Polar Capital Holdings Plc · LSE:POLR
Polar Capital — FY2018 Earnings Presentation
31 slides from Polar Capital's earnings presentation, Jun 25, 2018
Slide 1: Results Presentation – Twelve months to 31 March 2018
Results Presentation Twelve months to 31 March 2018 Gavin Rochussen, Chief Executive Officer John Mansell, Chief Operating Officer June 2018 This presentation is for one-on-one use with non-US professional investors only www.polarcapital.co.uk 25/06/2018
Slide 2: Contents
Results Presentation – Twelve Months To 31 March 2018 Contents • Highlights • Fund Flows and AuM • Fund Performance • Strategy • Emerging Markets Stars • Brexit and Regulation • Financials • Summary and Outlook For non-US professional investor use only. Please refer to the Important Information at t
Slide 3: Polar Capital is a specialist, investment led, active fund manager
“Polar Capital is a specialist, investment led, active fund manager with a collegiate and meritocratic culture where capacity of investment strategies is managed to enhance and protect performance”. For non-US professional investor use only. Please refer to the Important Information at the end of th
Slide 4: Market Perspective
Market Perspective Global indices vs volatility 60% 50% 40% 30% 20% 10% 0% -10% MSCI North America Index MSCI All-Country World Index TOPIX MSCI Emerging Market Index DJ World Technology Index FTSE All-Share Index S&P 500 30d Volatility Source: Bloomberg, as at 31 March 2018. For non-US professional
Slide 5: Highlights
Results Presentation – Year to 31 March 2018 Highlights • Net inflows of £1.9bn • AuM increased by 29% from £9.3bn to £12bn • Average AuM up 33% on the prior year • Compelling fund performance and increased performance fees • Core Operating Profit increased by 33% • Adjusted Diluted EPS up by 79% to
Slide 6: Fund Flows And AuM: AuM profile over years
Fund Flows And AuM AuM profile over 5 years £ Billion £13.0 £ 12.0bn £12.0 £11.0 £ 10.6bn £10.0 £9.3bn £9.0 £8.1bn £7.2bn £8.0 £7.9bn £7.6bn £ 6.9bn £6.2bn £7.1bn £7.0 £6.0 £5.0 £4.7bn £4.0 £3.0 £2.0 £1.0 £- -£1.0 -£2.0 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Flo
Slide 7: Fund Flows And AuM: Quarterly net flows
Fund Flows And AuM Quarterly net flows £ Million £700 £500 £300 £100 -£100 -£300 -£500 -£700 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4 Source: Polar Capital, 31 March 2018. Totals may not sum due to rounding. Past performance is not indicative or a guarantee of future results. For non-US professional inv
Slide 8: Strategy fund flows
Fund Flows And AuM Strategy fund flows 6 months and 12 months to 31 March 2018 £ Million £700 £600 £500 £400 £300 £200 £100 £0 -£100 -£200 -£300 Technology Japan Europe L/S Healthcare Financials Emerging Convertibles North America UK Absolute European UK Value Markets Income Income 6 months 12 month
Slide 9: AuM growth per strategy
Fund Flows And AuM AuM growth per strategy £ Million £3,500.00 £3,000.00 £2,500.00 £2,000.00 £1,500.00 £1,000.00 £500.00 £0.00 Technology Japan European L/S Healthcare Financials Emerging Convertibles North America UK Absolute European UK Value Markets Income 2015 2016 2017 2018 Source: Polar Capita
Slide 10: AuM Analysis
AuM Analysis AuM split by strategy Investor mix by geography Long only 90.2% UK 68.1% Alternative 9.7% Europe 28.6% Investment Trusts 17.4% Other 2.4% Open Ended Funds 82.6% USA 0.9% AuM split by strategy Investor mix by holdings Technology 27.5% Bank 24.4% North American 16.8% Polar Investment Trus
Slide 11: Current Position: Lipper figures for UCITS funds
Current Position Lipper figures for long and alternative UCITS funds – as at 31 March 2018 1 Year 3 Years 5 Years Since AuM £m Percentile Percentile Percentile Inception Japan Fund (I JPY) 817 27 17 40 7* 19/10/2001 Japan Value Fund (S JPY) 42 47 25 24 33 31/10/2012 Healthcare Opportunities Fund (I
Slide 12: Alternative Strategies
Alternative Strategies As at 31 March 2018 Annualised returns Strategies Inception date YTD 3 years 5 years Inception Europe Long/Short (AX EUR) 1 August 2003 1.09% 1.04% 3.04% 8.46% 29 September UK Absolute Equity (GBP I) -0.10% 24.63% N/A 23.15% 2014 Global Convertible 31 December 2015 0.94% N/A N
Slide 13: Annualised fund performance against benchmark
Fund Flows And AuM Annualised fund performance against benchmark (3 year & SI) 25.0% 1st Quartile First bar = 3yr 2nd Quartile Second bar = since inception 20.0% 3rd Quartile 4th Quartile Ranking unavailable 15.0% 10.0% 5.0% 0.0% -5.0% Source: Polar Capital factsheet data, 31 March 2018, Lipper quar
Slide 14: Strategy: Growth and diversification
Strategy Growth and diversification Investment strategies: Distribution • Add complementary Global/International equities capability • Focus on building the institutional channel that will appeal to institutional investors – This will follow, or progress in tandem with, the – This could include sub-
Slide 15: Emerging Market Stars: investment process
Emerging Market Stars Fundamental structure process around • Team of five, London based with a Shanghai delta in EVA creation – stock picking research office 3. Valuation EVA Valuation EVA GAP (Shareholder 1. Pockets Value) 2. Industry Key ESG: of Growth Success Factors Impact to Environment progres
Slide 16: Emerging Market Stars: Past performance relative to peer group
Emerging Market Stars Past performance relative to peer group (1 May 2011 − 31 December 2017) 1st quartile performance on all horizons vs peers1 1st quartile performance – driven by stock selection2 Nordea 1 – Emerging Stars Equity BI USD • Historical performance following MSCI EM NR USD this philos
Slide 17: Emerging Market Stars: Return attribution since inception
Emerging Market Stars Return attribution since inception Outperformance driven by stock selection • Performance has been driven by stock selection and industry allocation with an Information Ratio above 1, since inception1 • The fund grew from a seed investment at inception to around US$4.5 bn in Au
Slide 18: Emerging Market Stars: Long term goal
Emerging Market Stars Long term goal The ambition is to create a leading emerging market franchise, with this proven team and their well defined philosophy and process. Product road map: • Global Emerging Market (Emerging Market Stars) – Institutional segment – UK, Continental Europe, and Asia – Ins
Slide 19: Brexit And Regulatory Developments
Brexit And Regulatory Developments Brexit • Dublin UCITS Funds hold 77% of AuM • Investment Trusts account for 17% of AuM • Have received AMF regulatory approval for Polar Capital (Europe) SAS to establish an office in Paris • Will relocate certain functions to Paris during the year FCA Asset Manage
Slide 20: Financials
Financials For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 20
Slide 21: Financial Review: Highlights
Financial Review Highlights • AuM – AuM at 31 March 2018 £12.0bn from £9.3bn at March 2017 • Profitability – Core operating profit excluding performance fees £27.8m (2017: £20.9m) – Profit before tax £41.3m (2017: £20.4m) – Pre-tax (pre SBP on preference shares) profit £46.4m (2017: £23.6m) • EPS an
Slide 22: Presentation of accounts – share based payments
Financial Review Presentation of accounts – share based payments (SBP) – Previously face of P&L included separate SBP charge – FY’18 SBP charge has four constituents: 1. Preference shares 2. Options 3. LTIPs 4. Deferment plans Too much noise to warrant separate P&L disclosure – SBP now subsumed into
Slide 23: Presentation of accounts – adjusted EPS
Financial Review Presentation of accounts – adjusted EPS – First adjustment As previously detailed, element of SBP charge relating to preference shares removed from statutory EPS figure to create adjusted EPS figure – Second adjustment Deferral amounts that IFRS pushes out into future accounting per
Slide 24: Profitability – by year
Financial Review Profitability – by year Year to Year to Year to March 2016 March 2017 March 2018 Average AuM £7.7bn £8.0bn £10.7bn Core operating profit £23.6m £20.9m £27.8m Performance fee profit £3.0m £1.2m £15.3m Interest and similar income £0.3m £1.5m £3.3m PBT pre SBP on preference shares £26.
Slide 25: Financial Review: Costs
Financial Review Costs Year to Year to Year to March 2016 March 2017 March 2018 Comments Salaries, bonuses and other staff Increased discretionary bonus pool £16.6m £16.9m £20.9m and small increase in headcount costs Core distributions1 £17.2m £14.8m £22.9m Increase in core profits Core cash compens
Slide 26: Other operating costs
Financial Review Other operating costs Year to Year to Year to March 2016 March 2017 March 2018 Comments Increase in number and rate of IT £4.2m £4.7m £5.3m Bloomberg terminals Rent and rates £2.7m £2.6m £2.6m Professional fees £0.8m £1.0m £1.2m Core waterfront written Research £0.0m £0.0m £0.7m res
Slide 27: Cash and investments
Financial Review Cash and investments March 2017 March 2018 £m £m Cash £58.5m £87.9m Investments Alternative fund investment £9.5m £10.1m Long only seed £12.6m £8.3m £22.1m £18.4m Total cash and investments £80.6m £106.3m Source: Polar Capital as at 31 March 2018. For non-US professional investor us
Slide 28: Shareholder analysis at March 2018
Financial Review Shareholder analysis at 31 March 2018 Holding Percentage Directors, founders and staff 29.1m 31% Caledonia 6.4m 7% EBT 2.5m 2% Hargreave Hale 9.2m 10% Harwood Capital 7.0m 8% Artemis 4.0m 4% Blackrock 3.6m 4% Free Float = 60% Unicorn 3.4m 4% J O Hambro Capital Management 3.1m 3% Abe
Slide 29: Dividend
Dividend • Total dividend for the year 28p (2017: 25.0p) – Second dividend payable 22p (2017: 19.5p) • Policy – First (January) dividend 50% of first half core earnings – Total dividend will conventionally range between 55% - 85% of adjusted EPS – Range will provide flexibility given the inherent vo
Slide 30: Summary And Outlook
Summary And Outlook • Six quarters of net inflows • More balanced earnings contribution from fund strategies • More to be achieved on diversification • Pipeline of potential teams is promising, but we remain very selective • Flow momentum has continued into the current quarter – AuM at 31 May 2018 i
Slide 31: Important Information
Important Information Polar Capital 16 Palace Street London SW1E 5JD House View This document has been produced based on Polar Capital research and analysis and represents our house view. All sources are Polar Capital unless otherwise stated. Important Information The information provided in this pr
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