Earnings Call: H2 2022

Jun 20, 2022

Thank you to those of you who are joining us today to hear from Tatton, who has reported results last week. We will go through the presentation. There will be an opportunity for Q&A. A reminder for anyone who has not seen it yet, there is also an updated research note with forecasts on our website. Without further ado, I will hand over to Paul Hogarth, CEO. Thank you, Hannah, and good morning, ladies and gentlemen. Yes, absolutely delighted with this set of results. We were really looking forward to Wednesday and coming out with everything that we have been getting on with. If we can go to slide 8, please. Just on slide 8, I am not going to pull every single individual piece out, but just to say, obviously, revenue and profitability are ahead of consensus. Consensus was about GBP 14.1 million, so nice to come in ahead of that. We have also continued with our progressive dividend policy, so announced an 8.5p dividend. That is up 13.3%. The key KPI for us is always the funds under management. Delighted to say that the funds went up by 26.2%, so now sitting at GBP 11.3 billion. So, a record set of results, record number for AUM. In fact, the AUM, if you include market movements and the acquisition that we had, actually went up GBP 2.4 billion for the 12 months, which is obviously very, very strong. Moving to slide 9. Slide 9, again, just to pick up on a couple of points there. Obviously, organic flows, which is the big piece at GBP 1.28 billion, and the purchase of the Verbatim Funds are now firmly established and in. The Fintel five-year strategic partnership is working well, too, and I have got more on how that is going later. Actually, we really should focus on the mortgage business as well, which has performed incredibly well over the 12 months, and mortgage completions were up GBP 13.15 billion. Just going back to the organic flows, I am happy to say that despite the markets that we are in, even post the year end, actually, we have been performing at the run rate of GBP 100 million of new flows per month, which obviously is excellent. You will hear the theme throughout the presentation of the DFM/MPS market coming of age, and I believe it really has been over the last 18 months. There are lots of new players coming in, which I think also helps the maturity of the market. Some big household names entering the fray of DFM/MPS. If you look at the latest set of numbers from Brewin or from Brooks Macdonald, you can see that the only area that they are growing in is actually in the DFM/MPS space. We will go back later on in the presentation to look at how assets have grown on adviser platforms and indeed how assets have grown in the DFM/MPS space over the last five or six years. My slide on slide 10 is really a bragging slide of how well we have done with flows, the GBP 2.4 billion coming in over the 12 months. But as you can see, every single year in, year out, we have grown, on the basis of at least GBP 1 billion of new flows per annum. Despite the market crash of 2020, the global pandemic, and now obviously all the huge volatility we have currently, the assets are still coming in on the usual run rate. I will pass over to Paul now. Okay, thanks, Paul. Morning, everybody. Yes, as Paul said, we have delivered a really strong set of results this year with revenue increasing 25%, obviously on the back of record net inflows, but also coupled with the record completions within our mortgage business and also the acquisition of Verbatim helping there. Across all our key KPIs, revenue, adjusted profit, PBT, and fully diluted earnings per share, we have all grown in that mid-20s range. As Paul said, we are also really pleased to increase the dividend 13% to GBP 8.5 P, which would be GBP 12.5 P for the whole year. I think we can genuinely say now we have a progressive dividend policy. Over the last five years, we have paid approximately 70% of adjusted earnings in dividends. Moving on to the next slide on slide 13. We have put the cash flow as the next slide. As a high margin, low cost business, the cash generation from operations was 107% of operating cash. There is a little bit more going on this year in the cash flow. We exercised some options this year and received GBP 1.3 million. Obviously, the dividend payment of GBP 6.6 million, which is last year's final and this year's interim in total. We acquired Verbatim back in September, and the GBP 3 million is the down payment plus the acquisition fees. Tax payments and CapEx make up the difference, with CapEx actually accounting for about GBP 300,000 of that GBP 800,000 and lease payments, a little bit of interest is the balance. But a key number really for us there is the GBP 21.7 million on the balance sheet in cash. Could we just move to the next slide, Hannah, please? That GBP 21.7 million really is the vast majority of the assets on our balance sheet. The other movements really just relate solely to the acquisition of Verbatim, as I said, back in September, with the increase in intangible assets and also the other payables being the deferred element of that particular deal. The key number there, that GBP 21.7 million, one of the questions we always get asked, "How much of that GBP 21.7 million is actually free cash?" On the next page, we actually put a slide here for capital adequacy and our requirement for that. Those of you who are familiar with this particular industry will recognize that IFPR changed, and was influenced on the 1st of January this year. It has had an impact on Tatton. Clearly, it is there as a framework for the amount of capital that we are required to hold, to facilitate an orderly wind down, should that ever happen. The impact on us effectively has been that we have had to increase our capital from GBP 1.7 million to GBP 3.6 million. Albeit Tatton still remains the only regulated business within the group. We now have to incorporate and consolidate the rest of the group within our calculations, and as such, that has increased the capital adequacy. Secondly, the other impact is that as we look forward now, it is highly likely that we will have to issue shares or come back to the market and raise capital, should we require to make any other acquisitions. The reason for that, on the right-hand side, you will see there the capital and net assets of GBP 31 million, is then reduced by the intangible assets of goodwill intangibles and other, what I would consider, non-liquid assets, and obviously the future dividend that we will be paying later this year. That gives us our attributable capital of GBP 11.8 million. We obviously require that capital requirement of GBP 3.6 million. So we have effectively capitalized the headroom of GBP 8.2 million. The graph on the left-hand side is really the reconciliation of the GBP 21.7 million and how that works out from a free cash flow standpoint. The takeaway for us on that slide really is, first of all, we currently have 228% headroom. We have got free cash of GBP 21.7 million. The consequence of the whole IFPR process changing on January 1st this year will be that we will have to make acquisitions in the future by using shares or raising capital. Just going on to the next slide, on slide 16. We have separated out the divisional performance. You can see Tatton has grown phenomenally strongly this year. The margins stayed extremely strong as well. Net inflows or our record net inflows for us are just the GBP 1.3 billion or a 14% increase on opening AUM, which actually, when you compare us against our peers, really leaves us at the top of the table there. We have added market performance of GBP 424 million, and the acquisition of Verbatim Funds of GBP 650 million have helped drive that GBP 5.2 million of revenue. In addition to that, on that walk on the right-hand side which we have headed, analysis, it is just a walk between the two profits year on year. Clearly, the revenue has delivered GBP 5.2 million. We have invested in costs of GBP 1.7 million. We have got some inflationary costs, and also we have got costs that were now reoccurring since effectively COVID has come to an end. That was about GBP 300,000. While relatively modest, if you adjust 2021 for that cost, you will see that actually the margin will increase by about 1.7% per annum. Paradigm, it is still obviously the smaller parts of the group, 20% of the revenue in total. If you looked at that revenue and you broke that down, it would be mortgage would be about GBP 3.5 million, and the Paradigm Consulting about GBP 2.5 million. What's really driven that growth is twofold really. First of all, record mortgage completions, up 16% to GBP 13.1 million. In addition to that, clearly we had a slightly soft comparator in the prior year as well. But nonetheless, it's been a really strong performance, and as you can see, delivering also a slight uptick in the margin as well. Just moving on to the next slide, on to slide 17. We put this slide in simply because we consistently get asked by our investor base, a number of questions around costs. Is there a significant cost increase coming down the track for Tatton as the margin continues to increase year on year? What potentially could that margin get to at some point in the future? We've tried to produce a kind of explanation for that in a graphical format. If you see that Tatton sits between the IFA and the platforms, currently, Tatton deals with 746 firms. So we're a business to business firm, and we have 746 firms within Tatton. The Tatton firms actually have 90,000 clients, and those 90,000 clients all utilize Tatton MPS. So we think of that as our front office. But the fact that we have to deal with 746 firms rather than 90,000 clients means that we have a significantly lower overhead to do that. On the 18 platforms that we operate on, in many respects, Tatton is we have the same characteristics of a platform in that we only feed off the same assets. Secondly, we have a huge amount of renewable income. But what we don't actually have is a significant infrastructure that we have to continually keep investing in. A good example of that was IntegraFin's recent results where they said they had to add 50 developers. If we double the developers that we have, we'd go from two to four. So that gives you an indication of the type of infrastructure that Tatton actually runs. In addition to that, we derive our revenue from flows from the annualization of prior year revenue, and markets plus or minus, however that they treat us. But crucially, we actually operate through 44 models. Whether those models contain GBP 10 billion, GBP 12 billion, or GBP 15 billion of assets, it doesn't really impact the overhead that we require to run that business. So overall, we're looking to continue to invest in the growth. We'll obviously incur inflationary costs. But overall, we anticipate that we'll continue to grow in that sort of 1%-2% margin per annum. On the right-hand side there is really just a like-for-like example of how our margin progressed if we actually adjusted for those costs in the prior year. Then on the final slide, we've just put some high-level guidance, which really just sets out that we look to grow by GBP 1 billion a year in new flows. We'll continue to invest in the business and just really a reiteration of that 1%-2% per annum in margin. Thank you, Paul. Moving to slide 20, our strategic update. This is our Tatton ecosystem. Basically, really, this is depicting the amount of distribution that we have that feeds into the Tatton businesses and Tatton MPS, and also Paradigm Mortgage Services and Paradigm Consulting. On the right-hand side there, you can see we have all of the direct firms, which are now 746 firms there. We also have the Paradigm firms themselves, the strategic relationship with Tenet, which bears fruit, and I'll come back to that later to show how well that's performing. Also now the new Fintel arrangement, which is just getting going, and again, is starting to bear fruit. Then we add in the 8AM firms, which we have exchanged contracts on but haven't completed yet. We're just waiting for regulatory approval for that transaction, which will give us access to the 8AM firms as well. Other strategic partners with people like Sesame Bancorp Group and 360. Moving on to slide 21. This is our roadmap to growth, which we highlighted this time 12 months ago, and we said we'd like to take our assets, which were then at that point, 9 billion, up to 15 billion within a three-year period. I'm happy to say that after the first 12 months, as you can see from that chart, we've actually gone 40% of the way to completing that growth from 9 to 15, we're at 11.3. If you were to include the 8AM Global business, which as I say, we're exchanged on, we're just waiting regulatory approval, which hopefully will be with us within the next couple of months. That would actually take you to 52% to your completion over the first 12 months. We've done that through the organic growth, which delivered 1.7, and we've also done it via the M&A activity. I think the question really is, do we need to do more M&A activity? The answer to that is, we'll only do that if we see a very, very good opportunity that we feel actually would sit nicely within the group. We could leverage our existing distribution from all of the firms I mentioned just a few minutes ago. Also it was earnings-enhancing. There is no burning bridge that means that we need to acquire. We'll only acquire as and when, because we're very happy with the organic growth, as we've said earlier. Slide 22 just gives you some details on that 8AM acquisition. We've bought 50% of the business at this stage with a put and call option to buy the other 50%. I think the big important point there really is it's on a multiple of EBITDA that we're buying. It's on a 10 times multiple. We don't think that's an expensive price. We're paying 50% up front for the 50% and the balance of the other 50% over the next two years, subject to performance targets being met. Strategically, we see it fits very nicely as it complements our range of model portfolios. It's more of a quant momentum-driven type system. We know the individuals who run that business very well. We've known them for quite some time, and we respect them. I believe that they will be able to enhance their flows by working in conjunction with Tatton and utilizing some of the infrastructure that we have, because obviously we are a lot bigger business than they are. We can help them with our IFA portals for client engagement. We can help them with their marketing and obviously their communications as well. Our sales teams can distribute their MPS situation. I am hugely excited about that, and I think it will turn out to be a very good little acquisition for us. On slide 23, we are showing our four fundamental characteristics coming back to that DFM world coming of age. We have lots of new providers coming in, which, as I said, actually strengthens the situation. If you look at our core fundamental characteristics, we broke that down to growth. What is the market growing like? Well, the market continues to grow. The on-platform assets continue to grow. The amount of assets going into DFM, MPS is on a CAGR rate of 27%. That is now sitting at GBP 81.4 billion, which is actually higher than we anticipated. You can see our growth. We are very much the largest MPS player, sorry. We have got a market-leading price. Others are coming down towards our price, which is expected. But we are very happy with our price. It does not need to be changed. We have even seen some of the providers actually go lower with a strategy to try and disrupt. Those ones going lower are really not really comparing like with like as they are, in the main, trying to populate their own funds within the MPS. When you look at the OCF or the total cost of investing, there is not a great deal between us and themselves. So we have got this really lovely, consistent long-term investment track record, which is nearly 10 years. It will be 10 years in January, which is excellent. We have got the widest breadth of distribution through all those partners I went through earlier, and we are well-known for our service standards, which obviously, we will continue to make sure that we give that best of service to IFAs. We are single channel only, so we only receive business from IFAs. We are not multi-channel like everybody else is, and we retain both the firms and our AUM very well. We have got a slide on our attrition rate coming up shortly. As Paul has highlighted already, the margins are strong and are likely to tick up as we move forward. I think my killer slide is slide 24, which if you look at the beige-shaded areas, you can see that the amount of assets sitting on platforms that have been introduced by the IFA community has gone from GBP 450 billion in 2017 to GBP 680 billion. That is expected to go to GBP 1 trillion by 2025 or 2026. You can see from the silver circles how well we have done with our AUM and also our market share increasing gradually from 11.8% to 13.9%. But at the bottom, you can see how the DFM MPS world has gone from GBP 25 billion when we floated in 2017, now up to that GBP 81.4 billion in 2022. I think the interesting stat for me there is the fact that it is still only 12% of the total. There's a huge amount of growth because all of that is in the addressable market as far as we're concerned, and we believe MPS will continue to drive that forward. If you look at the latest set of numbers from some of our peer group, from Brewin, from Brooks, you can see that they're growing in MPS, but they're not growing on the private wealth management side. As I say, we're very happy with our position in the marketplace there. If you look at our defensive moat slide on slide 25, you can see that we're covering off that size, performance, price, service, and distribution. Then we've listed five people that effectively are in the market. Our closest competitors are Brewin, Brooks, and Vestra. You can see their size, and you can see their price. I put Legal & General in because they come in below us at 6 basis points. As I say, their MPS is actually what I would call fettered in that it is populated with their own funds, and then FE Investments at the bottom there, sitting at GBP 5 billion. The rest of them are multi-channel, as I said, and that really should give us our defensive moat moving forward. The retention slide is the next one, slide 26. As you can see from that, our attrition rate is really 1%. An attrition rate of 1% is fantastic for our industry. Who are we losing those assets to? We're not losing it to competition. We're actually losing it to consolidation of the IFA sector. There are numerous IFA consolidators at work in the marketplace. I think there's something like 30 odd out there. We lose business occasionally to these consolidators, and we've actually exploded it by showing you some of the consolidators that have actually taken some of the assets. Slide 27 is the changing landscape, which really just depicts where we are compared to the competition. Slide 28 just gives you our thoughts on strategic direction, which is pretty much the same as before, so nothing new there. It's through organic growth, as we've said, which is obviously the key area for us, through white labeling and platform migration, which everybody is incentivized to create. That's where the IFA actually wants to move all of his assets very quickly across to us, which obviously benefits our FUM calculation. Also by our strategic partnerships, which we are continuing developing. Then bolstering that with a little bit of M&A activity as and when it's relevant, as and when it's complementary, and obviously earnings enhancing. Slide 29 shows you where we are with these strategic partnerships, the breakdown of the assets that we've got, the breakdown of 11.3. We can see that Tenet is now nearly GBP 1 billion. In fact, it's over GBP 1 billion if you include the Sinfonia funds. I think we guided the market to say that in time we'd get GBP 1.2 billion from them. Happy to say that we should fly through that. Then we've got the same with Fintel, Sesame Bankhall Group, and 360, where we expect in time to get to that GBP 1 billion mark, and Fintel is already starting to bear fruit. The 4.2 billion GBP from the 700-and-odd firms that we are working with in the direct market, which includes the Tenet number and the Fintel number. Slide 30 and 31. Let's stay on 30 for a second. These are the old sort of slides which we just cannot find another way to depict where we are going. I think the key position from that is you have seen that the direct firms, the non-Paradigm firms, are now effectively bigger both in AUM terms and also in number of firm terms. So the first time they have actually gone bigger, all from March 2021 to March 2022. So 54% of our assets are now coming from non-Paradigm firms and 46% from Paradigm. The number of firms, as you say, 78% direct. Slide 31 is our saturation or penetration point, and this is where we compare where we got to with the Paradigm firms that we have worked with for the longest, where we got an average GBP 31.3 million per firm. Then we look at the non-Paradigm firms, the direct firms, which we recruited over the period that we have been floated. We have got 581 of those, and we have only got GBP 10.6 million per firm there. So if we were basically to sort of get to know them as well as we have got to know the Paradigm firms, work with them for a longer period, and reach the same penetration level, there is actually GBP 12 billion of latent potential just with the firms who have already signed up. Of course, we will continue to sign up more firms as we go through our progression. I think the final slide, really, before I pass over to Lothar, is just looking at Paradigm Consulting and Paradigm Mortgage Services. Really both businesses or both divisions have done well over the period. They have grown steadily. The mortgage side has actually done incredibly well. Even post the year-end, again, showing great returns and great results. But obviously the mortgage market is expected to tail off when affordability becomes an issue as interest rates increase. The way we counter that is mortgage advisers are very resilient. They will start looking at more re-broking or remortgaging of their existing book. Obviously then, as the sales team, we will make sure that we have got more member firms joining us so that we have got a bigger membership moving forward. It is only 12% of our total revenue, and we therefore do not expect it to affect or blow up anything that we are doing across the board. But, obviously, there is expected to be a little bit of a downside as affordability becomes an issue. Currently, we are not seeing that, but we just have to put that little watch word out there. That is it from me. I will pass over to Lothar on the investment side. Thank you very much, Paul. On the investment side, we would like to highlight and perhaps emphasize that Tatton Investment Management is now steadily moving beyond just MPS. Our fund range is now of a nature where we are increasingly able to offer our services to those advisers either who have not necessarily used MPS that is based on single asset class funds, but based on selecting a few multi-manager risk profiled funds. Initially, we just had one series in there, the Tatton blended funds, and the success of those has also driven us to be very warm to the acquisition of the Verbatim Funds, which are now allowing us to have a fuller complement of funds because they are adding a fully up to scale range of tracker-based risk profiled funds, but also an equivalent to our managed range. Over the course of the summer, we are hoping to be able to add our Tatton Ethos range, launch that, obviously subject to FCA being on time with the permissions for those funds. With that, we then have a full complement of funds that mirror pretty much what we are doing in the MPS world. Very cognizant of the fact that the ethical world at the moment is under a lot of scrutiny. So we are very clearly labeling, always have what our ethical or ESG investment strategies are, what they can do, but also what they cannot do. So we will very clearly label that the Ethos funds, for example, because of the cost targets that we have with them, will be running under the SDR responsible banner once that has been formally adopted in the U.K. Whereas the MPS, our ethical range at the moment, is running one notch higher under the sustainable transitioning range. We also see the continuation of our trend. Yes, let us go to the next slide of the distribution of our assets across the matrix. So we continue to see the ethical growing, but that is, it has to be said, slowing now in terms of relative growth. Obviously, our inflows, as we heard, are very strong and very positive for us. But the change in the proportions is slowly slowing. We are seeing it most in the tracker and the hybrid. At the moment it is still going into ethical and global. With the active managers actually having done really well over the last eight, 10 months, having been able to take advantage of the rotation from growth more towards value and other more cyclical exposures, we would expect that trend to be stronger and to be enforced and a sort of a normalization coming through as well because we have to acknowledge that there is always a bit of the asset distribution following the past performance. That obviously has been the strongest in growth and tracker and the ethical is just, in terms of the investment universe, quite a bit more growthy than anything that we otherwise run. We make that very clear that it is a restricted investment universe, but we have also been very happy with the performance of our ethical portfolios, not following the path of many other growth and tech propositions. It has not been able to perform quite as strongly on a relative basis as the previous years, but it's held up pretty well compared to what growth portfolios have done. That takes us neatly on to our Portfolio performance slides. This is the long-term portfolio position that we have. We're very happy with how we managed to get through the last year with an overweight in equity, but also tactical positions that we took, for example, for a time in global small cap, which contributed very nicely to the portfolios, but also being at times fairly short duration on the bond portfolio, which again has worked well for the portfolio. In comparison to our ARC peers, who are discretionary managers, who we compete with on the platforms, you can see that we are, over the longer term, pretty close, slightly higher, which is exactly where the IFA is like us to be. Not too much of a surprise in one way or the other, just consistent, steady performance of getting into the portfolio, what is generally available in the markets, while perhaps with the active component, earning back the fees that retail investors have to incur. On the next slide, we see our ethical portfolio range. Only three years because we've run only the balanced for the longer time period. It's pretty obvious here, I think, that it's a slightly different investment universe that we're investing through. Those green dots are still significantly above the average ARC portfolio. That is very much due to the fact that they are more growthy and more geared towards the U.S. market, which is still coming through strongly in the three-year performance numbers, even though that's currently coming back down somewhat. What we've learned all throughout, and that's on the next slide, is that no matter what the markets are throwing at us, it's always extremely important to have timely, contextual information for our clients, both in a written format but also in a video and a media format that is more easily to access for clients. Because at the end of the day, we can do as much as we like, keeping portfolios steady and on track. If the clients lose the nerve and forget about their long-term investment strategy that they'd agreed with their advisor, then it can all be for naught. Therefore, we're always happy to see that even when the going gets really tough in the markets, our advisors' clients are staying put and hopefully sleep a bit better by just having the background information that we can provide them with. Thank you, Lucan. Thanks, Paul. Yeah. Thank you. Just our final summary slide then, ladies and gentlemen. Obviously, hopefully, we have demonstrated that we are on track for our road map to growth, as we said, and delivering well. Continue doing the organic growth, because organic growth is absolutely vital to everything we are doing with that key KPI of FUM. Then top that up with some disciplined M&A activity as and when, but no burning bridges, no massive requirement to do it. We will just do it as and when we see fit and continue to develop our IFA distribution partners as we have said as well. Finally, it is just a question of all of that distribution that we have got, if we ever wanted to extend our asset management position into other areas, then we have got this lovely distribution connection that we can actually utilize and leverage up and against. That is it from us. I think, Hannah, we will probably go to you for questions. Thank you very much. Let's make a start. You've commented already on price and how you're seeing competitors moving. This gentleman asks, "How are you being impacted by the increased price competition in the market, specifically Legal & General and Schroders? Yeah. Okay. So far we've not been impacted at all, and we don't expect to be impacted either. I think these businesses are obviously very established and waterfront providers. I think it's a good thing to see them in the industry. As I mentioned earlier, I don't think the Legal & General one is actually comparing apples with apples because it's an MPS, but actually just populated by their own fund range. As I say, so far seeing no increase in competitive activity from either of those. We compete against people like Brooks Macdonald, against Brewin Dolphin, Vestra. They're the people that we come across on a day-by-day basis. As I say, it's an interesting thing to keep an eye on, but I don't feel that our price is under any pressure whatsoever. Okay. Thanks. Could you give us a little bit more flavor on the Fintel deal and how it's going? Are you seeing any insights you can offer on progress? Perhaps once you're finished with Fintel, maybe you could touch on Tenet as well. Sure, of course. Fintel's going fine. They just take a little bit of time to gather momentum, but the momentum is coming and the assets are coming. We will continue to develop that. We've done lots and lots of member meetings with firms, lots of face-to-face ones and lots of remote ones. I'm very, very pleased and encouraged by where we're going with Fintel. The Tenet one's been amazing. Been better than we could have ever hoped for. As I said, we put a target out of GBP 1.2 billion, and we're heading up over GBP 1 billion already, so these are still very early days. The relationship with the Tenet firms is good, with management is very, very good and very strong. We're very happy to continue to develop that with other distribution businesses as well. In terms of the learnings that you have benefited from the Tenet deal, are you able to apply these to Fintel in order to speed up conversion? You can apply them. It's very interesting that you have cohorts in different distribution businesses. Not every distribution business is the same. The Tenet firms are attracted to Tenet, and so you have the same type of firm being attracted to be a Tenet member. The same with Fintel, and they're all a little bit different and all at different stages. We are probably still educating a way really to get everybody to understand exactly where we fit and where it sits. Although that becomes a lesser of an issue as the market matures and DFM/MPS becomes the place to be. Okay, thank you. 8AM. Yeah. Obviously, going well so far. What is your longer-term plan there? How will your relationship change? What will it look like if you choose to take up the other 50%? Yeah. With it being a 50% deal, they will continue to manage and run their business. All we will do is assist them, and they will keep their own brand, and we will assist them in what we believe is utilizing some of our infrastructure. For example, we engage with all of our IFAs through our own in-house IFA portal. The team at 8AM are very excited about having a version of that available to them to help them distribute their portfolios through the IFA sector. We have digital signatures. We have a lovely ease of engaging with the IFAs, and they will benefit from that. They will also benefit from our marketing and from our comms, the weekly and things like that, which go down very well with the market. They will benefit from that. But we will definitely leave them as a standalone with them running that business. We will get through the first two years and obviously complete on the first 50%, and then we will look to acquire the other 50%, and then start to fully integrate into the Tatton business. Okay, thank you. One here on ESG portfolios, which have obviously had a challenging time recently. I think you touched on Lothar. Are you seeing a big slowdown in acquisition of assets there? We have talked before how it is an important part of an introduction, perhaps to some investors to Tatton. Yeah, how are the slowdown and the hit to ESG impacting more broadly? We are not seeing a major slowdown. Really cannot say that. I think what we are seeing is, on the side of some investors, a major surprise that those assets may not be top of the tree all the time. I think there was perhaps a perception among some investors, if they went for this type of investment, they would always get the best and only ever positive returns. That, I think, dispelled some myth about what ethical and ESG can do. But aside from that, we are just continuing with our educational drive on ethical and ESG too, because we think it is probably one of the most misunderstood areas of investment, and it has always been our passion to demystify investments and make it as clear as possible to investors. Yeah. Okay, another one here on ESG. Your ESG portfolio, great, and looks fairly traditional. Would you look to include impact investing funds too within the portfolio, as this is being demanded by clients? It depends on whether they can also meet our investment targets. The ones we've had a look at weren't quite up to scratch so far. That doesn't mean to say that we wouldn't invest in impact. The problem with impact ones is oftentimes that they are in fairly illiquid assets, and whenever there's illiquidity in investments, it really isn't particularly suitable in the retail space. Hence why that may not be becoming a big part in the portfolios. Okay. Last one that we have, if you do have any more, to our viewers, now would be the moment to submit them. Adjusted margin is close to 50%. What do you think you can do to get this up in the next five years or so? I'm glad there's a question for Paul because he was starting to go a bit out of it there. I think that was the point of the last slide within the financial section, so apologies if I didn't get that across well enough. I think what we're looking to do is increase our margin 1-2 points per annum. I think that's an achievable target given the nature of the business model that we're currently running. Yeah. Lovely. Right. Oh, here we are. We're going to run in. Do you think costs by other providers will come down? You touched that you're already seeing that, but it seems like the poor retail client is being lumped with high DFM costs. I think that the retail client has been lumped with high DFM costs. I think that's a very good question because it takes you to client outcomes, which has always been central to our proposition. Client outcomes is all about making sure that the client actually gets what they should get at the right price. Of course, the FCA is really focusing on that on the new consumer duty paper, which again, just looks at client outcomes all the way. Guess what? The theme throughout that paper is two things: it's price and value. I think we've led the way with our 15 bps. It was very brave of us to do what we did when we did that. When Lothar and I got together in 2013, it was one of the biggest decisions of what was the right price, and we went out 15 basis points. That's nearly 10 years ago, and we're now seeing the industry coming towards us. You've still got areas of the industry where there is higher pricing. I think that will be under scrutiny from the IFAs who want to do the best for their clients. I couldn't agree more with the question that the pricing, total cost of investing needs to come down and will continue to come down. But I'm absolutely adamant our 15 basis points is the right level. Lovely. That is it from the questions. Thank you to all three of you for your time today, and we look forward to an update in six months' time. Lovely. Thanks, everybody. Brilliant. Cheers. Thanks. Bye-bye.