Brooks Macdonald Group plc (BRK) Earnings Call Transcript & Summary

Welcome all to Brooks Macdonald's Full year '23 Interim Results Presentation. It feels like yesterday that I was last talking to you. It's incredible how fast 6 months passes and incredible what you can achieve in a 6-month period. Today, I'm joined by Ben Thorpe, CFO; and by Robin Eggar, who's Managing Director of our U.K. Investment Management and Advice businesses. If I could guide you to Slide 4 in the deck. In summary, I'm pleased to be able to report that with a background of difficult economic and market conditions we've made good progress strategically whilst also maintaining a stable financial base with profits in line with expectations and a robust underlying profit margin of nearly 25%, allowing us to announce an increase in the interim dividend of GBP 0.02. Looking at our strategic progress, our flows have continued positively at an annualized 4.4% in the half with a strong pipeline, driven by the growth of our B2B investment solutions and our platform MPS services. Sarah Ackland joined us in September as Global Head of Distribution, to ensure that we reach our intended target markets with our various services, and she has already made a big impact with plans afoot for improved distribution of our BPS and Fund Services. Sarah has also recruited Leanne Barnham as Global Head of Marketing to spearhead the growth of our services profile in those markets, and we anticipate broader growth across these services in periods to come. Over the 6 months, we went live on the SS&C platform, a significant step forward for us, and we're now in the process of embedding the systems and realizing the benefits from them, which should come through in our FY '24 numbers. But this is only part of the digital transformation of Brooks Macdonald with advice and distribution improvements also in train and now technology for finance and HR departments, making them more efficient as well. We completed the acquisitions of Integrity Wealth Solutions and Adroit Financial Planning, bolstering our advice business with additional management and advice capability and both financed by retained earnings generated by the business, a self-sustaining growth model. As I said, we've achieved much in these 6 months, and I'm proud of the team for their delivery, for their focus on our clients and for the work that they've done in preparation for further growth. Now I'm going to pass over to Ben Thorpe, our CFO, to go through the financial results. This being Ben's last results presentation before he moves on to a new role. I'd like to say thank you to him for all that he has done in contributing to the recent success of the business, which is greatly appreciated. Over to you, Ben.

Thanks, Andrew. I appreciate the kind words. Turning to my first slide, Slide 6. Although performance has been impacted by the 10% reduction in average markets year-on-year, I am pleased to report we have delivered solid results in line with expectations. Despite this backdrop, we have continued to make good progress on our strategy, winning market share in MPS and making progress towards our net flows goal of 8% to 10%. Looking at the numbers themselves. Total revenue was down 5% to GBP 58.9 million. Underlying profit was down 18% to GBP 14.5 million. The underlying profit margin was 24.6%. Statutory profit fell by 25.7%, and underlying diluted EPS was only down by 15%, partly helped by a lower effective tax rate off the back of R&D credits we received relating to our new operating platform implementation. And finally, we are pleased to announce an interim dividend of GBP 0.28 per share, which is up 8% year-on-year, showing the Board's continued confidence in the business and its prospects. Turning to Slide 7. Before we get into the detail, I want to take a minute to set the scene for the overall H1 outturn. As you know, our business model is geared to the market. When average markets are down 10% year-on-year, that will always impact income. But as markets recover, so will income and quickly profitability. We continue to be laser-focused on growth. And last year, we took a deliberate decision to invest in the multi-asset segment through a relaunch of our Cornelian fund offering. And this was underpinned by a material price reduction. That was the right thing to do, and it still is, but in the short term, it also impacts income. And when you put that together with the fall in market levels, you get a 14% reduction in fee income. This reduction has been partly offset by nonfee income and, in particular, interest income. This will be no surprise to anyone given the recent increases in base rates. Interest margin is an important part of our business model, and hopefully, higher levels of interest income tend to come when markets choppier. Therefore, overall nonfee income is up 61% year-on-year. Financial planning income is broadly flat with the small increase coming from the 2 acquisitions which we only own for a very limited period in H1. Putting this all together, income was down by only 5% versus the 10% decrease in markets. Costs have been kept flat overall due to the operational gearing in the variable pay model, driving a lower bonus [ score. ] This reduction has been offset by increases elsewhere in the cost base, which I'll cover in more detail later. Overall, we delivered a robust margin of 25%. Turning to Page 8 and funds under management. I won't give this page too much detail given we covered it back in January. However, we'll pull out a couple of key points. Firstly, total funds under management increased by 3.6% in the half on H2 last year, driven by relatively strong investment performance and an annualized net flows of 4.4%. Secondly, although total FUM is down 6% from last year's high point, net flows are up 6% on H1 last year, showing continued momentum in new business. Turning to Slide 9 in yield. Overall, the blended group yield was up by 1.3 basis points to 70.3 basis points. Nonfee income increased by 5.8 basis points due to higher interest rates, but this was offset by the reduction in pricing for the Cornelian funds of 1.3 basis points and the impact of business mix of 2.7 bps, with platform MPS share of the book increasing from 10% to 15%. This impact has been quite marked in the half given the shape of our flows. I would not expect that to moderate in H2, but it should improve in FY '24 as net flows become more balanced across the product range. Encouragingly, pricing was broadly stable elsewhere in the book. Turning to Slide 10 on costs. We have worked hard this year. And as you would expect, we have seen inflationary pressures across the entire cost stack. However, we remain confident that we can stick to our guidance of a year-on-year cost increase of just 6%. In H1, we have held costs flat at a total level with a reduction in our variable pay accrual due to lower profitability, offsetting increases in the rest of the cost base. Staff costs increased in line with guidance 6% due to mid-single-digit pay rises and some selective growth focused hiring. Non-staff costs increased by 16% at a headline level, this was slightly higher than expected. But within this, we incurred several one-off costs, for example, legal and professional fees relating to terminated merger and acquisition activity. Given our ambitious inorganic growth agenda, this will happen from time to time, and Andrew will talk more about M&A in a minute. If we ex out these one-off costs and the impact of acquisitions, before variable pay, total costs only increased by a reasonable 5.6%. Turning to Page 11 on the segmental view. Both business segments have obviously been impacted by market levels. However, U.K. Investment Management still delivered a decent performance with a margin of 34.6%, down from 37.1% last year. International produced a small loss on a fully loaded basis, driven by markets prior year net outflows and increases in direct costs due to inflation and some one-off costs. However, the group continues to see a material market opportunity in the Crown dependencies, and we will continue to invest in the islands while being focused on improving the short-term performance of the business. Turning to Slide 12 on capital. We remain well capitalized and continue to produce meaningful amounts of surplus capital every 6 months. From this, we can drive increases in the dividend and fund further investment in the business. The recent acquisitions are good examples of this, and we expect to do more of this type of deal as and when the opportunity arises. On the dividend, the payout rate increased slightly to 39% as EPS fell back on lower profits. However, the 8% increase is a good one given the backdrop. Turning to Page 13 on cash flow. We have a broadly similar shape to last year's first half where the only differences being the outlay for the 2 acquisitions this year and on deferred consideration where we've now fully paid for both Lloyds and Cornelian. Overall, cash generation remains strong, and the business is debt-free. Turning to my final slide on guidance, Slide 14. We remain on track to deliver market expectations once they've been mark-to-market and the recent acquisitions are added in. And therefore, I would expect consensus profit for this year and next to increase. On flows, H2 started strongly, and we are aiming for a full year outturn somewhere around 5% to 6%. This will set us up well to move closer to 7% to 8% next year and 9% to 10% the year after. Despite inflationary pressure in the one-off costs I mentioned earlier, we stick with the same cost guidance with total costs expected to rise 6% year-on-year, which means a outturn somewhere in the early to mid GBP 90 million. So in conclusion, we continue to make good progress and are on track to deliver as expected. I'll now hand you back to Andrew.

Thanks, Ben. If I can turn you to Slide 16. At the full year, I spent some time talking through the opportunity as we see it. Today, I'm going to hand over that task to Robin Eggar, who is somebody with day-to-day experience, can bring it to life for you. Robin, over to you.

Thank you, Andrew, and good morning all. As Andrew alluded to, at our full year results, he spent some time talking through the significant opportunity in front of us and the key dynamics driving both organic and inorganic growth ambitions. I thought it worthwhile today to look briefly at a couple of key points from this. Firstly, the demographic and policy underpins that we have; and secondly, the changing habits within the advice and IFA market. Turning to demographics. Put very simply, people living longer and the burden of providing for that eventuality is falling more and more on to the shoulders of the individual. As a result, people are saving more, and the value of personal wealth is growing and is expected to continue, as seen by the top right chart. At the same time, the change in the pensions market over the last 10 years is truly [ stack, ] with defined contribution schemes now firmly outnumbering defined benefit schemes. And indeed, those with no pension provision at all has more than [ halved ] over that same period. We see this on a daily basis in the business with both new and existing clients seeking to rationalize DC schemes into one, recognizing the key role that this part is likely to play in their future retirement plans. This focus on savings and self-provision more broadly plays firmly into the need for advice. And of course, our primary distribution channel financial advisers. Meanwhile, the highly fragmented nature of the wealth management industry, as seen on the bottom right chart, provides significant opportunity for us to capture and increase our market share. whether this be through acquisition or indeed through organic growth, both from financial advisers for investment work and indeed within our own advice business where we're able to capture the full value chain of the client. Turning to Slide 17. This requirement for self-provision and the associated requirement to seek financial advice has played through into the statistics with a number of ongoing clients with IFAs increasing steadily over the last 5 years. At the same time, however, the number of regulated advisers has failed to keep pace with the increase in demand for their services. As such, this has led to a clear need for advisers to increase their efficiency and productivity and outsourcing investment decisions to a third-party discretionary manager is a key part of achieving this. It is also fair to say that markets over the last 3 years and the rapid inflection points that we've seen, perhaps have focused the minds of advisers who historically may have been happy to pick funds on an advisory basis for their clients. Without solving the active versus passive debate today, the need for an actively managed underlying portfolio and asset allocation has never been more clear. This outsourcing trend is one that we have been a major beneficiaries of and one which the research suggests will continue as seen in the bottom left chart. Whilst the demand for bespoke investment products has remained broadly flat over the last 3 years, the substantial growth in model portfolio services and funds also place the shift in demand and requirement to increase adviser productivity. Advisers need to ensure consistency and quality of outcome for their clients, both driven by the regulator and their own need for business success. Model solutions are a clear way to deliver this. And as we will see on subsequent slides, is a trend that's provided clear opportunities for Brooks Macdonald. Those opportunities are underpinning both our ambitious growth strategy and our value drivers for an investment perspective. We will cover those drivers more -- in more detail over the next few slides, and I hope this broad outline of our strategy as shown below is familiar to you. As such, I wanted to focus today on our purpose and on our people and culture. Our purpose is to realize ambitions and secure futures for all of our stakeholders, namely our clients, employees, introducers and shareholders. Whilst in my role, I hope you might forgive me for my daily focus on the first 3 of these. I hope you also agree that if we're able to achieve this, it will undoubtedly lead to positive results for shareholders, too. As a people business in what is still a people industry, investing in our people is key and ensuring that they have opportunities to develop and grow with the business is vital. Looking at the mix of talent we have across the business, both in terms of long-standing colleagues and those new to the firm through organic growth and acquisition gives me the confidence and belief that we can continue to deliver value and opportunity for all of our stakeholders. Like Andrew, I've been with Brooks Macdonald now for well over 20 years, and the unrelenting focus on people and culture as well as the end client is what I believe has made BM so successful and gives us the capacity to continually invest for future growth. Turning back to the value drivers in a little more detail. We continue to make good progress on organic growth, with gross inflows higher and gross outflows lower than they were this time a year ago. Given the market backdrop and uncertainty of the second half of calendar year '22 as well as the seasonality of flows we have come to expect, it is not perhaps surprising that the position has weakened a touch in the first half of FY '23. But I'm proud of the efforts put in by colleagues across the business to support clients over this difficult period. This focus on clients was especially possible within our high-touch bespoke portfolio offerings where outflows in the U.K. were GBP 50 million less in the first half of FY '23 when compared with the same period last year. Whilst new clients in this segment have understandably been a little less willing to commit monies to markets over that period, the pipeline of new inquiries remains healthy, although the sales cycle for conversions has clearly increased. Despite this, the gross inflows level of 15% has now been consistent for the last 2 years and pleasingly, outflows have stabilized around 10%. Our intention and focus remains on improving both of these numbers, so increasing inflows and decreasing outflows in order to make that next step up like we did in the second half of FY '21. This will need to be across our full product range and is what Sarah and Leanne are working on now, more of which to follow at the full year. We know the components that will allow us to achieve this and they have not changed, delivering the right proposition with strong investment performance, a great client experience and a can-do culture is and will continue to deliver strong results. Turning to Slide 20. The power behind our organic growth has been the growth seen in our platform MPS offering, whether this is through our core platform service or our specialist B2B investment solutions offering. Growth here despite the growth in funds under management is still accelerating, now up at 64%. Whilst this cannot go up forever, it's exciting to think that it may not yet have peaked, and our market share capture can increase further from here. This has all been achieved without the need to change our existing centralized investment proposition, but rather by proactively positioning ourselves for how advisers want to access our services. It is the adviser's choice of which platform to use, and it is our job to make the choice of using us as easy as possible by being available on whatever platform they choose to use. Furthermore, having witnessed the trend for advisers to use models more as you saw on Slide 17 and the desire to consolidate client assets on one or 2 platforms and likely in one solution, this gave further credence to our Investment Solutions offering. This deep knowledge and experience of the adviser market enable the leverage of our existing investment proposition. And by backing this with a dedicated sales team has allowed us to increase our market share in what is a highly competitive sector. Performance and price are always going to be important in this market, but there should only ever be hygiene factors. The key is the attitude and culture that you bring to all interactions with the adviser firms and the ability to help them grow their businesses and ultimately realize their ambitions. A further benefit of the Investment Solutions offering, which is perhaps less obvious from this slide, is the greater breadth of opportunity that those clients bring to our business. I'm pleased to say that now in addition to the platform monies, we have over GBP 50 million of new bespoke portfolio funds introduced from investment solutions advisers who would otherwise have been unknown to Brooks Macdonald. This should remain a powerful driver for growth going forward, and I'll now hand back to Andrew to talk through the other value drivers in more detail.

Thanks, Robin. I remain truly excited about the opportunity before us and the pace of growth in the Platform MPS section of the business. Our job now is to get them all firing together. Looking at the second value driver, service and operational excellence on Slide 21. Key to our success is that we are able to bring a real ease of doing business to our clients and to their introducers. In terms of our progress in this regard, in this period, we crucially went live on the SS&C platform, a migration that went as well as could have been hoped for. So a huge credit to the teams at both SS&C and BM for their work in achieving this. We're now going through the embedding process and are continuing to work with SS&C as we will do for the duration of this contract to develop the systems to deliver the full benefits to the business, to our clients and to their introducers. We expect to be completed in the coming months. Importantly, the ability for us to leverage the contract with SS&C is in place, so increasing FUM will give us real operational gearing. But the SS&C replatforming is only one, if the biggest, of a number of digital changes within Brooks Macdonald. With our advice business, moving on to the Intelliflo financial planning platform during this time, an agreement reached with Salesforce to use their systems across our business, starting with distribution in this financial year, not to mention the other functions who have moved on to new technology designed to make their working experience easier and more efficient and more effective. The digital transformation is an important step forward in enabling our organic growth in terms of our ability to offer excellence in service, but it's also key from the perspective of our inorganic growth, our third value driver on Slide 23. As before, we are looking at acquisitions across advisers and investment managers and potentially transformational transactions, and we completed 2 adviser acquisitions in the period. Both Integrity and Adroit are long-term users of Intelliflo already, which reduces the amount of system upheaval and makes the integration into Brooks Macdonald much easier, and they will also help us to maximize the benefits from the new technology. They're high-quality businesses who had capability and skill sets that we didn't have, strong profitability and great growth potential with both firms having an enviable professional network with introducers and the ability to widen those nets considerably. Most importantly, they both have cultures, which are closely aligned to Brooks Macdonald and have been for a considerable period of time as we know through the long relationships we've had with them both. As important as the acquisitions that we have made are those we have not. And over the period, we've had a close look at a number of businesses, including 2 investment managers who we didn't proceed with. These are both high-quality businesses who could have fit culturally and added assets to our platform, but neither of whom had the compelling strategic logic we're looking for to drive us forward as a business. It's a high bar, but it protects us from making decisions with short-term gains in mind, which are likely to cause long-term problems. Turning to Slide 24. At the full year, I talked to our medium-term ambition to be a top 5 wealth manager in the U.K. and the Crown dependencies, and that is very much our intent. This requires us to move to a higher level of organic flows, and I believe we have the right ingredients in place to enable that growth with a culture, allied to our clients and introducers, robust investment performance, right attitude to excellence and a proposition set, which fits our target markets, [ ally this ] to a renewed focus on distribution, which we're now bringing to bear, and I think the future looks very promising. We do have some work to do in the international business to move it forward, but we have made great progress in making our group more global to grow that business with a focus on our offering to private clients across all 3 islands. Across the group, the overall growth profile looks encouraging and the proposition in good shape with Brooks Macdonald Investment Solutions and platform MPS leading the way, a renewed focus on funds and BPS as well as a growing private client proposition, allowing us to service a wider range of needs for our clients. To meet our objective, clearly, acquisitions will be necessary. But as I shared earlier, we will not be buying anything for the sake of buying it. We will maintain our discipline and focus on buying truly additive businesses. So to conclude on Slide 25, the business has now been in positive net flows for nearly 2 years -- we have had a margin at around and above 25% during that time period. We've successfully completed 2 acquisitions in the last quarter and continue to raise the dividend, such as our confidence in our strategy and in our ability to take advantage of the opportunities that are placed before us. Thank you very much.

The first question is from the line of Paul with -- Bryant.

Two from me, please, one on BPS and one on international. On the BPS side, there's been some small outflows over the last few quarters. You showed a chart today showing the market is relatively flat in that space. Could you give us any comment on specific actions you're taking to grow market share in the BPS market specifically? And just almost a bit of a subquestion there as well. Is there an element of funds flowing from BPS to MPS within Brooks Macdonald's? So existing clients shifting between those 2 products? And then on the international space, similar question. Could you give us a flavor of -- you kind of alluded to a few actions you're taking there to kick start growth in the international business? Anything you could add to that to give us a flavor of exactly what that might entail?

Paul, thank you for the question. Just to everyone's who's on this side of the telephone. So it's myself, Andrew Shepherd. Got Ben Thorpe with me and Robin Eggar. And I'll pick up the international piece in a minute, but I'll pass over to Robin first for some thoughts on BPS.

Yes. Thanks, Andrew. Yes, on BPS over the period, it is more of an inflow story than outflow story. We've seen the outflows continue to reduce half-on-half, GBP 50 million less in this 6-month period when compared to the same period last year. At the same time, inflow is happy, a little weaker, which has led to the small net negative movement. And that's really reflective of the 6-month period that we saw, which came on the back of the first half of the year with war of Ukraine, et cetera, followed on by the macroeconomic backdrop, the political uncertainty, et cetera, in the second half of the year. We just saw clients a little bit less willing perhaps to commit new monies to market over the period. So we saw our typical conversion period move out a little bit over that period in terms of time taken from an initial inquiry to monies at the door. But the pipeline of inquiries remains healthy, has really good interactions with advisers and their clients. In terms of what we're doing, the focus is very much still on the specialist products. So Decumulation, Court of Protection, RIS, also net positive flows over that period, and that's where we're seeing increased demand, where there is that real need for a Bespoke Service and for the clients who wants dedicated investment manager to take them through that journey. So yes, that's -- our focus clearly is still on improving what we do in the BPS world, making sure it's still fit for purpose as the market changes, as we alluded to as well Leanne and Sarah. It's quite a big focus of their initial work, and we look forward to sharing more of that with you in due course. In terms of the other point, BPS to MPS, the simple answer is no, not really. Clearly, the market for MPS solutions is growing as we've shown. It has been primarily in the adviser market where they're perhaps consolidating existing solutions they have on platforms, looking for that efficiency, they are increasing productivity, et cetera, where they can outsource all of their investment decisions for their full client banks. So we've seen big book moves in that market. But it's quite a different dynamic to that within the BPS market.

[indiscernible] Robin, and I'll link it into international in a moment. But I think what we're expecting over time is that we're building up a big bank of clients in MPS who will then have specialist requirements as they move towards retirement, whether that's the accumulation or building portfolios for tax purposes. So I'd like to think that we'll see an MPS to BPS move over a period of time, which is certainly what we've seen in the past in our own business. Robin touched upon Sarah and Leanne joining, which is very much focused on -- on distribution across the range of services that we've got, and I touched on it in the presentation, but they're both deliberately called global. So to move on to the international question, ensuring that the group is thinking globally and that the international business is getting the full benefit of the -- maybe the might of Brooks might be over-egging it a little bit. Certainly, the strength and the power of the overall group, I think, is really, really important. I have no doubt that their addition will help to push forward performance. And it's also the case that we see a major opportunity in that international business, particularly around the private clients on the 3 islands, where it's incredibly fragmented and there's no real leadership across the kind of tendencies. So we will have a bit more of a focus on what we're doing with the individuals on the island over the coming years, where I think that's the biggest opportunity.

The next question is from the line of Rahim Karim with Investec.

Hopefully, you can hear me and apologies for the background noise. Three questions, if I may. So the first was perhaps to Robin in the context of his comments on culture and people. Just would be interested to see what he's seeing in terms of demand for talent in the industry and how that sits versus some of the moves that you've seen in terms of variable comp and whether there's any risk there. I appreciate the need to keep costs in check, and I'm sure shareholders would appreciate that in short term, but just wondering if there was any long-term concern that he has about that dynamic. The second question, and then Andrew, you kind of commented on the acquisitions that didn't go through in terms of the last 6 months. I was hoping if you could give perhaps a little bit more color on any specific issues that you saw. It didn't sound like price was one of the things. And obviously, you have new platform that should help you drive material cost synergies. So just trying to understand what it was about those businesses that didn't appeal. And then the final question was just around the use of capital, obviously, I appreciate a very healthy increase in the dividend. Just wondering how you think about the retention of retained earnings and whether as you go through kind of more M&A, and look at that, whether you see the need to perhaps conserve a little bit more of those earnings to fund future growth.

That's great. Thank you, you've nicely split that up between the 3 of us. So I won't argue with you. I'll pass over to Robin on the first point on talent. And I'm sure we can all [ dip in on ] variable comp as well. I'll pick up on the acquisitions and then on the use of capital. So Robin, do you want to kick off?

Yes. Thank you. Yes, I mean, I think it's fair to say, it's quite a hot employment market as it were, and there's clearly demand for talent across our industry and more broadly. We haven't seen over the period any particular issues on that front in terms of turnover in front office staff specifically. We're clearly aware of the overall market dynamic. However, one of the reasons why we've always had a firm belief in graduates and training our own, if you like. We're taking on a further series of grants in September this year, and that's always useful to have that train of people coming through the business, has worked well for us in the past. In terms of -- around comp models, the front office, do you have -- part of their compensation is specifically linked to a profit contribution at a local level. So again, that focuses their minds on individual performance on what they're doing and have some linking back to their comp structure. So we haven't seen any specific concerns on that front.

In terms of variable comp as well, I mean it's a meritocratic organization. So we make sure that we go for performances, point A and point B, I think, in our calculations for the full year and our expectations to -- to hit your expectations, we have already included a reasonable amount of variable to make sure that we can fulfill peoples expectations as well. Cool, I'll carry on with the results for the acquisitions. So a little bit more color. So -- it's really important to us that we tick the 4 boxes that we talked through. And whilst we might be able to get to a position where there's economic value and if we don't think that we're going to get the strategic value from these businesses, although we think that the economic value is weighted away from us, then we're going to be nervous. And frankly, if we're nervous, we don't see any reason to move forward with these. In addition, it's dependent upon on the culture clearly because as we've seen in the marketplace, if you made the wrong acquisition from a culture perspective, it's just -- it's value disruption. So without going into too much detail because I don't want to point to pointedly at any particular company. What's important to us is that we continue our journey towards 8% to 10% net flows. So any businesses that we buy have to help us on that journey. Equally, we've got to pay a price where we're getting decent economic value, i.e., decent ROCE and [indiscernible] accretion. And they have to add something to the business from a strategic perspective, that's actually going to drive us forward and not hold us back in the future. So when you got all of those together, I said in the presentation, it's a high bar, it is, and there are consolidators out there who will maybe not have quite such a high bar, but we're not here for 3 years on a sale. We're here for the long term. We want to build a sustainable business. Do you want to touch on use of capital, Ben?

Yes, quickly. Rahim, I mean we're a strong business now. As you can see, we're thriving even in different times. So we are generating decent capital services every 12 months. And we can now put that to use as we have done with the 2 acquisitions recently. So we will continue to do that. But actually, we can also do both. We can also grow the dividend at the same time. And it's now 17.5 years, seems to be 18 years that we've increased the dividend. And we're very proud of that track record. And it will take a lot for us to deviate from that. But I think we're in a fortunate position of being able to do both at the moment. As we've always said, if it's a bigger deal, then clearly, we'll have to look at other ways of financing it. But for the types of deal we've done in H1, we can continue to do those out of our own resources.

[Operator Instructions] Ladies and gentlemen, I will now pass the floor over to management for any webcast questions.

Thank you, Constantino. We have 3 sets of questions on the webcast. First from Ben Williams from Shore Capital. Please could you talk more about the meaning of pipeline in the context of your business and how it could be possible for you to feel confident about 5% to 6% organic growth at this time in the year.

Yes. Okay. Thanks, Ben. I think there's different areas of our services where you can be more or less confident to be frank. The business-to-business work that we do is a clear pipeline of businesses that we've had conversations with that we're going through the process of putting them in a position where they can make the significant transfer of assets. And that's not a 1-month process, that's a 3- or 6-month process of preparation. And when they press the button, then the money starts to flow in. So we can see pretty clearly which firms are going to be working with us over the coming period. Equally, MPS on platform that is through investment solutions, that's built and built and built over a period of time to get to a relatively predictable quantum coming through on a monthly basis. So in those 2 areas, we can be pretty confident. BPS also tends to follow a trend. I mean Robin has talked about it a bit there. And our outflows have been pretty constant -- actually constantly slightly improving, which is great. And the inflows have stayed a bit. We'll make an assumption that those inflows will remain at that level, but we'd expect given the effects on distribution, they'll start improving. So I think we said 5% via into the top end, obviously.

Okay. And the second set of question from Stuart Duncan at Peel Hunt. There are actually 4 questions. In the notes, you quote a statutory PBT figure for the 2 acquisitions, is this stated after the amortization charge?

Stuart, it's Ben. I think you're relating to the [ point 3 ] acquisition-related items, that's actually related to deal costs. And the actual 2 acquisitions didn't really contribute much to profit in H1. However, they are going to meaningfully contribute in H2 with about GBP 2.5 million of additional financial planning income and then a margin of about 30%, so GBP 700,000 or GBP 800,000 of profit depending where we end up, which is actually a very good starting point for financial planning businesses. And actually, if you see in our mind, is the low point. We've got a lot of ideas about how we can extract further value from those acquisitions, and we'd expect them to build in the months and years ahead.

You have answered Stuart's second question, was on the margins from the businesses. So Stuart's third question, how does the variable comp accrual move in relation to revenues or profits?

Yes. It's very formulaic in terms of the actual supply port that we generate. We obviously have a demand comp coming up from the individual contribution models and what we think the market needs for us to deliver. But in terms of supply, we look at pre variable pay profit, which is effectively just the standard profit calculation. We ex our interest income from that because we think that is essential. And then we take 31% of it, and that is our bonus accrual for the year. Within that, clearly, we also have to fund this year's cash for, but also the deferred cost -- deferred stock options from prior years. But it is very formulaic. So it goes up and down as -- it's nice to get...

Final question from Stuart. Has the repricing of the Canadian funds had any positive impact to date in terms of flows?

I'll pick this one up again, and this is -- are there any other takers. But I think this is absolutely the right thing for us to do. We're really excited about the multi-asset segment. I think bringing Sarah on board, in particular, will absolutely see the charge what we're doing there. However, it's been really tough in the multi-asset market over the last year, 6 months. I think if you look at the whole market, there has been outflows, and actually, we pretty much tread water coming in -- which in terms of assets under management, I think that's actually is not a bad result. We would have liked to have gained a bit. So we are slightly behind the business curve. But actually, I'm not too worried about it at the moment. So that is costing us in terms of lost income at the moment, and we expect it to sort of come good within 18 months. I think it's probably more likely to be 24 to 30 at this point, but still the right thing to do.

The final question on the webcast is from Kim Bergoe of Numis. How should we think about the competitive landscape in U.K. Wealth Management, especially new entrants and new types of companies, platforms, et cetera.

Yes. Okay. Thanks, Kim. So I think there's a couple of points here. One is that the landscape changes pretty solid in U.K. wealth management will be over a decade or 2 decades. So it moves on. I was really interested to see yesterday that Vanguard had pulled out of financial planning in the U.K., which really surprised me, actually, because I think if anybody is going to go to the mass affluent marketplace, they're are probably one of the few firms with the profile to be able to do that properly. So that surprised me, and the wealth management industry has changed. It's moved towards us. And the idea of working with advisers and the idea of building your own advice business or changes that have happened really in this period since [indiscernible] I think we -- there's a bit of [ first entry ] advantage around advisers. But we had to make sure that we stay on our mettle and change the proposition set to stay at the forefront. I'm very conscious of that. We sit down on our new business committee every 2 weeks and talk about, right, what's next? What do we need to think about? How do we stay ahead of the game? And that's part of the reason why we're opting the skill set in the distribution part of the business. The platform piece is interesting in -- and there's an ability to what label for companies. And there's, I think, a better ability to get more mass market, which isn't actually our space. Our space is working with advisers, to building our platform to make it as easy to use as possible. So advisers is absolutely key and then improving that client experience because it's personal relationships and Robin talked about culture that comes through the personal relationships that we have with the clients and with the advisers who are recommending them to us. So I think, I mean, it's an interesting landscape. It changes bit slowly, and I think we're well positioned.

Thank you. We will now pass back to Constantino to see if there are further questions on the conference call.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Andrew Shepherd for any closing remarks. Thank you.

Yes. Thanks very much, and thank you very much for -- spending an hour with us this morning. As ever, we're very comfortable having conversations outside of this environment. So if you have got further questions, give either myself or Ben. Ben is going to be here for a while yet or indeed, Robin. But thanks for coming on the call, and we'll speak soon.

Thank you.

Thank you.