Tatton Asset Management Plc · LSE:TAM
Tatton Asset Management — FY2022 Earnings Presentation
49 slides from Tatton Asset Management's earnings presentation, June 2022
Slide 1: Tatton Asset Management plc Investor and Analyst Presentation
TATTON ASSET MANAGEMENT PLC INVESTOR AND ANALYST PRESENTATION June 2022 1
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 • Strategic Update • Investment and fund update • Summary 3
Slide 4: Introduction to the Team
INTRODUCTION TO THE TEAM 4
Slide 5: Introduction to the Team
INTRODUCTION TO THE TEAM Paul Hogarth Paul Edwards Lothar Mentel CEO CFO CIO – Over 30 years’ experience at – Joined Tatton Asset Management – Co-founder of Tatton Capital Board level in the financial plc as Group CFO in May 2018 Limited in 2012 services sector – Previously Group Finance Director –
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 7
Slide 8: Key Highlights: Financial
KEY HIGHLIGHTS FINANCIAL Group Revenue Adjusted operating profit1 Adjusted operating margin1 £29.4m £14.5m 49.5% up 25.7% up 27.4% 2021: 48.8% Fully diluted EPS2 Final Dividend Dividend yield3 18.62p 8.5p 2.8% up 26.3% up 13.3% Net Assets AUM Net Cash £31.0m £11.341bn £21.7m up 27.0% up 26.2% up 28.
Slide 9: Key Highlights: Operational
KEY HIGHLIGHTS OPERATIONAL Organic Net Inflows £1.28bn 5-year strategic partnership Acquisition of £650m Verbatim funds up 69.1% Ethical Portfolios AUM Non-MPS Propositions AUM Number of IFA firms £812m £1.2bn 746 up 84.1% up 11.7% Number of accounts Paradigm Mortgage completions Paradigm Consulting
Slide 10: Resilient Growth in Assets
RESILIENT GROWTH IN ASSETS +£2.4bn OVER 12 MONTHS, MAR-21 to MAR-22 Assets under management Tatton Assets Under Management in £ billion War in Ukraine 12.0 Global Economic volatility 11.0 10.0 Global pandemic 9.0 Mar 2020 8.0 Market crash £ billion 7.0 6.0 5.0 4.0 3.0 2.0 2013 Tatton Incorporated 1.
Slide 11: Financial Performance
FINANCIAL PERFORMANCE 11
Slide 12: Group Profit & Loss
GROUP PROFIT & LOSS Mar-22 Mar-21 Growth £000’s £000’s % • Group revenue increased 25.7% to £29.4m Revenue 29,356 23,353 25.7% • Organic Growth 20.7% ex-Verbatim Adjusted Operating profit 1 14,526 11,402 27.4% Margin % 49.5% 48.8% • Group adjusted operating profit1 increased 27.4% to £14.5m Share-ba
Slide 13: Group Cash Flow Bridge
GROUP CASH FLOW BRIDGE Dividends paid relates to FY21 final dividend of 7.5p / £4.3m, and FY22 interim dividend of 4.0p / £2.3m FY22 Corporation Capex & other in Tatton system tax payments development and premises lease Cash generated Exercise price of costs (IFRS 16) from operations* share options
Slide 14: Group Balance Sheet Highlights
GROUP BALANCE SHEET HIGHLIGHTS Mar-22 Mar-21 £000’s £000’s • Robust balance sheet - Net assets increased +27.0% to £31.0m Goodwill & intangible assets 13,384 7,690 • Intangible and Tangible assets Increase in intangible assets following the acquisition Tangible fixed assets 749 992 of the Verbatim f
Slide 15: Capital Adequacy Requirements
CAPITAL ADEQUACY REQUIREMENTS NEW INVESTMENT FIRM PRUDENTIAL REGIME “IFPR” The FCA’s IFPR focuses on the prudential requirements as to the potential harm to clients and the market. It includes the amount of capital IFPR and liquid assets a firm should hold to enable it to wind down in an orderly way
Slide 16: Divisional Performance
DIVISIONAL PERFORMANCE PERFORMANCE COMMENTARY ANALYSIS • Revenue and Adj Operating Profit delivered Mar Mar Change double digit growth, driven by: Tatton % o Net inflows £1.277bn or 14.2% of opening 2022 2021 AUM (2021: net inflows £0.755bn), Revenue £23.3m £18.1m 29.0% averaging £106m per month (20
Slide 17: Investment in Growth Driving Further Operational Leverage
INVESTMENT IN GROWTH DRIVING FURTHER OPERATIONAL LEVERAGE Generation of future incremental margin through a scalable business model, utilising the role of the platforms (back office) and our IFAs (front office) IFAs Front Office Distribution • Additional annual revenue driven by new net inflows of c
Slide 18: Future Outlook / Guidance
FUTURE OUTLOOK / GUIDANCE FY22 FY23 OUTLOOK Average AUM of £10.2bn, from the opening AUM of AUM expected to continue to grow organically by £9.0bn and closing AUM of £11.3bn targeting over £1.0bn net inflows per year REVENUE TATTON Net inflows of £1.277bn, and 22bps average fee rate Average bps fee
Slide 19: Strategic Update
STRATEGIC UPDATE 19
Slide 20: Tatton Ecosystem
TATTON ECOSYSTEM Direct Tatton Ecosystem Nucleus Aviva Direct Firms TAM plc (Group Propositions) Paradigm Firms Paradigm Tenet Firms Consulting COMPANY AUM Proposition Transact Fintel Firms Sesame Bankhall TATTON £10.1bn MPS xxx x Paradigm 8AM Firms Tatton MPS xx x Mortgages MPS Other Strategic Part
Slide 21: Roadmap to Growth
ROADMAP TO GROWTH OVER A THIRD OF THE WAY AFTER THE FIRST YEAR Targeting additional £6.0bn of AUM FY21 to FY24 to £15.0bn £15.0bn • We have delivered £2.4bn or 40% of the target in the first year +19% CAGR • Organic growth target £1.0bn per year – Delivered £1.7bn in first 12 months • M&A activity t
Slide 22: 8AM Global Ltd Acquisition
8AM GLOBAL LTD ACQUISITION ACQUISITION MECHANICS STRATEGIC RATIONALE • TAM has entered into a sale and purchase agreement to purchase • The transaction is expected to be earnings enhancing in 50% of the issued share capital of 8AM Global Ltd FY23 and beyond • Completion subject to FCA change of cont
Slide 23: Four Fundamental Characteristics
FOUR FUNDAMENTAL CHARACTERISTICS DFM MPS COMES OF AGE On platform DFM (MPS) market continues to grow, £81.4bn (5yr CAGR +27%) GROWTH Tatton AUM has grown strongly to £11.3bn (5yr CAGR +24%) Growth in adjusted operating profit1 £14.5m (5yr CAGR +26%) Largest MPS player, market leading price, consiste
Slide 24: Our Market Share
OUR MARKET SHARE MARKET GROWTH – ON PLATFORM FUM 180 180 2022 £11.3bn 2021 160 160 2020 2019 £9.0bn 13.9% 140 140 2018 £6.7bn 13.5% Tatton AUM £6.1bn 12.3% 120 % of on-platform £4.9bn 12.7% 20226 120 DFM FUM 11.8% 20215 Size: 100 20193 20204 Size: £680.1bn 20182 100 Total On- platform 20171 Size: Si
Slide 25: Defensive Moat
DEFENSIVE MOAT COMPETITIVE POSITION & BARRIERS TO ENTRY MPS SIZE PERFORMANCE PRICE SERVICE DISTRIBUTION IFA only Consistent c.10yr £10.1bn Investment 15bps Tatton Portal, MPS Specialist Mar22 Dedicated support, performance Investment Webinars 18 Platforms £6.5bn6 2009 Launch2 20-30bps1 BPS / MPS / M
Slide 26: High Asset Retention
HIGH ASSET RETENTION FY2022 Set up own proposition Other Tatton AUM Consolidators £11.34bn 1% Attrition1 c.£170m Retention 99% Avellamy • Ascot Lloyd True Potential • 8 IFAs 26 1. Attrition of assets under management from consolidators
Slide 27: A Changing Landscape
A CHANGING LANDSCAPE 0.30% 0.25% Tatton AMC bps1 % Brewin Dolphin 2 0.20% Brooks Macdonald LGT Vestra FE Investments 0.15% Schroders 2 2 AJ Bell 0.10% - £2.0bn £4.0bn £6.0bn £8.0bn £10.0bn £12.0bn MPS Assets Under Management3 1. AMC Source: Platforum - July 2021 3. AUM Source: Platforum July 2021, h
Slide 28: Tatton Strategic Direction
TATTON STRATEGIC DIRECTION EXAMPLES • Organic growth through net inflows, Organic Growth tailored solutions (white labels), and & ‘back book’ migration • Panel with nationals, networks and Strategic consolidators Partnerships • IFA distribution partnerships Mergers and • Strategically relevant Acqui
Slide 29: Strategic Partnerships
STRATEGIC PARTNERSHIPS • Market size of £81.4bn, up £5.2bn 22% over the last year £0.9bn • Tatton AUM of £11.3bn, up 26% over the last year >£1.0bn • 13.9% share of the on- DIRECT FIRMS £4.2bn platform DFM FUM 29
Slide 30: Tatton – Opportunity Update
TATTON – OPPORTUNITY UPDATE PROGRESSION Mar20 Mar21 Mar22 AUM £6.7bn AUM £9.0bn AUM £11.3bn Direct Firms Direct Firms Direct Firms Paradigm Firms £2.3bn / 35% Paradigm Firms £4.0bn / 44% £6.2bn / 54% £5.2bn / 46% Paradigm Firms £5.0bn / 56% £4.3bn / 65% Number of Firms 595 Number of Firms 668 Number
Slide 31: Tatton – Opportunity Update
TATTON – OPPORTUNITY UPDATE • £680.1bn1 Assets held on platform Total AUM £11.3bn • £81.4bn1 Assets held in DFM and growing Direct AUM • Tatton £11.34bn from 746 firms £6.2bn or 54% Paradigm AUM £5.2bn or 46% • Paradigm firms = 165 or 22% firms = £5.2bn AUM or 46% Growth • Non-Paradigm firms = 581 o
Slide 32: Paradigm
PARADIGM Current market activity Membership Growth 2017-22 • Strong activity although heat come out of the market 1700 1600 900 • April 22 gross lending £26.5bn up from £26.2bn in March 22 Compliance and Protect 800 1500 • April 22 66,000 approval for house purchases, 69,500 March 22, and 1400 66,77
Slide 33: Investment & Fund Update
INVESTMENT & FUND UPDATE 33
Slide 34: Tatton's Maturing Fund Proposition
TATTON’S MATURING FUND PROPOSITION Tatton Funds – good value risk rated funds with distinct strategies Third party funds - three fund families Five risk rated funds Five risk rated MM funds Cost focussed hybrid active and passive Managed by Tatton Five risk rated funds Four MM funds Active managed f
Slide 35: 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 set
Slide 36: MPS Investment Portfolio Returns
MPS INVESTMENT PORTFOLIO RETURNS 5 years to 31 March 2022 Portfolio Performance (per cent.) - core product set Risk Return - 5 Years to 31 March 2022 annualised, after DFM charge and fund costs) 12.0% ARC 10.0% Active Tracker Hybrid Ethical Peers1 8.0% Annualised Return Defensive 2.6 2.6 2.6 2.6 Cau
Slide 37: Ethical Investment Portfolio Returns
ETHICAL INVESTMENT PORTFOLIO RETURNS 3 years to 31 March 2022 Risk Return - 3 Years to 31 March 2022 Tatton Fund Performance (% - ethical product set, 14.0% annualised, after DFM charge and fund costs) 12.0% ARC Ethical Peers1 10.0% Annualised Return Defensive 4.8 3.5 8.0% Cautious 7.1 4.9 6.0% Bala
Slide 38: Effective Communications – Keeping Connected to IFAs and Their Clients
EFFECTIVE COMMUNICATIONS – KEEPING CONNECTED TO IFAs AND THEIR CLIENTS Accessible, insightful and valued communications • Tatton Weekly – 5,000+ readership each week • Market updates – 1,000s of views in 2022 • Monday digest – LinkedIn and media footprint • Tatton Teasers – bringing investment to li
Slide 39: Summary
Summary Growing the IFA relationships to grow AUM • Strategic direction and Roadmap 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 partners
Slide 40: Appendices
Appendices 40
Slide 41: Financial Progress Since IPO
FINANCIAL PROGRESS SINCE IPO Revenue £m Adj Operating Profit1 £m £14.5m CAGR 19.9% £29.4m CAGR 26.4% Consensus Consensus £11.4m £23.4m £21.4m £9.1m £17.5m £7.3m £15.5m £6.2m £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 Mar-18 adjusted for like for
Slide 42: 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 43: Tatton Share Price
TATTON SHARE PRICE COMPARISON TO ASSET MANAGERS Share price performance comparison of Asset Managers 30.0% 20.0% 10.0% 0.0% -10.0% Tatton 1 -20.0% Peer Group Average 1 Peer Group Average (excl Brewin from Apr22) -30.0% 1. 10 selected peer group companies, including AJ Bell, Brewin Dolphin, Rathbones
Slide 44: 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 45: DFM Assets on Platform
DFM ASSETS ON PLATFORM AUM £bn Wealth manager Mar-18 Mar-19 Dec-19 Dec-20 • At Dec20 £66bn on platform DFM funds under Tatton Investment Management £5.000bn £6.100bn £7.440bn £8.517bn management (“FUM”), Mar22 increased to Parmenion £4.540bn £5.760bn £6.960bn £8.200bn Quilter WealthSelect - - £6.700
Slide 46: 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 47: Paradigm Mortgages & Protection
PARADIGM MORTGAGES & PROTECTION MORTGAGE HIGHLIGHTS PROTECTION HIGHLIGHTS Growth in Lending vs Proc Fee Override • FY21/22 Life & Group Income £704k - 8% increase on FY 20/21 £14.00bn £4.50m £12.00bn £4.00m • FY21/22 GI Income £68k – 13% increase Gross Proc Fee Override £3.50m £10.00bn • Policies wr
Slide 48: 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 Of
Slide 49: 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 18 platforms
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