Brooks Macdonald Group Plc · LSE:BRK
Brooks Macdonald — H1 FY23 Earnings Presentation
37 slides from Brooks Macdonald's earnings presentation, Mar 2, 2023
Slide 1: Half year results for the period ended 31 December 2022
Half year results for the period ended 31 December 2022 Solid performance with continuing positive net flows, robust underlying profit margin, and two high-quality acquisitions 2 March 2023 1
Slide 2: Speakers
Speakers Andrew Shepherd Ben Thorpe Robin Eggar CEO CFO Managing Director, UKIM 2
Slide 3: Introduction
Andrew Shepherd 1 Introduction 2 H1 FY23 financial results 3 Update on strategy delivery 4 Q&A 3
Slide 4: Strong strategic progress underlined by solid financial performance
Strong strategic progress underlined by solid financial performance Underlying Solid financial Continuing positive net flows, profit margin (%) performance, with robust 4.4% annualised for the period underlying profit margin despite uncertain macroeconomic backdrop 28.2% 25.9% 24.6% Continued rapid
Slide 5: H1 FY23 financial results
5 Ben Thorpe 1 Introduction 2 H1 FY23 financial results 3 Update on strategy delivery 4 Q&A
Slide 6: Solid set of results, in line with guidance
Financial results Solid set of results, in line with guidance Underlying1 profit Underlying1 profit Total revenue (£m) before tax (£m) margin before tax 28.4% 61.9 58.9 25.1% 55.9 17.6 24.6% 14.0 14.5 H1 FY21 H1 FY22 H1 FY23 H1 FY21 H1 FY22 H1 FY23 H1 FY21 H1 FY22 H1 FY23 Statutory profit Underlying
Slide 7: Robust underlying profit margin of 24.6%
Financial results Robust underlying profit margin of 24.6% P&L (£m) H1 FY22 H1 FY23 Change Average market levels down 10% £m £m £m % 1 Closing MSCI PIMFA 1,849 1,661 (188) (10%) 1 Average MSCI PIMFA 1,815 1,633 (182) (10%) Average FUM down 7% Closing FUM 17,329 16,226 (1,101) (6%) Average FUM 17,036
Slide 8: Net flows up 6% year-on-year
Financial results Net flows up 6% year-on-year Total FUM for H1 FY20 to H1 FY23 (£bn) Organic net flows and annualised growth rate H1 FY20 to H1 FY23 (£m) 17.3 5.3% 4.4% 16.5 4.0% 16.2 459 15.5 15.7 347 326 13.7 1.2% 13.1 (7.7%) (4.1%) (5.4%) 92 up 6.4% (269) H1 H2 H1 H2 H1 H2 H1 FY20 FY20 FY21 FY21
Slide 9: Non-fee income driving yield increase partly offset by change in mix
Financial results Non-fee income driving yield increase partly offset by change in mix Average FUM (%) and yields (bps) Yields on fee and non-fee income (bps) UKIM (BPS) International Average FUM 86.2 90.6 85.0 77.2 £17.0bn £15.8bn 19.7 26.8 10.9 15.5 (3.9bps) 70.3bps 69.0bps 66.3 65.3 76.1 72.6 86.
Slide 10: Total underlying costs flat on prior year
Financial results Total underlying costs flat on prior year Total underlying costs movement H1 FY22 to H1 FY23 (£m) H1 FY22 H1 FY23 Inc / (dec) £m £m £m % Fixed staff costs 20.0 21.3 1.3 6.5 Variable staff costs 8.3 4.3 (4.0) (48.2) Acquired staff costs - 0.2 0.2 - Total staff costs 28.3 25.8 (2.5)
Slide 11: Weaker markets impacted all segments, International also impacted by outflows
Financial results Weaker markets impacted all segments, International also impacted by outflows UK Investment H1 FY23 (£m) International Group1 Total Management Revenue 48.8 10.1 - 58.9 UKIM UKIM which includes the Group’s Private Direct costs (20.7) (6.6) (17.3) (44.6) Clients business reported a s
Slide 12: Strong capital position to support growth and continued dividend enhancement
Financial results Strong capital position to support growth and continued dividend enhancement Annual dividend per share (p) Interim CAGR 10.2% Own Funds1 Capital requirement including internal Attribution (£m) buffer Interim dividend 28.0 Surplus capital 26.0 23.0 10.6 21.0 19.0 Total 4.4 FY19 FY20
Slide 13: Net cash outflows driven by funding of acquisitions and increased dividends
Financial results Net cash outflows driven by funding of acquisitions and increased dividends £m H1 FY22 H1 FY23 Opening cash 54.9 61.3 Cash flows from operating activities 18.5 16.1 Working capital movement (9.1) (9.8) Dividends paid (6.3) (7.0) EBT purchase net of shares issued (1.1) (1.7) Net tax
Slide 14: H2 FY23 outlook and guidance
Financial results H2 FY23 outlook and guidance P&L • FY23 underlying profit in line with market expectations, when updated for impact of acquisitions and current markets • The Group expects net flows to remain positive for the rest of the year with the annualised growth rate for FY23 expected to be
Slide 15: Update on strategy delivery
15 Andrew Shepherd and Robin Eggar 1 Introduction 2 H1 FY23 financial results 3 Update on strategy delivery 4 Q&A 15
Slide 16: Demographics and policy underpin the fundamental opportunity in wealth management
Strategy delivery Demographics and policy underpin the fundamental opportunity in wealth management Personal wealth is growing and expected to continue People are living longer to grow Actual and projected number of people aged 65 and Liquid savings & investments, £bn over in UK by age group, 2020 t
Slide 17: IFA market dynamics support the opportunity
Strategy delivery IFA market dynamics support the opportunity Investors are increasingly working with financial The number of financial advisers has stayed broadly advisers, our primary distribution channel flat Number of ongoing clients with IFAs Number of individual advisers 30,000 3,000,000 25,00
Slide 18: Ambitious growth strategy
Strategy delivery Ambitious growth strategy Our strategy is underpinned by three strategic value drivers People and Culture 1 2 3 Attracting, engaging and retaining Market-leading Service and operational Agile, high-quality the best talent in the industry organic growth excellence M&A Our mission Ou
Slide 19: 1. Market-leading organic growth: good progress
Strategy delivery 1. Market-leading organic growth: good progress Five components underpin our ambition Annualised gross and net flows by half year (%) to deliver market-leading organic growth Can-do culture focused on making a difference for clients and advisers 15.5 14.6 15.2 14.8 11.3 12.0 11.3 C
Slide 20: 1. Market-leading organic growth: Platform MPS
Strategy delivery 1. Market-leading organic growth: Platform MPS Brooks Macdonald Platform MPS FUM 2017-2022 (£m) Over FY20 and FY21, we increased the number of platforms our MPS is 2,750 available on from 13 to 20 and 2,500 launched BM Investment Solutions, our B2B offering 2,250 2,000 Our Platform
Slide 21: 2. Service and operational excellence: continuing our digital transformation
Strategy delivery 2. Service and operational excellence: continuing our digital transformation What we’ve done in H1 What we’re doing now What we’re going to do SS&C SS&C SS&C • Completed transition to the SS&C • Continuing embedding platform and • Continuous improvement towards platform processes i
Slide 22: 3. Applying our acquisition criteria with discipline
Strategy delivery 3. Applying our acquisition criteria with discipline Categories Acquisition criteria: high quality business, compelling strategic logic, strong cultural fit, value-adding 1. Investment managers • • Scale play Adding FUM takes advantage of high operational gearing in • Looked at c.2
Slide 23: Our medium-term ambition is to be a Top 5 wealth manager in the UK
Moving forward with ambition Our medium-term ambition is to be a Top 5 wealth manager in the UK and the Crown Dependencies Medium-term targets Organic growth driven by differentiation: • Strong culture Top 5 wealth • Robust Centralised Investment Process manager • Service and operational excellence
Slide 24: H1 FY23 was a solid half-year with further strategic progress
Moving forward with ambition H1 FY23 was a solid half-year with further strategic progress Continued positive net flows – Robust underlying profit now 7 successive quarters margin Increased the interim Completed two high-quality dividend again acquisitions Confident in our strategy, well positioned
Slide 25: Brooks Macdonald
BM BROOKS MACDONALD
Slide 26: Appendices
BM BROOKS MACDONALD
Slide 27: Our investment case
Moving forward with ambition Our investment case 1 Market opportunity Delivery capability 5 2 Strong culture and brand Distribution reach 6 3 Centralised Investment Service excellence 7 Process 4 Broad investment Quality of leadership team 8 proposition 27 27
Slide 28: Our guiding principles
Our guiding principles We do the right thing • We are worthy of our clients’, advisers’, partners’ and one another’s trust • We act with interity, honesty and fairness and we value diversity • We take responsibility for our actions and decisions We do the • We deal with issues and tackle hard decisi
Slide 29: Our Centralised Investment Process has delivered robust performance over the medium term
Our Centralised Investment Process has delivered robust performance over the medium term Cumulative performance (%) 3 months to 1 year to 3 years to 5 years to 10 years to 31.12.22 31.12.22 31.12.22 31.12.22 31.12.22 BM Low Risk 3.66 -9.18 -2.73 2.87 31.34 Low Risk ARC Sterling Cautious PCI 1.96 -7.
Slide 30: Our specialist BPS proposition
Our specialist BPS proposition Responsible Investment Service Decumulation Service Over • Environmental, Social & Governance offering which aims to deliver meaningful change to sustainability changes on behalf of investors • A new approach to retirement planning designed to help clients meet their i
Slide 31: Increasing positive net flows driven by enhanced distribution capability and MPS market share
Financial results Increasing positive net flows driven by enhanced distribution capability and MPS market share Q1 FY22 – Q1 FY23 Organic net Strong growth in BMIS and MPS Opening Opening Closing Platform achieving combined flows FUM Q1 Q2 Q3 Q4 FUM Q1 Q2 FUM H1 (£m annualised net flows of 52.6% FY2
Slide 32: Non-fee income driving increase in total yields, fee yield drop driven by change in book mix
Non-fee income driving increase in total yields, fee yield drop driven by change in book mix Revenue Yields Avg FUM Notes on yields movement: H1 H1 H1 H1 H1 H1 FY22 FY23 Change FY22 FY23 Change FY22 FY23 Change UKIM £m £m £m Bps Bps Bps £m £m % BPS fee yield – down by 1.0bps driven by the impact of
Slide 33: Statutory profit decrease in line with underlying earnings as adjusting items kept stable
Statutory profit decrease in line with underlying earnings as adjusting items kept stable H1 FY22 H1 FY23 Notes on reconciliation to statutory profits: £m £m Underlying profit before tax 17.6 14.5 Amortisation of client relationships (£2.8m) Amortisation of client relationships (2.7) (2.8) The incre
Slide 34: Capital expenditure
Capital expenditure 7.0 0.9 1.0 4.9 0.6 3.7 1.7 0.2 3.2 0.1 £m 0.4 0.2 2.4 0.1 5.1 2.3 0.1 0.4 1.7 0.2 3.1 2.9 0.4 2.6 2.2 1.9 1.1 FY18 FY19 FY20 FY21 FY22 H1 FY22 H1 FY23 Infrastructure & Technology Property Related IT Equipment 34
Slide 35: Restatement of H1FY22 segmental view
Restatement of H1FY22 segmental view UK Investment The Group has undertaken a wide-ranging review H1 FY22 (£m) Restated International Group1 Total Management of its internal management information and Revenue 50.9 11.0 - 61.9 Group costs allocation process. As part of this Direct costs (20.1) (6.2)
Slide 36: Contacts
Contacts Andrew Shepherd CEO 21 Lombard Street 020 7927 4816 London EC3V 9AH [email protected] John Welch Edward Berry Peel Hunt FTI Consulting Moor House 020 7418 8900 200 Aldersgate 020 3727 1046 120 London Wall Aldersgate Street London [email protected] London brooksmacdonald@fticonsult
Slide 37: Important information
Important information This presentation has been prepared for general information on ARC Private Client Indices (“PCI”) are based on historical matters of interest only and does not constitute an invitation to information and past performance is not indicative of future treat or a promotion, solicit
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