Brooks Macdonald Group Plc · LSE:BRK
Brooks Macdonald — H1 FY2021 Earnings Presentation
43 slides from Brooks Macdonald's earnings presentation, Mar 11, 2021
Slide 1: Half year results for the six months ended 31 December 2020
Half year results for the six months ended 31 December 2020 Record FUM, margin over 25% Entering the next phase of the strategy 11 March 2021
Slide 2: Speakers
Speakers Caroline Connellan Ben Thorpe CEO Group Finance Director
Slide 3: Agenda
Agenda 1 Context and introduction 2 Financial results 3 H1 achievements and outlook 4 Q&A 5 Appendices
Slide 4: Context and introduction
Caroline Connellan 1 Context and introduction 2 Financial results 3 H1 achievements and outlook
Slide 5: Record financial performance and continued strategic momentum
Record financial performance and continued strategic momentum… • Delivered for clients and intermediaries throughout the pandemic • Strong investment performance in volatile markets • Record FUM, record profit margin • Dividend up 9.5% • Entering the next phase of our strategy Half year results for
Slide 6: Grounded in our purpose of realising ambitions and securing futures
… grounded in our purpose of realising ambitions and securing futures Delivering for clients and Investing in our people Meeting our Environmental, Social intermediaries and Governance responsibilities • Continued focus on wellbeing • Proposals and pipeline through “Protect to Thrive” • Rapidly grow
Slide 7: Financial results
Ben Thorpe 1 Context and introduction 2 Financial results 3 H1 achievements and outlook Note: Numbers may not always cast due to rounding
Slide 8: Strong financial performance delivering record profit and margin
Strong financial performance delivering record profit and margin… Total revenue (£m) Underlying profit before tax Underlying profit before tax (£m) margin (%) +1.8% +4.2pts +21.7% 54.9 55.9 25.1% 14.0 20.9% 50.8 11.5 17.7% 9.0 H1 FY19 H1 FY20 H1 FY21 H1 FY19 H1 FY20 H1 FY21 H1 FY19 H1 FY20 H1 FY21 S
Slide 9: Record FUM of £15.5bn, net flows gaining momentum
Record FUM of £15.5bn, net flows gaining momentum Total FUM for H1 FY19 to H1 FY21 (£bn) Organic and acquired net flows Q1 FY20 to Q2 FY21 (£m) 977 15.5 776 H1 CAGR 1,181 15.1% 13.7 882 13.1 13.1 (28) (106) (204) (64) 11.7 (261) (478) H1 FY19 FY19 H1 FY20 FY20 H1 FY21 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20
Slide 10: Recent acquisitions on track to deliver targeted earnings accretion
Recent acquisitions on track to deliver targeted earnings accretion Notes on underlying PBT attribution: Underlying PBT attribution by business for H1 FY21 (£m) 0.4 Cornelian 2.7 14.0 Cornelian contribution to the Group in line with (0.6) expectations with synergies and accretion delivered. 11.5 Llo
Slide 11: Improved performance in UKIM & FP, more to come in H2 from International
Improved performance in UKIM & FP, more to come in H2 from International Group and UK Investment Financial H1 FY21 (£m) International consolidation Total Management Planning adjustments Revenue 46.9 7.1 1.9 - 55.9 Direct costs (19.9) (4.3) (1.4) (16.3) (41.9) Contribution 27.0 2.8 0.5 (16.3) 14.0 In
Slide 12: Stable fee yields, non-fee income driving reduction as per guidance
Stable fee yields, non-fee income driving reduction as per guidance Average FUM (%) and yields (bps) BPS annualised income yield International annualised income H1 FY20 vs H1 FY21 (bps) yield H1 FY20 vs H1 FY21 (bps) (4.0bps) 89.4 86.2 77.7bps 79.0 73.7bps 69.3 21.6 18.4 25.5 15.5 1% 12% 79.0bps 99.
Slide 13: Good cost discipline, investing for growth, costs down 9% ex acquisitions
Good cost discipline, investing for growth, costs down 9% ex acquisitions H1 FY20 H1 FY21 Change £m £m £ % Notes on underlying costs: Fixed staff costs 18.8 19.1 0.3 1.6 Variable staff costs 7.6 7.0 (0.6) (7.9) • Total costs down £1.5m (3.5%) over the period and down £3.9m (9.0%) on like-for- Acquir
Slide 14: Higher statutory profit with new adjusting items solely acquisition related
Higher statutory profit with new adjusting items solely acquisition related H1 FY201 H1 FY21 Notes on reconciliation to statutory profits: £m £m Underlying profit before tax 11.5 14.0 Acquisition related costs +£2.6m: Acquisition related costs: i. Gain on purchase (+£5.0m) in relation to the Lloyds
Slide 15: H2 guidance points
H2 guidance points • Group net flows expected to be modestly positive in H2. • UKIM pipeline strong, particularly BM Investment Solutions, and momentum building. BPS conversion times impacted by third lockdown. FUM • Underlying momentum in International boosted by Lloyds acquisition. However, H2 net
Slide 16: H1 achievements and outlook
Caroline Connellan 1 Context and introduction 2 Financial results 3 H1 achievements and outlook Note: Numbers may not always cast due to rounding
Slide 17: Delivered sustainable, value-enhancing growth since 2017, now entering the next phase
Delivered sustainable, value-enhancing growth since 2017, now entering the next phase Completed 2017 strategy, Targeting the full scale of the Entering a new phase of the focused on accelerating underlying opportunity for strategy with confidence and growth and value creation the Group ambition Unde
Slide 18: Focused on accelerating growth and value creation
Focused on accelerating growth and value creation, with vision for BM as the leading investment manager for intermediaries Market-leading organic growth People and Culture Best-in-class adviser experience and excellent client service, rigorous Centralised Investment Process, compelling investment pr
Slide 19: Strong first half across the business with momentum building
Strong first half across the business with momentum building UK Investment Management International • Inflows up and outflows down Q2 vs Q1, net • Energised, high performing team in place, now positive calendar year to end February excluding right-sized and focused DCF – momentum building • Now a mu
Slide 20: Our partnership with SS&C is a critical enabler of the strategy
Our partnership with SS&C is a critical enabler of the strategy Delivered already Enabling all three value drivers of the strategy Administrative Objectives of the processes partnership Organic growth transferred to SS&C • Market leading digital tools, Retained complementing face-to-face relationshi
Slide 21: Delivered strong performance in H1, focused on accelerating growth
Delivered strong performance in H1, focused on accelerating growth and value creation • Strong six months – record FUM, record profit margin, robust investment performance, flows trend improving, increasing employee engagement • Dividend up by 9.5%, underlining confidence of the Board in the Group’s
Slide 22: Q&A
Q&A BM BROOKS MACDONALD
Slide 23: Appendix
Appendix BM BROOKS MACDONALD
Slide 24: The fundamental opportunity for Brooks Macdonald is excellent
The fundamental opportunity for Brooks Macdonald is excellent Wealth is growing in the UK… … as is the number of advisers. Forecast UK assets by wealth band1 (£trn) Number of advisers in directly authorised firms (‘000) 4.0 3.0 30 CAGR 3.7% 2.0 CAGR: HNW + Affluent 3.2% 20 1.0 0.0 10 2019 2020F 2021
Slide 25: Fundamental opportunity – demographics and policy
Fundamental opportunity – demographics and policy Underlying demographic and policy trends Trigger for seeking financial advice (%) UK household wealth2 by age band • Supportive demographic trends: ageing population with need to save for retirement 50% c.26m £1.9tn • Supportive policy environment: p
Slide 26: Fundamental opportunity – UK wealth market
Fundamental opportunity – UK wealth market UK S&I market Wealth market participants by segment (by investment management provider) Retail Mass affluent Upper affluent High net worth £2.6trn High NS&I touch Private / bulge bracket banks Occupational DC £0.7trn Cash ISAs Financial advisers £1.4trn IFA
Slide 27: Fundamental opportunity – IFA market
Fundamental opportunity – IFA market IFA firm characteristics IFA firms by size, share of FA population and share of BM funds1 (%) c.26k c.£8bn 0.7% 5.8% 2.4% • Large national scale leaders 1.5% Financial Times Top 100 • Targeting individuals and firms in the ‘long tail’ to increase adviser numbers
Slide 28: Fundamental opportunity – IFA outsourcing
Fundamental opportunity – IFA outsourcing The trend for IFAs to outsource investment IFAs decide to outsource to let them focus and management to DFMs is continuing, with the reduce their administrative and compliance proportion of model portfolios and funds in the burden, but choice of DFM depends
Slide 29: Driving organic growth going forward
Driving organic growth going forward Importance to advisers What Brooks Macdonald will deliver • Critical to assure advisers of consistency of • Bring best of our ideas consistently to clients’ portfolios, giving client returns consistently strong returns Robust • Incorporates input from all investm
Slide 30: Our specialist BPS proposition
Our specialist BPS proposition • Environmental, Social & Governance offering which aims to delivery meaningful change to sustainability changes on behalf of investors Responsible • Two options – Advance, which invests in funds giving exposure to businesses Investment providing direct solutions to th
Slide 31: Investment performance
Investment performance 1 year to 3 yrs to 5 yrs to 10 yrs to 31.12.20 31.12.20 31.12.20 31.12.20 BM Low Risk 2.72 8.63 21.37 51.47 Low Risk ARC Sterling Cautious PCI 4.20 8.50 19.62 39.08 Relative performance -1.48 0.13 1.75 12.39 BM Low-to-Medium Risk 4.53 12.17 30.31 66.07 Low-to-Medium Risk ARC S
Slide 32: Higher average FUM, growth in revenue and slight drop in yields due to mix change
Higher average FUM, growth in revenue and slight drop in yields due to mix change Revenue Yields Avg FUM Notes on yields movement: H1 H1 H1 FY20 H1 FY21 Change H1 FY20 H1 FY21 Change Change FY20 FY21 UKIM: £m £m % bps bps Bps £m £m % BPS fee yield - flat on prior year BPS fees 28.3 27.6 (2.5) 67.8 6
Slide 33: Cash flows
Cash flows £m H1 FY20 H1 FY21 Opening cash 34.6 50.2 Cash flows from operating activities 14.4 16.7 Working capital movements (3.7) (6.2) Discontinued operations 0.4 - Net interest received 0.1 0.0 Cash paid on purchase of subsidiary - (5.3) Dividends paid (4.4) (5.0) Net tax paid (4.5) (3.0) Diluti
Slide 34: Strong cash generation, Lloyds acquisition funded from own funds
Strong cash generation, Lloyds acquisition funded from own funds Cash movements for 6 months to 31 December 2020 (£m) 16.7 (6.2) 62.6 (5.3) (5.0) Proceeds from (3.4) share placing 50.2 (3.0) 29.4 (2.6) Consideration paid 8.3m (2.4) (0.4) Capital acquired (3.0m) 34.6 38.6 33.2 Half year results for t
Slide 35: Capital expenditure trend
Capital expenditure trend Capital expenditure FY17 – H1 FY21 (£m) 7.0 0.9 1.0 4.9 0.6 3.5 1.7 0.5 0.4 2.6 5.1 0.2 0.4 1.7 0.2 2.6 0.4 2.6 0.9 0.1 2.0 1.1 0.4 0.4 FY17 FY18 FY19 FY20 H1 FY20 H1 FY21 Infrastructure & Technology Property Related IT Equipment Half year results for the six months ended 3
Slide 36: Interim and final dividend growth trend
Interim and final dividend growth trend Interim and final dividend FY15 to H1 FY21 (p) Total CAGR 11.7% 53.0 51.0 47.0 41.0 35.0 30.5 Interim CAGR 14.9% 21.0 23.0 17.0 19.0 15.0 10.0 12.0 FY15 FY16 FY17 FY18 FY19 FY20 H1 FY21 Interim dividend H2 Cover: Underlying 3.0 2.5 2.8 2.5 2.4 2.3 Statutory 2.
Slide 37: H1 FY20 restated P&L
H1 FY20 restated P&L Platform H1 FY20 ACD H1 FY20 H1 FY20 restatement: MPS VAT Reported adj. Restated adj. The H1 FY20 figures have been restated to Revenue 55.8 (0.7) (0.2) 54.9 reflect the correct recognition of: Total staff costs (26.4) - - (26.4) i. Authorised Corporate Director fees and Total n
Slide 38: Second strongly accretive acquisition completed
Second strongly accretive acquisition completed Lloyds Bank International's Channel Islands Lloyds FUM by type at completion (£m) wealth management and funds business Integration completed in Q4 2020, increasing International FUM 45% by £882m and adding c.1,000 private clients 55% Multi-asset and fi
Slide 39: Leadership team
Leadership team Caroline Connellan Ben Thorpe Robin Eggar Andrew Shepherd Lynsey Cross CEO, Executive Director Group Finance Director, Managing Director, UKIM CEO International Chief Operating Officer Executive Director Deputy Group CEO Edward Park Priti Verma Tom Emery Alick Mackay Chief Investment
Slide 40: Our guiding principles underpin everything we do
Our guiding principles … underpin everything we do and the way we do it Half year results for the six months ended 31 December 2020 40
Slide 41: Recent awards
Recent awards 2020 2021 • Defaqto: 5-star rating for the MPS and BPS • Defaqto: 5-star rating for the BPS, MPS and MPS (platform) • Defaqto: 5-star rating for the MPS (platform category) • Defaqto: 4-diamond rating for the MPS, PMPS and PMPS (passive) • Defaqto: 5-diamond rating for the MAF (risk fo
Slide 42: Contacts
Contacts Caroline Connellan Ben Thorpe CEO Group Finance Director 21 Lombard Street 21 Lombard Street London London EC3V 9AH EC3V 9AH T 020 7408 5577 T 020 7927 4955 E [email protected] E [email protected] Rishi Shah Edward Berry Peel Hunt FTI Consulting Moor House,
Slide 43: 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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