Premier Miton Group plc (LON:PMI), the AIM quoted fund management group, has announced its final results for the year ended 30 September 2020.
Highlights
· £10.6 billion closing Assets under Management 4 (‘AuM’) (2019: £6.6 billion)
· £11.6 billion closing AuM as at 20 November 2020 (unaudited)
· Net outflows of £619 million for the year
· Adjusted profit before tax 1,4 of £22.4 million (2019: £19.0 million)
· Adjusted earnings per share 2,4 of 12.46 pence (2019: 15.10 pence)
· Profit before tax 3 of £9.6 million (2019: £13.7 million)
· Cash balances totalled £36.0 million at 30 September 2020 (2019: £20.7 million)
· Final proposed dividend of 4.5 pence per share (2019: 5.4 pence per share)
Notes
(1) Adjusted profit before tax is calculated before the deduction of taxation, amortisation, share-based payments, merger related costs and exceptional costs. Reconciliation included within the Financial Review section.
(2) Adjusted earnings per share is calculated before the deduction of amortisation, share-based payments, merger related costs and exceptional costs.
(3) Merger related costs totalled £4.5 million during the year (2019: nil).
(4) These are Alternative Performance Measures (‘APMs’).
Mike O’Shea, Chief Executive Officer of Premier Miton Group, commented:
“It has been a landmark year for Premier Miton. Our financial year commenced following the announcement of the merger between Premier Asset Management Group plc and Miton Group plc and I am pleased to report that the integration process has gone to plan in terms of people integration and operational and financial synergies. We have also faced the significant market disruption arising from the COVID-19 pandemic and I am pleased with the overall strong performance delivered by our investment strategies via genuine active management.”
“We have made a number of key investment team hires during the year in fixed income, global sustainable equities, global smaller companies, and UK equities, which further strengthens our business for the future. Although we had net outflows during the year, we are encouraged by our continued positive fund flow momentum into our equity and fixed income funds, the strong performance across our broad range of multi-asset funds, and the potential of our new investment capabilities.”
“The Group seeks to maintain a dividend policy that targets an ordinary dividend payout of approximately 50% to 65% of adjusted profit after tax, and despite the challenging environment we are proposing a final dividend of 4.5p per share, bringing the total for the full year to 7p.”
“Following the successful integration, we now have an even stronger and scalable investment and operating platform. We see exciting growth opportunities across our range for both our new and established funds and believe that Premier Miton is well positioned for the future.”
Chairman’s Statement
The past 12 months have been a time of considerable activity, most notably with our business embarking on a corporate merger and dealing with the ramifications of COVID-19.
On 15 November 2019 we successfully merged two highly regarded companies – Miton Group plc and Premier Asset Management Group plc, via a court-sanctioned scheme of arrangement. The newly enlarged Premier Miton Group plc offers a more balanced and broader range of products for our clients.
From 16 March 2020 our employees moved to remote working supported by the Group’s business continuity arrangements. The leadership team acted swiftly to establish measures that ensured the safety of our employees and those in vulnerable categories whilst still providing a full service to our clients. At the time of writing we continue to assess a phased approach to returning to the office, whilst still recognising the success of our working from home arrangements and the future state of flexible working.
Whilst the past year has shown a great deal of volatility in financial markets, as a business we remain fiscally strong and profitable. More than ever, our business platform is in a strong position to support the growth of our Assets under Management (‘AuM’) and continue to provide solutions that meet our clients’ needs.
Results
The ramifications of the COVID-19 pandemic have caused many investors to be cautious. This year we have seen net outflows of £619 million, predominantly from our multi-manager funds due to their weaker short-term performance figures. Pleasingly however several of the Group’s other strategies have seen positive inflows during the year and many funds benefited from the recovery in asset prices during May and June. Total AuM ended the year at £10.6 billion, up 16% since the half year.
Our key measure for financial decision making, Adjusted Profit Before Tax (adjusted for merger related costs, exceptional costs, share-based payments and amortisation) was £22.4 million, up by 18% against the comparative year. Cash was £36.0 million at year end (2019: £20.7 million).
Earnings per share (‘EPS’) for the year was 4.14p (2019: 10.82p). Understandably this was lower than the previous year because of non-recurring costs associated with the merger combined with the increased amortisation charge arising from the intangible assets recognised on the business combination.
A final dividend of 4.5p per share is proposed, bringing total dividends for the year to 7.0p (2019: 10.5p) representing a 58.4% payout ratio of adjusted profit after tax (2019: 86%). As noted at the half year, the Board made the prudent decision to reduce the quantum of the second interim dividend and adopted a dividend policy that targets an annual payout ratio of between 50% and 65% of adjusted profit after tax.
Strategy and culture
Being a public company, we endeavour to deliver durable long-term value to our stakeholders. The Group’s strategy of product diversification coupled with the absence of ‘house views’ gives us the ability to provide differentiated outcomes for clients. Our fund managers have the freedom to express differing views – this is at the heart of our active approach to fund management. Our scalable operating platform supports this approach and facilitates growth in AuM through a client-centric business model.
As a Group we aim to achieve sustainable and durable growth over the coming years. We have sufficient capacity in our current product range and feel confident that with the right distribution strategy, talent management and effective leadership we are well placed to deliver this strategic achievement for the benefit of all our stakeholders.
The recent period of heightened volatility emphasises the importance of sound balance sheet management. As a Board we aim to safeguard our strong capital position through market cycles and apply a long-term view in the deployment of capital. The Group currently holds no bank debt on its balance sheet.
Since the merger, as an enlarged Group we have undertaken a series of interviews with key staff members to delve deeper into the Group’s culture and purpose. We have solidified our purpose as being to actively steward our clients’ capital for a better future.
Governance
As part of the merger integration process the Board undertook an internal review of its corporate governance structure during the year. This review included assessing the rights and responsibilities of each committee and its respective contribution to achieving the Group’s long-term aspirations and the mitigation of risk. The recommendations of this review, we believe, will enhance the performance of the Group’s committees, along with streamlining the reporting processes to our regulated entities and, ultimately, to the Board.
Board and people
On 14 May 2020 we announced the appointment of Alison Fleming as Non-Executive Director. Alison is a highly experienced financial services practitioner and has had an extensive career in financial markets over the last 25 years, holding senior positions within investment banks and boutique asset managers.
We also announced the departure of Non-Executive Director, Katrina Hart. We thank Katrina for her significant contribution during her nine years’ service and wish her well in future endeavours.
Products
The merger with Miton brought an additional 16 investment products to the Group’s offering. Since then we have
welcomed a new fixed income team, a global smaller companies team, a global sustainable equity manager and, more recently, we announced the appointment of Emma Mogford to manage our UK equity income funds.
Outlook
The merger with Miton has been delivered against a backdrop of volatility in markets coupled with the added pressures of operating in a remote working environment.
I would like to thank the senior executive team for their hard work during the last 12 months and all our people for their valued contribution to the long-term success of the business.
Could I also extend thanks to the Board for their continued leadership over the past year. Clearly it has been a turbulent period for indices and the economic landscape over the coming 12 months remains as hard to predict as ever. The dominant issues driving economic uncertainty at the beginning of the year (Brexit, the General Election) seem a distant memory.
The talent, enthusiasm and professionalism across all areas of our organisation continues to impress. It is exciting to see the development of the enlarged Group under the new brand of Premier Miton Investors. Our actively managed products offer clear and transparent objectives for our clients and their advisers. I believe the Group is well positioned for future growth and to achieve its potential as a balanced business of high performing, active investment products.
Mike Vogel
Chairman
25 November 2020
Chief Executive Officer’s Statement
It has been a landmark year in many ways for Premier Miton. Our financial year commenced following the announcement of the merger between two highly regarded businesses: Premier Asset Management Group plc and Miton Group plc. In mid-November we began the amalgamation of both businesses and pleasingly we have managed the integration process successfully to date, despite the challenges arising from the COVID-19 pandemic.
Business performance
The first half of the financial year saw an unprecedented market environment with markets falling heavily during March before rallying in April and into May following the support provided by central banks across the world. The Group’s Assets under Management (‘AuM’) has increased by 16% since the half year to £10.6 billion as at 30 September 2020. The average AuM for the year was £10.1 billion versus £6.7 billion for the previous year, an increase of 51%.
Net outflows for the year were £619 million (2019: £306 million). Whilst it is disappointing to report a net outflow position we continued to see strong demand for our non-UK focused funds with the LF Miton European Opportunities Fund seeing net inflows of £712 million and the LF Miton US Opportunities Fund net inflows of £78 million since the completion of the merger. By the year end the new fixed income team had achieved net inflows of £136 million following their arrival in August 2020.
The net management fee margin (the retained revenue of the firm after deducting the costs of fund administration, external Authorised Corporate Directors (‘ACD’) and other direct costs), was 65.9bps compared with 72.3bps last year. This reflects the Group’s balanced product mix, with the addition of a larger proportion of single strategy funds and inflows into the fixed income products.
The adjusted profit margin decreased against the comparative period, from 39.1% to 33.5%. Whilst disappointing to see a decrease, it is hard to draw meaningful comparisons between these two figures given they represent two different groups.
COVID-19
The COVID-19 pandemic provided an added challenge during the year. From early March our newly formed COVID-19 Response Committee made it a priority to protect the safety of our people whilst continuing to actively steward our clients’ capital. Our operational platform and capability to manage our range of funds continued unaffected as our workforce transitioned to work remotely. As a newly formed Group, we have been able to demonstrate our resilience and ability to work as a team.
In June we engaged external, specialist health and safety advice, including detailed risk assessments, to assess the potential of allowing some of our people to return to our offices.
At the time of writing we have extended our flexible working from home business model to at least 31 March 2021 and we are actively discussing the design of future working arrangements for all employees. I am pleased that our current arrangements are continuing to provide high levels of service and investment outcomes for our clients. Longer term, we expect to successfully incorporate a more flexible working regime into our business.
For the small number of staff members currently attending our offices, we continue to practice social distancing and work to ensure that their health and wellbeing is maintained.
I recognise how challenging it has been to transition from an office-based to home working environment and I wish to thank our team for their hard work, passion and dedication during this difficult period.
Merger progress
I am pleased to say that the team have shown great fortitude in continuing to be ahead of target with the integration, particularly considering the macro challenges during the year. There has been a considerable amount of work undertaken to get us to this point, including managing the legal change of companies, amalgamation of systems such as Bloomberg, establishing a centralised dealing desk and much more.
From 24 April 2020 all fund management moved to a single entity, allowing the unification of the Group’s investment teams under one corporate umbrella and the ability to share ideas. At the end of November, we will complete the transition to one ACD and the harmonisation of fund names across the range. They will be prefixed with ‘Premier Miton’ in place of ‘Premier’ or ‘Miton’, with no additional prefix for third-party ACD providers, making fund names consistent and easier for clients to identify. These achievements represent key milestones in achieving the recurring synergies outlined at the time of the merger.
As I have said before, merging two businesses creates a degree of change which can be unsettling. We endeavour to foster a culture where people’s concerns are heard, and their ideas are considered. We continue to take the best practices of both businesses to ensure we are in the strongest position to deliver the best outcomes for our clients.
Investment performance
The strong performance of our single strategy funds continued during the period with 6 out of 16 funds performing in the top decile of their respective IA sectors since the tenure of the fund manager. Three of these funds are ranked as the top performing fund in their respective sectors. In recognising this outperformance, several of our funds received industry awards. The LF Miton European Opportunities Fund, managed by Carlos Moreno and Thomas Brown won Best Europe Fund at the Investment Week Fund Manager of the Year Awards 2020 in June and won Best Europe Fund in the Money Observer Fund Awards 2020. Nick Ford and Hugh Grieves, who manage the LF Miton US Opportunities Fund and the LF Miton US Smaller Companies Fund, were winners at the Investment Week Fund Manager of the Year Awards 2020.
Our UK equity growth teams have done well over the year under review with four of the five funds achieving first quartile outcomes over one and three years and one achieving second quartile. Longer-term numbers are also good with every fund achieving first quartile returns since manager tenure. Our UK equity income funds have found progress more difficult with their natural bias towards more value-orientated stocks and UK domestic names, which have been out of favour with investors.
Our new fixed income team under Lloyd Harris, who joined us from Merian Global Investors as Head of Fixed Income in August, have made a strong start. We have launched two new fixed income funds that have already enjoyed some early investor support and which, we believe, will have strong appeal in the market going forward. On 22 October 2020 the team were appointed to manage £330 million across two external mandates bringing the current AuM across the fixed income products to £821 million as at 31 October 2020.
The multi-asset macro-thematic team of David Jane and Anthony Rayner continued to deliver attractive returns to investors during 2020. Three of their four funds are first quartile over the year under review and one is second quartile. Longer-term numbers are also respectable with two funds in the first quartile and one in second quartile since manager tenure.
The multi-asset diversified suite of products managed by Neil Birrell and members of the wider investment team also performed strongly with four out of the five growth funds delivering above median performance over the year to 30 September 2020. The Diversified Growth Fund is also first quartile over three, five and seven years and since launch. The Diversified Income Fund is second quartile over one and three years and since launch.
The multi-asset multi-manager suite of products have found progress more difficult in their respective sectors. The team has had a higher weighting towards value and towards domestically focused companies than many of their peers whilst maintaining an underweight position towards growth companies and overseas equities. This has impacted negatively on relative performance in the short term. Many of the funds that the team manage do have an income bias and the team have successfully maintained an attractive income for investors over this volatile investment period led by the COVID-19 disruption.
Products
We continue to develop our business through the addition of new investment talent and by evolving our product range to meet significant client demand.
In December 2019 the Group launched the Premier Miton Managed Index Balanced Fund which is managed by Wayne Nutland. Wayne joined the Group from HSBC where he managed substantial multi-asset portfolios investing in exchange traded funds. The new fund offers further multi-asset choice to advisers and their clients.
Duncan Goodwin joined in January 2020 to manage a global sustainable equity growth strategy. Although it is still early in the process, we are very pleased to note the much improved performance on both of the global equity portfolios under Duncan’s stewardship.
In March 2020 we launched our own no cost online portal for advisers, known as Connect. Connect allows advisers to hold our funds on our online portal with no additional fees thereby reducing the overall cost of investing in our funds for investors.
On 10 August 2020 we welcomed Lloyd Harris, Simon Prior and Rob James to an expanded fixed income team. This is an exciting development for our business whereby we can offer a wider range of fixed income funds to our clients. Following their arrival, we launched two new products: Premier Miton Strategic Monthly Income Bond Fund, that sits in the IA Sterling Strategic Bond sector; and the Premier Miton Financials Capital Securities Fund, that sits in the IA Specialist sector.
On 1 October 2020 Alan Rowsell joined the Group from Aberdeen Standard Investments. Alan will manage a new global smaller companies fund planned for launch in Q1 2021, subject to FCA approval. A highly active global smaller companies fund fits well into our product mix and plays to our strengths as a business. It will offer our investors access to the growth opportunities within the smaller companies universe. We now have a highly credible global equity offering for clients, alongside Duncan Goodwin’s newly rebranded Global Sustainable Alpha Growth Fund and Jim Wright’s Global Infrastructure Income Fund.
Distribution
During the year we refined our two specialist distribution teams. These teams are grouped according to two focus areas: the UK wealth manager market (typically equity and fixed income fund focused) and the UK adviser market (typically multi-asset fund focused). We have purposely resourced each team to meet the sales opportunities ahead and have developed a sales and marketing framework to focus on key products where we believe we will achieve the best net flow results.
Regulation
The Senior Managers and Certification Regime (‘SM&CR’) came into effect on 9 December 2019 and aims to strengthen market integrity by making individuals more accountable for their conduct and competence. We see it as an opportunity to continue to build a healthy culture through a robust governance framework and the appointment of clear responsibilities. As part of the implementation of SM&CR, we have agreed which roles and staff fall within each level – senior managers, certification regime and those who are subject to the new individual conduct rules.
Corporate Social Responsibility (‘CSR’)
During the year the Group continued to develop its CSR to allow us to play a positive, active and growing role in building a more sustainable future whilst promoting the successful business performance of the Group. Our CSR approach is designed to cover four areas: responsible investing (investing our clients’ money in a responsible way); our team (making Premier Miton a good place to work including by promoting diversity and inclusion, wellbeing and personal development); environmental responsibility (managing our business to help tackle climate change); and community responsibility (engaging with charities and community/volunteer work).
In August, we submitted Premier Miton’s first annual CDP climate change report. CDP runs a global disclosure system for corporate environmental reporting. We believe that disclosure is an essential step to drive positive environmental action. Each year the programme requests information on greenhouse gas emissions, energy use and the risks and opportunities from climate change. More and more investors are requesting companies to disclose their environmental position and data through CDP and we believe taking part in this disclosure process fits with our CSR approach.
Outlook
The economic environment continues to be impacted by COVID-19 with central banks doing everything they can to provide stimulus. It seems likely that the economic recovery will be fragile, and dependent on both unemployment figures and any further lockdown restrictions. Financial markets continue to be buoyed by central banks rather than the traditional metric that might demonstrate the health of an economy.
In this environment, we believe strongly that there is an opportunity for active management to perform well for investors. We have a balanced range of funds at Premier Miton backed up by a strong team across all areas of the business. We are working hard to emerge from this crisis having done a great job for investors through genuinely active asset management across our open ended funds, investment trusts and portfolio management service.
Although the outlook remains unclear, we should be encouraged by the excellent long and short-term performance of many of our active fund managers, despite the extreme market disruption. We should also be encouraged by the conviction expressed by our fund managers that the post coronavirus environment will prove to be a great opportunity for active managers, active management companies and very importantly for our clients.
We now have a strong and scalable operating platform, a focused distribution and marketing team, excellent investment products and, of course, great people throughout the organisation. I see exciting growth opportunities across our range for both new and established funds and believe that Premier Miton is well positioned for the future.
Mike O’Shea
Chief Executive Officer
25 November 2020
