Preliminary Results For the year to 30 September 2015
Vision To become the UK s leading provider of personalised wealth and investment management services, delivering rewarding careers and sustainable shareholder returns 2
Agenda Key messages 2015 results Strategy for organic growth KPIs, conclusion and growth ambitions Q&A 3
Key messages 4
Key messages Business in great shape, with foundations and resources to pursue ambitions Period of strengthening near completion expansion is on the agenda Focused on and confident about growth Sticking to what we do best personalised wealth and investment management Clear growth strategy to realise our goal 5
Leading personalised wealth and investment manager Clear strategy based on core strengths and guiding principles: Value of our people and strength of client relationships Personalised advice and professional investment management delivered through strong network Team approach and local presence personal contact leads to strong client relationships With focus on: Understanding our target clients, through segmentation, and their changing needs Developing products and services to meet those needs Improving brand awareness Focus on distribution and capitalising on our scale in delivery Continue to hire individuals with expertise in investment management and financial planning 6
2015 progress on many fronts Progress on growth agenda: Organic growth achieved in discretionary Leading with advice Future strategy is based on our core services client & market segmentation is key Continued strong growth in agent business Foundations in place creating capacity for growth: Delivered client advice process Focus on personalised wealth and investment management Sale of Stocktrade Larger regional hubs in place Larger teams, more efficient portfolio management Lower cost investment solutions 7
Key metrics 1 over three years Discretionary FUM ( bn) Adjusted diluted EPS (p) 24.0 24.8 16.0 17.1 21.3 14.4 2013 2014 2015 2013 2014 2015 Adjusted PBT ( m) Full year dividend (p) 50.8 58.4 62.2 8.6 9.9 12.0 2013 2014 2015 2013 2014 2015 1 Continuing operations. For details of adjustments see the 2015 Annual Report and Accounts 8
2015 results 9
2015 results agenda Theme 2015 update Going forward Asset flows Income growth Achieving organic growth in core business Diversified sources of new inflows Outflows from business re-shaping Converting non-core to core Market headwinds negative investment returns and lower volumes Some dilution of margin from mix trend Declining others - trail and interest Looking to accelerate inflows further through growth initiatives: Direct private clients Specialist services Outflows should begin to decline Margin stabilising, activity picking up Accelerating direct inflows to maintain blend Income to track closer to asset growth Other income - continued decline Operating margin Growing efficiency evident Margin progression despite lower markets Affords higher investment capacity for further growth Will achieve 25% as we grow Returns Growing shareholder returns EPS +7% Dividend +21% (payout from 62% to 70%) Strong capital base underpins: Ability to increase dividend in line with accelerating growth Ability to expand and invest further 10
Financial headlines 1 good progress FY FY Change 2015 2014 (%) bn bn Core FUM Discretionary Execution only 24.8 3.7 24.0 3.1 +3 +19 28.5 27.1 +5 m m Above market growth Core income Other income 251.3 32.4 238.6 42.2 Total income 283.7 280.8 +1 +5-23 Good growth Total costs (222.0) (223.4) -1 Adjusted operating profit 61.7 57.4 +7 Adjusted profit before tax 62.2 58.4 +7 Costs stable Good growth above market Net cash 149.8 135.1 Capital adequacy 248% 241% Strong financial position Adjusted PBT margin (%) 21.9 20.8 Further improvement Adjusted diluted EPS (p) 17.1 16.0 +7 Dividend (p) 12.0 9.9 +21 Increased pay-out to 70% of adjusted EPS 1 Continuing operations 11
Continued positive asset flows into core services FY Total net Growth Investment FY bn 2014 flows % performance 2015 Discretionary 24.0 1.1 +5 (0.3) 24.8 Execution only 3.1 0.8 +26 (0.2) 3.7 Core FUM 27.1 1.9 +7 (0.5) 28.5 Advisory 5.4 (1.7) -31 (0.2) 3.5 Total FUM 32.5 0.2 (0.7) 32.0 12
Strong organic inflows and advisory conversions 2015 FY 2015 % bn Inflow Outflow Net Transfers Net flows Inflows Outflows Transfers Discretionary 2.1 (1.3) 0.8 0.3 1.1 +9-5 +1 Execution only 0.4 (0.6) (0.2) 1.0 0.8 +13-19 +32 Core FUM 2.5 (1.9) 0.6 1.3 1.9 Advisory - (0.4) (0.4) (1.3) (1.7) - -7-24 Total FUM 2.5 (2.3) 0.2-0.2 13
Diversifying sources of gross discretionary inflows bn 2012 2013 2014 2015 Agent Agent Agent Agent 0.5 0.9 0.7 1.4 0.9 1.4 1.1 1.0 Direct Direct Direct Direct Total 1.4 2.1 2.3 2.1 14
External outflows stable through business reshaping bn 2013 2014 2015 (0.9) (1.0) (1.0) (0.1) (0.5) (0.2) (0.3) Direct Agent Discretionary (0.5) (0.6) Execution only (1.0) (0.7) (0.4) Advisory Total 2.5 2.4 2.3 15
Consistent growth record in discretionary Delivered more than 4bn net inflows over three years 7% compound real growth from asset flows Transfers 6% excluding advisory transfers 17% Good base to accelerate with new growth initiatives Agent 58% 25% Aiming for balanced inflows between direct and agent over next five years Direct 11% CAGR achieved 4.1bn net inflows 18.2 24.8 20.7* 2012 2015 * 2012 FUM indexed up on market growth (CAGR = 4%) 16
Income Yield stable Discretionary (bps) m FY 2015 FY 2014 % Change 94 89 89 28 23 23 Commissions Discretionary 225.5 215.9 +4 66 66 66 Fees Financial planning 15.7 13.0 +21 FY 14 H1 15 FY 15 Execution only 10.1 9.7 +4 Core income 251.3 238.6 +5 FP income continued strong growth 17% CAGR Advisory Trail income Interest 24.4 4.5 3.5 31.6 5.2 5.4-23 -13-35 9.3 11.7 13.0 15.7 Other income 32.4 42.2-23 2012 2013 2014 2015 Total income 283.7 280.8 +1 Other income MiFID II will close out remaining trail end 2016 Interest income c. 2m at current run rates 17
Improved quality of business - solid base for accelerated growth Income profile % Asset mix % 2010 2015 2010 2015 Fees FP income 38 4 66 Discretionary 51 78 Commissions 41 6 Execution only 16 Trail Interest 10 7 25 2 1 Advisory 33 11 11 18
Operating costs stable run rate Capacity to grow without adding significant costs Total operating costs Discretionary FUM per F30 m 41 49 55 75m target m 224.7 223.3 222.0 43.3 48.8 49.0 20.0 20.0 20.0 Profit share Discretionary income per CF30 k 370 443 502 103.6 98.5 104.0 77.8 76.0 69.0 Fixed staff Non staff Category 2013 2 Category 2014 3 Category 2015 4 2013 2014 2015 Profit share/pre profit share profit (%) Growing efficiency evident Capacity for growth 46.3 46.0 44.3 Total staff costs/income (%) 53.5 52.5 53.9 Non staff costs/income (%) 28.3 27.1 24.3 19
Margin retaining more of top line growth 25.0 Adjusted PBT Margin (%) 25% 20.0 16.5 18.5 20.8 21.9 Pre 7% drop in H2 market - run rate 23%+ 15.0 15% 10.0 5.0 0.0 Annual % growth +9 +2 +1 Income +6-1 -1 Costs 2012 2013 2014 2015 20
Shareholder returns underpinned by strengthening capital base 14 12 10 8 6 4 2 0 17.1 16.0 12.0 14.4 12.1 9.9 8.6 7.15 8.25 6.25 5.05 3.6 3.55 3.55 3.65 3.75 2012 2013 2014 2015 18 16 14 12 10 8 6 Final 4 Interim 2 0 Adjusted EPS (p) Dividend (p) Capital adequacy ratio 123% 226% 241% 248% 21
Strategy for organic growth 22
Strategy for organic growth Understand our target clients and their changing needs Refine proposition to meet those needs Improve brand awareness and promise Enhance services to deliver that promise Refocus on distribution and leverage our scale in delivery 23
A scalable platform for growth Wealth & Investment Management Managed Portfolio Service Brewins Portfolio Service Personal, named adviser (or external IFA) Full advice Caters for all client needs Full suite of solutions Actively managed IM solution only via Platforms No advice Simple needs only IM solution only Direct equities, core funds, alternatives & ETFs Passive & active model portfolios via core funds Private Clients Charities/ Corporates Professional Services Agents Agents Private Clients 24
Wealth & Investment Management direct clients Absolute focus, no distractions Private Clients Enhanced goals based advice process is generating significant new business opportunities Financial planning is increasingly the route to new markets and new FUM sources 11% of direct FUM in wealth managed service - we are targeting 30% 20% of new direct FUM in wealth managed service Financial planning income - 21% increase in 2015 Proactive response to RDR around transparency leaves us well positioned for MiFID II Charities Specialist teams created in 2010 - now 5 th largest player* (7 th in 2014, 11 th in 2011) Consistent marketing & investment approach = increased market share *source Charity Finance Magazine Annual Charity Fund Management Survey 25
Wealth & Investment Management Strong agent growth / professional services proposition Professional Services proposition Financial planning is the enabler to this market Two services in pilot for clients of matrimonial lawyers and corporate finance professionals Early feedback positive and on track for rollout in Q1 2016 Agents 5.6bn of FUM from 1,300 firms, 5.0bn FUM in personalised investment management Record year for the national sales team gross agent inflows increased 22% YOY Investment in Touchstone (shows market share per agent) to drive increased penetration Investment in BITA Risk & ARC to deliver more transparency around risk and return ARC & BITA Risk to provide opportunities for more Nationals and Networks in 2016 26
Managed & Brewins Portfolio Service opportunity & high growth Managed Portfolio Service (MPS) - agents ~350 firms have invested 638m in MPS ( 301m in 2014) via 10 platforms Year end inflows running at c. 35m per month run rate achieves 3bn in 5 years 30 bps revenue, but significant drop through scalable & high margin Passive version of MPS due in 2016 Brewins Portfolio Service (BPS) - direct clients An entry level non-advised proposition - 2,000 clients & 100m AUM Trialling marketing to smaller execution only & advisory clients Significant opportunity to distribute BPS Junior ISA to all clients BPS learnings around digital technology and advice to be leveraged group-wide 27
Summary initiatives leading to higher growth New advice process provides platform for new FUM from an advice led proposition Financial planning income +21% YoY Charities now the 5 th largest manager New professional services proposition to launch in 2016 Inflows from agents +22% YoY MPS FUM +212% YoY with new passive range launching 2016 Now focusing on increasing direct growth - specialisation, incentives and direct marketing Initiatives working total gross discretionary inflows of 9% in 2016 28
KPIs, conclusion and growth ambitions 29
KPIs: continued progress towards targets Strategic priority KPI FY 2013 FY 2014 FY 2015 Current target Progress Revenue growth Discretionary FUM inflows (%) 6 7 5 5 Revenue growth (%) 5 2 1 n/a Adjusted PBT margin (%) 18.5 20.8 21.9 25+ Discretionary income per CF30 ( '000) 370 443 502 490 Improved efficiency % of managed FUM in discretionary service 76 82 88 90 Discretionary FUM per CF30 ( m) 41 49 55 75 Average client portfolio ( '000) 420 478 498 500 Capital sufficiency Capital adequacy ratio (%) 226 241 248 Min 150 Dividend pay out (%) 60 62 70 60-80 Dividend growth Adjusted EPS growth (%) - diluted 15 11 7 n/a Dividend growth (%) 20 15 21 n/a 30
Conclusion Reshaping of business is behind us Business is in great shape Able to adapt whilst staying true to our values Depth of talent Stronger financials and higher quality business Expansion on agenda Hiring investment managers and financial planners Integrated into culture and structure Already achieving good growth no distractions in the future Focused on growth Growing the business in both absolute and market share terms Primarily focused on organic opportunities Sticking to what we do best Delivering high quality advice and service through a personalised approach 31
Growth ambitions..the next 5 years Aiming to grow discretionary FUM by a third over next five years Agent growth will be a major contributor in the near term Initiatives to accelerate direct client growth Aiming for balanced direct/agent growth by 2020 Targeting 1.5bn direct net inflows per annum by 2020 50bn is the long run aspiration 32
Vision To become the UK s leading provider of personalised wealth and investment management services, delivering rewarding careers and sustainable shareholder returns 33
Q&A 34
Appendices 35
Statutory PBT reconciliation m 2015 2014 FY FY Adjusted profit before tax 62.2 58.4 Amortisation of intangibles (9.2) (13.6) Exceptionals 8.0 (38.0) FY FY Statutory PBT from continuing operations 61.0 6.8 Tax (12.7) (1.4) Profit after tax from continuing operations 48.3 5.4 (Loss)/profit after tax from discontinued operations (7.3) 1.3 Profit for the period 41.0 6.7 m 2015 2014 Income 9.7 9.7 Expenses (8.4) (8.1) Operating profit 1.3 1.6 Costs of separation (11.7) 0.0 (Loss)/profit before tax (10.4) 1.6 Tax 3.1 (0.3) (Loss)/profit after tax (7.3) 1.3 36
Core income FUM & income margin FY 2015 Average FUM bn FY 2014 Average FUM bn FY 2015 Income m FY 2014 Income m FY 2015 Average margin bps FY 2014 Average margin bps Discretionary YoY change 25.5 11% 23.0 225.5 4% 215.9 89-5% 94 Execution only YoY change 3.6 20% 3.0 10.1 4% 9.7 28 32 Advisory YoY change 4.4-27% 6.1 24.4-23% 31.6 57 8% 53 37
Strong balance sheet, capital and cash flow m 2015 2014 Goodwill & client relationships Software Total intangible assets 87 94 Fixed assets Other non-current assets Total tangible non-current assets 19 31 Net cash Working capital Provisions Shares to be issued 78 9 8 11 150 (4) (7) (9) 87 7 11 20 135 (12) (5) (10) Total net current assets 130 108 Pension deficit Other non-current liabilities Shares to be issued FY (3) (14) - FY (8) (5) (9) FY FY m 2015 2014 Adjusted EBITDA 78.6 74.4 Pension funding Capex Working capital Interest and taxation Exceptional items & discontinued operations Share movements net (3.0) (7.6) (3.3) (10.6) 6.0 (18.1) (3.0) (10.5) (1.4) (6.4) (3.1) (5.0) Cash flow pre dividends 42.0 45.0 Dividends paid (27.0) (23.1) Cash flow 15.0 21.9 Total non- current liabilities 17 (22) Net assets 219 211 Regulatory capital resources 145 141 38
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