Brooks Macdonald Group plc · LSE:BRK
Brooks Macdonald — FY2024 Earnings Presentation
34 slides from Brooks Macdonald's earnings presentation, September 2024
Slide 1: September 2024
BM Hon ato September 2024
Slide 2: Agenda
01 FY24 Financial results 02 Reigniting growth: Playing to our strengths 03 Reigniting growth: Priorities, guidance & outlook 2
Slide 3: FY24: Financial results
\ ' "4 FY 94: Financial results
Slide 4: FY24 highlights
Growth in assets, revenues and profits underpinned by: - Continued momentum in MPS - Significant growth in specialist offerings within BPS - Management actions on efficiency Strong capital and cash position with cash (and cash equivalents) totalling £74.7m, up £21.3m on prior year Full year total di
Slide 5: FUM, revenue, underlying PBT, margin, EPS and DPS
FUM (£bn) Revenue (£m) Underlying PBT (£m) +7.0% +3.6% +12.5% 128.3 34.1 18.0 123.8 16.8 30.3 FY23 FY24 FY23 FY24 FY23 FY24 Underlying PBT Margin (%) Underlying Diluted EPS (p) Full Year DPS (p) +2.1ppts +6.6% +4.0% 78.0 26.6% 161.0 75.0 24.5% 151.0 FY23 FY24 FY23 FY24 FY23 FY24 5
Slide 6: FUM movement and Platform MPS growth
Group total FUM movement (£m) FY23 FY24 Opening FUM 15,667 16,847 • Platform MPS reaching £4.4bn with growth rate Gross inflows 2,729 2,330 of 13.4% Gross outflows (1,912) (2,946) Net flows 817 (616) • Growth in our specialist BPS products with Investment performance 363 1,797 increased demand for o
Slide 7: A key driver of our business
A key driver of our business Low Risk Low-Medium Risk Medium Risk Medium-High Risk High Risk 1 year Outperformed Outperformed Outperformed Outperformed Outperformed 5 year Underperformed Underperformed Outperformed Outperformed Outperformed 10 year Outperformed Outperformed Outperformed Outperformed
Slide 8: Average FUM, yields and revenue breakdown
Average FUM (%) and yields (bps) Total yield bridge between FY23 and FY24 (bps) Fee only Total fee yield Fee only -3.2bps yields yields 1.1 FY23 71.6bps 68.4bps FY24 71.6 (1.3) 73.3bps 14% 13% 70.4bps 68.4 (3.0) 48.3bps 12% 10% 47.7bps 18.8bps 17% 22% 18.2bps 59.1bps 6% 6% 59.2bps 65.1bps 51% 49% 63
Slide 9: Significant reduction in headcount costs
Significant reduction in headcount costs FY23 FY24 Inc / (dec) Total underlying costs movement FY23 to FY24 (£m) £m £m £m % Fixed staff costs 43.7 43.4 (0.3) (0.7) Variable staff costs 10.7 12.1 1.4 13.1 -£0.4m Acquired staff costs 1.7 3.1 1.4 82.4 1.1 94.2 Total staff costs 56.1 58.6 2.5 4.5 93.5 0
Slide 10: Capital position
Own Funds Breakdown (£m) 75.7 Capital position 64.6 • Regulatory resources of £75.7m with a robust 64.6 46.1 capital surplus £46.1m1 37.5 • Own Funds Capital Adequacy Ratio2 of 348.5% 7.4 7.9 (FY23: 328.1%) 19.7 21.7 • Own Funds not impacted by the goodwill FY23 FY24 impairment recognised at the hal
Slide 11: Summary financial performance
Summary financial performance • Record closing FUM up 7.0%, reflecting strong £m FY23 FY24 Change investment performance Closing FUM 16,847 18,028 +7.0% • Revenue up 3.6% driven by higher financial Revenue 123.8 128.3 +3.6% planning fees, transaction and interest income Underlying costs (93.5) (94.2
Slide 12: Reigniting Growth: Playing to our strengths
Reigniting Growth Playing to our strengths
Slide 13: Our purpose is clear – realising ambitions and securing futures
Our Purpose is clear – Realising ambitions and securing futures Meeting needs across the client lifecycle Clients Accumulators Preparers Retirees Age £ 2.5trillion Full range of wealth offering UK wealth Products and MPS Funds BPS management Services market Across Lifecycle Two complementary routes
Slide 14: Opportunity for Brooks Macdonald to realise ambitions and secure futures
Opportunity for Brooks Macdonald to realise ambitions and secure futures Ageing UK population By 2041 23% of the population will be over 65 ~£3tn* 2026 Addressable Advice gap Market 12.4m people who could benefit from advice don’t currently get it Retirement savings gap ~£2.5tn* Average pension pot
Slide 15: BPS meets a structural need
• BPS meets a structural need - as portfolios Advisers increasingly using BPS portfolio size grow, our clients’ needs become more complex multiple BPS services • 20% growth in BM’s BPS clients with portfolios 34% exceeding £1m since 2020 4% • Strong growth opportunity in retirement income 32% • BM a
Slide 16: BM MPS growing strongly
• MPS suitable for a wide range of clients BM MPS growing strongly • BM MPS has grown rapidly 5 • FuM 5x in four years • More advisers placing more assets Growth index 1x to 5x from 2020 4 • BM is scaling its offering in this fast-growing segment: • 4 investment strategies, 5 risk levels • Available
Slide 17: Clear strengths today
Clear strengths today Talented People Average tenure of IM: 10 years Broad investment Comprehensive proposition across BPS, MPS and Funds offered proposition via intermediaries and direct Delivering attractive Client portfolios across all 5 risk categories outperformed ARC investment returns indices
Slide 18: Priorities, guidance & outlook
Priorities, guidance & outlook
Slide 19: Strategic priorities
1 2 3 Broadening & Driving Scale Delivering Excellent Deepening Client & Efficiencies Client Service Reach Flows & Revenues Efficiency Supplemented by targeted M&A against strict criteria 19
Slide 20: Delivering Excellent Client Service
1 Delivering Excellent Client Service Key priorities Unlock the full potential of Brooks Macdonald’s client centric culture Proactively tailor our service to client needs Launch differentiated and innovative new products to further drive business growth Client retention rate Top 3 DFM provider 20
Slide 21: Broadening and Deepening Client Reach
2 Broadening and Deepening Client Reach Key priorities Take the Group’s broad product range to our existing network and new connections Increase brand awareness Enhance data analytics to support lead generation % of Advisers with No. of Advisers & Clients >1 product 21
Slide 22: Driving Scale & Efficiencies
3 Driving Scale & Efficiencies Key priorities Build talent and execution capabilities to support delivery of client service Leverage automation across front office and support teams to increase productivity Optimise investment and client reporting services to improve efficiency Cost : Income managem
Slide 23: Acquisition assessment criteria
We will explore opportunities that meet our strict acquisition assessment criteria Business Financial Strategy & Operations • A successful business with a track • Attractive financial return • Operational compatibility record of growth • Cost synergies • Geographical alignment in UK • Right cultural
Slide 24: Sale of Brooks Macdonald International
Sale of Brooks Macdonald International £ Strategic review concluded sale was the best Total consideration reflects the underlying option for both Group and International strength of the business and quality of the team: up to £50.85m, subject to revenue targets Highly credible buyer with a strong pr
Slide 25: Confidence in delivering our strategy
Confidence in delivering our strategy FY24 Performance Medium Term target Net Flows c.£0.6bn outflow 5% annualised net flows Underlying cost growth less BAU Cost Growth <5% per annum than 1% 25
Slide 26: FY25 outlook and guidance
• Return to overall positive net flows later in the year • The blended revenue yield to follow its established trend • Interest income in HY24 was in line with our guidance. Following on from that, we expect interest income to be impacted by further BOE base rate reductions. For FY25, we expect clie
Slide 27: Unlock the full potential of Brooks Macdonald
Unlock the full potential of Brooks Macdonald • A good set of results, with strong capital and cash position • Strategic progress - creating a more simplified and efficient business • A clear strategy to reignite growth • Strengthened leadership team to drive execution at pace 27
Slide 28: Appendix
Appendix
Slide 29: Annualised gross and net flows (%)
Annualised gross and net flows (%) 21.5 17.4 14.4 15.3 13.2 3.8 4.8 5.2 (2.1) (3.7) (10.5) (12.2) (17.7) (16.5) (16.9) FY20 FY21 FY22 FY23 FY24 Gross inflows Gross outflows Net flows Note 1. H2 FY23 included a number of large new mandates in the Group’s BMIS offering within the Platform MPS service.
Slide 30: FUM and flows by service
FY24 Closing Organic net flows FUM (£m / annualised % growth) Opening FUM H1 (£m/%) H2 (£m/%) Total FY Inv. Perf. (£m) (£m/%) (£m) (£m) (192) (363) (555) BPS 8,527 908 8,880 Broad network of IFAs and Platforms (4.5%) (8.5%) (6.5%) expanding our distribution reach (35) (45) (80) MPS Custody 966 88 97
Slide 31: Notes on yields movement
Notes on yields movement UKIM Revenue Yields Avg FUM • BPS fee yield lower by 1.6bps driven by underlying product FY23 FY24 Change FY23 FY24 Change FY23 FY24 Change mix and rates achieved on new business £m £m % bps bps bps £m £m % • BPS non-fee yield (transactional & FX) up by 1.7bps in BPS fees 54
Slide 32: Underlying to statutory profit reconciliation
FY23 FY24 Goodwill impairment (£11.6m) £m £m • Impairment charge recognised in relation to the International business, where the Underlying profit before tax 30.3 34.1 estimated recoverable amount is less than the carrying value of the goodwill held on the balance sheet. Goodwill impairment - (11.6)
Slide 33: Cash and cash equivalents
Cash and cash equivalents £m 33
Slide 34: Cumulative performance by risk profile
Cumulative performance (%) 1 year to 3 years to 5 years to 10 years to Risk Profiles 30.06.24 30.06.24 30.06.24 30.06.24 Low Risk BM Low Risk 8.19 0.32 8.01 30.17 ARC Sterling Cautious PCI 6.14 -0.03 8.99 26.49 Relative performance 2.05 0.35 -0.99 3.68 BM Low-to-Medium Risk 9.98 2.51 15.63 48.51 Med
Brooks Macdonald Group — FY2024 Earnings Presentation on 6ix