1. Source: Platforum, 2020
Slide 21: DFM Assets on Platform
DFM ASSETS ON PLATFORM £bn • Tatton remain largest provider of DFM MPS on platforms • £2bn growth over 18 months • £7.8bn 30 September 2020, current > £8bn 21 1. Source: Platforum, November 2020
Slide 22: More Than Model Portfolios
MORE THAN MODEL PORTFOLIOS MPS £7.382bn Blended Funds Funds £0.429bn Sinfonia Funds AIM BPS MPS 15bps Oak Funds Funds 51bps (avg) MPS Funds 22
Slide 23: Industry Trends
INDUSTRY TRENDS Competitive challenges and trends Response / impact Tatton remains the lowest cost DFM provider, platform agnostic with a Environment becoming more strong track record of performance. Our expanding range of competitive propositions ensures we can meet the needs of IFAs and their clie
Slide 24: Strategic Direction
STRATEGIC DIRECTION Organic • Growth in line with a growing market c.21% CAGR over the • Organic growth through White labels Growth last three years • Panel with consolidators • Strategic partnerships Tenet partnership Strategic delivered £377m (93 • JVs with IFAs Partnerships firms), growing pipeli
Slide 25: Paradigm: Compliance and Protect
PARADIGM Current Membership • Mortgage: Up 3% to 1,591 (Mar 2020: 1,544) Membership Growth 2017-20 1700 800 • Consulting: Increase to 404 (Mar 2020: 394), 2.5% increase in 6 months 1600 700 • Protect: Up 16% to 773 (Mar 20: 666) 1500 Compliance and Protect 600 1400 Targets for FY 20/21 Mortgages 130
Slide 26: Investment & Fund Update
INVESTMENT & FUND UPDATE 3 Tatton
Slide 27: Growth in Assets Under Management
GROWTH IN ASSETS UNDER MANAGEMENT +£1.1bn over 6 months, Mar-20 to Sep-20 Tatton Assets Under Management in £ billion Assets under management Key AUM milestones • By June 2014: £1.0 bn • By June 2015: £2.0 bn • By June 2016: £3.0 bn • By May 2017: £4.0 bn • By Sept 2017: £4.4 bn • By Mar 2018: £4.9
Slide 28: Tatton: What We Do
TATTON WHAT WE DO • Discretionary investment management • Segregated, fund based, non-bespoke private investor portfolios (MPS based DFM) • Bespoke investment services, as long as using scalable building blocks + platform (BPS based DFM) • Exclusively available on adviser platforms and only B2B thro
Slide 29: 2020 Sector Headwinds
2020 SECTOR HEADWINDS COVID inertia Reduced pension consolidations and appetite for change by clients Advisers struggled to switch to socially distanced advice Our sales and investment teams lead the digital engagement by example with pro-active online demonstrations which has brought advisers and t
Slide 30: Tatton's COVID Business Activity
TATTON’S COVID BUSINESS ACTIVITY RESPONSIVE AND RELEVANT Communications Ongoing comms The Tatton Weekly Bi-weekly Video updates Tatton Teasers Crisis comms: Videos and ad hoc 1/4ly podcast 1/4ly webinar and 4th MoneyFacts 1/4ly webinar and bulletins interview interview award interview Proposition MP
Slide 31: Distribution of AUM Across Proposition Matrix
DISTRIBUTION OF AUM ACROSS PROPOSITION MATRIX 44 multi-asset portfolio choices that satisfy multi-manager, index tracker, income drawdown and ethical investment choices across 6 standard UK risk profiles (3-8 out of 1-10) and a UK home bias set as well as a global market capitalisation weighted Defe
Slide 32: Investment Portfolio Returns
INVESTMENT PORTFOLIO RETURNS Since launch 1 January 2013 1 October 2015 to 30 September 2020 TIML1 Portfolio Performance (per cent.) - core produce set annualised, after DFM charge and fund costs) TIML TIML TIML ARC Active Tracker Hybrid Peers2 Defensive 4.4 4.7 4.6 3.1 Cautious 5.7 6.0 5.9 4.4 Bala
Slide 33: Ethical Investment Portfolio Returns
ETHICAL INVESTMENT PORTFOLIO RETURNS Since launch 28 January 2018 to 30/9/2020 1 October 2019 to 30 September 2020 Tatton Fund Performance (per cent.) - ethical produce set, annualised, after DFM charge and fund costs) ARC Ethical Peers1 Defensive 4.1 1.9 Cautious 5.0 1.1 Balanced* (since Aug 2014)
Slide 34: Summary
Summary Growing the IFA relationships to grow AUM • Deliver against the stated strategy • Further organic growth white labelling & back book migration arrangements • Promote further strategic IFA partnerships and JVs • Continue to broaden the asset management proposition • Disciplined M&A activity t
Slide 35: Appendices
Appendices OTatton
Slide 36: Financial Progress Since IPO
FINANCIAL PROGRESS SINCE IPO Revenue £m Adj Operating Profit1 £m CAGR 14.5% CAGR 21.6% £11.0m £5.0m £9.7m £4.1m £8.4m £3.3m £2.8m £7.3m Sep-17 Sep-18 Sep-19 Sep-20 Sep-17 Sep-18 Sep-19 Sep-20 Sep-17 adjusted for like for like plc costs pre-IPO Margin1 % Adjusted F.Dil EPS2 (p) +3.4% (Absolute) CAGR
Slide 37: Divisional Development and Analysis
DIVISIONAL DEVELOPMENT AND ANALYSIS Revenue Split Adj Operating Profit1 Split Group Adj Op Profit1 £3.350m £4.126m £5.030m £5.283 £4.273 £3.482 £0.823 £0.910 £0.757 2018 2019 2020 (£0.955) (£1.058) (£1.010) Tatton Paradigm Central 37 1. Adjusted for exceptional items, share-based payment costs and a
Slide 38: The IFA Market
THE IFA MARKET • Adviser platform market currently at £540.8 billion2, estimated £1 trillion 2023 Total on-platform Tatton Funds Under On-platform • Latest Forecast by Fundscape is £713.1bn DFM FUM AUM Management ("FUM") Hardman May 2020 £54.5bn2 £7.8bn £540.8bn2 • 1/3rd of the total in advisory mod
Slide 39: Platforum Report – DFM Distribution Dynamics July 2019
PLATFORUM REPORT – DFM DISTRIBUTION DYNAMICS JULY 2019 Our World • Adviser trends to outsourcing Investment strategies used by advisers • 51% of advisers outsource but only 12% of advised assets on platform • 47% run their own in-house MPS • = 32% of advised assets on platform • 21% of assets in Mul
Slide 40: Mortgage and Protection Highlights
MORTGAGE HIGHLIGHTS PROTECTION HIGHLIGHTS Growth in Lending vs Proc Fee Override • Protection & GI income £314k, 5.4% increase on £12.00bn £3.50m Sep 2019 £10.00bn £3.00m • Policies written increased 30% on H1 19/20 to Gross Proc Fee Override £8.00bn £2.50m 11,9032 Gross Lending £6.00bn £2.00m • FY2
Slide 41: Mortgage Market: COVID-19 & Beyond
MORTGAGE MARKET: COVID-19 & BEYOND What’s happening? A mix of signals • Lockdown (April/May) effectively halted purchase activity, following which the housing & mortgage markets surged forward - initially with first-time buyers & now it is home movers in the ascendancy. Pent-up demand, the stamp dut
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