Liontrust Asset Management Stock

Good morning, and welcome to the Liontrust Asset Management PLC Investor Presentation. [Operator Instructions]

Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Simon Hildrey, Chief Marketing Officer. Good morning, sir.

Good morning. Thank you very much for joining the Liontrust presentation. This morning, I'm joined by John Ions, CEO; Vinay Abrol, CFO; and John Husselbee, Head of Multi-Asset Investment. It's just under a week since Liontrust released their full year results.

John, I just want to start, though, by looking at the last few months. we've seen a reduction in net outflows. Could you talk a little bit about what's driven that and how you've seen the progress of Liontrust over the last few months?

Yes. Good morning, everybody. [indiscernible] presentation, look at the half year, I mean, we said that our strategy would lead to a better shape of the business and a more diversified client base and a positive business pipeline. And that strategy progress has been meaningful and deliberate. And you can see it in the results. We have broadened out our distribution further with GBP 800 million of institutional mandates and that has helped the overall flow reduction mix reduced to a little under GBP 300 million for this quarter. That's I suppose the way we've broadened out the business has provided us with a better mix of things. It's still been a very challenging period for the industry, a challenging period for active managers.

But in the past, we've talked about the heavy concentration in markets and investors looking for areas in which active managers can add value. And as we began to sort of move through this year, we've seen an improvement in performance. We have 8 funds now in the first and third quarter over a year -- over 3 years of the global products, the strong performance of our European funds and the fixed interest. And that sort of broadening out of our performance and our product suite, combined with a very strong brand identity and distribution franchise that has led to this improvement in flows.

So we still got a challenging period, but one of our was to look at how do we broaden out our client base. We had an office in Luxembourg. We closed that down. We shifted the office in Switzerland and sales in Europe. But we've also opened up an office in Abu Dhabi in the Middle East, where the last time we were beginning to see strong incoming demand from institutions from consultants predominantly initially based around the European product and inquiries coming in there, and that's where you see inflows coming. But those inquiries are from the Middle East, from Japan, from Asia. That pipeline continues to broaden and to develop. And you've seen that in the flow profile improving.

One of the other things we did was to merge the 2 fixed interest teams together that give more sort of size and credibility. We transferred some of the assets that were managed by external managers to that team. And so the bulk of that combined with the strong performance those teams have enabled us to get very much on the front foot there and to start to begin to see inquiries from institutions both in Latin America and in Europe going forward.

The expansion of the distribution base is not to put any less emphasis on the U.K. retail market, still a heart and core of the business. But as we said from really last year, we began to see institutional investors look for areas to invest other than the U.S. And we think that's very much more of a leading indicator to where investor demand is going. That's continued to increase and improve. And the assets in the European product probably were around GBP 1 billion 2, 2.5 years ago and stand at GBP 4.5 billion today. It goes to show that if we have the strong product and the right product, we have the routes to market and the brand strength to be able to do that.

The brand maintained its resilience we've had 2 very challenging years flow-wise. And quite often, I think people get brand performance quarter. So having gone through a more challenging period performance-wise for the brand to stay in the position it has stayed in and still one of the preeminent brands in the retail space in the U.K. is a testament to the levels of engagement that we have with our clients.

So John Husselbee, can we dive into -- we're going to dive into some of these improvements. Can we start with the capabilities and what we've done with the capabilities recently?

Yes. I mean, as John said, we're not just waiting for markets to rotate back into our favor. We are actively continuing -- actively broadening our investment capabilities. And that's because the environment has changed. We're living in a world now where globalization is contracting, fragmenting and geopolitics is very much reshaping the global supply chains.

Governments themselves are increasingly influencing markets through changes in taxation, changes in regulation and sort of policy. And at the same time, we're seeing sort of technology, particularly AI accelerating across industries. So what's that doing? It's creating different winners, different losers in terms at a much faster pace than we've seen before. And what we're seeing is investors actively seeking diversification, seeking active decision-making rather than relying just upon passive exposure.

As John said, we've looked within our capabilities within Liontrust, one of the things that after seeing the reset in bond markets, yields obviously clearly a lot higher than they are today than they were 3, 4 years ago. We've seen demand for fixed income. We've taken the opportunity to integrate our 2 teams. It's already seeing some good results.This is our high-yield bond fund that we're showing up on the screen. You can see good performance, top quartile performance against peers and outperforming their relative primary benchmarks as well.

But we're seeing it beyond single strategy. We're also seeing demand for solutions. So diversification from solutions. We're seeing in the wider market that people are moving away from individual funds and looking for solutions. What we've got on here is our range of blended and dynamic multi-asset funds, again, showing a good performance against the wider peer groups. And that performance is not going unnoticed. We've recently done a roadshow around the IFA market, the third of one we've done in the last couple of years very much attracting attention in that respect.

You talked about the rise of passives, John, and the kind of momentum-driven market. Does Liontrust have enough capabilities? Do we have enough capabilities?

Yes, I think we should look at that concentration. A lot of people when we think about concentration in markets, they naturally think of the U.S. and the Mag 7. But as this slide shows you, that concentration is global. And it's global for equity markets wherever you look. So a small number of stocks are driving a disproportionate amount of return of the market.

So we have narrow markets. We have large winners. The challenge for passive investors, the biggest risk for passive investors is if one of those large winners falls over, you're going to fall with it. So that's why we see a significant opportunity for active managers, providing diversification, and that's where that demand is coming from. And we're seeing that demand across all areas and all sections. So this chart here will just show you the top by flows, the top 15 sectors, which investors are looking at.

The orange bars there show you, as I said earlier on, that demand for bond, but you can see diversification right -- that investors are seeking diversification right across asset classes, right across geographies, right across investment styles. So you need to have a broad investment capability. And that's what we have today, and we're actively seeking to basically keep that breadth going, whether it's by asset class, by geography or by investment style. This today is how we will be set up when we're looking across equities, fixed income, but also the solutions in terms of multi-asset, sustainable and not forgetting alternatives themselves.

We already have funds which are delivering in the current market conditions. European Dynamic is a good example of a fund and a process and a philosophy that can deliver as the market and the leadership changes from cycle to cycle. And of course, I mentioned AI and technology earlier on. We're going through a digital transformation. AI is changing everything. And we have in the global tech fund, which is shown here on the screen now, we have first quartile performance that we're very proud of, again, against peer groups and against our chosen benchmark.

Today, we're completing the River Global acquisition. Can you talk about what that will bring in terms of capability as well?

Yes, actively seeking broader investment capabilities and one of the best ways to show you what that brings in terms of talent and investment styles to Liontrust is to look at the chart on the right-hand side of this. It's a chart that basically divides the market into investment style value growth momentum and quality in that regard. You can see with the orange bubbles here, that's what River Global brings to us. Our most success in recent years has come in that quality growth space with basically the need for diversification, the changing styles we've seen of value coming back, clients beginning to buy value again, you can see that how -- in terms of a jigsaw, how River Global fits very neatly into that value space that we've got. And they've got some performance besides it. And you can see here that some good numbers, not only over the short term, but long-term numbers as well, which they bring with them as well.

John, you talked about distribution, broadening distribution. How will River Global help us with furthering that?

I touched on it earlier that our style, which has been one of more small mid-cap quality growth, which responsible for a lot of growth. When the market moved a little more towards value and momentum, we didn't have a wide enough range of products. If you look at the River acquisition, their style is very much more value orientated. It has a very good global income proposition there. And if you go back to one of the previous charts John was showing, that's the one area in active management in equities that has inflows there.

So I think the issue with River was it had very talented fund managers with good performance track records. But because of the corporate instability and the lack of sort of resource, its routes to market were much more limited. So the deal completes today, their fund management teams will be in our office as of tomorrow. But we've already started that process of engaging with our sales team and our franchise to very much to get on front foot and to unlock the potential that we see in there.

So that chart there, the pipeline is clearly strengthening. That diversification driven by the institutional and the international activities there. But the conversion still remains key. But the institutional marketplace, there's a longer lead in time to that there. But I also want to stress, it's not just the European franchise that is there. One of the larger mandates that we won earlier this year was with the sustainable team. The sustainability much more challenged performance-wise because of the types of stocks that are driving the markets do not necessarily fit into that sustainable criteria.

But for those clients that are committed to investing in that way, the strength of the franchise and the proposition holds up well. And we won a large mandate from an existing investor in that space. With the U.K. smaller companies, there's ongoing interest there against a market in a sector place that has halved in size over the last 2 or 3 years. So where we can identify opportunities, we will. The slide -- the numbers on the right show you the level of activity and the intensity there, the focusing on the right types of clients and then the right types of contacts within that. And obviously, all of the client events that are around that to support that.

You talk a lot about international institutional, John. But obviously, the vast majority of assets are still in kind of the U.K. retail wholesale market. What's going on there in terms of improving that?

I think good engagement. I think the broadening of the product suite with the Global Income Fund coming from River, having more of the value propositions from River will help broaden, if you like, the products we can engage with clients with. So the U.K. retail marketplace economy is more mixed in its outlook at the moment. But where you have good, strong investment propositions, there are still areas in which you can that up. So a lot of the work John is doing and looking at the strength of the products and the positioning. We have an excellent brand. We have excellent distribution in that retail marketplace. And I think by broadening out the range of products we have, we will create further opportunities.

Great. Vin, turning to you on financials. Can you talk about cap, which came in a year ago and how that's worked out?

Yes, I will do. And I'll just recap, we introduced a new capital allocation policy last June. And really it was as a result of what we saw in FY '25, so year ended 31st March '25, where we paid out 72p in dividends compared to earnings -- earnings per share of 57p. So clearly not a sustainable under the old policy. So we put in place a new capital allocation policy covered off as what we do with our cash dividends, investment in the business and share buybacks. And maybe I'll just talk a little bit about how we performed against that new capital allocation policy over the financial year.

So come to the end of March '26, cash was healthy. We had just under GBP 51 million of net cash on the balance sheet and our surplus capital above regulatory requirements was just under GBP 30 million. So the business is well capitalized. We declared a dividend of 19p for the full year, so 12p final dividend, which is just over 50% of our adjusted diluted earnings. So our earnings were 36.7p per share. So we're paying out 52% of our earnings. So again, in line with our new policy of sustainable dividend.

In terms of investment in the business, we look to use cash after we pay the dividend to -- for organic investment in the business. And an example of that, we've invested in reorganizing our fixed income capability, bring that together in 1 team from 2 teams and inorganic opportunities. So we've announced the River Global acquisition that John talked about earlier. We announced that at the end of middle of March and although the consideration is being satisfied in shares, there's considerable cash spend in reorganizing that business and bringing it on to our target operating model. And the final element of our capital allocation policy is share buyback.

So if we have excess capital and [indiscernible] to do so, we will buy back shares. And in November last year, we announced a share buyback of GBP 10 million, up to GBP 10 million to be completed by the end of June. So today is the last date. So we bought back 3.7 million shares. So it's about 5.8% of the company over that buyback.

Given that share buyback and the dividend being down, can you talk about the financial strength for the business?

Yes. So I'll talk about that and maybe just go through the results that shows you how the business performed and how rather than profits [indiscernible]. So our revenues in the year were GBP 123 million, so down this year and a little bit [indiscernible] used to dealing with a revenue margin of 55 -- 0.55% we managed. Our admin expenses were down 16%. So staff costs, our overall staff costs are down 20% and other admin costs down 9%. So a very credible performance in terms of cost management. And really, we see the benefit of the cost efficiencies that we've announced in November '24, January '25 and November '25. So those cost efficiencies have been coming through.

And a good example of that is we've seen our headcount reduced from 210 people in November '24 when we first announced the cost efficiencies to a headcount pre the River Global acquisition or completion of 170. So we've managed our headcount and our cost. So that's given us an adjusted profit of GBP 30.5 million, which is pretty much -- which is in line with what the market was expecting. So down from last year on lower AUM, but very much in line with what the market is expecting with an adjusted operating margin of 24%.

So which when you compare to our peer groups is a very credible performance in terms of operating margin, which is the percentage of each pound that we earn revenue drops down to the bottom line. So that has led to a strong balance sheet, Simon's question about strengthening the business. So I already mentioned, we have GBP 51 million of cash on the balance sheet, and we have just under GBP 30 million of surplus capital from the balance sheet regulatory [indiscernible]. So the business is in strong shape and the capital allocation policies ensure that we have a distribution capital allocation policy that is standard test time in sustainability.

Thank you. John, do you want to kind of finish off the presentation by talking given everything that we said this morning, what gives you confidence going forward?

I think Liontrust has continued to take the right strategic decisions in a difficult marketplace. The growth is going to come from diversification in geography-wise in terms of distribution, client type of institutional and retail and product growth with the recent River acquisition. The platform now covers value growth, quality and momentum investing. So we have a much broader suite of products to suit clients' requirements that sort of materially diversifies us sources of performance and client solutions.

And John touched earlier on the multi-asset side, we changed the risk profile of those funds 3 years ago. That is real improvement in performance but that has to be closer to small inflows. So it's about focusing on what we've got and looking to the opportunities to broaden and diversify that investment capability and exploit those opportunities and the expansion of the client base. It's improving the mix of flows, and you can see that reduced there. It's not a precise inflection point, but the underlying business has got improving. The pipeline is expanding. There's broader engagement across and more diversified client interest.

I think also, I think with the recent River acquisition, clients, consultants are now seeing M&A, not as a disruptive influence on a business, but a way of getting things done, a way of moving to what do you need, how can you move forward. The industry is still highly fragmented with different capabilities but it's distribution that you need brand strength, scale. The investments we've made in the operating platform of the business from outsourcing trading to implementing Aladdin to middle and front office with Bank of New York to the adoption of that data vault to analysis going forward.

So we've got a very strong platform in place. We combine that with our excellence in the brand and the distribution, this broadening out of our investment capabilities makes me more confident that going forward, we could continue to improve the flow profile.

Great. Thank you. We have got some questions that have come in. Obviously, a reminder to everyone, if you want to ask a question, please submit it, we will try and answer them. First question, just picking up on flows. I mean this is a question I think you must get asked a lot. When will we actually get back to positive?

I think -- it's a question of looking at the underlying drivers. If you think about a year ago, our outflows were made up of the U.K. book and all mid-cap space. That business has gone from GBP 10 billion to around GBP 2.5 billion now. So by definition, the flows have slowed down on that side of the business. If I look also at the opportunity set, the fact that I mentioned earlier, we have a couple of institutional inquiries in that small cap space. There's no denying. You can see it from some of the M&A activity going on in private equity or looking to take out. [indiscernible] denying that the value sits there.

But the market is the market and we have sort of lowest historic weightings, global international funds have a bigger weighting in the U.K. now than we have in our own domestic market. So I think one side there, sustainable is still challenged despite the win with the institutional mandates. So the quality of the franchise is there, but that is a long-term trend and theme and deny that will continue to be [indiscernible]. What we've seen with this heavy concentration in markets is when investors have put products together before, you put a value manager with a growth manager.

And it's a bit like a rolling more and only one point in a market cycle, you've got that insurance over the last sort of 2 years, the delta has been so big between those styles that clients have moved away from that because if you're not in the right place, the detraction to the portfolio is really punishing. I think if we go back to what John was saying, where we start to get the risk now is that concentration.

We are beginning to see signs that people are looking to active managers who can add alpha in areas where you have got these deep discounts. So I think the environment is getting better. I think the institutional marketplace has certainly identified that and is looking to search for managers going forward. I think the retail side will take time to catch up because it flows -- it's interesting if you look at the data now, we've had 3 years of a value market. And if you look at the top performing funds that are bought by retail investors, they have all in that value space to show that what do they do, they follow the numbers.

So for us, it's about the strength of our marketing, it's about the strength of our distribution and targeting the client base to get that message out to those clients where we put the value. And I think that connectivity in place. So I think the outlook is improving. But as I said earlier, it's not an inflection point. I just think we've got a better mix and a broader suite of both product and client to help improve that picture to continue to drive growth.

Vin, we've had a question really about alignment. It's about remuneration for directors given the cut in dividend and the outflows. Can you talk about that?

Yes. No, I think we have got strong alignment to the executive directors and shareholders, both John and I hold I think about 1.7% of the company in shares. So we're aligned in terms of share ownership. In terms of remuneration and variable remuneration, obviously, the dividend is down just over 70% to bring it more in line with our earnings. And our -- the variable remuneration for the executive directors is down 100%. So I think there has been strong alignment there.

We've got a question, obviously, partly in light of River Global, but are we looking at further M&A opportunities? And what do you see as the opportunities? And how do you get the economies of get all the synergies out of that?

I think M&A has always been part of our DNA inside of Liontrust, first and foremost, it's the organic growth. The things that management team can affect on a daily basis happen inside of our business. So that's going to be our priority. John was talking about what we're doing on the management side, and you've seen what we've done with the brand and distribution. But where we've used before, if you like, to fast forward or take provide solution for either in sort of manufacturing investment talent or broadening of distribution.

If you look at the backdrop and the background of the last 3 years, it's been a very challenging environment for active managers specifically. And that in itself throws out opportunities. It's very difficult to grow your business if you haven't got a strong financial position. If you -- over the last 3 years, we've continued to be able to invest in the operating platform to put [indiscernible] also our trading. We've continued to be able to invest in the department and broaden distribution needed routes and marketing.

If you're having to cut your cost to come back to level, it's very difficult to keep that engagement with clients to move forward. River was a classic example of that, good strong underlying performance, but starved of the oxygen of brand and distribution. So from point of view, I think opportunities are there. I think scale does become more important now. I think the speed at which we've been able to integrate River and to bring forward with that integration shows you the strength of our underlying platform and the operating efficiencies we can make from it.

As I said, in the past, M&A looked a bit of a block and consultants and clients now are very much looking at as part of that strategic direction and that's when and how does it get you to the right place of the solution. The key though is always to make those decisions to know day 1 and not to get caught in that sort of caught in decision. So to have a clear vision and a clear outlook for the business and to be brave enough to make those decisions going forward.

We've got a question that could be answered by either of the Johns here. It's really about how do you track money flows into active rather than track the passives. Maybe John Husselbee?

Yes. I mean I said my role as Head of Multi-Asset and selecting funds is one of the sort of key roles that -- or data that we look at on a regular basis. So that data is available. You can see, of course, not only what asset class the flows are, but then you can start breaking it down into the sectors and into the funds and then you can break between active and passive.

So you can see those flows. And it's important to see basically where the money has come from, where the money is coming today, but also to try and make a call on perhaps where the flow is going. John said earlier on, it never -- in this industry, never ceases to amaze me that basically how eventually the flows track the winners, but it does take time. Value has been outperforming. You can see an inflection point in value in most markets bar the U.S. Obviously, the U.S. market hasn't quite got the message yet. But in most markets around the world, value has been outperforming for 2 to 3 years. It's only now, particularly year-to-date, the numbers are quite strong year-to-date, where you're starting to see the flows into value.

Okay. Thank you. Thank you for the questions. John, you've obviously covered a lot of ground, but do you want to do a short kind of concluding remarks?

I think it's not an inflection point, but I think a lot of the strategic sort of implementation has taken place last year was beginning to see it now coming through in that flow. The underlying drivers of the business are improving. We have a broader pipeline and that pipeline continues to grow. We've got broader engagement across client base, not just the U.K. retail, but internationally as well. And we're beginning to see more client interest in the types of products as an underlying improvement in the performance, the addition of the River funds gives us a broader suite to move forward to. So I think still navigating through a difficult environment but with a much stronger underlying business to achieve success.

Thank you. And thank you to everyone watching. That concludes the Liontrust presentation.

That's great. Thank you for updating investors today. Can I please ask investors not to close the session as shall now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the management team, I'd like to thank you for attending today's presentation and good morning to you all.

Good morning, and welcome to the Liontrust Asset Management PLC Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, John Ions. Good morning to you.

Good morning, and welcome to Liontrust company update in conjunction with the half year results for 2025. I'm John Ions, Chief Executive of Liontrust. And with me are Vinay Abrol, Chief Financial Officer; Simon Hildrey, Chief Marketing Officer; and Stephen Corbett, Head of Investor Relationships.

At Liontrust, our purpose has always been clear to deliver long-term value through disciplined active investment management and exceptional client service. These beliefs have guided us through every market cycle, every challenge and every opportunity. We believe in consistency of process because markets will always test conviction. We believe in transparency and integrity because trust is earned every day. And we believe in service excellence because performance alone doesn't build enduring relationships, partnerships do.

While it's been another challenging period for flows, there are more reasons for optimism looking forward. We see more demand coming through, particularly internationally and from institutional investors. It is just taking longer than expected for the potential pipeline to be realized. We have won two mandates that are funding imminently worth a combined GBP 250 million. As an illustration of how long flows are taking to be realized, the process for these institutional mandates started around March of this year. Several factors are expected to drive demand for active management, lower expected market returns compared to the past decade, making alpha generation more critical. Valuation opportunities in the U.K. and European equities, particularly small caps and greater market volatility and dispersion, which further stock selection of passive exposure and client need for diversification away from concentrated U.S. mega cap positions.

Liontrust believes these conditions will create a more favorable environment for active managers over the next few years. If we look at the headline of the results, adjusted profit just under GBP 16 million and still a strong capital position, which is reinforced by the up to GBP 10 million share buyback that we announced with our half year results last Thursday.

At this level, we do believe it's appropriate use of capital to buy shares back given the confidence we have in the outlook of the business and the current valuation of the shares. Share buybacks do split opinions, and I always want to divide sharebacks from the question of whether we have cash to make acquisitions. However, at the current market levels of share price, we -- and if we find the right transactions to execute on, we'll be less worried about the finances more about finding the right deal to do. The other development I want to highlight is the fact that it will generate further annual cost efficiencies of around GBP 1.5 million.

Here's a list of the headwinds that we have talked about for the past year or so. Slide also shows some of the tailwinds that are emerging that add to our optimism and the outlook. Without dwelling on each of those, I will pick up on a few of the points.

We go to the next slide, Stephen. For much of the post global financial crisis period, quality was a dominant style, as you can see in this chart is up there, recommending U.K. equities, lower interest rates, subdued economic growth and persistent uncertainty meant investors rewarded companies with strong balance sheets, high returns on capital and predicted cash flows and low leverage. But that regime changed when inflation surged post COVID, interest rates rose sharply and the cost of capital increased. In that environment, growth also rolled over as long-duration cash flows were discounted more heavily. Meanwhile, value, particularly financials, energy, cyclicals and commodity-linked companies benefited from rising interest rates and the recovery in global activity.

The combination of higher discount rates and a cyclical upturn created one of the strongest periods for value leadership in over a decade. Quality hasn't collapsed. Its fundamentals remain robust, but the market cycle simply flavored value.

As now we move to our next -- so there's now a strong case building for a meaningful rebound in quality. Peaking interest rates reduced the valuation headwinds for companies with long-term sustainable cash flows. Slower global growth increases of premium investors place on earnings visibility and resilience. Normalizing inflation favors businesses with strong margins and pricing power. Broadening market leadership after value-dominated period historically supports quality as investors rebalance. Corporate balance sheet strength becomes a greater advantage as refining costs rise.

Today's equity indices are more concentrated than ever. A handful of mega cap stocks now dominate returns. Passive investors are forced to keep buying the winners of the last cycle regardless of valuation or fundamentals. That concentration creates hidden risk. In just a few names, falter, the whole index suffers. This is where active management can potentially shine. Active managers can diversify, avoid overvalued positions and tilt towards sectors or stocks with better risk reward.

Goldman Sachs is forecasting lower annualized equity returns over the next 10 years compared to the last decade. In this environment, active management becomes even more important. Active managers can rotate across sectors, regions and factors and exploit structural or thematic opportunities and manage concentration risk that passive investors cannot.

Earlier this year, the Investment Association data showed a clear rotation out of U.S. equities following the tariff announcement. What really stands out is the renewed confidence in European equities. Investors are recognizing that Europe offers compelling valuations, broader sector diversity and a strong base of high-quality global businesses that have been overlooked during the long U.S. bull market.

At the same time, the move signals that investors are increasingly aware of the concentration risk in the U.S. market and are willing to relocate capital when the risk return balance shifts. For active managers, this rotation is a major opportunity. Clients are seeking thoughtful regional diversification and want exposure to markets like Europe where fundamentals and valuations are working in their favor. And that plays directly to our strengths across both equity as well as our multi-asset strategies.

If we go where Liontrust are particularly well positioned in distribution and brand, if I hand over to Simon now to talk about the strength of the brand.

Thank you, John. This slide is designed to show that the Liontrust brand has maintained its strength. The stats on this slide illustrate that Liontrust has strong awareness, familiarity and engagement among both professional intermediaries and retail investors. This familiarity and engagement should mean that it's more likely that clients will both potentially invest in Liontrust funds and retain their holdings.

As this slide shows, Liontrust scores well for investors, seeing and engaging with our videos and advertising, rating our client service and communications very highly and are very familiar with our brand. This has been supported recently by direct feedback we have received from our clients. At a recent client dinner for our multi-asset team, for example, we asked all the clients what we could do better. The response was universally that our service and communications is excellent and is superior to other brands that they work with.

We then held an investment conference with over 200 professional clients attending in Central London. The feedback was extremely positive, and there was wide recognition of the fact that we offer a much broader range of sustainable U.K. equities and some attractive offerings that Stephen will talk about shortly.

Thank you, Simon. The strength of the brand despite the challenges over the last few years is still there and high and engagement is good.

On the distribution side, Liontrust has secured new institutional mandates and added strategies to our -- to other buy lists across wealth managers domestically and internationally, areas including South America, Australia, South Africa and the Middle East. The sales team has increased engagement with its Tier 1 clients globally and the pipeline includes significant opportunities across regions.

International distributions have further broadened this reach. These initiatives position Liontrust to deliver diversified solutions across equities, fixed income and multi-assets and alternatives. You can see on the slide that we now have -- of the 7 teams, all are at GBP 1 billion or above, and therefore, that sort of critical mass and element to be able to engage on a broad range with the client base.

And I hand over to Stephen for a little bit more detail on some of the strategies.

Thanks, John. And again, as John said, taking a closer look at some of the great things we see day-to-day at Liontrust, we've lifted out nine funds in focus, which in addition to our sustainable and economic advantage funds, the sales team are taking out to investors. Our seven teams are laid out here, all with active funds, offering investors distinctive solutions to their diversified portfolios. Notwithstanding the headwinds for Sustainable and the U.K., the sales team have kept busy on the front foot with a raft of other funds at Liontrust. So looking at a few of them.

The European Dynamic Fund continues to see inflows and has grown to GBP 2.4 billion in AUM from being GBP 1.6 billion a year ago. We've had a recent buy list of mandate wins for the fund from both international and U.K. clients. Managed by the team since launch in 2006, the cash flow solution investment process delivers a truly differentiated high conviction portfolio of equally weighted stocks. This is active management, high active share, delivering for investors.

The European long/short equity fund is one of our alternative funds, a flexible long/short approach to European equities. It has delivered annualized returns of 7.9% with low volatility, again, high conviction, actively managed.

Two actively managed bond funds have also been consistently delivering for investors. Surprise stars of the show at our investment conference a couple of weeks ago. The monthly income bond fund is a sterling corporate bond fund. It is actively managed with 69 holdings. That's compared to an average of 291 holdings for other funds in the sector, delivering an average income yield of 5.5% since launch versus its peer group average of 3.1%. And like the rest of our stable sustainable range of funds, it has the new SDR labeling.

For the high-yield bond fund, it's all about the income, actively managed diversified portfolio of 77 issuers, consistently strong performance, yielding 7% currently. And the team there are carefully selecting high-yielding bonds less sensitive to those exogenous forces. The fund is growing and attracting a lot of interest.

The global innovation team have been delivering superb returns since we formed the team in 2019. The three funds have been growing in AUM, now over GBP 1 billion, and the team have been building on their reputation in the market through amazing client engagement and delivering their investment process. Crucially, they're not just investing in U.S. mega cap companies, but instead finding those global innovators across the market caps. They're nimble, sensitive to valuations and fully immersed in the world of innovators. Investors love meeting them, and it's great to be able to take them out.

The Global Equity team was formed in May 2024 when Mark Hawtin and team joined Liontrust. Since then, the team have transferred across the Global Alpha long-short fund that you can see there and maintain Mark's long-term track record. They've also taken on the management of the Global Alpha Fund and now manage GBP 1.2 billion in AUM across their 10 funds, a hugely experienced team, delivering superb returns for investors and gaining traction in the market. So that gives you a flavor of nine funds at the top of their sectors, gaining that traction in the market and keeping our sales team very busy at the moment.

We continue to strive to make the business more efficient and efficiency improvements include the operating model. Overall, including outsourced trading and data services to the Bank of New York and implementing Aladdin for risk management and portfolio management.

I hand over now to Vinay to talk a bit further about the operating platform.

Thanks, John. So over the last 2 years, we've overhauled our operating model, partnering with BlackRock implementing their enterprise portfolio management system in our front office, further expanded our relationship with BNY across front office and middle office support and a new data ecosystem using BNY's Data Vault product. We've also outsourced fact sheets and regulatory reporting to Broadridge, thereby reducing our headcount. More recently, in the first half of this year, we outsourced our trading to BNY's Buy-Side Trading Solutions team, giving us much greater capability and 24/6 trading in global equity and fixed income. Looking forward, our focus is on embedding the enhancements that we've made to our operating model to make sure that we make maximum benefit from them.

I'll now move on to the financial results for the half year ended 30 September 2005. So I'll take you through. Average AUM over the period was GBP 22.4 billion, which is down 17% half year on half year with a revenue margin, excluding performance fee revenues of 0.56%, reducing by 7% half year on half year, mostly as a result of margin mix. This resulted in gross profit of GBP 63.3 million, down 22% from last year and includes GBP 0.2 million of performance fees. Administration expenses are also down 14%, reflecting reduced compensation costs, which are down 22% and other admin costs, including depreciation, which is down 1%. Additional cost efficiencies of circa GBP 1.5 million on an annualized basis have been identified, which will be implemented by the end of June 2026 at a cost of GBP 1 million.

Our adjusted operating margin is 23.8%, which reflects that most performance fees are earned in the second half. And as a guidance, our full year adjusted operating margin will be in the mid-20% levels for FY '26. Adjusted profit before tax is GBP 15.7 million, which is down 39% from last year and adjusted EPS of 18.7%, down 38%. Adjustments to the -- of GBP 8.4 million, down 37% when compared to last year. And of that, GBP 4.6 million relates to the amortization of intangible assets. Expectation is that adjustments will be much lower in FY '26 compared to FY '25.

The group continues to have a strong capital position with net cash of GBP 46.3 million and surplus capital after foreseeable dividends of over GBP 30 million. Under our new capital allocation policy, the first interim dividend will be of 7p, which has been declared and will be payable on the 7th of January 2026, going XD on Thursday, 27th of November. And given the strong capital position of the group, the Board intend to put a share buyback program in place that will purchase up to GBP 10 million large shares to be phased over the period to the end of June 2026.

Thank you. The past 5 years have been extraordinary. Value investing has enjoyed a resurgence, passive strategies have grown exponentially and fee compression has reshaped the competitive landscape. At the same time, quality growth and mid- and small-cap stocks have faced significant challenges. But cycles turn. History tells us that periods of underperformance create opportunities for active managers with discipline and insight. Passive investing cannot exploit inefficiencies or anticipate change. It simply follows. Active management when done well, adds value by identifying mispriced assets and positioning for the future.

We also believe sustainability and responsible investing will remain central to long-term success. These are not trends. They are imperatives. Liontrust is prepared for the challenges and opportunities ahead. We'll continue to invest in technology, talent and global distribution. We will advocate for reforms that strengthen markets and support growth. And above all, we will remain true to our core beliefs, consistency, integrity and excellence. Thank you for your trust, your partnership and your confidence in Liontrust.

Any questions?

So we'll go straight to questions then. The first one, do you intend to make use of share buybacks in the company while the share price is at depressed levels, adding shareholder value and supporting the share price. Vinay, I think one for you.

Yes. No, yes. I think as I mentioned earlier, we've announced a share buyback program up to GBP 10 million, which will phase over the period to the end of June. I think that is part of our capital allocation policy. It will be starting soon. We'll make a further announcement in due course.

Okay. Thanks, Vinay. We've been asked a couple of questions here about the share price and about it underperforming some of the peer group. I can probably pick up on that.

I mean, in terms of the brokers that cover off, we have 8 analysts covering Liontrust. We have 4 buys, 3 holds and underperform. In our consensus across those brokers that cover us, the target price is GBP 3.83. Some of the traditional asset managers are beginning to turn, and that's a good sign. I mean we won't all turn in unison, that's for sure. Flows are the focus of the market, but we are focused on those inputs. And we're focused on doing all the right things and flows will follow. And hopefully, the price will follow with that, too. It's worth adding just more recently for U.K. S/Mid-Cap, the runup to the budget, we've certainly seen quite erratic trading in mid and small caps.

I think a bit of it is confidence. Confidence is very much on flows. You can see where groups which have had products in areas where flows began to come in, have started to move certainly into better flow profiles, and that is quite quickly reflected in share prices. I think earlier, I touched on one of the slides showing that transition out of the U.S. if you've been investing globally and you were happy with the 45% weight in the U.S. now that it's closer to north of 70% concentration in global portfolios. What's happened since the beginning of the year is you start to see people say, where can I invest my money outside of the U.S.

That follow-through to us has been very much with the cash flow team in the European product suite. It's been led initially with our institutional inquiries, and we've had mandate or IP requests from Asia, Korea, Japan, the Middle East. The two latest wins are both in Europe and from European investors. And so that pipeline has taken longer to come through.

On the other side of that, our biggest asset pools have historically been in sustainable and U.K. equities. Stephen said, that U.K. equity market, mid/small-cap position has been more challenged. And certainly, well, you can see in the lack of activity in the market this week ahead of the budget. So we all wait tomorrow where we get to with that confidence in that outlook. So I think it's actually, if I was look -- and when I'm looking at the pipeline, there is -- it's a lot stronger than it has been and continues to be stronger. That's both the engagement we have through the distribution team we have, but also incoming where international investors are looking and in areas like European equities where the team scores really highly, we've got those inquiries coming in.

So I think expecting everybody all to move at the same time, given the sensitivity of flows in share prices probably isn't there, but we're optimistic that the follow-through from our recent wins and the future pipeline will help us move forward.

Another question here. Where are recent outflows focused? And do you see any inflection in these areas?

I think, well, as I touched on in previous answer, U.K. equities remain challenged, small/mid-cap stocks do as well. And with the sustainable side, if you've been away from energy or carbon emitting among 7 from that sort of restriction from a sustainable mandate has led to an underperformance there. Across from that, I'd say four of our teams now are either in inflows or pretty much marginally flat with the business. So our two big growth engines of the past have been -- had more challenging there. But as I said, this sort of remarkable period of 5 years of value investing doesn't mean that quality small and mid-cap is broken, but it very much needs some stimulus and concentration.

The underlying companies, I think one of the earlier charts I showed shows you where their relative valuations are and the discount to historic trading ranges where that sits. And sustainability, it's still very much that long-term theme. But I think strong performance in the fixed interest area. We put the fixed interest team into part of our multi-asset side, and we've bolstered the size of the funds there, and that has already enabled us to get broader engagement certainly in the institutional marketplace, where funds that historically had good performance, but were not of a large enough size and now meet that size criteria and engagement is good with institutional investors going forward. And some of the wealth managers in the U.K. are now looking to add those funds to their list.

I think the frustration is just the time and the caution and hence is there. Things are moving more slowly. If you can see what I see every day in the business and drive the determination of the people that are there, that's what helps fuel the optimism.

Are you considering new product launches to capture the shift towards active diversification from U.S. mega caps?

We always look at new products and pipelines. I mean Mark Hawtin's team came on board, and we recently with a Liontrust Global Alpha Fund. We're looking at an international version of that product. As I said, we made enhancements with the fixed interest team as well. I think the old adage though of launching products to gain flows is much more challenged. There are an awful lot of products out there. In fact, if anything, there were too many products in the marketplace. So really where our concentration is, is to make sure that the products we have, they will be the engine of future growth and to make sure they are as robust and well positioned as possible to capture new fund flows.

Thanks, John. I've got a question here about distribution. It's a long question. I'll try and summarize it. Thank you for sending that in. International distribution and our efforts there and broadening out, how is that process going?

Well, as I said a bit earlier, we've had inquiries from Australia superannuation 7 or 8 inquiries internationally from Japan and in the Middle East, where we've got good traction there. In Latin America, we've got good action with the South American pension fund market, specifically in Chile and are looking to broaden out the range of products, specifically on the fixed interest side that are available to the Chilean pension fund industry. So it's taken a while.

But again, through this the big change or the big up has been that international investors have started to ask that question, if I'm not going to invest or have as much concentration in the U.S., where are the next opportunities? And it is Europe, ex U.K., I may add, that we're seeing those inquiries and putting in the extra resource internationally has enabled us to service and to -- with those inquiries better and to promote products. You can see that in the short term with the two awarded yet to be funded mandates that we've mentioned, but a strong pipeline that follows through.

Thank you, John. A question here. Hopefully, you feel we've answered a chunk of this question through the presentation. But despite the general growth in markets this year, the share price is down, how does management intend to address the slide given everything we said, I mean, John, do you have anything to add to that?

I mean look the slide in the share price is disappointing for management as it is for shareholders Vinay and I will all of us here are significant shareholders in Liontrust. If you can see from the promotion of the share buyback, as I said earlier, share buybacks draw opinion if you're buying back your shares, does that mean you don't have other things that you can augment the business with rather than just buying your own shares. But I think that's a commitment from us that we believe the price is wrong. It is undervalued. It offers great opportunities. What we -- all we can do though to make is to execute on the strategy that we have in place and to turn the flows from the negative position they are in gradually into positive flows. And that will aid and boost the share price, I should think, significantly.

Thank you, John. There was a question on AUM, which I think we've covered. If anyone has any further questions, please e-mail me directly, and we can come back to you if you feel that you need some more color on anything we've said, please let us know.

That concludes the presentation. Thank you very much for your support and engagement. It's been a difficult challenging period, but we believe that by sticking to the core of Liontrust, we have reasons to be optimistic going forward. Thank you.

That's great. Thank you very much indeed to the team presenting from Liontrust. [Operator Instructions] On behalf of the management team of Liontrust PLC, I would like to thank you for attending today's presentation, and good morning to you all.