Rathbones Group Plc · LSE:RAT
Rathbones — Rathbone Brothers — FY2019 Earnings Presentation
40 slides from Rathbones's earnings presentation, February 2020
Slide 1: Rathbone Brothers Plc
Rathbone Brothers Plc
Slide 2: Financial results
Financial results “== Wsatnbones =Look forward
Slide 3: The year in review
Rathbone Brothers Plc | Preliminary results Page 2 The year in review Funds under management — FUMA up 14.3%, outperforming FTSE and administration FTSE100 FUMA surpasses 7542 100 and MSCI PIMFA Private Investor £50bn Balanced increases of 12.1% and 13.1% FTSE100 6728 £50.4 £44.1 +14.3% bn Revenue g
Slide 4: Analysing organic Investment Management inflows and outflows
Rathbone Brothers Plc | Preliminary results Page 3 Analysing organic Investment Management inflows and outflows 11.2% Inflows 10.3% — lower gross inflows in 2019 but held up well with 9.3% economic and political backdrop 8.8% 8.6% — 2018 elevated due to short term mandates 5.3% 5.5% Outflows 5.0% 4.
Slide 5: Outstanding growth in Unit Trusts
Rathbone Brothers Plc | Preliminary results Page 4 Outstanding growth in Unit Trusts Unit Trusts Unit Trusts Top ten managers by net retail sales in 2019² (£m) FY 2019 FY 2018 (£bn) (£bn) 4,986 Opening funds under 3,475 5.6 5.3 2,846 management 2,405 2,370 2,112 Inflows 2.3 1.9 1,340 1,306 943 531 O
Slide 6: Strong income growth
Rathbone Brothers Plc | Preliminary results Page 5 Strong income growth Investment Management basis point return on average FUMA (inc. S&J in 2018/2019)² FY 2019 FY 2018 % (£m) (£m) change 72.7 71.4 68.2 Average FTSE 100 Index (on 2017 2018 2019 7456 7269 2.6 quarterly billing dates) — ongoing impro
Slide 7: Specific items impact an otherwise robust margin
Rathbone Brothers Plc | Preliminary results Page 6 Specific items impact an otherwise robust margin FY 2019 FY 2018 % (£m) (£m) change Fixed staff costs Fixed staff costs 110.8 96.0 15.4 — full year effect of 2018 hiring — S&J cost synergies will take effect from 2020 Average FTE1 employees during —
Slide 8: Profit before tax reflects acquisition
Rathbone Brothers Plc | Preliminary results Page 7 Profit before tax reflects acquisition FY 2019 FY 2018 % Acquisition-related costs (£m) (£m) change — Speirs & Jeffrey total £31m of which £26m consideration Underlying profit before tax 88.7 91.6 (3.2) — amounts capital in nature; deferred consider
Slide 9: Strong capital position, increased dividend
Rathbone Brothers Plc | Preliminary results Page 8 Strong capital position, increased dividend 31/12/19 31/12/18 Pillar 2A Assets (£m) (£m) — reduced pension obligation risk Total own funds1 282.2 251.3 Pillar 2B Capital conservation buffer (CCB) Pillar 1 own funds requirement 96.7 91.3 — increase p
Slide 10: Strategic update
Strategic update
Slide 11: Speirs & Jeffrey now operating on a common platform
Rathbone Brothers Plc | Preliminary results Page 10 Speirs & Jeffrey now operating on a common platform In — over 98% of clients Working — c. 50 work streams numbers migrated to Rathbones together — strong collaboration and — c.26,000 cash records pooling of intellectual capital converted — leveragi
Slide 12: Strategic progress
Rathbone Brothers Plc | Preliminary results Page 11 Strategic progress Enriching the client Supporting and Inspiring our people Operating more and adviser proposition delivering growth efficiently and experience 2 Enhancing valued Penetrating specialist Our culture and Driving productivity 1 service
Slide 13: Building on our ESG capability
Rathbone Brothers Plc | Preliminary results Page 12 Building on our ESG capability PRI annual survey results ― £1.6 billion (2018: £1.2 billion) in Rathbone Greenbank Investments Strategy and governance ― £1.5 billion (2018: £1.2 billion) in Ethical Bond Fund A+ Median score: A ― launched Rathbone G
Slide 14: Outlook
Rathbone Brothers Plc | Preliminary results Page 13 Outlook — investing for organic growth — increasing productivity — pursuing inorganic growth opportunities — confident in future direction
Slide 15: Our purpose and corporate values
Rathbone Brothers Plc | Preliminary results Page 14 Our purpose and corporate values Our purpose Our corporate values We see it as our responsibility to invest for everyone’s tomorrow. That means doing the right thing for Responsible and entrepreneurial in creating value “ Thinking, acting and inves
Slide 16: Appendix
Rathbone Brothers Plc | Strategic update 2019 October 2019 Page 15 Appendix
Slide 17: Our target market is large and continues to grow
Rathbone Brothers Plc | Preliminary results Page 16 Our target market is large and continues to grow Robo-advisers £1.7tn and secular growth opportunities remain <£5bn, 0% Several business models Vertically Several business models Self-directed integrated firms £220bn, 13% £210bn, 12% — the market i
Slide 18: Rathbones has the platform to succeed…
Rathbone Brothers Plc | Preliminary results Page 17 Rathbones has the platform to succeed…
Slide 19: …with a robust business model…
Rathbone Brothers Plc | Preliminary results Page 18 …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 Mult
Slide 20: …and product offerings suitable for the clients of today and tomorrow
Rathbone Brothers Plc | Preliminary results Page 19 …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 manag
Slide 21: Analysing the balance sheet
Rathbone Brothers Plc | Preliminary results Page 20 Analysing the balance sheet 31/12/19 31/12/18 31/12/19 31/12/18 Assets (£’000) (£’000) Liabilities (£’000) (£’000) Cash and balances with central banks 1,932,997 1,198,479 Deposits by banks 28 491 Settlement balances 52,520 39,754 Settlement balanc
Slide 22: Underlying PBT (£m) / EPS (p)
Rathbone Brothers Plc | Preliminary results Page 21 Underlying profits before tax¹ (£m) and EPS (p) 100 90 80 Underlying PBT (£m) / EPS (p) 68.3 70 60 53.2 51.1 50 44.2 43.2 40 41.6 30 35.7 25.8 20.4 20 24.5 10 37.2 33.2 70.4 35.3 39.6 74.9 43.3 44.2 87.5 48.3 43.3 91.6 46.6 42.1 88.7 0 2015 2016 20
Slide 23: Earnings per share
Rathbone Brothers Plc | Preliminary results Page 22 Earnings per share FY 2019 FY 2018 Pre tax Post tax Pre tax Post tax EPS (p)1 EPS (p)1 (£m) (£m) (£m) (£m) Underlying profit attributable to shareholders 88.7 71.1 132.8 91.6 74.2 142.5 Charges in relation to client relationships and goodwill (16.0
Slide 24: Capital expenditure
Rathbone Brothers Plc | Preliminary results Page 23 Capital expenditure 14 12 £11.6m £11.0m 1.3 1.3 10 1.8 1.9 £ million 8 1.5 1.5 6 4 7.0 6.3 2 0 2018 2019 Purchased software Internally developed software IT & other Property¹ ¹ Property expenditure in general only includes leasehold improvements fr
Slide 25: Shareholders at 31 December 2019
Rathbone Brothers Plc | Preliminary results Page 24 Shareholders at 31 December 2019 Lindsell Train Mawer 14% Current Rathbones staff MFS¹ 33% Heronbridge 9% Blackrock Vanguard Aviva 8% Kabouter 2% Baillie Gifford 2% 7% Marathon 2% 3% 5% Legal & General Investment Mgt 3% 4% 4% 4% Troy Other ¹ Includ
Slide 26: Investment Management reflects acquisition integration
Rathbone Brothers Plc | Preliminary results Page 25 Investment Management reflects acquisition integration Investment Investment Management Management FY 2019 FY 2018 (£bn) (£bn) Opening funds under management and 38.5 33.8 administration Inflows 3.5 10.6 – organic¹ 3.3 3.8 – purchased² 0.2 6.8 Outf
Slide 27: Segmental results
Rathbone Brothers Plc | Preliminary results Page 26 Segmental results y/e 31 December 2019 Investment Management Unit Trusts Indirect Total (£m) (£m) (£m) (£m) Net investment management fee income 224.1 36.1 - 260.2 Net commission income 51.1 - - 51.1 Net interest income 16.4 - - 16.4 Fees from advi
Slide 28: Reconciliation of equity to total own funds
Rathbone Brothers Plc | Preliminary results Page 27 Reconciliation of equity to total own funds FY 2018 FY 2019 restated (£m) (£m) Equity Share capital and share premium 213.8 208.0 Reserves 313.6 288.8 Less: - Own shares (42.0) (32.7) - Intangible assets1 (218.9) (229.3) Total common equity tier 1
Slide 29: Total operating expenses
Rathbone Brothers Plc | Preliminary results Page 28 Total operating expenses 31 December 2019 31 December 2018 Staff - payroll (excluding Staff - payroll (excluding 4% variable) 5% variable) 4% Staff - variable 4% Staff - variable 13% Staff - other 10% Staff - other 36% 38% Property Property 9% 11%
Slide 30: Other information
Rathbone Brothers Plc | Preliminary results Page 29 Other information FY 2019 FY 2018 % change Investment Management Total rate of net growth in funds under management (0.9%) 23.5% Revenue yield on FUM (excluding Charities team) (bps)¹ 77.2 76.6 0.8 Revenue yield on Charities team FUM (bps)¹ 49.1 47
Slide 31: Analysis of operating income
Rathbone Brothers Plc | Preliminary results Page 30 Analysis of operating income Basis point return from fees Basis point return from commission 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 52.9 2019 12.1 0 20 40 60 0 5 10 15 20 25 Basis point return from interest Advisory fee income (£m)
Slide 32: Investment Management client base
Rathbone Brothers Plc | Preliminary results Page 31 Investment Management client base Analysis of funds under management¹ 5.3% Service level by number Fund type by value 5.3% 10.3% Private clients Discretionary Advisory 10.7% ISAs 35.1% Execution-only Charities 11.9% Pensions 13.7% Trusts 89.4% 18.3
Slide 33: Where our clients' assets are invested
Rathbone Brothers Plc | Preliminary results Page 32 Where our clients’ assets are invested¹ Direct FY 2017 13.1% 36.4% 34.3% 9.7% 6.5% holdings 51.5% Collectives FY 2018 13.3% 35.3% 34.5% 10.0% 6.9% 48.5% FY 2019 13.4% 35.4% 36.3% 8.8% 6.1% Fixed income UK equities Overseas equities Alternatives² Ca
Slide 34: Offices
Rathbone Brothers Plc | Preliminary results Page 33 Offices Investment Management funds under management and administration Office location Number of investment managers¹ (£bn at 31/12/19)² London 117 18.4 Glasgow 41 7.3 Liverpool 28 2.3 Edinburgh 25 2.6 Other offices³ 86 12.4 Total 297 43.0 ¹ As at
Slide 35: Annual management fees
Rathbone Brothers Plc | Preliminary results Page 34 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 char
Slide 36: Performance: retail funds
Rathbone Brothers Plc | Preliminary results Page 35 Performance: retail funds Performance¹ and Quartile Ranking at Size of fund 1 year 3 year 5 year 10 years 31 December 2019 (£m)² Rathbone Global Opportunities Fund I Acc³ 26.12% 1 50.64% 1 103.37% 1 276.68% 1 1,858.20 Sector: IA Global 21.92% 31.07
Slide 37: Performance: outcome oriented funds
Rathbone Brothers Plc | Preliminary results Page 36 Performance: outcome oriented funds Discrete year performance1 at 31 December 2019 (S-class shares) 1 year 3 years 5 years Size of fund (£m)² Rathbone Multi-Asset Total Return Portfolio S Inc³ 9.16% 10.86% 21.67% 276.46 Bank of England Base Rate +2
Slide 38: Corporate governance at Rathbones
Rathbone Brothers Plc | Preliminary results Page 37 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 39: Reference sheet
Rathbone Brothers Plc | Preliminary results Page 38 Reference sheet Common Equity Common Equity Tier 1 capital as a proportion of total risk Tier 1 ratio: exposure amount Leverage ratio: Tier 1 capital resources as a percentage of total assets, excluding intangible assets and investment in associate
Slide 40: Important information
Rathbone Brothers Plc | Preliminary results Page 39 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 exc