Polar Capital Holdings plc

Good morning and indeed good afternoon. And thank you to those of you who are joining us today to hear from Polar Capital, who announced their results earlier this morning. If you haven't seen this already, You can find a note on our website with updated forecasts. But the purpose of this afternoon is to hear from the management team and then take questions from the audience. As ever, please feel free to submit questions as we go through the presentation and we'll take as many as we can at the end. But without further ado, let me hand over to Gavin Rochester, CEO.

Hannah, thank you very, very much. And good afternoon, everybody. Thank you so much for joining us this afternoon. With me, I have Samir Ayoub. He is our CFO. And I also have with me Ian Evans, who is currently our global head of distribution. But as you may have seen, was we also put an announcement out this morning that he is my successor as chief executive. So we'll talk a bit about that later on. Once I've been through the results and some years been through the financial aspects of it. The year has been a good year for Polo Capital. I think if you compare our results to many of our peers, we've actually stood up reasonably well. Obviously, we don't want to get too overconfident, but core operating profit increased 27% for the year ended March, with operating margin increasing 29% to 32%. We had positive net inflows, albeit modest, in the 12 months in a very, very challenging environment. And our average AUM, which obviously drives revenue, was up 17%, notwithstanding the fact that our AUM point to point was marginally down. Average AUM was up. The big inflow story is that of emerging markets where we saw a lot of inflows, particularly in the first quarter of the financial year. And that team is now the third largest in terms of AUM at Polar Capital. All of this has led us to maintain our dividend at 46 PS share, the total annual dividend. And whilst the market uncertainty persists, and there is a lot of uncertainty at the moment, interest in Australia remains very strong. Ian will give more colour on that later on. Very briefly, just in terms of market perspective, I won't go too much into detail here, as you've all lived with this over the course of the year. Suffice it to say that obviously the post-year-end period, in other words, April, May and June, has been more volatile. April, particularly so given the tariff announcements on the 2nd of April. But interestingly, markets actually rebounded relatively quickly after that first shock and literally within the week. They were back to where they were prior to the announcement. So it's an interesting time. I think markets have become slightly immune to some of the negotiating tactics of the administration and seem to be taking things within their stride. Markets are currently almost at an all-time high for certain markets. Fund performance and capacity, again, very, very briefly. What that shows is the performance of all of our key strategies since inception. The bars above the horizontal line indicating the outperformance versus their respective benchmarks. Below that line is underperformance against their respective benchmarks. The color of the bar depicting first quartile dark blue, second quartile light blue. Third quartile, amber or orange. And fourth quartile is red. They are listed in sequence of inception. So on the left-hand side, those are the longest standing funds. So you can see performance numbers. longer term is far better. And some of the more recently launched funds, obviously the earlier days, they've had more challenging times. So of particular mention is Smart Energy and Smart Mobility, quite significantly below benchmark, although benchmark in this case for this chart is MSCR Acqui. So all companies world index, which is what these funds have on their fact sheets as their benchmark, In reality, these funds are measured against their peer group index, which effectively is a peer group of holdings that actually can hold in their sustainability funds. So against their peer group performing very, very well. So a slightly misleading chart in that we are obliged by compliance to reflect MSCR performance here. Next slide shows us performance in quartile ranking. Again, exceptional performance, 100% in the top two quartiles since inception. High 80s over five years. 91 and 84% May this year and last year, top two quartiles over three years. So exceptional peer group performance, although it should be noted that we are not measured only by our performance versus peer group, active peer group, but also performance against benchmark, which is what the next slide shows us. So when measured against benchmark, still very, very good long-term, but more challenging in the shorter term. This is to the end of May, so it does take into account the really, really difficult April month. We decided to show the more current performance. And of course, it's improved since then as well. So again, we'll go into more detail a bit later on, but healthcare really suffering performance in that volatile period and also in the current quarter outflows, given the sentiment that has changed for healthcare in particular. Capacity, not going to dwell on that other than it hasn't changed that much since last time I reported this. So about £66 billion of total capacity, £45 billion of remaining capacity. And not all of that capacity is sellable. Some of it is in funds that are just out of favour or underperforming. But key to this slide is there is significant capacity in four of our strategies. which actually are in inflow so global insurance healthcare international small company and emerging markets so these are four stages that had inflows in the last 12 months on that i'm going to talk a little bit about flows and ian will come back to that in his capacity as head of distribution but you can see our progression of aum an all-time high of 23.4 billion in september 21 so that just precedes the interest rate hikes and obviously the peak of inflation. And as you all know, we saw markets repress on high interest rates. Obviously, yields had a big change and we saw AUM come down and we saw outflows. So we've endured in the last three years, two of those were years of net outflow and the most recent year, was a marginal net inflow. And that was all precipitated by effectively sentiment going against equities. But AUM recovered significantly. And you can see March 24, 21.9 billion, September 24, 22.7. And at the end of June, or certainly on the 20th of June, a couple of weeks ago, 22.6 billion. So almost back to where it was at the peak. A lot of that being driven by markets as opposed to flows. That shows you, the top graph shows you what's happening in the industry. So that's global active equity funds industry-wide. So you can see in the last eight years, 17 to 24, net outflows in most of those years, 2021, which was the tail end of the whole COVID ramp up and obviously pre the interest rate changes was a marginal year of inflows globally. Polo has actually fared quite well. So bottom chart on that page, you can see in those last eight years, Polo has actually had net inflows in four of those eight years of 2025. In fact, five of those eight years, 2025 was a marginal year. inflow. You can't see it on that chart because it was quite marginal, 12.3 million of inflows on the back of significant gross inflows and gross outflows. Total net inflows, you can see that's done by a month over the year. So you can see dominated by the first quarter of the financial year and in itself dominated by emerging markets net flows. Next slide shows gross and net by strategy. So you can see emerging markets in Asia, significant inflows, international small company, which is a recent launch with promising early flows, global healthcare, insurance, Japan, marginal inflows, European small cap, small inflows. And then of course, much lesser outflows, global tech, European opportunities, North America, UK value on the right hand side. But I think interestingly on the slide, what really is actually quite important and encouraging is you see gross inflows and gross outflows. So it's not just about the outflows. Polar has done exceedingly well in terms of generating gross inflows to almost surpass in the case of global tech, and European opportunities, but also UK value almost exceeding the gross outflows. And this really comes down to managing a very large back book of mature assets where you do see general churn of the older assets under management. Calendar year to date, again, we'll turn a bit to this later on, but this is effectively showing what's happened in the last quarter. So you can see, given the volatility of the markets, given uncertainty created, certainly by the Republican administration in the last quarter on tariffs and other geopolitical tensions, we have had outflows. So again, just to be aware that it has been a more challenging quarter. I'll hand over to Samir to take us through the financial results.

Thank you, Gavin. Thank you, Hannah. So having just seen the profile of what's happening during the current quarter, we go back and just take a look through the last 12 months, the normal format of the next few slides. I'll counter through the highlights of the overall P&L. We'll explore the balance sheet and ground up with the dividend. But essentially, over the last financial year, average AU MS cap and indicator was up 17% to 22.9 billion. That's really driven the net management fee revenue line, which was up 16% in turn. And that was managed on an average net management fee yield, which was fairly consistent, 78 basis points year on year. Now, the first point of guidance for the next year that I'm looking to provide the market is over the last few years, anyone that's followed us will have heard me say to expect a net management fee yield decline of one to two basis points each year over the medium term as we look to manage the change in product mix and therefore the fees and therefore the impact on net management fee yield. That guidance still holds over the medium term. Over the next 12 months, the guidance is to expect at least two basis points to arrive to that line. And therefore the expected yield for FY26 is 76 basis points. And the reason for that is roughly half of that will be the normal product mix changes. And then the other half will be delivered by a fee renegotiation on our technology trust, Polar Capital Technology Trust, which comes into place, is effective 1st of May, 2025. So those two things combined lead us to indicate that fee yield for next year will be 76 basis points. With the higher average AUM, higher management fee income for this year, combined with managing the cost base prudently feeds through to core operating profits being up 27% year on year to just under 57 million for FY25. at an operating profit margin of 32%. And again, managing that cost base prudently provides evidence of the operational gearing that is in place. That kicks in very, very quickly if things are going in the right direction as average AUM expansion this year has proved. The cautionary note that I would say is that we're starting this financial year on a slightly lower AUM. It has bounced back through to the end of June, as Gavin said, but that average AUM has been slightly lower for this first quarter, so one to watch. Again, it isn't a linear expansion all the time, so therefore not to extrapolate for that 32% just yet for this year. The other key line, important line of our profits is delivered through performance-free profits. And again, over the last few years, you will have heard me say that the expectation should be of a low to mid single performance fee profit number to be delivered. And that is especially true, again, given over the course of this financial year, we have taken performance fee profits off our technology trust and our technology open-ended usage vehicle. So therefore, that... Average that has existed for the last three years certainly is the right average to think about as we move forward. And then the third line of profitability is other income. That is, remember, mark-to-market gains and losses on our seed portfolio net of hedging costs and interest income on bank balances. So when you pull those three lines of profit together, Adjusted total diluted EPS for the year was 53.5p, up 22%. And really that increase in earnings has allowed the board to maintain that second interim dividend at 32p, and therefore a maintained total dividend of 46p for the full year. And if we move on, please, and look at the overall cost base for the business, and really looking at the chart on the right-hand side of that slide there, The two main drivers of the overall operating costs and finance costs at roughly 147 million for the year, two things. One is with the higher profits for this year, variable staff compensation costs, which are bipartisan. for the largest component of our overall staff compensation costs, have tracked in line with those increase in profits. Remember, there is a very well-defined profit sharing or revenue sharing model in place for all of our investment teams that really drives that variable compensation line across the firm. And the other big change this year is a non-cash impairment write-off of intangibles, which I'll come back to later on. But if you X out exceptional items, non-cash exceptional items, overall operating costs have increased 11% year-on-year, which again gives you an indication of how carefully we manage the cost base over the long term. The next slide takes a look at non-staff compensation-related other operating costs. These are the costs that are slightly more fixed in nature. And again, very quickly looking at a couple of lines, we've done slightly more on the technology line, the IT spend, but mainly driven by our push in the US where we've taken on that new international small company team that arrived halfway through this financial year. And therefore, technology related spend with setting that team up. We've invested in a few back office systems to, again, put us into good stead for future growth. And again, we are spending a bit of money very carefully on AI related proof of concepts to, again, find those incremental marginal efficiencies to really drive future growth and manage the cost base over the long term and find those edges wherever we can. The other line is office space where we've done a bit more and again, very carefully tied to the push in the US where again, office space for the new international small company team and office space for the distribution team as that's expanded in the US. And again, there was a one-off refund in the prior year, which provides... the remaining balance of that year-on-year increase across that rent line. But across most of the other lines within those operating costs, we've managed to find cost savings wherever we can. And overall, other operating costs are 1% down compared to the prior year. On the right hand side, we've set out that impairment charge on intangibles. And again, it's a mix of amortization and impairment related to the Dalton intangibles that we acquired as part of that acquisition. And really that's been a mechanical exercise and looking at the discounted present value of those intangibles Given the decline in AUM faced by the Melchior European Opportunities team in that space, and that's the team behind those intangibles, they've been in an incredibly difficult space over the last couple of years, European equities, but also especially European SMID equities. That decrease in AUM has really driven the mechanical accounting calculation for that impairment charge. Again, a reminder that it is a non-cash exceptional item is the way that we've treated it. And that write-off does not impact the cash flows for the business in this financial year. And if we move on, then we look at the first of our two slides on the balance sheet. The first slide, total cash and seed investments of roughly 160 odd million. At the end of the financial year, the change in the seed portfolio has really been the international small company team coming online through the year and that fund being seeded. And again, as we allude to in the presentation further on, that team is now above 100 odd million US dollars. So that's been really, really pleasing to note over that short period that that team's been going. On the next slide, we look at capital from a slightly different perspective. We look at excess over regulatory capital, and that surplus position is roughly 65 million over our REG requirement of 26 million, which is held flat year on year. And really the other key thing that I draw your attention to is for the last number of years, we've very clearly laid out our thinking and our framework for use of capital. Again, those four principles remain intact, seeding new product ideas for new teams and product extensions for existing teams. That really forms the R&D side of our thinking and our business. We will look to continue to maintain a strong balance sheet as much as possible, both for future growth, but also to ride out challenging periods that we've seen over the last couple of years. We will continue to return capital through ordinary dividends, and then we will also look to do share buybacks. Historically, we've done them through the EBT, and historically, we've done them to mitigate existing equity incentive plans. But as you move forward and move to the next slide, again, pulling everything together, increased earnings for this financial year, strong balance sheet, and therefore with those enhanced earnings, the board were able to maintain that second interim dividend, as I said, and therefore the full interim dividend at 46P for this financial year. And that equates to a payout ratio of 86% of total adjusted earnings for this year. Our longstanding policy remains intact, range of 55 to 85% of adjusted total earnings. And again, I'm sure the question will arrive, so I will try and explain that, but very happy to pick up the conversation again later on. As we look to dividends for FY26, the key decision point really, the next decision point is in November when we come out with our interim results. And the way we will look at this and approach this is to look at earnings for the year as they evolve over the financial year. We will look at the outlook and the market conditions that surround the business over a short and medium-term view. And again, we will look at our balance sheet strength and see how best to deploy that within the framework of capital allocation, as I've explained, that we've sort of had in place for a number of years. In terms of sensitivity and stress testing, you will have heard me say before, every 1p of dividend that the board declares and that we pay out equates to roughly 1 million pounds of outlay for the business. So that gives you some sense of the strength of the balance sheet and how that could be deployed and to what extent we might feel comfortable deploying that. With that, I will pause and hand back over to Gavin for strategy and outlook.