Tatton Asset Management Plc · LSE:TAM
Tatton Asset Management — FY2021 Earnings Presentation
49 slides from Tatton Asset Management's earnings presentation, Jun 15, 2021
Slide 1: Tatton Asset Management Investor and Analyst Presentation
TATTON ASSET MANAGEMENT INVESTOR AND ANALYST PRESENTATION June 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 4
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 7
Slide 8: Key Highlights: Financial
KEY HIGHLIGHTS FINANCIAL • Group revenue increased 9.3% to £23.4m (Mar 2020: £21.4m) • Adjusted operating profit1 up 25.6% to £11.4m (Mar 2020: £9.1m) • Adjusted operating profit1 margin 48.8% (Mar 2020: 42.5%) • Adjusted fully diluted EPS2 increased 22.8% to 14.74p (Mar 2020: 12.00p) • Final divide
Slide 9: Key Highlights: Operational
KEY HIGHLIGHTS OPERATIONAL • Assets Under Management (AUM) increased 35.2% to £9.0 billion (31 Mar 2020: £6.7 billion), an increase of £2.3 billion for the twelve-month period • Current AUM at 15 June 2021 c.£9.5bn • Organic net inflows were £755 million, an increase of 11.4% of AUM with H2 £427m, 3
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. £103
Slide 11: Financial Performance
FINANCIAL PERFORMANCE OY Tatton
Slide 12: Group Profit & Loss
GROUP PROFIT & LOSS 2021 2020 Mar-21 Mar-20 Growth £000’s £000’s % • Group revenue increased 9.3% to £23.4m Revenue 23,353 21,369 9.3% • Group adjusted operating profit1 increased Admin expenses1 (11,951) (12,293) +25.6% to £11.4m Adjusted Operating profit1 11,402 9,076 25.6% Margin % 48.8% 42.5% •
Slide 13: Group Balance Sheet Highlights
GROUP BALANCE SHEET HIGHLIGHTS • Robust balance sheet - Net assets increased +37.5% to £24.4m • Intangible and Tangible assets - Goodwill, acquisition related customer relationships (Sinfonia), and system development to deliver efficiencies and improved service quality to our firms - Capital light,
Slide 14: Group Cash Flow Bridge
GROUP CASH FLOW BRIDGE • Cash generated from operations £10.9m, net of working capital • FY21 Corporation tax payments of £2.1m movements • Proceeds from share issue £3.2m on exercise of employee share • £1.0m purchase of own shares through the EBT options, and warrant held by Zeus Capital from list
Slide 15: Divisional Financial Performance
DIVISIONAL FINANCIAL PERFORMANCE Performance Commentary Analysis • Revenue and Adj Operating Profit Adj Op Profit delivered double digit growth, driven by: Normal level of o AUM increased 35.2% to reach a annualisation £1.1m milestone of £9.0bn (Mar 20 £6.7bn) + Market performance £1.584bn or 23.8%
Slide 16: Case Study: Financial Impact of COVID-19
CASE STUDY: FINANCIAL IMPACT OF COVID-19 REVENUE OPPORTUNITY Financial cost of COVID-19 is the combination of the opportunity cost of lost revenue net of lockdown cost savings • The impact of COVID-19 has tested and proved the financial resilience of Tatton’s business model, whilst COVID-19 IMPACT a
Slide 17: Cost Analysis
COST ANALYSIS Costs have been well controlled throughout an uncertain and volatile year • No change in Staff costs (2/3 of costs) • A recruitment and pay freeze was put in place in H1, and lifted in H2 after successfully adapting to the new circumstances • Headcount increased by 3 on average over th
Slide 18: Market Overview
MARKET OVERVIEW OY Tatton
Slide 19: IFA Activity During Lockdown
IFA ACTIVITY DURING LOCKDOWN TIML Sales Activity February 2020 to April 2021 Increased engagement Start of Lockdown 1 Gentle recovery out Return to work continued, as the of lockdown into messaging Start of Lockdown 2, vaccine rollout Impact 45 more normal trading commenced, in conjunction with gath
Slide 20: Market Growth – On-Platform FUM
MARKET GROWTH – ON-PLATFORM FUM Tatton CAGR +21% 2020 2019 2018 £540.8bn1 £495.9bn2 2017 £490.5bn3 £54.5bn1 £449.8bn4 £48.1bn2 10.1% 9.7% £41.6bn3 8.4% £25bn4 5.5% Tatton AUM Tatton AUM £9.0bn Tatton AUM £6.7bn 16.5% share Tatton AUM £6.1bn 13.9% share +35.2% growth £4.9bn 14.7% share +9.6% growth 1
Slide 21: Tatton – Opportunity Update
TATTON – OPPORTUNITY UPDATE PROGRESS FY19 FY20 FY21 AUM £9.0bn AUM £6.7bn AUM £6.1bn Direct AUM Paradigm Direct AUM Direct AUM £4.0bn / 44% AUM £5.0bn £2.3bn / 35% Paradigm £1.5bn / 24% / 56% Paradigm AUM £4.4bn AUM £4.6bn / 65% / 76% Number of Firms 668 Number of Firms 595 Number of Firms 445 Parad
Slide 22: Tatton – Opportunity Update
TATTON – OPPORTUNITY UPDATE • £540.8bn1 Assets held on platform and growing Total AUM £9.0bn • £54.5bn1 Assets held in DFM and growing • Tatton £9.0bn from 668 firms Direct AUM Paradigm £4.0bn or AUM £5.0bn • Paradigm firms = 170 or 25% firms = £5.0bn AUM or 56% 44% or 56% Growth • Non-Paradigm firm
Slide 23: Tatton – Opportunity Update: Direct Firms
TATTON – OPPORTUNITY UPDATE DIRECT FIRMS Total Direct Firms New Direct Firms Existing Direct Firms No. Avg per No. Avg per No. Avg per AUM AUM AUM Firms firm Firms firm Firms firm Below £1m 212 £72m £0.3m 90 £27m £0.3m 122 £45m £0.4m £1m - £5.0m 153 £366m £2.4m 25 £50m £2.0m 128 £316m £2.5m £5m - £1
Slide 24: More Than Model Portfolios
MORE THAN MODEL PORTFOLIOS UPDATE MPS £8.512bn Blended Funds Funds £0.478bn Sinfonia Funds Equivalent to £1.5bn @ 15bps AIM BPS MPS 15bps Oak Funds Funds 45bps (avg) MPS Funds 24
Slide 25: Strategic Direction
STRATEGIC DIRECTION Organic • Growth in line with a growing market c.23% CAGR over the • Organic growth through White labels Growth last three years • Panel with consolidators • Strategically relevant Key aim is to increase FUM Maintaining discipline Acquisitions • Complementary around strategic fit
Slide 26: Roadmap to Growth
ROADMAP TO GROWTH Targeting £15.0bn of AUM in 3 years £15.0bn • Organic growth averaging £1.0bn per year +19% CAGR • M&A activity of £3.0bn, with £1.6bn in pipeline M&A Markets could add/subtract to target AUM Y3 Y2 Y1 £9.0bn 26
Slide 27: Strategic Partnerships
STRATEGIC PARTNERSHIPS TOP UK DISTRIBUTORS Partnership Distribution Reach Source Type Fintel plc +10,000 financial intermediaries using Fintel services or technology Co. Annual Report Potential Sesame Bankhall +10,000 Advisers, +800 directly regulated financial services firms Co. Website No Engageme
Slide 28: Paradigm
PARADIGM Membership Growth 2017-21 1700 850 Current Membership • Mortgage: Up 4% to 1,612 (Mar 2020: 1,544) Compliance and Protect 1600 750 1500 • Consulting: Up 3% to 407 (Mar 2020: 394) 650 Mortgages 1400 • Protect: Up 22% to 811 (Mar 2020: 666) 1300 550 1200 450 1100 1000 350 Targets for FY 21/22
Slide 29: Industry Trends
INDUSTRY TRENDS Competitive challenges and trends Response / impact Tatton price/proposition remains extremely competitive, platform Environment becoming more agnostic with a strong track record of performance. Our expanding competitive range of propositions ensures we can meet the needs of IFAs and
Slide 30: Tatton's First National Advertising Campaign
TATTON’S FIRST NATIONAL ADVERTISING CAMPAIGN 30
Slide 31: Investment & Fund Update
INVESTMENT & FUND UPDATE OY Tatton
Slide 32: Growth in Assets Under Management
GROWTH IN ASSETS UNDER MANAGEMENT +£2.3bn over 12 months, Mar-20 to Mar-21 Tatton Assets Under Management in £ billion Assets under management 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 33: Tatton Investment Management
TATTON INVESTMENT MANAGEMENT The sector’s leading provider of discretionary managed platform portfolios (MPS DFM) 33
Slide 34: Tatton Platform Propositions
TATTON PLATFORM PROPOSITIONS 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 Platform ac
Slide 35: Pandemic as a Change Accelerator
PANDEMIC AS A CHANGE ACCELERATOR 2021 OPPORTUNITIES 2020 headwinds • Digitalisation of client onboarding • Tatton Portal COVID inertia • Digital signatures • Zoom end client engagement Adviser firms • Strategic distribution buyouts • White labels and co-brands • Network agreements • Investor attitud
Slide 36: Investing in Technology to Support Growth Ambitions
Investing in technology to support growth ambitions Ease of business for Effective Cyber security advisers & clients communications Tatton portal Digitalised communications Keeping data safe • Straight through processing • Showcasing digital comms to • Prioritising identification, for client onboard
Slide 37: 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 38: Case Study: Ethical Model Portfolios
CASE STUDY: ETHICAL MODEL PORTFOLIOS Change Change Mar-21 Mar-20 £ % • Tatton’s Ethical portfolios hold £441 Opening AUM (£m) 182.5m 95.2m 87.3m 92% million of AUM, 5% of overall AUM Net Inflows (£m) 204.2m 108.1m 96.1m 89% and an increase of 142% in the year Market (£m) 54.4m (20.7m) 75.1m - • Net
Slide 39: MPS Investment Portfolio Returns
MPS INVESTMENT PORTFOLIO RETURNS 5 years to 31 March 2021 Portfolio Performance (per cent.) - core product set Risk Return - 5 Years to 31 March 2021 annualised, after DFM charge and fund costs) 14.0% ARC 12.0% Active Tracker Hybrid Ethical Peers1 10.0% Defensive 4.6 4.5 4.5 3.6 Annualised Return 8.
Slide 40: Ethical Investment Portfolio Returns
ETHICAL INVESTMENT PORTFOLIO RETURNS 3 years to 31 March 2021 Risk Return - 3 Years to 31 March 2021 Tatton Fund Performance (% - ethical product set, annualised, after DFM charge and fund costs) 14.00% 12.00% ARC Ethical Peers1 10.00% Annualised Return Defensive 6.1 3.4 8.00% Cautious 7.9 4.7 6.00%
Slide 41: Summary
Summary Growing the IFA relationships to grow AUM • Strategic direction on track and delivering • Further organic growth, white labelling & back book migration arrangements • Disciplined M&A activity to support AUM growth • Promote further strategic IFA partnerships and JVs • Continue to broaden the
Slide 42: Appendices
Appendices OTatton
Slide 43: Financial Progress Since IPO
FINANCIAL PROGRESS SINCE IPO Revenue £m Adj Operating Profit1 £m CAGR 18.4% CAGR 26.1% £11.4m £23.4m £9.1m £21.4m £7.3m £17.5m £6.2m £15.5m £4.5m £11.9m Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-18 adjusted for like for like plc costs pre-IPO Margin1 % Adjusted F.Dil
Slide 44: The IFA Market
THE IFA MARKET • Adviser platform market currently at £540.8 billion2, estimated £1 trillion 2023 Total on-platform Tatton Funds Under On-platform • Latest Forecast by Fundscape is £713.1bn DFM FUM AUM Management ("FUM") Hardman May 2020 £54.5bn2 £9.0bn £540.8bn2 • 1/3rd of the total in advisory mod
Slide 45: Platforum Report
PLATFORUM REPORT DFM DISTRIBUTION DYNAMICS NOV 2020 Our World • Adviser trends to outsourcing Investment strategies used by advisers • 41% of advisers outsource but only 12% of advised assets on platform • 51% run their own in-house MPS • = 25% of advised assets on platform • 18% of assets in Multi-
Slide 46: DFM Assets on Platform
DFM ASSETS ON PLATFORM AUM £bn • Tatton remain largest provider of DFM MPS on platforms • £2.3bn growth over 12 months • £9.0bn 31 March 2021 • March 2021 AUM compares to: • Brewin Dolphin = £5.3bn • Brooks Macdonald = £2.1bn • AJ Bell = £1.4bn 46 1. Source: Platforum, November 2020
Slide 47: Mortgage Market: What's Happening
MORTGAGE MARKET COVID 19 & BEYOND WHAT’S HAPPENING • Last 12 months have shown that the housing market is firmly embedded in the UK economy and remains a key platform for the Government. Despite the gloomy forecasts from this time last year, the housing market has outperformed all expectations with
Slide 48: Protection Market: What's Happening
PROTECTION MARKET COVID 19 & BEYOND WHAT’S HAPPENING • The Market showed us during Lockdown that many Protection sales are intrinsically linked to House Purchase and average Protection Sales activity dropped amongst Mortgage firms quite dramatically during Q2 2020. The winners in this regard were th
Slide 49: Paradigm Mortgages Income Trends
PARADIGM MORTGAGES INCOME TRENDS Growth in Lending vs Procuration Fees £12.0bn £3.5m Gross Procuration Fees £m £3.0m • Despite a difficult start in Q1 of FY21 Gross Lending £bn £10.0bn £8.0bn £2.5m (valuation market closed), our Mortgage £6.0bn £2.0m procuration fee income finished the year 2% £1.5m
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