Tatton Asset Management Plc · LSE:TAM
Tatton Asset Management — H1 FY2022 Earnings Presentation
49 slides from Tatton Asset Management's earnings presentation, November 2021
Slide 1: Tatton Asset Management Investor and Analyst Presentation
TATTON ASSET MANAGEMENT INVESTOR AND ANALYST PRESENTATION November 2021
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 OY 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 OY Tatton
Slide 8: Key Highlights: Financial
KEY HIGHLIGHTS FINANCIAL • Group revenue increased 26.4% to £13.847m (Sep 2020: £10.956m) • Adjusted operating profit1 up 37.9% to £6.934m (Sep 2020: £5.030m) • Adjusted operating profit1 margin 50.1% (Sep 2020: 45.9%) • Adjusted fully diluted EPS2 increased 33.7% to 8.76p (Sep 2020: 6.55p) • Interi
Slide 9: Key Highlights: Operational
KEY HIGHLIGHTS OPERATIONAL • Assets Under Management (“AUM”) increased £1.8bn or 20% to £10.8bn (Mar 2021: £9.0bn) • Current AUM at 12 November 2021 c.£11.2bn • Organic net inflows £652m (Sep 2020: £328m), an increase of 7.3% of AUM - Average run rate of £109m per month • Acquisition of £650m Verbat
Slide 10: Maximising Shareholder Value
MAXIMISING SHAREHOLDER VALUE • The Group has continued its growth trajectory and delivered against its financial performance targets • Earnings generated from the business are issued to shareholders as dividends or reinvested in the business to drive future growth to maximise shareholder value. £115
Slide 11: Financial Performance
FINANCIAL PERFORMANCE OY Tatton
Slide 12: Group Profit & Loss
GROUP PROFIT & LOSS 2021 2020 Sep-21 Sep-20 Growth £000’s £000’s % • Group revenue increased 26.4% to £13.8m Revenue 13,847 10,956 26.4% Admin expenses1 (6,913) (5,926) Adjusted Operating profit 1 6,934 5,030 37.9% • Group adjusted operating profit1 increased 37.9% to £6.9m Margin % 50.1% 45.9% Shar
Slide 13: Group Balance Sheet Highlights
GROUP BALANCE SHEET HIGHLIGHTS • Robust balance sheet - Net assets increased +12.7% to £27.5m • Intangible and Tangible assets - Increase in intangible assets following the acquisition of the Verbatim funds, adding £5.8m - Capital light, no significant tangible asset requirement • Cash - Strong fina
Slide 14: Group Cash Flow Bridge
GROUP CASH FLOW BRIDGE • Cash generated from operations* £7.0m (+101% of Adj OP) • FY22 Corporation tax payments of £1.6m • Dividends paid relates to FY21 final dividend of 7.5p / £4.3m • Capex investment in Tatton system development and premises lease costs (IFRS 16) • £3.0m payment on Verbatim ran
Slide 15: Divisional Financial Performance
DIVISIONAL FINANCIAL PERFORMANCE Performance Commentary Growth trend Sep Sep • Revenue and Adj Operating Profit CAGR Revenue +23.8% Change Tatton 2021 2020 % delivered double digit growth, driven by: £10.9m o Net inflows £652m or 7.3% (H1 £8.6m Revenue £10.9m £8.6m 26.5% FY2021 net inflows £328m) £7
Slide 16: Cost Analysis
COST ANALYSIS Investment in COVID Change Change Inflationary One off Sep-21 Sep-20 Growth Recovery £ % £ £ £ £ Staff Costs (£4.4m) (£4.0m) (£0.4m) 9.3% (£0.1m) (£0.2m) (£0.1m) - Legal & Prof (£0.7m) (£0.4m) (£0.3m) 52.5% - (£0.1m) - (£0.2m) Travel & Marketing (£0.3m) (£0.2m) (£0.1m) 66.0% - - (£0.1m
Slide 17: Verbatim Acquisition
VERBATIM ACQUISITION ACQUISITION MECHANICS FINANCIAL RATIONALE • Sep-21 acquired £650m of Verbatim funds • The transaction is expected to be earnings • Purchase Price £5.825m (c.0.9% of AUM) enhancing in FY22 and beyond • £2.825m paid on completion, funded from cash • Over the remainder of FY22, the
Slide 18: Market Overview
MARKET OVERVIEW OY Tatton
Slide 19: Market Growth – On-Platform FUM
MARKET GROWTH – ON-PLATFORM FUM Tatton AUM Sep 2021 Dec 2020 £10.8bn Tatton CAGR +21.6% Jun £593.9bn1 2020 Mar 2019 £540.8bn2 £66.6bn1 13.9% Mar 2018 £495.9bn3 £54.5bn2 10.1% Mar Tatton AUM £490.5bn4 £8.5bn 2017 £48.1bn3 9.7% 12.8% share Tatton AUM +11.5% growth £449.8bn5 £41.6bn4 £7.6bn 8.4% 13.9%
Slide 20: Tatton – Opportunity Update
TATTON – OPPORTUNITY UPDATE PROGRESS Sep19 Sep20 Sep21 AUM £10.8bn AUM £7.8bn AUM £7.0bn Direct AUM Direct AUM Paradigm AUM Direct AUM £3.0bn / Paradigm £5.6bn / £5.2bn / 48% £2.4bn / 34% Paradigm 39% AUM £4.8bn 52% AUM £4.6bn / 61% / 66% Number of Firms 703 Number of Firms 624 Number of Firms 552 P
Slide 21: Tatton – Opportunity Update
TATTON – OPPORTUNITY UPDATE AUM £10.8bn • £480.6bn1 Assets held on platform • £66.6bn1 Assets held in DFM and growing Direct AUM • Tatton £10.8bn from 703 firms £5.6bn / 52% Paradigm AUM £5.2bn / 48% • Paradigm firms = 168 or 24% firms = £5.2bn AUM or 48% Growth in FY22 • Non-Paradigm firms = 535 or
Slide 22: The Evolution of an Asset Manager
THE EVOLUTION OF AN ASSET MANAGER Managed Portfolio Services Tatton Funds Bespoke Services • Pioneered access to DFM • Straight forward, cost-effective • Designed for investors with more • Available across 20 platforms investment option specific requirements • Compatible with the leading risk • Broa
Slide 23: More Than Model Portfolios
MORE THAN MODEL PORTFOLIOS UPDATE Including the new acquisition of Verbatim funds, our fund range now accounts for £1.2bn or 11.3% of total AUM (Mar21: £0.5bn) Blended Funds MPS £9.674bn Sinfonia Funds Funds / Other £1.238bn Equivalent to c.£4bn @ 15bps AIM BPS Oak Funds MPS 15bps Verbatim Funds Fun
Slide 24: Strategic Direction Progress Update
STRATEGIC DIRECTION PROGRESS UPDATE Organic • Growth in line with a growing market • Organic growth in the last 6months • Organic growth through White labels 12.8% or £1.1bn AUM (c.21% CAGR Growth • Panel with consolidators over the last 3 years) • Strategically relevant • Verbatim acquisition in Se
Slide 25: Roadmap to Growth
ROADMAP TO GROWTH A THIRD OF THE WAY AFTER 6 MONTHS Targeting £6.0bn of AUM FY21 to FY24 to £15.0bn £15.0bn • 6 months in we have delivered £1.8bn or 30% of the target in 17% of +19% CAGR the time • Organic growth target £1.0bn per year – Delivered £1.1bn in 6 months M&A • M&A activity target £3.0bn
Slide 26: Strategic Partnerships Accelerating Distribution – Fintel plc
STRATEGIC PARTNERSHPS ACCELERATING DISTRIBUTION – FINTEL PLC FINTEL STRATEGIC PARTNERSHIP • Extends Tatton distribution footprint through access to new distribution through 3,800 Fintel member firms controlling >£30bn AUM • Tatton proposition forms bedrock of Simply Biz Risk Controlled Solutions as
Slide 27: Strategic Partnerships Accelerating Distribution – Delivering Value
STRATEGIC PARTNERSHPS ACCELERATING DISTRIBUTION – DELIVERING VALUE FINTEL STRATEGIC PARTNERSHIP • Distribution and marketing footprint delivered via 3 FINTEL IFA brands • Simply Biz - The UK’s number one provider of outsourced compliance and business support to directly authorised advisers covering
Slide 28: Strategic Partnerships Accelerating Distribution – Tenet Group
STRATEGIC PARTNERSHPS ACCELERATING DISTRIBUTION – TENET GROUP TENET GROUP PARTNERSHIP • In 2019 Tatton won a significant long-term investment mandate from Tenet, one of the UK’s largest Adviser support Groups now giving access to over 400 network members and 180 directly authorized firms • A sustain
Slide 29: Strategic Partnerships: Top UK Distributors
STRATEGIC PARTNERSHIPS TOP UK DISTRIBUTORS Partnership Distribution Reach Source Type Simply Biz +10,000 financial intermediaries using Fintel services or technology Co. Annual Report Partnering Sesame Bankhall +10,000 Advisers, +800 directly regulated financial services firms Co. Website Partnering
Slide 30: Healthy & Growing IFA Sector
HEALTHY & GROWING IFA SECTOR • Average client portfolio £346k (2020: £305k) • 65% of planners working with more clients (2020: 45%) CLIENTS • Restricted advice firms OCF 28bps > than IFAs 2,429 sole traders 5,137 AUTHORISED FIRMS • 99% use ESG for approximately 20% of client assets • 38% of advisers
Slide 31: A Changing Landscape
A CHANGING LANDSCAPE INTEGRATED BUSINESS MODELS 31
Slide 32: Paradigm
PARADIGM Paradigm Mortgages £7bn 1900 Current Membership £6bn 1700 • Mortgage: Up 2% to 1,646 (Mar 2021: 1,612) £5bn 1500 • Consulting: Up 3% to 418 (Mar 2021: 407) £4bn 1300 • Protect: Up 6% to 865 (Mar 2021: 811) £3bn 1100 £2bn 900 General Market factors £1bn 700 • “New normal” working models emer
Slide 33: Investment & Fund Update
INVESTMENT & FUND UPDATE OY Tatton
Slide 34: Growth in Assets Under Management
GROWTH IN ASSETS UNDER MANAGEMENT +£1.8bn over 6 months, Mar-21 to Sep-21 Assets under management Tatton Assets Under Management in £ billion 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 35: Tatton's MPS DFM
TATTON’s MPS DFM Managed Portfolio Service – two strategic allocations, six risk profiles Risk profile compatibility Two strategic asset allocations: Classic with a higher allocation to UK based investments and Global which exploits the opportunity of the wider global economy Access on 20 platforms
Slide 36: Tatton IM's 'Moat'
TATTON IM’s ‘MOAT’ Barriers to imitation Embedded service standards in IFAs business through multi High opportunity costs to platform Portal, investment communications and investment an IFA to replace Tatton return consistency Network effect of Relationships with Paradigm, Tenet, Fintel and 360 has
Slide 37: Ethical Model Portfolios
ETHICAL MODEL PORTFOLIOS Change Change Sep-21 Sep-20 £ % • Tatton’s Ethical portfolios hold £627m Opening AUM (£m) 441m 183m 258m 142% million of AUM, 6% of overall AUM Net Inflows (£m) 158m 60m 99m 165% and an increase of 129% over the last 12 months Market (£m) 28m 31m (4m) - Closing AUM (£m) 627m
Slide 38: Launch of Complementary Ethical Fund Range
AFTER 7 YEARS ETHICAL MPS LAUNCH OF COMPLEMENTARY FUND RANGE (Q1 2022) NEW LOW COST ESG FUNDS • Multi-asset globally diversified trackers and ETFs, with active, whole Tatton ETHOS Defensive Fund of market selection • Mapped to Defaqto and Dynamic Planner Tatton ETHOS Balanced Fund • Same active mana
Slide 39: 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) Defensive (3) Cautious (4) Balanced (5) Active (6) Aggressive (7) Global Eq. (
Slide 40: MPS Investment Portfolio Returns
MPS INVESTMENT PORTFOLIO RETURNS 5 years to 30 September 2021 Portfolio Performance (per cent.) - core product set Risk Return - 5 Years to 30 September 2021 annualised, after DFM charge and fund costs) 14.0% ARC 12.0% Active Tracker Hybrid Ethical Peers1 10.0% Defensive 3.7 3.6 3.6 3.1 Annualised R
Slide 41: MPS Returns vs. Immediate Competitors
MPS RETURNS vs. IMMEDIATE COMPETITORS 6 months to 30 September 2021 • Names including – AJ Bell, Brooks, Brewin, Parmenion, Hawksmoor, Investec, Liontrust, Charles Stanley, 7IM, FE, LGT, Quilter • Our positioning in 2021 with an overweight to equities, and a more diversified exposure to value as wel
Slide 42: MPS Returns vs. Immediate Competitors
MPS RETURNS vs. IMMEDIATE COMPETITORS 1 year to 30 September 2021 • Our more diversified exposure to regions and investment styles resulted in particularly strong relative returns over the period 42 Defaqto peer performance – UK wealth management portfolio peer group with historically comparable ass
Slide 43: Ethical Investment Portfolio Returns
ETHICAL INVESTMENT PORTFOLIO RETURNS 3 years to 30 September 2021 Risk Return - 3 Years to 30 September 2021 Tatton Fund Performance (% - ethical product set, 12.0% annualised, after DFM charge and fund costs) 10.0% ARC Ethical Peers1 8.0% Annualised Return Defensive 6.6 3.5 6.0% Cautious 8.2 4.7 Ba
Slide 44: Summary
Summary Growing the IFA relationships to grow AUM • Strategic direction and road map to growth on track and delivering • Continued organic growth, white labelling & back book migration arrangements • Further disciplined M&A activity to support AUM growth • Developing additional strategic IFA partner
Slide 45: Appendices
Appendices Catton
Slide 46: Financial Progress Since IPO
FINANCIAL PROGRESS SINCE IPO Revenue £m Adj Operating Profit1 £m CAGR 18.4% CAGR 26.1% £23.4m Consensus £21.4m £11.4m Consensus £17.5m £9.1m £15.5m £6.2m £7.3m £11.9m £4.5m Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Consensus Consensus Mar-18 adjusted for lik
Slide 47: DFM Assets on Platform
DFM ASSETS ON PLATFORM AUM £bn Wealth manager Mar-18 Mar-19 Dec-19 Dec-20 Tatton Investment Management £5.000bn £6.100bn £7.440bn £8.517bn Parmenion £4.540bn £5.760bn £6.960bn £8.200bn • Tatton remain largest provider of Quilter WealthSelect - - £6.700bn £7.900bn DFM MPS on platforms LGT Vestra £2.5
Slide 48: Mortgage Market: What's Happening
MORTGAGE MARKET COVID 19 & BEYOND WHAT’S HAPPENING • With the ending of the Stamp Duty deadlines, transactions in the housing market have begin to return to pre pandemic levels, with both estate agents and lenders reporting that whilst demand is still there, stock has become a real issue. • Accordin
Slide 49: Tatton's Sales Proposition to Advisers
TATTON’s SALES PROPOSITION TO ADVISERS Low cost – places the adviser at the heart of the value chain 0.15% DFM fee Agnostic on platform, risk profiler, investment style, charging structure – you decide “how” Non compete with adviser, platform only, IFA only, no D2C, Service Excellence Breadth of Off
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