Good afternoon, ladies and gentlemen, and welcome to the Premier Miton Group plc full year results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q&A tab that's just situated on the right-hand corner of your screen.
Please just simply type in your questions and press Send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish those responses where it is appropriate to do so. Before we begin, as usual, we would just like to submit the following poll, and if you could give that your kind attention, I'm sure the company would be most grateful.
I would now like to hand you over to the executive management team from Premier Miton Group plc. Mike, good afternoon, sir.
Thank you, Jake, and good afternoon and welcome to the presentation of Premier Miton's annual results for the year ended 30 September 2024. I am Mike O'Shea. I'm the chief exec, and I'm joined today by Piers Harrison, CFO and Jonathan Willcocks, Global Head of Distribution. Together we will be presenting the results for the year, covering the main events during the period and the outlook for distribution and the financial results. Without further ado, we will begin.
We closed the period with GBP 10.7 billion of assets under management, and we saw good investment performance across many of our strategies over the period as investment markets broadened out and mid and small-cap stocks performed better relative to large, which has allowed us to deliver good long-term results for our investors.
We reported an adjusted profit before tax of GBP 12.2 million, a final dividend of three pence per share, bringing the total for the year to six pence, and we closed the period with GBP 35.9 million of cash on the balance sheet. Assets under management have increased further since year-end and now stand at GBP 10.9 billion.
During the year, we saw continued inflows into our fixed income, absolute return and international equity funds, particularly the U.S. Although the U.K. market unfortunately remained very much out of favor. We are pleased to report that we completed the integration of the Tellworth business onto our platform, and we have delivered the synergies that we identified at the time of the transaction.
It is pleasing to note that investment performance has been strong on the Tellworth funds, and we have seen net inflows into these funds over the period since the acquisition. We have also been busy on the distribution side of the business with the launch of our Managed Portfolio Service, the registration of a number of our funds in South Africa and new funds planned for our Irish business to meet client demand. Geoffrey will cover all of this and more in a few minutes.
This page sets out the results in their historic perspective, and Piers will be going into more detail on the numbers here shortly. I do not propose to spend time on this slide. In terms of the industry backdrop, during the year this has really been quite challenging and it's remained this way, really since the beginning of 2022.
From our perspective, while we initially experienced something of a bounce in interest from investors over the early part of this summer, with net flows turning marginally positive. However, the gloomy prognosis set out by the incoming U.K. government and the imminent threat of significant tax changes in the budget at the end of October, made financial planning quite difficult. This, in turn, impacted on fund sales across the industry and the improvement we had seen reversed with record levels of industry outflows from equity funds reported in both September and October.
What fund sales there were in equities, global and typically passive, and investors continued to sell down U.K. equities. We've also seen a noticeable decline in demand for sustainable strategies as a combination of delays with the FCA's new SDR regime and weaker performance from these strategies has squashed demand.
Our own performance during the most recent quarter very much reflected this, with GBP 126 million of redemptions from our U.K. value fund, largely driven by a single client making an asset allocation shift out of the U.K. and a redemption of almost GBP 80 million pound from the U.K.-focused Diverse Income Trust.
Across the whole of the rest of the business, we actually saw net inflows of around GBP 70 million, mainly focused on U.S. equities, fixed income, absolute return and our diversified multi-asset range, all of which were in net inflow over the quarter. Looking forward and as demand improves post the U.K. budget and the U.S. election, we see demand continuing to be focused on these key areas, fixed income, U.S. equities and absolute return.
We also expect demand to remain strong for MPS Solutions and for low cost, high performance multi-asset strategies, where changes to the U.K. Capital Gains Tax regime will help support demand. This is borne out by our own recent experience, where during the second half of our last financial year, we saw around GBP 420 million of net positive flow into those key areas, and these sectors will be the focus of our distribution activity as we move through 2025 and Jonathan Willcocks will discuss this in more detail shortly. We've remained absolutely focused on what we can, as investment managers, control in the difficult environment that we have been in for the last two and a half years.
There have been six key areas that we can influence, and this has very much been the focus of the team during this period. They are ensuring that our product mix is well-diversified so that we are not overly exposed in any one area, that we have an absolute focus on delivering strong investment performance, that we stay loyal to our principles of providing truly active management and original thinking, that we ensure that we can successfully execute M&A activity, that we maintain a disciplined approach to cost control and operational efficiency, and that we continue to develop our distribution reach, our brand, and our client service. I'd just like to spend a couple of minutes looking at each of those areas in turn. This slide shows the breakdown of our assets under management, which are now well-balanced across equities, multi-asset, fixed income, and absolute return.
It is interesting that our exposure to U.K. equities has now fallen to 18% of our total assets under management. Within that, funds that have a specific U.K. small companies brief represent just 1.6% of our total assets under management. Most of our equity exposure is now international and is spread across U.S. equity, continental European equity, and global equity. Our multi-manager business is now 11% of our assets under management.
Our directly invested multi-asset business, which has been growing well, now represents 16%. Excuse me. Fixed income is 19% and growing well, as is our albeit smaller absolute return business. This diversification by asset class means that we are not overly exposed to any one sector or strategy or investment team. I think this is important because it creates a stable and diversified revenue base for the business.
This, together with our healthy balance sheet, allows our investment managers the freedom to manage money the way they believe will deliver the best long-term outcomes for our clients. It means they can take and manage the risks necessary to deliver outperformance against the individual indices against which they are measured. It's pleasing to see that investment performance has remained strong over the long term.
In the shorter term, given the high concentration of returns we have seen coming from a relatively small number of mega-cap stocks, it has been a difficult environment in which to keep ahead of the index. Even over the shorter term three-year period, we have 38 funds where we have delivered outperformance and where the distribution team can be having many positive conversations.
This does not include funds such as absolute return or risk targeted strategies that do not have a specific sector against which they are measured but which have performed very creditably. A good case study here is our US Opportunities Fund, which takes a very different approach to the S&P 500, focusing on domestically oriented U.S. mid- and large-cap companies. This approach has led to an underperformance against the tech-heavy S&P 500 over the last five years, but a noticeable outperformance against the S&P 500 equal weighting.
The original thinking behind our US Opportunities Fund has been attractive to investors looking for a differentiated product that they can use in their portfolios alongside traditional U.S. equity funds or indeed passive and index funds. As a result, we have seen strong flow into this fund over the last year.
As the S&P 500 Equal Weight Index has started to outperform the main S&P 500 in recent months, our fund has continued to deliver for investors. A good example of active management delivering for investors. This leads us neatly onto our belief that if passive investing will form the core of many portfolios, then active funds will need to demonstrate that they are worthy of a place in client portfolios.
To do this, they will need to provide something different in terms of risk management, market exposure or diversification. We call this the edge. These active funds will need to have high Active Shares and high tracking errors against the underlying indices to deliver the outperformance that clients are aiming for. Our funds do, as can be seen in the data on the left-hand side of this chart. Why is this important?
Well, it's important because you cannot beat the index by looking like the index. For example, we have seen that the Tellworth UK Select Fund has compounded at 9.6% per annum over the last five years with a volatility significantly below the all-share index, effectively capturing the alpha available from strong stock picking skills.
The Premier Miton European Opportunities Fund and mid-cap focused high alpha pure stock picking fund has outperformed the FTSE World Europe ex U.K. index by 3.8% per annum since launch in December 2015 net of fees. You simply do not get that from an index fund. When we look for acquisitions, we look for the following key attributes. Do they bring a scale to existing capabilities? Do they bring us new investment capabilities that will be attractive for our clients?
Or do they bring us access to new clients? Those are our three strategic objectives when we're looking at M&A. As we have previously discussed, the Tellworth acquisition ticked two of these three boxes for us with very strong investment capabilities in interesting areas that are interesting to our clients, as well as access to new client segments where we were underrepresented. Successful M&A is not just about identifying good opportunities.
It is also about successful execution in an industry that is notoriously poor at delivering successful M&A. We are pleased to report that we have completed a swift integration of the Tellworth business onto the Premier Miton platform, and we have delivered the expected synergies. Just as importantly, we are pleased to report that the business has benefited from access to the wider distribution footprint at Premier Miton.
This, coupled with the Tellworth team's excellent investment performance, has meant that we've seen this business return to net positive inflow and increasing assets under management over the period. Turning to cost control and operational efficiencies, towards the end of the period, we were joined by a new Chief Operating Officer, Nicola Stronach, who has extensive experience in the asset management operations area, having worked at Old Mutual, Merian, Jupiter and Quilter.
We are in the midst of a review of our operational infrastructure to ensure that it is working as efficiently as possible. We're in discussions with a number of our third-party suppliers to ensure we leverage these relationships effectively for the benefit of our clients and for the firm. We're also introducing new risk analytics software and increasing the use of AI across our business for productivity, analytics and client service.
All of this is to ensure that we maintain our reputation for effective business management and strong cost control with a clear focus on efficiency and productivity. In terms of our distribution reach, during the period, we have continued to focus on ensuring that we are laying the groundwork for when market sentiment turns. You'll be hearing from Jonathan Willcocks in a moment about the work we have been doing on supporting our brand proposition in our key markets, and there are some exciting developments coming as we move into 2025.
On the distribution side, we have continued to leverage our experience in both of our key markets in the U.K., as well as building our presence in both the institutional and international markets. During the year, our fund managers held over 700 individual meetings with fund buyers in both one-to-one sessions and group presentations.
Our fund managers have presented at almost 200 events in front of over 7,000 fund buyers, and we were very pleased to welcome 200 fund buyers to our flagship conference in February last year. Based on the early registrations we have seen for next year's event, we are confident that we will surpass that number at the end of February 2025. We are ensuring that we are relevant and visible to fund buyers across our key market segments. Just finally from me, I continue to believe that Premier Miton is well-placed for recovery. We have spent the last two or so difficult years ensuring that we are controlling those things that we can control. The foundations are in place for a market recovery.
We have strong distribution and marketing capability that has, as you will hear shortly, been working to diversify its reach into new markets and geographies while maintaining a strong presence in our core market. Our business is well-diversified. Our funds provide high levels of differentiation against the underlying indices against which they are measured. We are not overexposed to any one theme, strategy, geographic area, market segment or manager.
We have significant optionality across our business and significant capacity to run additional assets under management as conditions improve. We are cash generative, and our shareholders are paid to wait for recovery through an attractive dividend yield. We have a robust balance sheet that can support our growth ambitions, and we have a management team that has a proven track record of successfully executing M&A.
We remain focused on our organic growth plans and open-minded about further M&A where this meets our strategic objectives. I'm now going to hand over to Jonathan Willcocks to run through the distribution side of our business. Jonathan Willcocks.
Many thanks, Mike. We have made considerable progress in distribution and marketing since I joined in September 2022. Now, we quickly reorganized the two separate ex-Premier and ex-Miton sales teams into one team and brought marketing and PR into distribution so that everyone is aligned to one overall distribution strategy and a consistency of messaging to the whole market. We also made our first hire in the institutional team. Once that was done, we focused on increasing our visibility and reach across our target distribution markets and really upped attendance at our events, as Mike referred to, which also shows that clients are interested in our product offering and what we have to say. We began marketing into institutional markets in the U.K., Chile and Peru, while also registering a number of OEICs in Ireland.
2024 has been a really busy year for us as we laid the foundations for international expansion. More funds registered in Ireland, the establishment of our offshore fund platform, which Mike referred to, six funds being recently registered in South Africa. While domestically, we also launched our new MPS model portfolio service. Following the successful integration of Tellworth, we've now got the full distribution team deployed and promoting the Tellworth range of funds, and you've seen the impact that Mike referred to. We also adopted FundPath, which gives the distribution team better MI and intelligence on which fund managers to target and what funds. In addition to the second half of the year, we've also been working hard on a new project for a new advertising campaign and rebrand to take to market next year.
If I take a look at the growth levers, the long-term strategic plan remains intact. We have strength and depth across the different asset classes, covering equities, fixed income, multi-asset and absolute return, where we have recognized and competitive investment capabilities. The launch of our new MPS allows us to target those advisors in the U.K. who've moved away from selecting funds and continue to outsource their investment propositions to discretionary fund managers or other MPS providers, a trend that we have seen accelerating since introduction of Consumer Duty. The MPS proposition leverages off our already strong heritage and legacy in the advisor community. A key focus for us this financial year will be to leverage off the foundations of our growing offshore fund range, allowing us to properly access for the first time.
There are wealth managers in the Channel Islands, Ireland, and other offshore wealth managers based in London and long-term further internationally. We've also had the first inflows coming into the institution channel from Latin America, and we can now properly promote our funds in South Africa, having spent the past year building up awareness of our investment capabilities in the region. The addition of the Tellworth range, and especially the absolute return strategy, is now getting real traction with wealth managers. Lastly on this slide, following the FCA thematic review into retirement income earlier this year, we are now seeing advisors recognize that they need their central retirement propositions to look different to their central investment propositions by paying greater heed to cash flow modeling. With our strong lineup of income generating products, we continue to feel this will be a growing area for us going forward.
As Mike highlighted earlier, it is important for us to maximize our strengths where we see the evident demand pools. Our U.S. and European equity funds, our U.S. smaller company funds, the absolute return fund and our fixed income funds are a core focus for our distribution teams with wealth managers and select institutional clients. Our three multi-asset propositions, which I've highlighted in green on the slide, are a core focus for us in the advisory market. This clear distribution focus on these key eight areas ensures we can bring the right resources to bear on the opportunity set. Now coming back to MPS, you know, the inexorable growth of MPS continues apace, as I mentioned earlier. Why do we believe that we can succeed in this space?
Well, while we're not the first entrants to the market, we do have a long history and legacy of managing multi-asset portfolios for advisors and end investors, leveraging off our multi-manager team who been working together now for the best part of 20 years or more. Our proposition is competitively priced as a clear investment process and with a strong service proposition led by a new Investment Director for MPS who we hired from Tatton, Chris Robinson. Tatton, of course, are arguably the lead provider in this marketplace today. Now we know advisors are actively reviewing their roster of MPS providers, and a number have already signed up to our service already.
When we look at our growth and our target expansion internationally, what we're gonna do is continue to grow and focus on that target international expansion to diversify away from just being dependent on a U.K. investor base. We hope to have three UCITS funds in Dublin early in the new year. We've seen our first institutional success in Peru. I've already mentioned we now have six funds registered in South Africa, where we can focus on raising assets there in 2025. As our offshore fund range begins to grow and reaches critical mass, then we can turn our attention to the wealth management market in Europe. Meanwhile, we're also seeing growing institutional interest in our sustainable emerging market equity strategy in the Nordics, where we've been attending a number of events already.
Let me come back to the brand positioning, which is going to be for us a key initiative in 2025. Those advisors and wealth managers know us, know us well. There are many out there who don't yet know what Premier Miton stands for. Additionally, in order to support our advisors, we need to project a stronger brand to end consumers. We need to project a brand that is bigger than what we are today. A strong brand can create such a positive banner wave to help the distribution and marketing teams reach deeper and wider across the client bank. We fundamentally believe in active investing, as Mike referred to. There's no point in looking like the index, which investors can access cheap anyway.
We believe we have a clear differentiated proposition centered around the idea that we give all of our managers a blank sheet of paper. We give them the freedom to deploy their investment edge, and we do not impose a top-down house view on them. Anyway, more to be revealed in the coming months. Finally from me, now why do we think we will succeed? Well, we actually do have a very diversified fund range, but we continue to focus on our core area of strengths where we see the demand pools. We have smarter tools to allow us to target the right wealth managers in the U.K. at the right time. We are expanding our distribution reach into new geographies and channels. Our rebrand and advertising campaign I think will achieve real cut-through.
As cash rates continue to fall and with our continued strong performance, I think there are strong grounds for optimism going forward as cash gets redeployed to risk assets. Let me now hand over to Piers to walk you through the financials. Piers.
Thanks, Jonathan Willcocks. Afternoon, everyone. As Mike's already mentioned earlier, the assets under management or AUM ended the year at GBP 10.7 billion. That represented an increase of 9% over the opening position for the year. Now, the net flows for the 12 months were GBP 380 million out, but that was a significant reduction on the outflows of GBP 1.1 billion last year. This is after the inclusion of net inflows arising from fund or mandate acquisitions and disposals completed in the year, which totaled GBP 440 million. Positive market and investment performance drove the balance of the increase over the opening AUM position for the year. Now, the majority of the group's revenue is generated based on the level of assets being managed by our investment teams.
This is the key measure for the group in terms of the average AUM, and that drives our revenues. For 2024, this was GBP 10.3 billion, and that represents a decline of 5% on the comparative period, which really reflects the lower starting position for the year. We saw gross profits fall by GBP 4.9 million or 7% to GBP 62 million for the year. Again, the key driver of this were the lower levels of average AUM achieved when we compare against last year. In addition to that, we saw the net management fee margin reduce marginally to 58.9 basis points for the year, down from 61.7 in 2023.
Now, this decrease on the comparative year continues to reflect the sort of change in the group's product mix and the growth in AUM in some of our lower margin products, and in particular, strong growth, as Mike mentioned earlier, in our fixed income assets being managed. Now, the administration expenses, they decreased by 1% to GBP 51.2 million. We'll discuss that in a little bit more detail later on. The adjusted profit before tax was GBP 12.2 million for the year, representing a decline of 22% on the comparative year. Now, the amortization charge relating to the group's intangible assets was broadly flat at GBP 5.1 million, and our share-based payment expense fell by 28% to GBP 3.4 million, which primarily reflects the rolling off vesting of historic nil-cost conditional share rights.
Non-recurring items of GBP 500 ,000 related to professional fees associated with the acquisitions completed in the year, with comparative being related to the closure of Connect that took place in 2023. Now, if we look at the administration expenses on slide 25, again, as I mentioned earlier, they're down by GBP 500 ,000 to GBP 51.2 million for the year. Now, this reduction was driven really by a fall in the fixed staff costs, with the increase in overheads being broadly offset by a fall in the variable staff costs. As expected, people costs continue to be the largest portion of our cost base and represent circa 60% of our administration expenses for the year.
Fixed staff costs were GBP 22 million, which is a fall of 4%, and really reflects a lower level of average staff or head count throughout the year. Notably, at the year-end, we had 160 full-time staff, including non-executive directors, and that represents an increase of 1 over the comparative period. The variable staff costs total GBP 8.6 million, and that's a decrease of GBP 1.1 million on last year. Now, these costs adjust with the net revenues of the group and the adjusted profit before tax. The overheads increased to GBP 19.9 million, and the following slide shows a bridge of the key movements to get there. The increase includes additional costs associated with the dual running of the Tellworth operations while they were integrated into the group's operating model, as Mike mentioned earlier.
That was completed in June, and there were also additional non-recurring costs, which I just mentioned. The balance reflects an increased spend on sales and marketing activities and a rebranding exercise, which Jofi's highlighted earlier, that commenced in the second half of the year. Now, we continue to invest in our business to ensure that we are well-placed to capture growth when demand returns. You know, managing what is in our control and our cost base continues to be a key focus as we move into 2025. As mentioned earlier, we've embarked on a further review of this area following the arrival of our new COO in September to see if there are any further operational efficiencies we can achieve.
Now, the group's balance sheet shows that we had GBP 35.9 million in cash at the end of the year and no debt. The other notable movement from last year was an increase in the goodwill and tangible assets arising on the acquisition that was completed in the year. Now turning to dividends, the board is recommending a final dividend of three pence per share, which will be payable on the 14th of February, 2025. When this is added to the interim dividend, it brings the total dividend for 2024 to six pence per share, which is unchanged from last year and represents a payout ratio of roughly 95% of the adjusted profit after tax. The group's stated dividend policy remains to target an annual dividend of approximately 50%-65% of the adjusted profit after tax.
Now, the board remains pragmatic when considering dividends, and this reflects the group's overall approach to capital management, considering balance sheet prudence, the market outlook, and return to stakeholders, and we continue to distribute twice yearly in line with our reporting calendar. This slide sets out the regulatory capital of the group and shows what the surplus position is after the proposed dividend, a surplus of GBP 15.5 million. The group maintains a strong capital base to support the future development of the business while ensuring compliance with both regulatory capital and liquidity requirements. With that, I'll hand back to Mike for the summary.
Thank you very much indeed, Piers. Thank you, everyone for listening today. I hope you found the update helpful, and that we've been able to set out our plans for the business and the outlook clearly for you. In summary, we believe that original thinking applied to active management in a well-controlled business risk and compliance environment will be attractive to fund buyers as they seek funds that can add value alongside their core passive strategies. We have invested heavily in our distribution capabilities to capture market share in our key markets and to create demand in new markets. Our investment performance remains attractive, and we provide a strong culture for talented individuals to operate within. We are cash generative, we have a healthy balance sheet.
While we have a clear focus on the organic growth opportunity, we also have a management team that is capable of successfully executing M&A in a sector that is ripe for further consolidation. That's the end of the formal part of the presentation. I'll just hand back to Jake.
Perfect. Mike, Piers, Jofi, that's great. Thank you very much indeed for your presentation this afternoon. If I may, I'll just bring back up your camera there. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that's situated on the right-hand corner of your screen. Just while the team take a few moments to review those questions that were submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can all be accessed via your investor dashboard. Guys, as you can see there, we have received a number of questions throughout your presentation this afternoon. Thank you to all of those on the call for taking the time to submit their questions.
Jonathan Willcocks, at this point, sir, if I may hand over to you just to chair the Q&A with the team. If I pick up from you at the end, that'd be great. Thank you.
Great. Yeah, thank you very much indeed, Jake. Again, thank you to everybody for taking your time out to be with us today and submit your questions. We've got a few that have come through now, so I'll perhaps switch into a Q&A mode now. Maybe, Piers, I can begin with you. One of the questions come through is do we plan or do you plan to maintain the current dividend?
Great question. I mean, I think, as I mentioned earlier, clearly we've got a defined dividend policy, which is a range of our adjusted profit after tax. Obviously the dividend that's been proposed for the current year is outside of that range. While I can't obviously forecast what the dividend will be or indeed what the board will decide at the time, I think it's safe to say that the board takes a pragmatic view on deciding the dividends. It will obviously take into account the strength of the group's balance sheet, the macro outlook, and indeed the capital requirements of the group.
Great. Thank you, Piers. Right. Next question's come, maybe one for you, Mike, this one. Does the company intend to look for further suitable acquisitions to grow the business?
Yeah. I think, you know, this is an industry that sort of is at a juncture where there probably will be further M&A. As I explained in the presentation, when we look at M&A, we're always looking for those three key strategic fits. You know, does an acquisition bring us additional scale to something that we already do? Does it bring us access to new capabilities that would be of interest to our clients? And does it bring us access to new client segments, perhaps that we don't already operate within? We're continually looking for opportunities that tick one or more of those boxes. I think we shouldn't lose sight of the fact that M&A in asset management is quite difficult to do.
We are, in the end, people businesses, and there are numerous examples of M&A activity in our space that hasn't worked well. It's critical, I think, when we look at M&A, that we focus on culture and we focus on strategic fit. Those are, you know, the key areas that we look at. I think there will be further opportunities to do deals and to strengthen our business through M&A as we go through the rest of next year and beyond.
Thank you, Mike. Actually maybe another question that sort of kind of links to that, you know. As demand for U.S. and global equity strategies increase, how well-resourced are we to scale these offerings to meet expected demand?
Yeah, it's a good question. I think, you know, we have strong investment teams in these areas. You know, as we have seen, for example, with our fixed income team, which I think is now nine people.
Yeah.
You know, as assets come through, as the team builds, we're able to add resource to meet the needs of our clients. I think we will see exactly the same thing, you know, taking place, for example, on the U.S. desk and the global desk as we build assets under management. I think we're in a position now where we can handle significant extra capacity. As we attract that capacity, we have the ability to invest further in those strategies to ensure that we continue to deliver for clients.
Thank you, Mike. In fact, while you're in the chair, I might as well just keep going. Another question's come up on one of our investment trusts. Can you give us an update on the current situation with Miton Investment Trust?
Yeah. I can't really add much more here than has been sort of stated publicly through the RNSs. You know, from my perspective, it's a shame that, you know, investor interest in that strategy has waned. You know, clearly the UK equity market has been under significant pressure, selling pressure for, you know, really since the period since Brexit in 2016. That of course has exacerbated or amplified for the very, very small end of the market.
Structurally, I think the decline that we've seen in the U.K. equity market is a you know, nothing short of a tragedy for the U.K. economy, and I you know, I do hope that the government are aware of the impact that the decline of an effective and strong capital market will ultimately have on the economy and continue as they did at the Mansion House to come up with ideas to help revitalize it. Yeah, I can't really add anything more specific on Miton than the board have already added through the RNS process. Apologies for that.
Thank you, Mike. Then probably a question I'm gonna have to answer, ask myself. What is our conversion rate upon meeting, you know, potential investors, investment product, and is there anything else, any more strategic distribution deals you can do? Conversion rates are very hard if you're talking in the sort of wealth managed advisory space, 'cause it requires multiple conversations with clients over a protracted period of time. It's very hard to pinpoint one particular activity that results in a specific conversion. Conversions are very hard. If you do the institutional space and you get invited to a pitch and there's three of you, then you can work out those conversion rates, but it's much more hard in the kind of broader distribution channel. We do track that, although I don't have numbers I can share specifically on this call.
I think in terms of distribution deals, and again, if you think about the market we're trying to operate in, if you're talking to wealth managers, you're essentially trying to get your single strat, your equity fixed income funds on those buy lists, and we're having those conversations all the time. When you get to advisors, again, that you're offering either retirement income solutions or multi-asset funds, where you kind of get more of that strategic distribution arrangement is when the advisor decides to outsource their investment proposition effectively to your model portfolios service, the MPS. And that's when you can actually access maybe 25% or 30% of an IFA's book. By the launch of our MPS, that allows us to have those conversations, and as a consequence of having this MPS proposition, actually we're broadening out now with some of the large...
We're having much larger distribution conversations with much larger entities. I think that momentum's building quite nicely. The next question, I think maybe I'll ask that in conjunction with Mike. Do you think investors believe you are still a U.K.-centric business? Is the idea you're more global resonating with investors, which are perhaps two ways to take it. Are we a U.K.-centered investment management business or are we a U.K.-centered distribution business? We'll, I'll hand you first, Mike.
I mean, yeah, I think it's early days for us. You know, the work that we've been doing over the last 18 months, two years in terms of building our presence outside the U.K. is still at a relatively early stage, but I think, you know, we're making decent progress.
Yeah.
I think, you know, investors I think have a perception of Premier Miton that we are a very U.K.-centric business that runs an awful lot of U.K. equities and an awful lot of U.K. small cap equities. In actual fact, that's probably an out of date perception now, I think as you've seen, a much broader and more diversified business with a relatively small exposure to UK small cap and UK equities representing just 18% of the overall. You know, one of the things that we've seen over the last few years is, you know, effectively as one part of our business has been going down, another better diversified and I think stronger business has been growing.
We have suffered, you know, with clients who've reallocated away from the UK. I think, you know, we've lost nearly GBP 900 million of assets under management as one large client has reallocated away from equities and into global. I think, you know, we've had to sort of build our business against that backdrop of one part going down as another part goes up.
We are, I think, a stronger and better balanced business today than we've probably ever been.
Yeah. No, I think that's fair. Going back to what Mike said at the beginning of the answer, you know, we are now active in Ireland. We are active in the Channel Islands where we weren't historically, 'cause most wealth management channels only wanna buy offshore funds. We're now building out that range. We are active in the Nordics. We are active in South Africa. We are active in Latin America. So we're gradually broadening out that distribution reach and that awareness of who Premier Miton is. Right. Let me swap tack and bring Piers back in the conversation. You've been too quiet for a wee bit. Piers, you know, given all the sales initiatives that we've been talking about and sort of next management, sort of future bit, where do you think. Sorry, Mike, I just scroll back up again.
Oh, sorry, Jonathan Willcocks.
If we look into the other core profit of the business, costs have been well managed, but it's surprising in one of the worst years for asset management overall that the cost reductions have been a little bit more aggressive. What say thee, Piers?
Well, there's two questions there, Jofi. One is, the sales initiatives and the flow that's gonna come, which I can almost bat over to you.
Yeah. Fair point.
If we look at that as a sort of complementary, I think what we're looking at here is what is the core business, and what are these new initiatives such as MPS? I think we look at that as complementary to what we are doing.
The costs attached to the MPS and some of the other initiatives are already baked into our figures and our numbers and our cost base. Really any revenues that come from those new initiatives, I think would just look on top of our core business as additional. I think that's the first point. The second point is, as I flagged earlier in terms of the cost base, yes, our overheads are higher than last year, but we did end up have effectively a dual running of course for the Tellworth acquisition while we brought it onto our platform. That was about GBP 800,000.
You know, actually we were net down in terms of cost year-over-year, which I think really is reflective of the environment we're operating. We're running you know, with a tight focus on our cost, but we have spent a little bit more on sales and marketing as we've alluded to earlier. Indeed, we might see a bit more of that coming through in 2025 as we build the brand out and really making sure that, you know, we've got a platform that is well positioned for growth and capture demand when it returns.
I think our new COO is very much tasked with ensuring that we review all parts of our business to deliver cost efficiencies. I think you'll see some more of that coming through as we move through FY 2025.
Yeah. No, agreed. Thank you. Actually one of the other questions that's come through, Mike, is, you know, there are a lot of other asset managers that also struggle, looking pretty miserable out there. It's been a tough time for active asset managers per se in the last sort of two, three years as we talked about. You know, how many more teams like Tellworth are out there?
Yeah. I mean, I think there's very little point to being miserable if you run an asset management business. You have to be optimistic.
Right
Positive on the outlook. You know, I think there are opportunities out there. I mean, we actually looked at another opportunity over the summer. Unfortunately, we weren't able to bring it to a satisfactory conclusion for various reasons. You know, there are people out there. You know, we are a small business, but we're still GBP 11 billion of assets under management. I think for smaller businesses than us, the last two or three years has been really challenging.
I think that creates opportunities where people feel that actually perhaps being part of a larger organization that still allows them that investment freedom, but can bring, you know, enhanced compliance and risk and operational infrastructure and also, of course, a stronger distribution footprint can be attractive. I think that, you know, there are other opportunities, and we will continue to try and unearth them.
Yeah. Thank you, Mike. Maybe getting back to Piers, you know, one of the questions come on the screen, what are, why are the share-based payments being adjusted out of EPS? Is this a cost that should be included or not?
Yes. I think it's a great question. I think historically we've always presented it in this fashion. The reason really is adjusted profit is the tool that the management team and the board use for decision making purposes. Really it is a proxy for the cash generation of the group. Obviously share-based payment charge is a non-cash item. That's really why it's done in such a fashion. I think obviously when you get groups which are much bigger, then they would. You know, they do tend to assume that this goes into administrations better, but we've always done that in a consistent way.
Thank you, Piers. Can I just go jump on another question now? One question. Well done, chaps and guys, for sticking to the plan through a difficult time. Maybe Mike's a big one here. Could you provide the vision of the size and the shape of the business in five years?
Yeah, that's a great question. I think, you know, we'd love to see this business growing through that sort of GBP 20 billion level. I mean, we're at GBP 11 billion today. You know, we have the capacity and the operational capability to probably run 3x-4 x the level of assets under management we have today. I think GBP 20 billion would be a really, really strong milestone for us. You know, from a personal perspective, that would be something I would love to see.
Thanks, Mike. Right, I think we've got time for a couple of more questions. Maybe back to you, Piers. You know, one of the things you've done is include acquisitions within net flows. Is there a reason why you've done it that way?
Yeah. When we do the RNS on the quarterly AUM updates, we actually split it out.
Yeah.
We show the net flows by strategy, and then we'll show what is effectively been bought in through acquisitions and what's gone through disposals, whether it's been sold or left. It is presented in some of the other areas as a net figure really for ease of understanding, where actually if you don't include it, you end up with a. You could assume it was all market performance was the difference. Really it's that w e do provide that level of detail within the RNSs and other areas into the market updates.
Yeah. Great. Thank you. I think we've almost got one more question on the boards. If anybody has any other questions, you know, please do fire it in the next sort of couple of minutes or so. Maybe this is perhaps back to you, Mike.
Yeah.
You know, I think I've heard that you've got less than 2% of assets today allocated to U.K. smaller companies. Given the amount of M&A in this sector and the implications much value in this sector, can you see this allocation towards small companies increasing? It's probably a slightly different question.
Yeah. I think, you know, we have about in terms of funds that have a specific UK smaller companies brief.
Yeah
We have about 1.6% allocated to those specific briefs. However, within our broader U.K. suite, so U.K. Growth, U.K. Responsible, U.K. Value, U.K. Multi-Cap Income
Yeah
U.K. income, we do hold smaller companies within those portfolios. Our managers have the freedom to move up and down the market cap scales as they see fit.
Yeah.
I think the issue for U.K. smaller companies at the moment, and I agree with the questioner in terms of the amount of M&A in the space. I think, you know, one of the things that'll be a real driver for a recovery in the sector is a slowdown in the level of outflows from U.K. equity funds.
Because the difficult situation is that people are continually selling to meet redemptions, and that is driving down the value of U.K. small caps, which is then causing redemptions, which is then y ou know, we're in that kind of doom loop. I think, you know, we saw one data point earlier this morning that showed November was the first net inflow for U.K. equity funds in 42 months.
Yeah.
Well, if we have a few more of those, you know, a few more positive months, I think that will support and improve confidence for our investment managers to start looking a little bit further down the market cap spectrum again. You know, clearly, if any of you have listened to Gervais' talk, you know, clearly there is huge value in this sector. It's just, you know, we don't wanna get caught in the value trap. We wanna be able to invest in the area and get the upside as and when market conditions improve.
Great. No, thank you, Mike. In fact, there is a late entrance in the questions .
Late entrance from Paul.
From Paul. Given the depressed share price, do you have any thoughts on initiating share buybacks programs?
I think, you know, obviously as Piers has mentioned, you know, we have a big debate in terms of, you know, our capital allocation.
Yeah.
You know, we've strayed outside of our stated dividend policy in order to you know, to take a pragmatic view on that. I think my general view on share buybacks is that they you know, unless it's part of a long-term program, it doesn't really help. I think you know, small one-off share buybacks are not really that much help. We've also got to be aware of the fact that if we reduce our market cap still further by buying back shares, we potentially reduce our attractiveness to investors as well.
Yeah.
We reduce our liquidity, and so on. It's a debate the board have, you know, fairly regularly, should we use our cash for this or that? I think as we've seen with the Tellworth acquisition, you know, that's been a good use of our cash. I think we, you know, if there are other options out there along those lines, which we've alluded to in one of the earlier answers, then I think it's right that we use our cash in that way to strengthen the business and increase the profitability and revenues, and so on, rather than using it to buy back our shares. I understand the question and it is regularly reviewed.
Thank you, Mike. Thank you, Piers. I think that's all the questions we got. In that case, I'll hand you back to Jake. Thank you, Jake.
Perfect. Jofi, Mike, Piers, that's great. Thank you very much indeed for being so generous with your time there and addressing all of those questions that came in this afternoon. Of course, we'll publish all those responses, where it's appropriate to do so on the platform. Mike, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that'd be great.
Yeah. I mean, just to say, you know, it has been a very difficult period, as you know, over the last three years for the active management space. I think, you know, we've done what we can and controlled what we can, you know, actively taken the view to diversify our business, to build investment capabilities that will allow us to attract assets as and when market conditions improve. You know, we share your pain in terms of the recent share price movement. You know, we are, as a management team, all shareholders in the business, and we care very much about the direction of the share price. We know that we have to focus on building and growing the business in order to deliver for shareholders.
Primarily, we have to focus on delivering strong investment outcomes for our clients because we know that ultimately that's what will drive flow, and that's what will drive the share price. So, thank you very much for attending today. Thank you for listening in. I hope we've been able to answer all your questions and to give you our views on the outlook for the company over the next 12 months and beyond. We look forward to providing further updates in due course. Thank you.
Thank you.
Perfect. That's great. Mike, Piers, Jofi, thank you once again for updating investors this afternoon. Could I please ask investors not to close this session, as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Premier Miton Group plc, we would like to thank you for attending today's presentation. That now concludes today's session. Good afternoon to you all.