Kingswood : Investor and Analyst Presentation - December 2020

POSITIONED FOR GROWTH

I N V E S T O R & A N A L Y S T P R E S E N T A T I O N	D E C E M B E R 2 0 2 0

INTRODUCTION

GARY WILDER

Group CEO

• Vertically integrated wealth management group with a global ambition to consolidate and grow in high growth markets
• We are evaluating raising additional permanent equity to further accelerate our acquisitive growth strategy
• Targeting acquisitions of c£5 - £10m in size over the next 2 years
• Targeting returns on investment of c20%
• Clear and executable pipeline of 20+ opportunities across the UK
• Further growth opportunities available in US largely through active recruitment and organic growth
• Capital support through Pollen Street convertible equity facility

2

INVESTMENT PROPOSITION

HIGH GROWTH MARKETS

Grow by acquisition in globally fragmented markets

VERTICAL	DISTRIBUTION
INTEGRATION	NETWORK
Holistic wealth and	Focus on creating
investment	regional 'Hubs' for
management drives	personal advice
revenue growth

ADVISERS

75

50

25

0

2018 2019 Now

SCALABLE	MANAGEMENT	GLOBAL
PLATFORM	TEAM	AMBITION
Centralised	Experienced &	Growth equity
proposition to	incentivised at	enables
support economies	every level	execution of
of scale and sales		international
efficiency		growth plan

EMPLOYEES

200

100

0

2018 2019 Now

AUM/A		CLIENTS
£5.0bn
	20,000

£2.5bn		10,000
£0.0bn
	-
2018 2019 Now		3
	2018 2019 Now

KINGSWOOD GROUP

UK

Wealth

		Institutional
	Investment	treasury and
Wealth Planning	liquidity
Management	management
advice, pensions, estate	discretionary service, managed	services to
planning, mortgages,	institutional
portfolio service,
	clients
protection, tax & accounting	personal/bespoke portfolios,
	alternatives

US

Independent Broker	Registered	Investment Banking
Dealers	Investment
Self employed model,	Advisers	self employed model, fee &
	commission driven,
commission driven,	employed model, recurring
centralised distribution
centralised compliance	advisory fees, AUM driven

AUM/A

£430m	Wealth Planning - London
£1,350m
	Wealth Planning - Regional
£5.6bn	Investment Management
	£2,510m
£1,000m	Institutional
£380m	Kingswood US

PRO-FORMA ANNUAL REVENUE

£2.5m		Wealth Planning - London
£5.8m
		Wealth Planning - Regional
£1.8m
£31.0m		Investment Management
£4.2m		Institutional
	£16.7m
		Kingswood US (net)

4

KEY DIFFERENTIALS

LEIGH PHILPOT

Head of

Wealth Management

Full vertical integration maximises synergies and economies of			AUM PER ADVISER
scale. Growth in AUM and Revenue focussed on:	£50m
DFM
o Strong investment performance vs ARC and risk benchmarks	£30m
o Migration opportunity for wealth planning assets to MPS
(currently £90m) and higher margin PPS service (£320m)	£0
o "Kingswood Private" service for HNWs and Charities
o Each £100m to MPS adds £250k of revenue and each £50m to			Wealth Planning	Investment Management
PPS £375k			RECURRING REVENUE PER ADVISER

Increased Adviser Efficiency	£300k
o Centralised proposition and additional support
o Reduced administrative burden to focus on client interaction	£200k
o	Kingswood Academy
Expanded Share of Wallet	£100k
o Revenues from cash management, portfolio lending, mortgages
o Consolidate client assets from competitors	£0k
o	Kingswood product launches
Wealth Planning	Investment Management
Integrated proposition coupled with LTIP and equity upside, strong financial	Current	Target
backing and international growth supports acquisition strategy

PERSONAL AND LOCAL	INTEGRATED EXPERTISE	DEPTH	GROWTh	IMPACT	5

UK MARKET OPPORTUNITY

	The UK private wealth market is
	fragmented and undergoing
	substantial consolidation
JEFF GRANTHAM	Significant number of Financial Adviser business
Head of Wealth Planning •
	owners at or close to retirement age and looking to

exit.

• Speed and scale of regulatory change proving highly disruptive. PI Insurance is increasingly problematic.

• Major aggregating opportunity, targeting strategic acquisitions. Creation of fully operational regional 'hubs' capable of efficient scaling up through further acquisitions.

• Over 2,750 firms across UK with 2-50 advisers represent potential targets

• Long term loyal client/adviser relationships provide reliable income stream, with significant potential uplift through cross selling additional products and service.

Fragmented market

generates many

acquisition opportunities

Preferred bidder status allows attractive pricing to be achieved

In house expertise

utilized to efficiently execute transactions

Central support drives

cost synergies

Integrated service

proposition enhances client revenue streams

Hull

Sheffield

Worcester

London

4 Regional Hubs

12 Satellite offices

6

CAPITAL STRUCTURE

PATRICK GOULDING

Group CFO

POLLEN ST CAPITAL EQUITY FACILITY	FUNDING AVAILABLE
•	Irredeemable convertible preference share facility
	agreed in September 2019
•	Initial commitment of £40 m, with a potential further	£60m
	£40m, gives up to £80m of acquisition funding to
	execute our pipeline	£50m
•	£25m utilised so far
	£22m
•	Converts at 16.5p
•	Value sharing between Pollen Street Capital and	£40m	£40m
	Kingswood aligns interests
•	Pollen Street Capital board members bring significant	£30m
	experience and expertise
		£20m	£35m
POTENTIAL EQUITY RAISE
•	While Kingswood remains well funded by the	£10m	£15m
	convertible facility, we would like to maintain our		£2m
	capital flexibility and balance our capital structure
	£0m
•	With a UK pipeline of c£200m we feel there is a
	significant opportunity to deploy additional capital
•	An equity raise would be deployed over 2 years in
	transactions of c£5 - £10m
•	This is expected to produce returns on investment of
	20% post integration

7

ACQUISITION MODEL

Acquisition criteria

• Must be singularly dedicated to servicing their clients
• Target must have strong appetite for centralisation and synergies it can bring
• Focus on ability to migrate assets to our integrated wealth proposition - earnout linked to achieving migration targets
• We want the acquired teams to stay and grow the business
• Targeting EBITDA returns on investment of c15% pre-synergies, c20% post
• Identification of fee uplift and organic growth
• Clean regulatory track record

Post- acquisition integration

• Key staff retained to preserve and grow client relationships
• Rigorous focus on revenue and profit, as well as AUM/A and ROCE
• Target higher revenue yield on AUA/M by providing enhanced services to clients
• Post-acquisition,review against these metrics quarterly and adjust strategy

Why Kingswood is a preferred bidder

• Kingswood model frees adviser time to focus on clients
• Products and services present additional revenue opportunities for incoming advisers
• LTIP and incentives align teams to deliver short and long term performance

TARGET RETURNS

20%

Cross-Selling

					Revenue
					Synergies
			Initial Cost	Adviser
	15%		Attrition
Return*			Synergies
Indicative	10%
Acquired

EBITDA

5%

0%

6 months

1 year +

1 year +

1 year +

Time after completion

*Returns calculated as

EBITDA/Acquisition cost incl.8 expenses

KINGSWOOD's RECENT ACQUISITIONS

Initial

Current

Target Post-

Initial

Target

Initial

Target

Date

Acquisition

Price

AUM/A

P/AUM

Advisers

Synergy

EBITDA(1)

EBITDA

P/EBITDA P/EBITDA

ROI(2)

ROI(3)

EBITDA

Oct-18 Marchant McKechnie

£4.0m

£200m

2.0%

4

£0.9m

£0.9m

£1.1m

4.4x

3.6x

23%

28%

Feb-19

Thomas & Co

£3.3m

£150m

2.2%

4

£0.5m

£0.5m

£0.7m

6.6x

4.7x

15%

21%

Sep-19

WFI Financial

£14.0m

£550m

2.5%

16

£1.8m

£1.9m

£2.3m

7.8x

6.1x

13%

19%

Jun-20

Sterling Trust

£17.8m

£1,200m

1.5%

22

£2.5m

£2.5m

£2.8m

7.1x

6.4x

14%

18%

Sep-20

Regency

£3.5m

£320m

1.1%

6

£0.5m

£0.5m

£0.7m

7.0x

5.0x

14%

20%

Total

£42.6m

£2,420m

1.8%

52

£6.2m

£6.3m

£7.6m

6.9x

5.6x

15%

19%

Marchant McKechnie

• Highly profitable business with principal key to remain
• Growth potential in region
• Relentless focus on client service

Thomas & Co

• Preferred location with potential for growth
• Experienced team keen to remain and grow business
• Fee uplift potential

Sterling Trust

• Track record and experience of Jeff Grantham, who has assumed senior leadership role in Kingswood group post acquisition
• Highly profitable business with consistent record of growth and success
• Five locations across North East , traditionally under-served by financial advisers
• Over £1 billion of assets with potential to migrate to Kingswood's proposition

WFI Financial	Regency
• Four locations across South Yorkshire and Midlands	• Great location in affluent London commuter belt
• Strong and consistent record of growth and profitability	• Principal's desire to remain and grow the business
•	Scalable platform with potential for fee uplift and growth	•	Young adviser team
•	AUM/A of £500m+ with opportunity to migrate to Kingswood's proposition	•	Relentless client service focus

1)	Represents EBITDA delivered 12 months prior to acquisition	9
2)	Defined as Initial EBITDA/Price
3)	Defined as Target EBITDA/Price

HIGHLY EXECUTABLE UK PIPELINE

The approach is disciplined in both identifying opportunities and determining value, given the accretive possibilities of each specific deal

		 Strong in house M&A skillset
Conversations held	65	 Standardised documentation & process

Meetings held				 5 acquisitions completed to date
		46
			 3 under exclusive due diligence
Information shared		38		 Significant reverse enquiry as a result of Pollen
			Street Capital's equity investment
HoTs
issued/agreed	13			Clear	+20	£7.5bn
				executable
Executed				pipeline	Opportunities	Projected UK
				identified	across the UK	AUM/A by 2021
5

10

KINGSWOOD GROUP FINANCIALS

RUN RATE EBITDA BRIDGE

£10m
				£1.5m
£8m		£0.4m	£0.6m		£4.0m
	£0.4m
							£1.0m
£6m
£4m	£6.2m	London
						£7.0m
		Acquisitions
			£6.0m
£2m		Synergies
£0m	£0.9m
Wealth Planning	Investment Management	Institutional	Kingswood US	Central Costs	Run Rate EBITDA	Synergies to come	Potential EBITDA

AUM/A
£3,500m
£3,000m
£2,500m
£2,000m
£1,500m	£2,940m
£1,000m
£500m			£1,000m	£1,350m
£0m		£380m
	WP	IM	Institutional	US

REVENUE YIELD

1.5%

Current Target

					1.00%
1.0%	0.90%
	0.70%				0.66%
0.5%		1.27%
	0.77%
		0.20%	0.20%
0.0%
	WP	IM	Institutional	US	11

KINGSWOOD U.S.

MIKE NESSIM

Managing Partner

(Kingswood US)

OBJECTIVES:

1. Built a successful scaled BD and RIA
2. Provide excellent service & technology
3. Benefit from movement towards fee-based business
4. Leverage economies of scale

Kingswood US will grow by:

• Recruiting independent financial advisers
• Acquiring small to mid-size RIA firms and Broker/Dealers
• Expanding adviser "same store sales" growth by offering a superior wealth management platform and practice
• Management support

KEY PERFORMANCE INDICATORS ( 12 months to Oct 2020)

	Business		Chalice	Benchmark	Combined
	AUM		$1.19Bn	$0.61Bn	$1.80Bn
	Registered
		95	89	184
	Representatives
	Gross Revenue		$11.5MM	$18.0M	$29.5MM

KINGSWOOD CAPITAL MARKETS

Kingswood has launched an investment banking business in the US under the brand Kingswood Capital Markets (KCM), initially with 8 bankers and support staff based in NY, with a goal to increase to 25 bankers plus in key locations across the US over the next two years. KCM will generate high quality income for our business via securities underwriting and placement , debt arrangement, advisory and M&A leveraging our growing advisor distribution network.

New York, NY

San Diego, CA

Atlanta, GA

KINGSWOOD MARKETING

Kingswood marketing is a 7-personin-house recruitment team and acquisition team. Their target market is; Broker dealers, Registered investment advisors and individual advisors. Our goal is to increase this team to 15 over the next 12 months.

BD - Broker Dealer	RIA - Registered Investment Adviser	12

U.S. MARKET OPPORTUNITY

INDEPENDENT BROKER DEALERS (IBDs)

• IBDs buy and sell securities on behalf of clients on a commission basis, aligning themselves with a FINRA authorized firm to execute trades and custody assets
• IBDs control ~$3 trillion in client assets with ~123k advisers across the US operating on a mostly self-employed basis
• The IBD sector includes firms as large as LPL with close to 17,000 independent financial advisers and ~$700 billion AUA to small, local IBD firms with less than 20 advisers
• Small and medium sized independent BDs are facing many challenges:
• • An inability to achieve scale , leaving very little leverage to revenue share with clearing firms and product sponsors
  • Rising regulatory and technology costs
  • A difficult recruiting environment making it hard to attract good advisers as large competitors issue upfront cash incentives to attract talent
• The independent channel has consequently seen significant consolidation:
• • IBDs have gone out of business or transitioned to branch offices of other BDs
  • Larger BD networks can achieve economies of scale with increased bargaining power allowing them to attract advisers with a larger service offering at a reduced price

REGISTERED INVESTMENT ADVISERS (RIAs)

• RIAs generate recurring, measurable and predictable revenue streams from the direct management of client assets
• Regulated by SEC
• Currently over 12,500 RIA firms with between $10m and $500m in AUM
• RIA marketplace is ripe for acquisition:
• • Aging ownership with no clear succession plans
  • Rising operational costs
  • Slow pace of growth
• Market is therefore active with pricing in range of 6 - 8x EBITDA multiples for target firms
• Key value drivers include:
• • Size of firm and quality of underlying client base
  • Whether target possesses some unique value proposition e.g. proprietary technology solution
  • Typically cash + equity structure, with potential multiple year earn-out driven by revenue retention and AUM

Some firms and individuals operate as IBDs and RIAs concurrently, with some potential overlap in the data presented above.	13
Source: Cerulli Associates , FRNA; L.E.K. research

CONCLUSION

TODAY

STRATEGY

EXECUTION

OPPORTUNITY

• High growth, international and fully integrated wealth & investment manager
• £5.6 billion AUM/AUA and circa 16,000 clients
• Significantly undervalued relative to fully integrated peer group
• Active transaction pipeline in UK and US
• Strategy provides hedge against UK centric businesses and enhances quality of earnings
• Robust balance sheet underpinned by Pollen Street's growth equity commitment
• Implementation of change management programme to improve cost/income ratio and enhance margin
• Strong risk and compliance culture
• Unique management team combining extensive PE experience and track record of out performance
• Leadership group with large firm financial services experience and success
• Focus on closing valuation gap to reflect true underlying valuation
• Targeting AUM/A of £13-£15 billion by end 2021
• Raise further raise to advance strategy within next 12 months

14

Disclaimer

Certain statements included or incorporated by reference within this presentation may constitute "forward looking statements" in respect of the company's operations, performance, prospects and/or financial condition.

By their nature, forward looking statements involve a number of risks, uncertainties and assumptions and actual results or events may differ materially from those expressed or implied by those statements. Accordingly, no assurance can be given that any

particular expectation will be met and reliance should not be placed on any forward looking statement. Additionally, forward looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in

the future. No responsibility or obligation is accepted to update or revise any forward looking statement resulting from new information, future events or otherwise.

This document contains information that is strictly private and confidential. Kingswood Holdings Limited is incorporated in Guernsey (registered number: 42316) and has its registered office at Oak House, Hirzel Street, St Peter Port, Guernsey GY1 3RH.