Equity story - Rothschild & Co
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Disclaimer This presentation has been prepared solely for information purposes and must not be construed as or considered as constituting or giving any investment advice. It does not take into account, in any way whatsoever, the investment objectives, financial situation or specific needs of its recipients. This presentation and its contents may not be copied or disseminated, in part or as a whole, without prior written consent of Rothschild & Co. This presentation may contain forward-looking information and statements pertaining to Rothschild & Co SCA (“Rothschild & Co”), its subsidiaries (together, the “Rothschild & Co Group”) and its and their results. Forward- looking information is not historical. It reflects objectives that are based on management’s current expectations or estimates and is subject to a number of factors and uncertainties, that could cause actual figures to differ materially from those described in the forward-looking statements including those discussed or identified in the documentation publicly released by Rothschild & Co, including its annual report. Rothschild & Co does not undertake to update such forward-looking information and statements unless required by applicable laws and regulations. Subject to the foregoing, Rothschild & Co has no obligation to update or amend such information and statements, neither as a result of new information or statements, nor as a result of new events or for any other reason. No representation or warranty whatsoever, express or implied, is made as to the accuracy, completeness, consistency or the reliability of the information contained in this document. It may not be considered by its recipients as a substitute to their judgment. This presentation does not constitute an offer to sell or a solicitation to buy any securities. This presentation is qualified in its entirety by the information contained in Rothschild & Co’ financial statements, the notes thereto and the related annual financial report. In case of a conflict, such financial statements, notes and financial reports must prevail. Only the information contained therein is binding on Rothschild & Co and the Rothschild & Co Group. If the information contained herein is presented differently from the information contained in such financial statements, notes and reports, only the latter is binding on Rothschild & Co and the Rothschild & Co Group. For more information on Rothschild & Co: www.rothschildandco.com 2
Contents Sections 1 Investment case 5 2 Business lines 10 3 Financials 30 4 Shareholding structure and governance 34 Appendices 37
High level of synergies across our businesses Facing Page 4 1 Increased opportunities in client referrals to GA 3 Market intelligence Network of contacts 1/3 of commitments of the Five Arrows funds1 from Sourcing opportunities Rothschild & Co distribution network Fundraising 2 10%-20% of asset inflows in Wealth Management from other businesses Note 1 Excluding CLOs and co-investments
One Group organised around three pillars Global Advisory Wealth & Asset Merchant Banking Management Geography Global European European / US Offerings ⚫ M&A and strategic advisory ⚫ Wealth Management ⚫ Private equity ⚫ Debt financing and debt ⚫ Asset Management ⚫ Private debt restructuring advisory ⚫ Investor advisory # Front ⚫ c.1,160 bankers in 53 offices ⚫ c.275 relationship managers and ⚫ c.90 professionals office over 40 countries investment managers Size ⚫ #7 globally by revenue ⚫ c.€76bn of AuM ⚫ c.€14bn of AuM ⚫ c.€1.16bn of revenue With 3,500 financial services employees in 40 countries across the world, we provide independent advice on M&A, strategy and financing, as well as investment and wealth management solutions to large institutions, families, individuals and governments 4
Our strategy Facing Page 5 ⚫ Focus on our three core businesses Focused ⚫ Global Advisory, Wealth & Asset Management and Merchant Banking ⚫ Grow our businesses organically and through targeted acquisitions Grow ⚫ Development of activity in existing and adjacent businesses, with a strong focus on cultural, strategic and scale financial fit Create ⚫ Improve synergies between three core businesses value ⚫ Focus on long term performance and value creation Deliver ⚫ Strong capital position strong ⚫ Tight cost controls returns ⚫ Focus on delivering consistent returns over time
Key drivers for building long-term value creation Expand core Grow private Human capital businesses asset offering management ⚫ US organic investment in Global Advisory ⚫ New initiatives and ⚫ Recruitment ⚫ Ancillary advisory acquisitions successor funds ⚫ Retention ⚫ Development of Investor advisory franchise ⚫ Make available to our ⚫ Succession management Wealth and Asset ⚫ Expend Merchant Banking platform outside Europe, Management clients notably in the US ⚫ Bolt on targeted European deals in Wealth Management 5
Strong capital position … Fully loaded solvency ratios around 20% Facing Page 6 Risk weighted assets (in €m) Group solvency ratio Strong capital position gives us Stable the optionality ratios 9,069 around development +59% 20.9% 19.5% opportunities 3,307 19.3% 19.5% and cash returns 5,693 to shareholders 230 Capital ratio min: 2,443 10.5% 144 5,532 CET 1 with 3,106 buffer min: 7% 31 Dec 2016 31 Dec 2019 31 Dec 2016 31 Dec 2019 Credit risk Market risk Operational risk CET 1 / Tier 1 ratio Tier 2
… coupled with a progressive dividend policy Dividend progression over 5 years Steady increase of +35% dividend over since 2016 time +8% €0.85 €0.79 €0.68 €0.72 €0.63 2015/16 2016/17 2017 2018 2019 Payout ratio 1 32% 26% 22% 19% 26% In addition in 2018, share buy back as part of Edmond de Rothschild deal of €132m 1 Payout ratio is calculated excluding exceptional items 6
Our financial targets Target 2019 2018 2017 2016 Group Compensation Low to mid 60’s targets ratio1 through the cycle 61.8% 60.8% 62.4% 64.0% Return on 10 to 15% tangible equity2 through the cycle 12.6% 18.0% 17.2% 14.4% Businesses Global Advisory: Mid to high-teens targets Profit before tax through the cycle 16% 20% 18% 18% margin3 Wealth & Asset Around 20% Management: 15% 18% 17% 2% by 2022 Profit before tax margin4 Merchant Banking: Above 15% 3 years average RORAC through the cycle 28% 28% 26% 25% 1 Calculation detailed slide 47 2 Excluding exceptional items 3 Pre-US investments 4 Excluding the Trust business sold in February 2019 7
Encouraging a culture of responsible business Investment Community Ethics People solutions Environment investment ⚫ Safeguarding ⚫ Talent development ⚫ ESG integration to ⚫ Responsibly ⚫ Financial support to confidentiality opportunities, feedback create long-term value managing greenhouse charities, social ⚫ Effective compliance and assignments ⚫ Engagement policy for gas emissions and enterprises and systems and ⚫ Flexible working a constructive proactively reducing individuals technology approach dialogue with our negative impact ⚫ Professional expertise ⚫ Stringent ⚫ Equal opportunities for companies on ESG ⚫ Championing for social purpose anticorruption and all via development, an issues responsible organisations, helping anti-bribery standards effective reward strategy ⚫ Investment solutions consumption and to drive change for and transparency in that contribute to resource use young people ⚫ Impactful governance and oversight promotions Sustainable ⚫ Volunteering to help Development Goals young people to achievement succeed in life 8
2 Business lines
1 Global Advisory 2 Wealth and Asset Management 3 Merchant Banking 10
Introduction to Global Advisory Geography Global We fieldc.1,160 advisory bankers in Offerings ⚫ M&A and strategic advisory over40 countries ⚫ Debt and restructuring - more than any other advisory advisory house ⚫ Equity advisory ⚫ Investor advisory ⚫ Rating advisory ⚫ Sovereign advisory # Front ⚫ c.1,160 bankers of which office c.240 MDs Key #7 #2 numbers globally by globally by revenue number of completed transactions €1.16bn €182m 800 200 100 30 30 of revenue of PBT in Europe in US and in Asia- in Latin in Africa & (62% of total (50% of total Canada Pacific America Middle East group revenue) group PBT) 11
A history of long-term value creation in the mid-cap segment Facing Page 12 We provide our clients with deep knowledge of the dynamics of every sector, and unrivalled insight on capital markets. This is gained through the shared perspectives of our specialists and senior advisers across global markets. General Consumer, Aerospace and Business Energy and Financial Engineering Automotive Retail and Defence Services Power Institutions and Capital Leisure Goods Government Telecoms, Industrial Mining and Transport and and Public Healthcare Real Estate Media and Materials Metals Infrastructure Sector Technology
Our differentiators Global ⚫ Network of bankers in 54 offices over 40 countries, pooling a wealth of local We combine an scale knowledge and sector expertise advisory only ⚫ Advise on more transactions across both M&A and Financing than anybody in our platform with the core markets, ranking #2 by number of deals ⚫ This provides us with a unique insight that helps us advise all clients scale and geographic Sector and ⚫ Our network of sector specialists provides our clients with a global picture of reach of a global market industry dynamics and the current strategies of their participants investment bank knowledge ⚫ The scale and reach of our financing and investor advisory offering give us deeper insight into capital markets than any other adviser Advice ⚫ Our advice is independent and unbiased, based on a long-term view to deliver only each client’s interests 12
Leading position: 7th position by revenue and 2nd by number of deals Ranking by advisory revenue (in €m) – 12m to December 2019 Ranking by % of Total # deals revenue Goldman Sachs 2,855 1 9% JP Morgan 2,123 3 2% Morgan Stanley 1,894 4 5% Evercore 1,479 10 80% Lazard 1,213 5 53% BoA / Merrill Lynch 1,196 7 1% 1,160 2 62% Citigroup 1,124 6 2% Houlihan Lokey 1,026 20 100% Barclays 885 8 4% 2019 2018 Source: Company’s filings, Thomson Reuters, global ranking by # of deals based on completed transactions 13
Global M&A market by deal values The rise and fall of M&A Facing Page 14 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Announced Deal Value ($bn) Completed Deal Value ($bn) 16 vs 15 17 vs 16 18 vs 17 19 vs 18 % var Announced (17)% (4)% 19% (3)% % var Completed (0)% (8)% 15% (14)% Source: Refinitiv Note: 2019 announced value includes 3 US domestic deals >$80bn with a cumulative value of $267bn (Bristol-Myers Sqibb / Celgene, United Technologies / Raytheon and AbbVie / Allergan (vs none in 2018)
Resilient model over the cycle Complementary mix of M&A and Financing Advisory Revenue progression (in €m) 1,271 1,171 1,183 1,160 26% 1,037 24% 25% 947 32% 14% 852 774 29% 740 741 699 711 692 689 36% 33% 29% 23% 31% 45% 36% 34% 74% 86% 76% 75% 68% 71% 77% 67% 71% 64% 69% 66% 55% 64% 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2013 2014 2015 2016 2017 2018 2019 M&A Advisory Financing Advisory (debt & equity advisory) 14
Steady growth in profit Revenue growth and tight cost control leads to increasing profit Profit Before Tax (in €m) and PBT margin - pre US investment costs 1 1,400 60% 1,271 1,190 1,171 1,183 1,200 1,160 50% 1,040 1,000 880 40% 800 741 689 30% 600 19% 18% 18% 20% 16% 17% 20% 400 12% 13% 16% 255 225 212 211 180 182 10% 200 142 96 80 - - 2012/13 2013/14 2014/15 2015/16 2016/17 2016 2017 2018 2019 Revenue Profit before tax % PBT margin Compensation 65.1% 65.9% 65.0% 64.8% 64.6% 65.6% 65.0% 63.4% 64.9% ratio 2 1 US investment costs were €23m for 2016, €25m for 2017, €22m for 2018 and €16m for 2019. Our US investment costs are expected to be around 2% of revenue subject to the right opportunities 2 On an awarded basis and pre US investment costs 15
Our response to market changes Fully integrated investor engagement business Facing Page 16 Disruption of traditional equity markets Our response: New investor advisory franchise ⚫ Governance matters Boards 90% Activism, governance, shareholder of active funds integrate ESG considerations into engagement strategy investments decisions ⚫ Rise of passive investors M&A Investor Financing Advisory Advisory Advisory ⚫ Activists see these changes as an opportunity ⚫ De-equitisation of listed market, since 2000 Shareholder Engagement c.50% decline in LSE c.36% decline in US listed companies listed companies ⚫ Private Equity companies chose ECM exits less often Corporate Shareholder Advisory in 2018 and 2019 versus previous years Investor Perceptions Equity Marketing ⚫ Structural shift amongst long-term capital providers – Recent pivot towards direct investing : sovereign wealth, pension fund and family office Shareholders
Our North America development Overview Broadening sector coverage 6 offices Debt Activism Restructuring New York, Washington and Toronto and more recently Los Metals & Advisory Mining Angeles (2014), Chicago (2016) and Palo Alto (2018) Technology Financial Sponsors FIG / Asset Established presence Equity c.200 40 Management Enhanced since 2016 Advisory advisory bankers MDs Retail Initiated since 2016 Consumer Enhanced in 2019 Healthcare Industrials 30 5 new M&A MDs since 2014 new MDs in 2019 Infrastructure Telecoms & Power Business Chemicals Paper & Services Our North American progression1 Packaging Var Market 2014 2019 14-19 % change Deal value $43bn $56bn 30% 23% Objective to build a comprehensive platform Deal number 76 115 51% 14% in North America League table position consistent with our overall global franchise #19 #14 36% (# of Announced deals) Source: Refinitiv, any US or Canadian involvement on announced transactions 16
Strategy of Global Advisory 1 Enhance our leading position in Europe Maintain leading global position 2 Grow market share in North America Resilient business model while adapting to market 3 Deliver considered growth in Rest of World evolution 4 Develop ancillary business areas, including Investor facing activities 5 Enhance cross-selling synergies between the businesses 17
1 Global Advisory 2 Wealth and Asset Management 3 Merchant Banking 18
Our offering Facing Page 19 Wealth Management Asset Management Europe Externally managed Alternatives 4% 6% Cash 11% Bonds & Execution convertibles only 34% 31% Equity 16% Discretionary 58% Advisory 7% Diversified 33% ⚫ 4 brands: ⚫ Focus more on high net worth individuals (>€1m in – Conviction: actively managed funds France and >€5m in other geographies) – Valor: diversified solutions without any benchmark ⚫ Transforming the business mix to increase AuM under – Thematic: identifying durable themes (ie. real discretionary management estate, ageing population, gold mines funds) – 4change: coupling responsibility and performance Note 1 Data as at 31 December 2019
Introduction to Wealth and Asset Management Geography ⚫ European Wealth Management €51bn Asset Management €30bn1 Main ⚫ France, UK, Switzerland, ⚫ France €19bn ⚫ Europe €20bn 1 c.50 locations Belgium, Italy, Monaco and c.225 Germany ⚫ Switzerland €12bn # Client ⚫ USA2 €10bn # Portfolio ⚫ UK Advisors Managers €11bn Offerings ⚫ Wealth Management ⚫ Belgium €4bn ⚫ Asset Management ⚫ Germany €3bn # clients ⚫ Monaco €1bn ⚫ c.20,000 ⚫ Italy €1bn # Front office ⚫ c.275 clients advisors and portfolio managers Key numbers c.€76bn of AuM as at 31 December 2019 €497m €73m €2.4bn of revenue of PBT (27% of total group revenue) of NNA in 2019 (20% of total group PBT) 1: Of which €5bn managed on behalf of Wealth Management clients 2: Non core activity 19
Strong growth in AuM over time and track record of attracting new business Wealth vs. Asset Management AuM split Net new Assets (in €bn) CAGR 15-19: 90.0 +10% 80.0 76.0 Martin Maurel 70.0 merger: 67.3 +€10bn 64.8 33% 60.0 54.0 51.0 37% 34% 50.0 41% 40.0 40% 2.6 2.4 30.0 0.3 1.5 67% 1.8 1.7 20.0 63% 66% 0.4 60% 59% 2.3 1.0 2.5 2.2 10.0 1.3 0.8 (0.1) (0.7) - 31/12/2015 31/12/2016 31/12/2017 31/12/2018 31/12/2019 2015/16 2016 2017 2018 2019 Wealth management Asset management Wealth management Asset management 20
Steady growth of revenue… Facing Page 21 Revenue1 (in €m) and annualised bps progression 800 350 700 CAGR 17-19: 300 +3% Asset 600 +3% Management 250 22% +2% 497 500 470 480 21 20 20 200 Wealth Management 400 78% 150 300 +3% 380 +6% 404 370 100 RoW 200 72 73 71 19% France 50 UK 47% 100 17% - -10% 80 80 72 - - Sw itzerland 2017 2018 2019 17% NII Fees and commissions Others Revenue bps margin Note 1 Revenues are calculated excluding Trust business following its sale in February 2019 2 France includes France, Belgium and Monaco
… while maintaining a healthy PBT thanks to cost control Profit Before Tax (in €m) and PBT margin 600 40% 497 35% 500 470 480 30% 400 25% 17% 17% 300 20% 15% 15% 200 15% 15% 11% 10% 100 81 82 73 5% - - 2017 2018 2019 Revenue PBT excluding MM costs PBT margin - PBT margin - excluding MM costs including MM costs Revenue 72bps 73 71 bps margin % NNI / total 15% 17% 15% Revenue Note 1. PBT are calculated excluding Trust business following its sale in February 2019 2. Martin Maurel integration costs were €27m in 2017, €9m in 2018 and nil on 2019 21
Strategy of Wealth & Asset Management 1 Growth in core markets Build a strong European Wealth management 2 Cost control and improving profitability: around 80% CIR by 2022 in a low interest rate platform environment 3 Refocus Asset Management on France 4 Strive to maximise synergies across the division and between the division and group 22
1 Global Advisory 2 Wealth and Asset Management 3 Merchant Banking 23
Strong AuM growth Merchant Banking continues to scale across all our strategies Facing Page 24 Asset under management (in €bn) €19.0bn €14.0bn x4.8 €8.2bn €4.9bn €2.9bn 2013 2015 2017 2019 obj 2022 Private Equity Secondaries / Co-investments Direct Lending Credit Management Note For illustrative purposes only. The above information is based on a variety of assumptions including that fundraising efforts will reach multi-year targets. Actual results may differ.
Introduction to Merchant Banking Geography Europe and US 5 offices Offerings Paris, London, Luxembourg, New York, Los Angeles ⚫ Corporate private equity €6.2bn Private Equity ⚫ Multi-strategies ⚫ Direct lending funds €7.8bn Private Debt ⚫ Credit management Key c.€14bn c.90 numbers of AuM of which 9% from investment professionnals Rothschild & Co 155 professionals 24 nationalities €197m €111m of revenue of PBT (11% of total group revenue) (30% of total group PBT) 24
Private Equity offering Mid-market focus through directs, secondaries, co-investments and multi-managers Facing Page 25 Corporate Private Equity €3.6bn Multi-Strategies (FAMS) €2.6bn FAPI FAGC FACP FASO FAMI FAPEP Five Arrows Principal Five Arrows Growth Five Arrows Capital Five Arrows Secondary Five Arrows Minority Five Arrows Private Investments Capital Partners Opportunities Investments Equity Programme Mid-market Mid-market Mid-cap Multi-managers & Small-cap buyout Co-investments buyout buyout Secondaries fof platform FAPI I (2010): €583m FASO III (2012): €259m FAPEP I (2017): €195m FAGC (2020): FAMI I (2013): €100m FAPI II (2015): €781m FACP (2018): $655m FASO IV (2016): €459m FAPEP II (2019): fundraising FAMI II (2016): €155m FAPI III (2019): €1.3bn FASO V (2019): €1.0bn fundraising 33 investments in 10 countries 15+ years track record across more than 50 transactions 36 investment professionals 21 investment professionals
Private Debt offering Credit solutions across the capital structure for mid-cap and large companies Direct Lending €1.2bn Credit Management €6.6bn FACS FADL FADP Oberon Elsinore GLI CLO Five Arrows Five Arrows Five Arrows & managed accounts & managed accounts Five Arrows Global management Credit Solutions Direct Lending Debt Partners Loan Investments Debt financing solutions to privately- Senior, Unlevered senior owned businesses across the European subordinated and CLO Equity CLO vehicles secured credits mid-market CLO credits FACS: €415m (2014) Oberon I-III (2013-17): €965m €3.5bn FADL: €655m (2018) Oberon IV (2018): fundraising Elsinore I (2018): Europe: 5 CLOs FADP III: fundraising Oberon USA (2018): open- fundraising FA GLI (2019): €205m (Contego) ended Managed Account: €100m North America: 4 CLOs Managed Accounts: €1.8bn (Ocean Trails) 31 investments across Europe 11 investment professionals 23 investment professionals 25
Strong value creation in portfolio for shareholders Facing Page 26 Net asset value NAV of €617m 84 for a total 9 (22) commitment of 126 75 c.€1bn (c.9% of (82) 617 AuM) 52 511 74 (104) 179 140 438 371 Asset value Additions Value creation Disposals Asset value 31/12/2018 31/12/2019 Private Equity Private Debt
A disciplined investment philosophy We base our asset selection on stringent criteria centred on risk-adjusted returns Our core Our key investing principles sector focus ⚫ Attractive and durable returns on invested capital ⚫ High and sustainable barriers to entry ⚫ Strong free cash flow conversion and yield ⚫ Superior long-term organic growth Healthcare ⚫ Multiple value creation levers and active portfolio engagement Key product & company themes Views on managing risks ⚫ “Installed base” of customers (recurring sales) ⚫ Input price volatility can be a killer ⚫ “Asset-lite” businesses with disproportionate ⚫ Understand business performance through Data & profit scaling several cycles Software ⚫ Secular growth prospects driven by ⚫ Operating leverage and financial leverage is a sustainable tail winds dangerous combination ⚫ Dominant domestic franchises and/or export ⚫ Awareness of the impact of regulatory change champions Technology- Enabled 46% on core 58% on core sectors focus sectors focus Business in 20151 in 2019 Services 1 Calculation based on NAV, excluding carried interest shares 26
Strong revenue growth with increasing contribution of recurring revenue Facing Page 27 Breakdown of revenue (in €m) 300 250 CAGR 16-19: 250 +14% +13% 197 200 185 175 200 186 164 150 58 133 145 -15% 150 131 69 100 93 +32% 48 53 100 36 91 31 29 70 % Recurring / 50 61 +31% total50revenue : 51 46% 38% 0 - 2016 2017 2018 2019 Recurring Revenue Carried interest Gains (realised and unrealised) Revenue - average 3 years
Good return on capital tied to successful business growth, investment performance and delivery of strategic priorities Profit Before Tax (in €m) and RORAC1 200 250.0% 180 CAGR 16-19: +11% 160 200.0% 140 +9% 120 120 111 150.0% 102 100 82 80 100.0% 60 40 62% 65% 50.0% 59% 56% 20 0 - 2016 2017 2018 2019 Profit before tax PBT margin 3 year average 25% 26% 28% 28% RORAC 1 Note 1 RORAC stands for Return On Risk Adjusted Capital – an internal measure of risk capital invested in the business, being profit before tax divided by risk weighted capital 27
Strategy of Merchant Banking 1 Grow Assets under Management as a multi-asset manager A niche player ⚫ Accelerate the roll out of core multiple products in Europe and the US in private assets in ⚫ Raise new funds targeted at specific opportunities, where we believe we have a distinct Europe investment advantage and US with a growing contribution to group profits 2 Pursue attractive risk reward propositions and return on ⚫ Focus on 3 core sectors “asset light” (healthcare, business services and data services) capital with high visibility on future revenues and earnings ⚫ Strong organic growth coupled with multiple opportunities for value creation ⚫ Sustainable returns on invested capital with strong free cash flow generation 3 Continue to grow profitability for the group ⚫ A mix of management fees, carry and capital gains ⚫ Increasing share of recurring revenue from management fees and lowering “invested assets-to-AuM” ratio 28
3 Financials
Comments on P&L Facing Page 30 ⚫ Revenue growth Improving ⚫ Cost control operating margin ⚫ Targeted headcount optimisation Compensation ⚫ Target of an adjusted compensation ratio: in low to mid 60%’s through the cycle costs Exceptionals 2016 2017 2018 2019 impact on Martin Maurel integration costs 4 18 7 - Net Income – Group share Others (pensions credit, swap settlement cost, - (7) 10 (10) special tax credit, provision, legacy assets) Total exceptionals (gains) / costs 4 11 17 (10) Non-controlling ⚫ Comprise the profit share distributed to French partners and interest on perpetual debt interests
Summary P&L Strong momentum over recent financial years In €m 2016 2017 2018 2019 Revenue 1,713 1,910 1,976 1,872 Staff costs (1,013) (1,087) (1,098) (1,065) Administrative expenses (268) (320) (309) (289) Depreciation and amortisation (32) (34) (30) (66) Impairments (14) (13) (4) (6) Operating Income 386 456 535 446 Other income / (expense) (net) 7 21 (4) 19 Profit before tax 393 477 531 465 Consolidated net income 331 412 454 397 Net income - Group share 179 236 286 243 Earnings per share € 2.60 € 3.18 € 3.88 € 3.38 Net income - Group share excl. exceptionals 183 247 303 233 EPS excl. exceptionals € 2.66 € 3.33 € 4.10 € 3.24 ROTE (excluding exceptional items) 14.4% 17.2% 18.0% 12.6% 30
Compensation ratio target: low to mid 60%’s through the cycle Facing Page 31 (in €m) 2016 2017 2018 2019 Revenue 1,713 1,910 1,976 1,872 1 Total staff costs (1,119) (1,211) (1,225) (1,176) Compensation ratio 65.3% 63.4% 62.0% 62.8% Adjusted accounting Compensation ratio 2 64.0% 62.4% 60.8% 61.8% (INCLUDING deferred bonus accounting) Adjusted awarded Compensation ratio 65.0% 62.1% 62.3% 61.6% (EXCLUDING deferred bonus accounting) Headcount 2,946 3,502 3,633 3,559 1 Total staff costs include profit share paid to French Partners and effects of accounting for deferred bonuses over the period in which they are earned, as opposed to “awarded” basis but exclude redundancy costs, revaluation of share-based employee liabilities and acquisition costs treated as employee compensation under IFRS 2 Ratio adjusted with FX effects, UK Guaranteed minimum pension provision and GA US investments costs
Performance by business – 12 months Global Wealth & Asset Merchant Corporate IFRS (in €m) 2019 Advisory Management Banking centre reconciliation 1 Revenue 1,160 497 197 24 (6) 1,872 Operating expenses & impairments (994) (424) (86) (53) 131 (1,426) Operating income 166 73 111 (29) 125 446 Operating income excl. exceptional charges / profit 166 73 111 (29) 126 447 Operating margin % 14% 15% 56% - - 24% Global Wealth & Asset Merchant Corporate IFRS (in €m) 2018 Advisory Management Banking centre reconciliation 1 Revenue 1,271 480 175 58 (8) 1,976 Operating expenses & impairments (1,038) (404) (73) (92) 166 (1,441) Operating income 233 76 102 (34) 158 535 Operating income excl. exceptional charges / profit 233 85 102 (34) 165 551 Operating margin % 18% 18% 58% - - 28% 1 The reconciliation to IFRS mainly reflects: the treatment of profit share paid to French partners as non-controlling interests; accounting for deferred bonuses over the period that they are earned; the application of IAS 19 for defined benefit pension schemes; adding back non-operating gains and losses booked in "net income/(expense) from other assets"; removing realised gains on sales of investment securities where the unrealised gain was in the available-for-sale reserve at 31 December 2017 before the introduction on IFRS 9; and reallocating impairments and certain operating income and expenses for presentational purposes. 2 Wealth & Asset Management numbers are calculated excluding Trust business following its sale in February 2019 31
Non-controlling interests Facing Page 32 P&L Balance sheet (in €m) 2019 2018 (in €m) 31/12/2019 31/12/2018 Interest on perpetual 17.3 17.7 Perpetual subordinated debt 303 291 subordinated debt Preferred shares 1 136.2 146.3 Preferred shares 1 138 159 Other Non-controlling interests 0.3 3.5 Other Non-controlling interests 5 6 TOTAL 153.8 167.5 TOTAL 446 456 Note 1 Mainly relates to the profit share distributed to French partners
Summary balance sheet (in €bn) 31/12/2018 31/12/2019 Cash and amounts due from central banks 4.7 4.4 Loans and advances to banks 2.0 2.0 Loans and advances to customers 2.9 3.3 of which Private client lending 2.5 2.8 Debt and equity securities 2.1 2.8 Other assets 1.5 1.7 Total assets 13.2 14.2 Due to customers 8.7 9.5 Other liabilities 2.0 2.1 Shareholders' equity - Group share 2.0 2.2 Non-controlling interests 0.5 0.4 Total capital and liabilities 13.2 14.2 Key ratios Loan to Deposit ratio 33% 35% Private client lending / Deposit 29% 29% Liquid assets / gross assets 60% 57% Equity per share €28.7 €31.2 Tangible Equity per share €24.5 €27.1 32
4 Shareholding structure and governance
Shareholding structure as at 31 December 2019 Facing Page 34 Share capital Voting rights Treasury shares 5.9% Enlarged Float Enlarged family 30.0% family Float concert concert 39.0% 49.7% 62.7% Jardine Jardine Matheson Matheson Group Group 7.3% 5.4%
Rothschild & Co at a glance As at 31 December 2019 Enlarged family concert Float 49.7% of share capital 44.4% of share capital (62.7% voting rights) (37.3% voting rights) Managing Rothschild & Co Gestion Partner 5.9% Global Advisory Merchant Banking Wealth Management Asset Management c.45 countries UK Switzerland Europe Five Arrows Managers LLP Rothschild & Co Rothschild &Co Asset Bank Zurich Management Europe France Five Arrow Managers France US Rothschild Martin Maurel Rothschild & Co Luxembourg Asset Management R&Co Investment Managers SA UK US Rothschild & Co Wealth Management Five Arrows Managers LLC 34
Strong corporate governance 1 Group management 2 Board and board’s 3 Aligned shareholders and committees senior management Rothschild & Co Gestion, Managing Partner of Rothschild & ⚫ A Supervisory board composed of: ⚫ Equity Scheme introduced in October Co. Represented by: – 14 recognised professionals, 2013 for 57 global partners from 10 including 7 independent members countries Alexandre de Rothschild Executive Chairman – 8 different nationalities ⚫ Extended to 10 new global partners in December 2015 ⚫ 4 specialised committees: ⚫ Extended to 21 new global partners in Assisted by a management board: – Audit Committee December 2017 Robert Leitao – Risk Committee ⚫ Extended to 6 new global partners in Managing Partner / Co-Chairman of the GEC – Remuneration & Nomination December 2019 and new subscription Committee from 49 existing global partners – Corporate responsibility Committee François Pérol Managing Partner / Co-Chairman of the GEC Marc-Olivier Laurent Managing Partner Group Executive Committee (GEC) with 12 members (Business heads and significant Support function heads) Governance complying Accomplished management team Alignment of interests with best practice 35
Appendices
Regional M&A market by deal values (US$bn) Facing Page 37 Europe North America 3000 % 2017 vs 2016 % 2018 vs 2017 % 2019 vs 2018 3000 % 2017 vs 2016 A: -10% A: +40% Announced: -25% A: -12% C: -9% C: +16% Completed: -25% C: -2% 2000 2000 % 2018 vs 2017 A: +26% 1000 1000 C: +25% % 2019 vs 2018 - - Announced: +2% Completed: -19% Announced M&A - North America Completed M&A - North America Announced M&A - Europe Completed M&A - Europe Asia Rest of the world 2000 2000 % 2017 vs 2016 % 2018 vs 2017 % 2019 vs 2018 % 2017 vs 2016 % 2018 vs 2017 % 2019 vs 2018 A: -6% A: +19% Announced: -20% A: +8% A: +11% Announced: +16% C: -9% C: -11% Completed: -1% C: +4% C: +27% Completed: -16% 1000 1000 - - Announced M&A - RoW Completed M&A - RoW Announced M&A - Asia Completed M&A - Asia Source Thomson Reuters Verizon deal has been excluded from European data due to the size ($130bn – announced in 2013 and completed in 2014)
M&A market by deal values Global M&A by deal values (US$bn) Deal Values > $10bn 2018 2019 % 4,500 Announced 935 1,197 28% Completed 1,142 905 -21% 4,000 o/w US 3,500 Announced 632 969 53% Completed 934 668 -29% 3,000 2,500 2,000 1,500 1,000 500 - 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Announced Deal Value ($bn) Complete Deal Value ($bn) 16 vs 15 17 vs 16 18 vs 17 19 vs 18 % var Announced (17)% (4)% 19% (3)% % var Completed (0)% (8)% 15% (14)% Source: Refinitiv Note: 2019 announced value includes 3 US domestic deals >$80bn with a cumulative value of $267bn (Bristol-Myers Sqibb / Celgene, United Technologies / Raytheon and AbbVie / Allergan (vs none in 2018) 37
Regional M&A market by deal number Facing Page 38 Europe North America % 2017 to 2016 % 2018 vs 2017 % 2019 vs 2018 % 2017 to 2016 A: -1% A: +3% Announced: -3% 6,000 A: +5% 6,000 C: -4% C: 0% Completed: -2% C: +1% 4,000 % 2018 vs 2017 4,000 A: +6% C: +3% 2,000 2,000 % 2019 vs 2018 0 Announced: -6% 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Completed: -5% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Announced M&A - North America Completed M&A - North America Announced M&A - Europe Completed M&A - Europe Asia Rest of the world % 2017 to 2016 % 2018 vs 2017 % 2019 vs 2018 % 2017 to 2016 % 2018 vs 2017 % 2019 vs 2018 A: +1% A: -1% Announced: -12% A: +9% A: -1% Announced: -11% 4,000 C: -1% C: -10% Completed: -5% 4,000 C: 0% C:+ 0% Completed: -9% 3,000 3,000 2,000 2,000 1,000 1,000 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Announced M&A - Asia Completed M&A - Asia Announced M&A - RoW Completed M&A - RoW Source Thomson Reuters
M&A market by deal number Global M&A by deal number Deal number > $10bn 12,000 2018 2019 % Announced 40 43 8% Completed 47 31 -34% 10,000 o/w US Announced 27 35 30% Completed 35 23 -34% 8,000 6,000 4,000 2,000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Global announced - M&A Global completed - M&A 16 vs 15 17 vs 16 18 vs 17 19 vs 18 % var Announced (1)% 3% 4% (7)% % var Completed (1)% 1% (2)% (5)% Source Thomson Reuters 38
Global Advisory M&A and Strategic Advisory – example of transactions Facing Page 39 Company Deal Country Sector Value Maersk ⚫ US3.5bn demerger and listing of Maersk Drilling Energy and US$3.5bn on NASDAQ Copenhagen Power Jardines ⚫ £4.3bn recommended cash offer for Jardine FIG £4.3bn Lloyd Thompson by Marsh & Mclennan Skia ⚫ €2.2bn acquisition of Parex from CVC by Sika Industrials €2.2bn ⚫ €3.25bn sale of Antelliq to Merck Consumer €3.25bn Antelliq Novenergia ⚫ €1.1bn sale of Novenergia to Total Eren Energy and €1.1bn Power Brambles ⚫ US$2.51bn sale of IFCO to Triton and Luxinva Business US$2.51bn Services Dia ⚫ €2.1bn public tender offer by L1 and concurrent Retail €2.1bn refinancing and recapitalization plan Teck ⚫ US$1.2bn sale of 30% of the Quebrada Blanca Mining US$1.2bn Project
Global Advisory Long-term clients ⚫ 16 deals ⚫ 36 deals ⚫ 18 deals ⚫ 8 deals ⚫ Multiple assignments ⚫ 20 years ⚫ 22 years ⚫ 20 years over 100+ years ⚫ 11 years ⚫ 19 deals ⚫ 9 deals ⚫ 8 deals ⚫ 7 deals ⚫ Multiple assignments ⚫ 14 years ⚫ 26 years over 100+ years ⚫ 13 years ⚫ 20 years ⚫ 19 deals ⚫ 8 deals ⚫ 8 deals ⚫ 16 deals ⚫ 13 deals ⚫ 14 years ⚫ 12 years ⚫ 19 years ⚫ 10 years ⚫ 21 years ⚫ 15 deals ⚫ 16 deals ⚫ 16 deals ⚫ 18 deals ⚫ 14 deals ⚫ 16 years ⚫ 24 years ⚫ 25 years ⚫ 28 years ⚫ 22 years 39
Global Advisory Financing advisory – example of transactions Facing Page 40 Company Deal Country Sector Value IKKS Group ⚫ €370m debt restructuring Consumer €370m Products Finerge ⚫ Debt advice on €798m refinancing of onshore Transport and €798m wind portfolio Infrastructure EG Group ⚫ Debt advice on €1.6bn cross border debut high Consumer €1.6bn yield bond refinancing Products Traton ⚫ €1.6bn IPO of TRATON SE on Frankfurt Stock Automotive €1.6bn Group Exchange Ministry of ⚫ Debt advice on €1.0bn EUR-denominated Industrial €1.0bn Finance Eurobond issuance Materials Ukraine The ⚫ £242m IPO of Watches of Switzerland on Consumer £242m Watches of London Stock Exchange Products Switzerland Group Eutelsat ⚫ Debt advice on its €600m 8-year senior TMT €600m ⚫ unsecured bond refinancing Ferguson ⚫ Debt advice on US$1.5bn of US Private Industrial US$1.5bn Placement notes Materials
European IPO market IPO volumes in Europe since 2008 (>€200m) 65 62 48 48 38 39 34 28 29 28 25 19 27 26 25 15 10 16 7 14 11 4 8 4 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source Dealogic Value of IPOs (€bn) Number of IPOs 16 vs 15 17 vs 16 18 vs 17 19 vs 18 % Value (46)% 10% (12)% (45)% % Number (53)% 66% (29)% (56)% 40
Selected sample of transactions in Merchant Banking A history of long-term value creation in the mid-cap segment Sample of recent transactions Private Equity Private Debt Leading player on the Developer of high Provider of legal and IT support and Nuclear measurement Specialist systems and privately managed quality tests for tax information and technology services tools outsourcing services nurseries market medical diagnosis publications provider France United Kingdom Denmark Global UK UK Provider of Repair and Provider of patient Benchmarking and Maintenance Specialized education Fast-food restaurant Multi-regional chain for safety and risk technical data in the Information for and care chain routine laboratory management software automotive sector garages United Kingdom France United Kingdom UK France France Healthcare Technology-enabled Digital platform Generic Leading European tech-enabled insurance distribution Global computer for the real estate pharmaceuticals petrol forecourt procurement platform platform and service products and services intermediation market company operator provider Germany Netherlands France USA Germany Europe Software company Education sector leading provider of Leading Global Nordic payment focused on the (kindergartens and educational travel in Dutch cable operator hospitality service processor banking sector primary schools) the US provider United Kingdom China USA Netherlands USA Scandinavia 41
Rothschild & Co volume by trading platforms As at 28 February 2020 Base 100 Volume (in ‘000’s) 15% 93,860 31% 29% 28% 23,934,305 42% 40% 40% 59,481 17% 23% 53,051 56,141 35% 47,279 15,056,967 13,580,947 14,195,604 18% 24% 12,056,131 52% 18,000 49% 45% 39% 4,626,081 36% 38% 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 annualised annualised Volume Euronext Volume Electronic Volume Euronext Volume Electronic Volume OTC Volume OTC xxx Daily average volume trading on all platforms 42
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