Miton Group PLC (LON:MGR) Chief Executive Officer David Barron caught up with DirectorsTalk for an exclusive interview to discuss his new position as CEO and their 2016 final results. David discusses the financial highlights, the drivers, what makes them different, the £21 million cash on their balance sheet and confidence for 2017
Q1: Now David, congratulations on your new position of CEO for Miton Group. How does it feel to be at the helm with just over £3 billion worth of assets to manage?
A1: Well, it’s excellent to be coming to the helm when we’re announcing the results for last year which we think are very strong so it’s a good time. I think Miton Group have done a lot of good things over the last 5-6 years under the leadership of Ian Dighé and Gervais Williams, since they re-financed the business and I think we’re seeing the benefits of that in the results that we announced yesterday. Particularly, I would point to what we did when Gervais came on board with Ian which was to set up a single strategy business, we’ve launched 5 new funds in the last 6 years and some of those are reaching maturity now and that’s been a key element in our growth. So, I see it very much as a continuity, and continuing on the good work, but it’s a great position and a great time to be taking over.
Q2: Those Assets under Management (AuM), they’ve increased 20% over last year, can you talk us through the financial highlights?
A2: So, our closing AuM were up about 4% but, as you say, the average were up 20% to about just over £2.7 billion and there are a number of drivers behind that.
I would highlight two in particular, which are continuing good flows into the UK Multi Cap product, so that’s Multi Cap Income and Diverse which is run by Gervais Williams and Martin Turner and that’s continued to be a very differentiated fund in that equity income sector, we’ve seen good flows into that. People who know may recollect that we brought in a new team to run our multi-asset funds about 4 years ago, David Jane, Anthony Rayner and Henna Hemnani, and under their stewardship that fund range has really turned around in performance but also being positioned slightly differently and we saw about £160 million flow into that range so that was an increase of just over 40% into that range. One other one to pick out is the US Opportunities Fund, Nick Ford and Hugh Grieves, where they went through a 3-year track record in March last year and saw their AuM increase by 85% to end the year at £238 million.
So, there was some individual funds and strategies that did very well but there was strong performance across the business with 86% of our funds in first or second quartile.
Q3: As you say, I think this partly comes back to the strength of your team but what else makes you successful? How are you different from your peers?
A3: I think that ‘be different’ is really the key for a small or specialist fund management business and I think we do have a strong team and you’re probably right that lots of our competitors would say they have a strong team, I think there’s a number of other valid points too. I think there’s a culture of accessibility in the firm, I think we have very good distribution and sales people but I think we get out and see people very well, I think when we talk to them the managers and the sales people are very engaging, they’ve got something interesting to say and so clients find it very useful, very interesting to have a meeting with Miton.
I think the other point is in the differentiation of the funds themselves so at a time when there’s quite a drift, particularly in some parts of the market towards passive products, I think one of the key things about active management is both the management performance but also the management of risk. One of the things, I think, the Miton funds have is a focus on trying to achieve good performance, as I mentioned before on quartile rankings, we seem to be doing that at the moment, it won’t always be like that but we’re in a good patch at the moment. Also, we look at things like volatility and a rather technical phrase, Sortino ratio, which looks at the management downside risk and we compare well both across the single strategy and the multi-asset range and I think that’s a theme, if you like, within many of the Miton funds.
So, I would put it down to differentiated funds with a linkage, some themes in there, many of them also have a focus on good and growing income, accessible as a firm, I think we have something interesting to say when we get out and talk to people and I think people find our funds very much complementary to some of the mainstream managers.
Q4: There’s around £21 million in cash on the balance sheet, is that going to change and what should investors expect in terms of news flow over the coming months?
A4: So, where we are on that is we did, as you say, have £21 million on the balance sheet as of the end of the year, 28th February that was to £18 million so we were strongly cash generative during 2016 and there’s some positive improvements from working capital. We’ve done a couple of things since the year-end, we’ve done a share buyback of about 6.6 million shares which expensed about 2.6 million and that reduced future dilution per share for shareholders. The other thing we’ve done is we’ve proposed a dividend of 1 pence per share and that’s up 49% over the last year, it’s about 2.15 times covered, and probably puts the shares at around 2.5% yield. So, I think we’re very comfortable and we think it’s a good thing in volatile times to have a healthy cash balance but we do see continued strong cash generation and it’s the Board saying to have a progressive dividend policy and pay out growing dividends to shareholders.
Q5: As you said, you have increased the dividend, it obviously shows confidence in the future for Miton Group PLC?
A5: Yes, I think as we said in our statement, we think it’s not easy to predict market or regulatory change and we think we’ve got a range of strategies that are distinctive, we’re diversified, we’re diversifying more in the range with the launch next week of the Miton Infrastructure Income Fund, we’re nimble, we can take advantage of opportunities that come up and we reached AuM at the end of February of £3.097 million. So, I think with maturing, ranging funds we look forward to 2017 beyond with some confidence.
