Tatton Asset Management plc (TAM) Earnings Call Transcript & Summary

Good morning, and thank you to those of you who are joining us today to hear from Tatton Asset Management, who announced their full year results earlier this week. If you haven't seen it already, we have published a note and put it up on our website, but the purpose of today is to go through the numbers and then take Q&A at the end. As a reminder, you can submit questions as we go through. But for now, I will hand over to Paul Hogarth, CEO.

Thank you, Hannah, and good morning. Yes, it's been an amazing week. So we announced our numbers on Tuesday and the road show has been going very, very well. And it was lovely to see the share price bounce finally on Tuesday, which was good to see. So yes, if we can move forward to Slide 8 and have a look at our financial and operational highlights. I won't focus on everything on that. But obviously, some key ones, the increase in revenue, the adjusted profit coming in ahead of consensus, which was lovely so a nice upgrade and movement on the profit margin, again, a healthy movement from 50.6% to 52.3% and then an increase in the dividend, which was discussed at Board level pushing the expected 12p up to 15p for the full year dividend. And obviously, that then takes us to 27p for the year, which is a significant increase to up 42.1%. I am pleased to say that the trajectory on flows has continued. We had a lovely GBP 2.8 billion underlying increase in the flows, and that has also moved forward post the year-end. So at the end of March, so we've had April, May and some of June, we are trending exactly in line with our forecasting flows of GBP 200 million to GBP 250 million a month. So we're about GBP 0.6 billion there now. So a lovely rounded number of GBP 26.5 billion, which has taken us into a fair bit of debate around our GBP 30 billion target, which we set for FY '29 and the suggestion has been that we might just achieve that a little bit sooner, but I'll come back to that later. The next slide really just shows the CAGR on revenue and obviously on profit too. Lovely to see that profit margin that I alluded to earlier, that's gone up since the flotation in '17, up 14.3%. And the rest is just data on that slide. If we look at Slide 10, this is also looking at Tatton shareholder returns. And as you can see previously, up until very recently, we've actually been trading and performing on the share price very, very well with a lovely premium to the peer group and also to the FTSE all share. That, of course, has kind of dissipated and - the lines have converged, as you can see at the end, obviously, is an improvement on the share price move over the last few days. But it still shows that sort of sentiment has been weak. We still trade at a decent rating, but we've had a few -- not concerns, but we've literally been disappointed at the share price of late. We put it down to a few things. There was a situation where 2 fund managers in a fund was closed down by a leading Lifeco, and they had a position that has been fed into the market. We've obviously had the [indiscernible] fear over AI, which I'll come back to later. But the headline there is there is no -- AI is not a threat, it's an opportunity. And also then we've had the Gulf crisis as well. So when we put the whole lot together, it has been disappointing. But as I say, it was lovely to see that adjustment starting on Tuesday and continuing through the weeks. So yes, the rest is just showing how we've returned GBP 64.5 million to shareholders. We have always worked on the progressive dividend piece, as you can see from the bottom. And we still maintain that we should still work towards that 70% of earnings being distributed as a dividend, but will change our policy to 1/3, 2/3 moving forward to next year. And then the final slide is just our position on FUM, which obviously has corrected on the back of the Perspective loss, which is now, as I say, we've kind of passed through that and drawn a line under it, but you'll see it coming through in some of the stats later on. So without further ado, I'll pass you over to Paul. He will take you through the financial performance, and then we'll pop up later with the strategy.

Okay. Thanks, Paul. Yes, I mean, it's been really another strong year of profitable growth for the business. I think Paul just touched on the revenue and adjusted operating profit growth of 20% and 24%. And obviously, that consistent progress on the margin is really pleasing to see up to 52.3%. And the adjusting items there of GBP 4.2 million, we rarely have exceptional items on the face of our P&L. We have our normal adjusting items, which are share-based payments and amortization. But this year, we had GBP 0.5 million related to project management costs relating to our ACD transfer from 2 ACD providers down to 1, and that should have a benefit of improving the bps going forward. And then the net finance income, I think it is an important number for us now. It's over GBP 1 million or GBP 1.1 million. That's actually interest all on our balance sheet cash. So it's our own cash. It's not taking a clip from any client cash, which can happen in other businesses. Adjusted fully diluted earnings per share is up 22%, so overall in line with general growth. And as Paul mentioned, the annual dividend is up 42% with a strong final dividend, which I think just reflects the confidence in the ongoing cash generation of the business and also the capacity of the business and our commitment to a progressive dividend over the medium term. In the divisional performance on the next page, clearly, Tatton is the primary growth engine of this business. Revenue pretty much revenue and actually operating profit pretty much increased in line with the overall group, which is not surprising when you think that it consists of 87% of the total revenue. And you can also see the operational gearing coming through there on Tatton increasing its margin just under 65%. Obviously, driven by strong AUM, GBP 24.2 billion at the end of March, an 11% increase, which also includes a Perspective outflow of GBP 3.3 billion, so very strong. Underlying inflows, I think we mentioned earlier, GBP 2.8 billion, an average of GBP 234 million per month, which is towards the top end of our range, which still remains at GBP 200 million to GBP 250 million. And we've also had investment performance this year of GBP 2.5 billion. The revenue yield this year is around 20 bps. That would have increased adjusting for Perspective to about 22 bps. And you can see there the final bullet in the commentary for Tatton is really just setting out the impact of Perspective, which is a negative GBP 3.3 billion on the outflows. So while optically, that seems like a big number actually due to the relatively low yield actually had a GBP 1.2 million impact in the year. And then Paradigm. Paradigm has seen really good growth this year, 8% in revenue, 4% in operating profit and still maintained a strong margin at 28%. The mortgage had particularly strong performance around completions totaling GBP 18 billion. That's a record for us, up from GBP 14.2 billion in the prior year. And actually, applications year-on-year have also seen positive movements as well in terms of the overall performance. On the next slide, this is a new slide that we've included. And in many respects, it's actually quite a simple point, but it's one that can get actually easily overlooked. And I think it's sort of worth pausing on for a moment. And the core message really is that -- the prior year revenue that we have in FY '26, FY '25 and prior, all that revenue, which comes from a combination of recurring revenue in the year, any market appreciation in that year and also underlying flows falls into the following year as recurring revenue. So 100% of the prior year's revenue start -- it starts off with 100% of the prior year's revenue in the new year coming. And that just shows that the characteristics of this business and the scalability of the business model shows that you've got real visibility of the revenue of this business. It's also a sort of nuance in this financial year in that the flows were weighted H1 to H2 and slightly stronger in H2. So I think we're about GBP 100 million. But actually, the H2 flows were also weighted to the back end as well. And what that means is that the amount of revenue in FY '26 from those flows is relatively minimal, but you will get the annualized flows coming forward in FY '27. So what you also have, not do you only have the 100% of revenue from the prior year, but pretty much you also have embedded growth in this year. So we wouldn't need to take on a new firm or a new client or a new client, give us new flows, and we still see growth come through. I think that's just a really strong message, again, like I say, for the visibility of revenue. And then just to sort of lay the trail really, if you look at the our exit run rate and you take the fact that if we had GBP 100 million of flows, then that would have an annualized impact of about GBP 200,000 and a 1% market movement on the opening AUM would also have about GBP 0.5 million impact on revenue. So you can see how the growth comes through the business in FY '27. And actually, on the right-hand side of that slide, you can see the growth in the AUM from the underlying business is still tremendously strong. If you strip Perspective out of FY '25, the actual AUM growth is just under 28%. And that's clearly driven by the strong firm growth with a compound growth over that period from 2020 of 13% and new client growth of 18%. So the underlying drivers of growth in the business are really, really strong. On the next page, we give some overhead analysis. And I think the key message here really is 2 things actually. The cost allocation within the group is very consistent. So there's no significant change in the cost. We always say and we never have since IPO, hit a cost cliff and there's no reason that we should do that going forward. And then the other point that I'd like to make is that the 60% of our total overhead is actually people cost. But more importantly, the variable pay within that people cost, 28% of that 60% or GBP 4.3 million is variable pay and paid on performance. So that's a way of us managing the business in terms of if we get a downturn in markets or a downturn in flows, then clearly, that variable pay doesn't get paid and protect earnings and therefore protect shareholder value. And on the right-hand side, we just show the walk really between the 15.6% growth in total, but actually underlying is around in our guidance of 12%, 12.5%, split pretty much evenly between inflationary and investment. And you can see there the 0.8%, which is the performance-related pay on the back of a very strong year this year. On the next page, on the balance sheet, I think the key message here is we have a pretty pristine balance sheet. Net assets of GBP 55 million, strong return on capital employed, which is very unusual to see from a business of 53.4%, good cash of GBP 34 million, and it's probably an important point to make that we're debt-free also. The movement in goodwill is our investment in Absolute. So that's the only significant movement in the balance sheet this year. And then from a regulatory capital perspective, clearly, we have qualifying capital resources of GBP 21.5 million or 400% headroom there. And actually pure headroom is actually 300% or GBP 16.1 million. And then from a cash flow perspective, cash from operations was a strong 120% of operating profit. You've obviously got the inflows of the interest, which we discussed earlier as well. Then the relatively normal elements of cash flows going out with dividends and tax and so forth. The 2 elements that need probably highlighting is we acquired GBP 4.9 million worth of our own shares as a sort of hedge in our EBT for future options and then the investment in Absolute GBP 4.7 million, which we'll no doubt touch on later as well. And then finally, we have a guidance and outlook slide. I think we split this into 2 sections really, the prior year guidance, and it's really just to demonstrate that the guidance that we gave you last year of where we've landed with that guidance, and we've pretty much either hit all the guidance or exceeded, which I think is a very positive point. We take our guidance super seriously. The FY '27 guidance, our net flows at GBP 200 million to GBP 250 million. That's what we're guiding to in FY '27. So a consistent GBP 2.7 billion there. Bps or yield on that revenue should increase to 22 bps now Perspective wash through. And our underlying cost increase will be that 10% to 12%, which we guided in the prior year as well. And then from a future dividend policy, we're maintaining our dividend policy, which we've always said is progressive. It's 70% of adjusted earnings. And this year, we're going to split it on a 1/3, 2/3 basis.

Thank you, Paul. Okay. And if we can move forward to the strategy piece and start off with Slide 21. This is our road map for growth, the GBP 30 billion being the finishing line in 2029. And as you can see, we're making really solid progress towards that. And our sort of target area should be around about 40% of the target at this stage. And actually, in reality, we're running at 72% and as I mentioned earlier, there's been some question about whether what speed or what pace we will get to that GBP 30 billion. And we've also been sort of asked about what the next target would look like. But we're very keen to get the first one or the second target before we start revising and coming forward with a new number. But that's all very positive. I think on Slide 22, you can actually see exactly how this global world is growing. So assets continuing to pile into platforms. You can see the number there in adviser-led platforms is now up to GBP 991 billion but that's at December 2025. So we're well and truly through the GBP 1 trillion mark now within the platforms, which is obviously very encouraging. And you can see that MPS is sort of 22% of that position. And that actually has doubled over the last 5 years when you look at it, but still 22%. And again, the question that gets asked there is what percentage of those total FUM sitting on their platforms will actually ultimately end up in MPS. And we think over the next 5 to 6 years, it could go to 45%, maybe 50% of the total. And there are others within the industry that are coming forward with similar comments as well. So we're looking good. When you look at our market share as well and you strip out the Perspective piece, our underlying market share is actually up a couple of notches to 11.3% from 10.9%. We're competing in the same place with the same kind of competitors. There are lots and lots of MPS providers out there, probably over 200, 220, 230, it really is a question of who isn't an MPS provider. But we're very happy with where we sit. We're happy with our pricing at 15 bps, and we've got a slide on that later. And we're competing nicely and getting our just deserts. And of course, as the CEO, I'd like to see us improve our market share. But as this is a growing market and we're performing relatively well, we can't be disappointed on holding. And as I said, just a slight little uptick on our market share moving forward. When you look at the competition, ourselves and Quilter control around about 25% of the flows going into MPS. And if you drill down a little bit deeper on that, you can see that actually the top 10 MPS providers get sort of 60% of the flows moving forward. And it's very difficult for the smaller ones to actually build scale and get moving forward. And we are seen as a first mover. Some people have used the word pioneer, which is a little bit strong. But we are being rewarded for our position, and we've got a lovely consistent investment performance, which goes back 13 years now. So we've got a real solid base on investment returns. We've got the right price, and we are very, very active, as you know, in the IFA community going to as many IFA meetings as we possibly can every single week. We've got another slide on 23, which looks at our sort of evolved or tailored selection from co-branded to white labeling, seen a nice healthy increase in the number of arrangements there, up to 71 now. I did say last time that we'd like to see that get to 100, and we still would. And as you can see over the year, we've had GBP 1.2 billion from those 71 arrangements, which is fantastic. And just to make the point that these are all at full margin of 15 basis points and not on a reduced margin. Funnily enough, IFA start saying, actually, I quite likely joining you on the investment committee for the appointed investment adviser position. But when they actually sit down with our investment team, they really quickly come to realize that they're not really going to add any major benefit to that team and the team is so well equipped on research, et cetera, that they just decide to go further down towards a white labeling or co-branding. But the conversations do start with the IFA saying, I'd like to be part of the committee and then sort of dropping back from there. Another new slide from us is Slide 24. And I think this is an incredible slide really. We've got a lot of data now. We can drill into how much on average assets we get in year 1 from IFA from new IFAs. We can see how much we get on average in year 2 from them. We can see in year 3, what we can get in year 4. And we've kind of just for the first time, went to extrapolate what this could look like over the next 10 years. So I make the point that this isn't a forecast. This is really an extrapolation. But when you look at it, it's really, really interesting. So if you look at what we've done so far, Tatton grown on a compound basis of about 23.9% in FUM terms. We've got a base of GBP 22.8 billion AUM in March '26. We've got 1,218 firms who are already working with us, as you can see from that first slide. If we work on our averages of those firms coming in, in year 1, year 2, year 3 and actually adding to the situation, we can see a further GBP 23.1 billion there. And then if we continue to bring new firms on at a pace of, say, 100 new firms per annum for the first or the next 5 years, and then we reduce that down for the second 5 years, culminating with a total of 1,850 firms. That's not a massive number. For example, I think the last time I saw anything from Brewin, it was around about 1,600 -- 1,650 firms that they're working with. If you did that, you could add another GBP 13.9 billion of FUM. As the 3 together in 2036, you're just about at GBP 60 billion. That would obviously be a reduced compound rate of growth. And I think when we did the math, it looked at around about between 10% and 11% compound. So it's realistic and I think it just really goes to show, again, as Paul said, the strength of the model. And if we keep doing as we have been doing and keep executing the plan, this sort of number is not a crazy number to shoot for. So I'll leave that one for you to ponder. And the next slide, Slide 25, is a further endorsement of that. And that's our old saturation slide, which again, you can see the total opportunity. If we can get as close to the firms as we have done with the Paradigm firms is another -- is that GBP 26.3 billion. So it kind of backs up the stats that we had in the previous slide. And then we move on to have a look at a few surveys. I thought this was really interesting on Slide 26. How many firms now see MPS as core? Well, it's now 38%. So that's a healthy increase. That's up from 26% last year, so a 12% increase on that. MPS has a core proposition for them kind of endorses the fact that we think we'll get to 40% to 50% of the total FUM on adviser-led platforms. Multi-asset multi-manager is still playing a major part. And when you look at multi-asset, multi-manager compared to the fund performance of MPS, MPS does really well there, reduced costs and good performance, and it's a real true competitor to multi-asset multi-manager. And then this is the amazing one for me is there still are such a huge amount of firms who are still running their own portfolios, still running advisory and other portfolios, which as we've said, it isn't scalable. It's not a good use of their time, and it's low-hanging fruit for us. And if you look at the right-hand side, you can see that 59% of the firms have gone for the outsourced Tatton type MPS proposition and 41% are still doing themselves under that advisory piece, which is very clunky and time-consuming and not an efficient use of their time. Going to our next slide on AI. And AI, we had the whole thing, didn't we? We had the situation where everybody thought the world was going to completely change. Would IFAs exist? Would they be replaced by an AI bot, would MPS continue or would that be replaced totally by AI? Would the platforms be replaced by AI and wouldn't continue to thrive. And we have that sort of myriad of concern around it. We've got and at times at some of the comments that were made. But just to sort of go back to my point at the start, AI is superb for both the IFA community and the way that we operate, and we embrace it, and we should all embrace it like crazy, but we shouldn't see it as a threat to what we're doing. So let's go back and look at IFAs, first of all. IFAs can really, really benefit from AI. AI can get rid of a lot of the mundane stuff that they spend an awful lot of time on. I'm thinking of suitability reports, the annual confirmation to the client of the suitability of the advice that's been given. A lot of the areas where the IFA is spending time can be replaced by AI. We are seeing IFAs adopting AI and winning on the back of that, saving time and enabling to get more clients on board because only 9% of the population get IFA advice, which frankly, isn't a great number. So there's huge demand for what they do. So IFA world not being replaced by an avatar will continue to thrive in our eyes. And then you look at MPS, MPS as a service, it's not a product. IFAs have decided to outsource and remove themselves from that responsibility of managing clients' portfolios. It's released them to have a better, more scalable business underneath them and enable them again to go for more clients and build up their FUM at a time where PE is all over the industry and basically consolidating. We like consolidation. We think it's a good thing. And it's given great valuations to businesses, which is encouraging people to build businesses and bring their families into the business to move it forward. So we actually think when you look at MPS, it is a service, it's a proposition for the IFA to go back and use AI and create their own MPS models, this would take them back and all the way to taking responsibility for fund management again. And that just does not seem to make any sense whatsoever. They've got to rebalance all the time. They have to go back to the client to get a signature. It has to go back on to the platform every time to make the change. It's just not a feasible proposition. And therefore, we are not at all concerned around that. And then finally, if you look at our own operational piece, we're using AI extensively within the business when we're reconciling trades. We have a Six Sigma principle where we check double check and triple check, but we can now use AI to do that as well and add into that and actually start to look where maybe a sell or 2 has gone slightly right, and that can pick us up. So we're already utilizing AI within the business. I'm sure Lothar will talk about that later on. And then you've got this regulatory moat, too. We've got a situation where these AI tools aren't authorized by the FCA and a lot of great pains to explain that. And then also you look at all of the changes that have been made over the last 11 years, I think there's 77 changes that are being made to legislation around pensions, inheritance tax, et cetera, et cetera. So you've got this trust paradox where actually it could even enhance where the IFA sits with the client. Clients may end up actually paying a premium for this advice piece moving forward. So I think we're comfortable on AI. If we move to Slide 28, you can see that MPS has got a competitive position. Why do I love it? It actually takes them away from it and puts it into a specialist hand. It reduces their compliance risk, and it really, really sits very well on the consumer duty. And that's the reason why we actually believe that the assets will move forward and obviously improves efficiency. And then you can see on the right-hand side where Tatton fits in. We were the leaders at 15 basis points. We've been 15 basis points right from the start. We think that is the industry norm. If it isn't, it's so close to being. We saw Fidelity join the MPS world about 2 months ago, and they came in at 15 basis points, and I'm sure they did a really good sort of study of the marketplace before they came into the market, albeit late, I thought it was interesting they were coming at 15 bps. Yes, there are 1 or 2 that actually are cheaper. But I think you get what you pay for, and there's always certain nuances between us and the competition. We've got that lovely 13-year track record. That has been so consistent and that is our watchword when it comes to our investment outcomes, and we have an extensive range. On Slide 29, we've actually drilled in to show how competitive we are because it's not just about the IM fee or the MPS fee, it's also about what is the total cost of investing for the client. And as we get bigger, we can demand better discounts. And because of our scale, we can reduce the OCF. And as you can see from the table, we've got a very, very attractive OCF when you look at it and add our normal holding charges and at our IM fee, you can see that we are super competitive around that level. And then we did a little bit of work internally on brand awareness. I personally think this is a great slide. My colleague on my right actually thinks actually, is it so good, but I'm going to lead with why I think it's so positive. I think that's the yin and yang of the CEO and the CFO working together. But that slide basically shows how firms sort of think of us if they've not used us and those firms that have used us how they think about us. So I personally love the fact that people who are using us actually see that we're professional and credible that we're a brand they can trust with their clients, and it feels totally relevant in this good quality situation. And they're really strong parameters for me. That says that we've got a lot of satisfaction from the firms that work with us. And obviously, if you don't work with us, it's hard for you to judge. But once we've actually won them over, we're doing incredibly well with that. So I think that's a real strong piece. And that's further endorsed by Slide 31, which basically just shows you that we're seen as delivering good, strong performance. We're kind of weak when it looks -- when you look to see are we a large provider, are we a leading brand. I think we're a punchy brand in MPS. I think our brand does very well in MPS. But you wouldn't say we're a leading brand right the way across the piece in the financial services industry, and we're still relatively young aren't we? So obviously, I think there's a little bit of work there, but that will come as we mature and grow moving forward. And then finally, on Paradigm. Paradigm has done so well. The Paradigm consultancy piece has continued to do what it says it will do. And we've seen lovely improvements in mortgage completions, which the team have done incredibly well with. We've seen an increase in our member firms. And we've actually had some real big accounts that have moved across to us and have joined us and are helping us on those completions. So I think whilst the mortgage market is still difficult, the housing conditions are still impacted obviously by the macro piece and confidence isn't as great as it should be or could be. And we're in great shape on that. And whilst Paradigm becomes a smaller and smaller part of the group, I think it's now 13% of our total revenue, it's still playing its part, and we're very pleased with the performance there. I think without further ado, then I'll pass over to Lothar.

Thank you. Thank you very much, Paul. And yes, just a couple of words on the investment side of the business. So it was another year where you could have really gotten it wrong, starting with the Liberation Day drawdown and then the very strong earnings growth that persisted throughout last year, drove markets higher, even led to certain frenzies or hypes if you think about what happened first in crypto, then in gold and very obviously, the Mag7, which then came down. But nevertheless, overall, last year, for the first time in a long time, the U.S. market underperformed the global markets. We were well positioned for that. We had underweighted the U.S. while staying somewhat neutral on the Mag7 and AI. Nevertheless, from time to time, you suffer a little bit with your positioning as things go against you. But overall, it resulted in a very decent outcome for our portfolios. Our base case for this year is, well, we already sit on pretty healthy single-digit to almost double-digit returns across our portfolio. So I wouldn't mind if we close the year on that. There isn't even that much more required. But if we look at just the 1-year returns on the next slide, we can see as per the end of March, very healthy returns. But that was obviously, to a large extent, also driven by the base effect of starting from the low point of the approach of the Liberation Day market drawdown last year. And I'm very happy to say where we stand now and the Liberation Day drawdown well behind us that the portfolio still look quite similar as the markets have now recovered from Gulf War #3. And so overall, we're quite happy with where we are. It also has to be said that end of March was a slightly strange valuation point for anybody who invests through third-party vehicles through funds because the funds tend to price on the previous day lunch time. And with the U.S. markets, if you think about it, that can be up to 18 that you're trading up to 18 hours, meaning that if you get a significant upsurge in the markets as we did this year on 31st of March, then your performance figures versus index figures can lag. That is exactly what happened. And so I'm still very happy with what we see on the performance slides, the relative performance slides, which now follow. So on 36, the next slide, we see our comparison against the ARC peer group, and it has to be said that the ARC peer group there is initially calculated or extrapolated on based on index returns. So just taking the historic investment allocations and extrapolating them by index returns. We're looking pretty strong there, looking even stronger now, but very happy with what you see there in terms of the outperformance for 1 year, 3 years, 5 years in annualized figures. So that's the peer group against the core. If we move on, we've also put it as usual on the risk return picture just to say this is not just us taking more risk. We are aligned with the risk profiles, although the ARC falls a bit short of what's really going in risk profiles in the markets in the U.K., but we're very evenly spaced out and putting in a very solid return there. That's the 1 year. The next page, similar picture over the 3 years. So our green dots nicely above the black dots of the peer group. And then the next slide, the 5-year and the next slide, even the 10 years because we have got 13 years of track record now, which also makes us a little bit of outstanding competitor here in that we are able to show very long performance track record. The last relative slide is the ethical performance of our ethical portfolio. So we're only showing 5 years here because most of our peers only have 5 years. We have got 10 years. But as you can see here as well, we are showing strong performance. And that gives us a really strong backdrop in terms of where markets stand because we have a wide variety of choices for advisers so they can select from our model portfolio family wherever their clients' particular interest lies. If we compare against our closest competitors, so that's on the next slide, 5-year annualized return comparison here, we're looking pretty strong. And as usual, we're right up there with our closest competitors, Quilter, the Quilter Wealth Select, quite happy where we stand in terms of the consistency of our returns over time. So we tend to be pretty solid where we are there, and we see others fluctuating perhaps a bit more. The quartile rankings on the next slide, we actually took those for April because March was just too distorted. They've since further improved. We're very happy with where we're standing there first, second quarter and is exactly where you want to be because that moves you into the first quartile over the longer time periods of 3 and 5 years, which is exactly what happened. The distribution of our assets under management across on the next slide shows that we've had a shift more towards the hybrid and blended. That to some extent was driven by the assets from Perspective leaving us that were more heavily focused on the tracker propositions, but we have generally seen not just a move back more towards hybrid as active managers have been able to find alpha again as we've had quite a bit of rotation opportunities in the markets over the last 12 months. But we've also, and you see that at the bottom, seen a slight uptick in client money is going into the active, aggressive and global equity, although to a certain extent, that will also have been driven just by the sheer outperformance of equity over bonds over that time period. So we mustn't read too much into it. The last slide then is just briefly on the FCA's multifirm MPS review. So at long last, the regulator has come out with its long-signposted MPS review, sent out a survey to 40 of the 200 MPS providers. And obviously, we were part of it being one of the leading MPS providers. We're very comfortable, very happy with their focus on consumer duty and how that's applied across the DFM MPS sector. We have and we'll go back to them before the deadline early in July, but they've already said we can't really expect much feedback from them before the first quarter next year. So we'll have to see and wait what they're actually going to come out with, but their focus is, as usual, very much on client outcomes, transparency of prices and any conflict of interest that may be arising here.

I hand back to you for questions.

And we do have a number -- do you charge client management fees on cash held in accounts?

Well, I mean, no, we don't, but there is a platform requirement of 1% cash in portfolios and the DFM fee is charged on the whole portfolio. So if you want to be pedantic, yes, there is a tiny fraction of management fee on 1% that has to be in cash. Sorry, Paul.

You've already mentioned that you're discussing a new target beyond GBP 30 billion. When can we expect an update?

I think what we do there, Hannah is we go through the GBP 30 billion. I think it's a bit premature to actually come forward with a number until we've actually achieved that GBP 30 billion. So I'd rather wait until we get there and then we will be coming forward with a new plan then. But I just don't want to race forward. I think the only thing I can suggest you look at is that Slide 24 to get some kind of idea.

Okay. And what an average management fee are you targeting on that GBP 30 billion?

We're saying 15 basis points.

Can gets much bigger over the next 5 to 10 years, are there any ways that your IFAs will benefit specifically because of that scale?

Yes. I mean I think the big thing really would be as we continue to gain scale is we have effectively more bargaining power with the collectives that we work within in the portfolio. So I suppose the bigger we get, the stronger we get around that, which would be reflected in the reduction in the OCF for the end client. So yes, that would be the strongest element. I think that would really, really help.

Are you seeing any evidence of MPS being used for higher-value bespoke clients?

It's a very good question. And yes, we are just starting to see a little bit of that. So we're starting to see some IFAs look at their sort of BPS or traditional wealth management investments that they call for clients and saying, actually, have they performed or outperformed the MPS? Obviously, it's more expensive to be there. And we are starting to see this transfer from BPS to MPS. And I think you can see that from some of our competitors as well where there's a movement away from BPS towards MPS.

One investor thanking you for your AI comments, but suggesting that there was one crucial point missing, which was that AI will lead to fee pressure since you and everyone else can be more efficient. Do you see AI applying pressure to costs?

To be honest, I think to start off with, we're seeing it as an assistance. It's not actually reducing cost just yet. Maybe in the fullness of time, that might have an effect and possibly that could lead us into that. But I think these are still very, very early days for AI and where we are utilizing it within the business, this isn't affecting headcount at all. It really is just helping us be more efficient. And it's not a point where we're swapping AI for people.

You like the slide, Paul Hogarth, of your brand awareness. Given your success, why is it so low? And what are you going to do to address it?

I just think it's really because we're still seen as a small business. The question -- and it's all how you make the question, how the question is framed. You can't say that Tatton is a major, major brand in the world or in the U.K. financial services industry across the board. It's a major brand in what we do, and we're seen as an industry leader in what we do. So we punch above our weight on that side. But we haven't got that broad church of offerings that lots of other players have. And we don't actually go to the consumer for business either. We're very much an IFA-focused business. We're a B2B proposition. I think that's absolutely the right place for us to be. But it's still relatively small, aren't we when you look at where we are in the industry. As I say, that will come with time with maturity as we grow. But I think also, we're really, really focused on what we do. We're sitting here saying, actually, we love the world of MPS. We're not rushing to do other things. We're not creating our own platform or offering some sort of integration for our IFAs. We're remaining completely and that's what we focused in the world of MPS.

Okay. A couple of questions on Perspective. One, are there any other Perspective type risks still out there? And two, now that the contract is gone, is there any of them staying with you? Is there a potential upside from those that like the Tatton service?

Yes. I mean, again, really good question. I mean I think when we look at Perspective concentration-wise, it was a one-off. We didn't have any other relationships like Perspective. Perspective was done at a reduced fee. We grew up together and moving forward. So no is the answer. There's no second Perspective in the wings or anything like that. Concentration risk is not a concern for us at all. Our second largest business was Absolute, which is obviously part of the new Absolute position because that's been bought. And I think then you drop down to something like GBP 300 million would be one of our larger ones. And then you've got this huge sort of number going through to the 1,218 or with smaller amounts. So I'm not at all concerned about concentration risk. The second part of the question, really, have we managed to get assets back. We've had some dribs and drabs so far. It's not been as good as we'd hoped. The Perspective compliance teams are working very hard to retain their clients. And I think it very much depends on how the new provider of the MPS process actually does perform. And if they make some mistakes or if we start to compare us with them on a regular basis and they're not performing, then I think that will make our job a lot easier to drive some of these assets back.

Okay. What is the risk that the FCA will require scale benefits to be passed on to clients through tiering of fees?

I don't think it is a risk, to be honest. I don't think that's their scrutiny. I mean when we look at the sort of the MPS review and the questions that they've asked, they're very sort of high level right now. I think it's really trying to understand exactly the market and the differences between the different providers. The questions are all around how many portfolios do you offer? How do you do it? What's your pricing like? How do you manage any conflicts of interest that might be? It's all very, very sort of high level right now. And I don't think they're interested in looking at fees and deciding that they need to be scaled or whatever. I think that the regulator has always, in my mind, always left all of that to the market to find its way and the market to sort of push to whatever the pricing needs to be, and I can't see that changing.

Okay. A couple of questions on Absolute. Can you expand on the rationale for it? And how big is it gives you your ability to attract and retain deals from IFAs as part of the deal?

Sure. Again, super question. I mean I think when you look at Absolute, we have a lot of member firms, whether that's Tatton or Paradigm or whatever who are reaching a level where they do potentially want to retire or exit, and we were having people saying to us, some of these consolidators want us to move platform. They want us to move into their own host version of what you do. And we're very happy with what you do. Can't you have a solution that sits out there that's available to us. And I think that's where Absolute takes us. Absolute position means that we've got somewhere where we can refer that IFA to where we know they're not going to have to or be forced to actually move to another provider. We've seen Absolute has a lovely start. They bought about 12 businesses post the purchase of the Absolute business. And about 1/3 of them have actually been Tatton firms and Paradigm firms, which is great. So from a defensive point of view, that's good for us. But also from an offensive point of view, we believe that when you look at the firms that they bought, 2/3 of them aren't utilizing us right now. And maybe in time, they may want to use us, and we'll get that business by performing and being at the right price. We're not going to mandate any usage of Tatton within Absolute. It's just where it can be done and IFAs want to do it and then of course, they can avail themselves of our services.

You yourself said it's a question of who isn't in MPS these days. And on that basis, can we assume that acquisition opportunities have been on the ground? Are you seeing anything at what are prices valuations?

Yes, it's still not happened yet. So 220-odd, there's got to be consolidation of the MPS world at some stage, but it hasn't actually happened yet. But as and when it does, we would love to take part in that if we can see that we can buy businesses that's earnings enhancing, which has obviously been our promise to the city.

Okay. Finally, two questions again on international opportunities. Which countries would you look at? What's got the right profile?

Yes. I mean, I think as we said earlier, MPS is not just a U.K. phenomenon. There are lots of territories that adopt and utilize MPS. Some are much more mature than others. The states, for example, in Australia are very, very mature. We would look for a territory, and we are in discussions and having early discussions with certain territories where we believe that there's a thriving IFA community, where they use platforms as the custody. So it would all fit into us and also where the regulator, I suppose, is starting to focus on reducing the cost of investing in that particular country because that would fit into where we were sort of 5 or 6 years ago. And if we could get that kind of backdrop, we would like to be involved and maybe take a stake in somebody who's already on the ground and operating in the MPS world in that country. And that's what we look to do. I can't actually give a territory right now. We are just doing our research and also in early discussions. So hopefully, there'll be more of that later.

News, what news can you offer on the JV, which was acquired a few years ago?

Yes. Certainly, Paul.

Yes. I mean 8am, we acquired back in 2021. We own 50% of the business. We have an option to buy the further 50% in FY '27, October '27. The business has been performing well. So I think the AUM last year was just under GBP 1 billion. It's closer to GBP 1.5 billion now. It's had very strong flows over the last 6 months. Yes, we're super happy with its performance, and we'll see how it gets on over the next 6, 12 months up to the point where we look to acquire the second 50%. If and when we do acquire that 50%, we'll keep that business separate. It won't be rolling into Tatton. It will be a separate brand and a separate business.

Sorry, last question is coming in. GBP 16 million headroom in capital, what are your plans for it? And how much is freely deployable?

The GBP 16 million is all headroom. There's an element of the acquisition that I just talked about potentially in closer to 18 months' time, 15, 18 months' time. We also have the other GBP 5.3 million that we will be investing into Absolute. So we've committed up to GBP 10 million for Absolute. We expect that to be over the next 12, 18 months, perhaps even 2 years. So there is a runway. That said, though, over that period of time, we will obviously increase our headroom as well, certainly once we file these accounts and obviously, when we file the interim accounts as well. But essentially, what you should also expect to see is the cash to continue to increase as well.

That's it for the question.

Sorry, I just wanted to put the earlier question on the cash a little bit of perspective around it. So I think it stems from the fact that one of our competitors might have been even this week, announced that they wouldn't charge DFM fees on cash anymore. I think it's worth noting that this competitor is talking about assets under their own custody where they're already taking a clip on the interest on the cash. And therefore, really, you could argue that there is a conflict of interest then also charging a DFM fee on it. I think it might have been cleaner to actually not take the clip anymore rather than the smaller bit of the DFM fee. But that's just to put that into perspective. We obviously haven't got our own custody. We only operate on platform. And therefore, we are not taking any clips on cash, and that was really what Paul was referring to when he immediately said no because obviously, we are not.

Thank you for the clarity, Lothar. And thank you to you all for your presentation today, to our audience for listening. There's feedback coming up at the end. Please do fill it in. And we look forward to hearing from you in 6 months' time.

Thank you, Hannah.

Thanks, everybody.

Thank you. Bye-bye.