2017 Full-year Results Presentation. 21 March 2018

Transcription

1 2017 Full-year Results Presentation 21 March 2018

2 Forward-looking statements These presentation slides contain forward-looking statements and forecasts with respect to the financial condition and the results of IFG Group plc ( IFG or the Group ). These statements are forecasts involving risk and uncertainty because they relate to events and depend upon circumstances that may occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this presentation should be construed as a profit forecast. Nothing in this presentation should be seen as a promotion or solicitation to buy IFG Group plc shares. It should be remembered that the value of shares can fall as well as rise and therefore you could get back less than you invested. 2 Investor Presentation 2017 Results 21 March 2018

3 Agenda 1 Introduction 2 Highlights and Financial Results 3 Operational Review 4 Q&A 5 Appendices 3 Investor Presentation 2017 Results 21 March 2018

4 Introduction John Cotter Group Chief Executive Mark Dearsley Interim Chief Financial Officer Alastair Conway James Hay CEO Tony Overy Saunderson House CEO 4 Investor Presentation 2017 Results 21 March 2018

5 Complementary market offerings Both businesses are well-positioned with clear strategies for growth IFG is a financial services group with full market listings in London & Dublin Market Capitalisation 194m/ 223m* The Group has two distinct businesses with strong competitive positions in growing markets. One of the largest platforms in the UK, specialising in retirement wealth planning. Award-winning financial advisor with a strong client-focused brand and an excellent investment track record. Platform Wealth management *At 31 December Investor Presentation 2017 Results 21 March 2018

6 Key messages Strong business fundamentals overshadowed by legacy matters Both James Hay and Saunderson House performed well and delivered in line with expectations at an adjusted operating profit level Both are winning clients, growing assets and well-positioned for growth Re-pricing in James Hay has reduced historical over-reliance on interest income Disposal of Saunderson House being considered but only if appropriate value, reflecting the quality of this business, is realised for Shareholders. Process is ongoing Elysian matter is complex and we continue to seek clarification with HMRC, to enable us to assess our options to bring a resolution to this matter Resolving legacy issues remains a key priority, to bring clarity and ensure the quality and capability of both businesses is recognised 6 Investor Presentation 2017 Results 21 March 2018

7 Overview of Results Strong growth fundamentals in both businesses Material increase in AUA up 15% to 30.6bn (2016: 26.7bn) and clients served increased from 58,000 to 61,000 Revenues maintained despite loss of 5.9m of interest revenue James Hay s best year for organic growth, with significantly improved H2 operating margin (18% vs 8% in H1) following re-pricing Saunderson House discretionary offering growing well; investment performance continues to beat the benchmark over 1,3,5 and 10 years We are well positioned for improved financial performance in 2018, subject to the resolution of a number of legacy matters Underlying business performance offset by one-off exceptional costs associated with legacy issues and restructuring ( 8.8m) Focus on resolving legacy issues; Group well positioned to fund any crystallisation of potential contingencies Prudent decision of Board not to pay final dividend; we remain committed to a progressive dividend policy once legacy issues resolved 7 Investor Presentation 2017 Results 21 March 2018

8 Financial Review 8 Investor Presentation 2017 Results 21 March 2018

9 Financial Highlights REVENUE ( 000) 78.4m 78,465 78,394 ADJUSTED OPERATING PROFIT ( 000) 10.5m +5% 11,649 OPERATING (LOSS)/PROFIT ( 000) ( 0.4m) 8,490 71,316 9,967 10,499 6,226 (433) -434 NET ASSETS ( 000) 74.7m -7% 79,198 80,206 74,716 ASSETS UNDER ADMINISTRATION AND ADVICE ( BN) 30.6bn +15% BASIC & ADJUSTED EPS (PENCE) (0.32p)/8.34p (0.32) Investor Presentation 2017 Results 21 March 2018

10 Income Statement Revenue in line with 2016 Underlying adjusted operating profit increased by 5% One-off exceptional costs reflect a number of legacy matters Loss after tax of 0.3m; materially lower than profit of 5.2m in m 2016 m Revenue Costs (67.9) (68.5) Adjusted operating profit Amortisation (2.1) (2.0) Exceptional costs (8.8) (1.8) Operating (loss)/profit (0.4) 6.2 Net finance income/(costs) Share of profit in associate (Loss)/profit before income tax (0.3) 6.4 Income tax credit/(expense) - (1.2) (Loss)/profit for the year (0.3) Investor Presentation 2017 Results 21 March 2018

11 Revenue Benefitting from growth in clients and assets, combined with strong retention Total revenue in line with 2016 James Hay fee revenue increased by 13% to 39.5m as a result of growth in clients and assets under administration and re-pricing in H2 Interest income in James Hay decreased by 5.9m to 6.7m due to interest rate changes Saunderson House revenue increased by 4% to 32.2m Advisory revenue broadly flat at 30.8m (2016: 30.7m) benefitted from increased demand for advice, post the Brexit referendum DMS growing ahead of expectations, which will underpin future growth. Revenue from discretionary offering increased from 0.3m in 2016 to 1.4m in 2017 Both businesses saw an increase in client numbers in the year, with the Group now serving more than 61,000 clients 2017 m 2016 m % James Hay (Non-interest revenue) % James Hay (Interest revenue) % Total James Hay % Total Saunderson House % Total Group revenue % Revenue ( m) James Hay Saunderson House Total Revenue 11 Investor Presentation 2017 Results 21 March 2018

12 Adjusted Operating Profit Group Adjusted operating profit increased by 5% to 10.5m, with managed costs and reduced variable pay offsetting the impact of flat revenues Group costs remained in line with 2016 at 4.2m Overall operating margin before Group/other costs at 19% (2016: 18%) James Hay Contribution decreased by 14%, driven by the impact of lower interest income Operating margin declined to 13% (2016: 15%), but was 18% in H2. Contribution in H2 significantly improved to 4.3m from 1.8m in H1 Saunderson House Contribution up 22%. Operating margin increased to 27% (2016: 23%), in part due to a reduction in variable compensation due to exceptional costs Adjusted operating profit Adjusted operating profit ( m) m 14.7 James Hay Saunderson House Before Group Costs 2016 m % James Hay % Saunderson House % % Group/Other (4.2) (4.2) - Total % 10.0 Total 10.5 * Adjusted Operating Profit is stated after adding back amortisation of intangibles and other exceptional costs. 12 Investor Presentation 2017 Results 21 March 2018

13 Adjusted Operating Profit H1 vs H2 performance James Hay Adjusted operating profit significantly improved in H2, up 139% from 1.8m to 4.3m Total revenue up 7% in H2 from 22.3m to 23.9m, with the benefit of repricing coming through Margin increased from 8% in H1 to 18% in H2, sustainable in 2018 Revenue run-rate going forward more in line with H2 performance, with some upside from increase in interest rates announced in November 2017 James Hay H m H m % Fee income % Interest income % Operating expenses (19.6) (20.5) -4% Adjusted operating profit % H1 4,242 H2 H2 4,285 2,843 H1 1, Investor Presentation 2017 Results 21 March 2018

14 Adjusted Operating Profit H1 vs H2 performance Saunderson House Adjusted operating profit up 21% in H2 Margin in Saunderson House increased in H2, primarily due to 800k FSCS levy all expensed in H1 Discretionary management product is growing ahead of expectations, supporting growth trajectory going forward Operating expenses also impacted by reduction in variable compensation Time lag in revenue recognition on discretionary management services in contrast with Advisory, due to time required to onboard clients Saunderson House H m H m % Revenue % Operating expenses (11.3) (12.3) -8% Adjusted operating profit % H1 3,632 H2 3,426 H1 3,908 H2 4, Investor Presentation 2017 Results 21 March 2018

15 Group Costs Overall ongoing Group costs have remained flat to 2016 Headcount (excluding NEDs) is expected to remain at 18 in 2018 Other costs include rental, listing fees and licensing costs Other costs increased following the relocation to London '000 '000 % Non-Executives (424) (428) -1% Staff Compensation (2,065) (2,323) -11% Legal & Professional (677) (699) -3% Other (1,013) (726) +40% Sub-Total (4,179) (4,176) +1% Headcount No. of Staff Group Board 8 Group Finance 6 Legal, Risk & Compliance 8 Internal Audit 2 Administrative 1 Total Investor Presentation 2017 Results 21 March 2018

16 Exceptional Costs Redundancy and restructuring Previously announced James Hay restructuring costs of 1.3m and 0.1m relating to delayed office closures Legal and remediation Elysian Fuels costs of 2.0m, (which includes 1.3m of provision for future legal costs) Costs associated with other legacy matters in James Hay of 1.8m, (including 1.5m for potential remediation) Costs associated with advice on historical pension transfers where there are safeguarded benefits, of 1.6m (which includes 0.9m provision for client remediation) Consultancy costs Costs of 1.6m associated with the detailed review of the ongoing legacy matters as detailed above Exceptional Costs Contingent Liabilities Dec 17 m Dec 16 m Redundancy and restructuring (1.4) (2.7) Legal and remediation (5.4) (0.5) Consultancy (1.6) - (Loss)/gain on disposals (0.4) 1.5 Total exceptional costs (8.8) (1.7) There are a number of outstanding legacy matters noted as contingent liabilities. Effort to resolve these is ongoing and the potential exposure is both uncertain and unquantifiable These would be fundable from the Group s cash resources should these contingencies crystallise 16 Investor Presentation 2017 Results 21 March 2018

17 Dividends Final dividend Interim dividend No 2017 final dividend due to uncertainty over the quantum and timing of potentially material contingent liabilities Board remains committed to resuming progressive policy at earliest possible time 17 Investor Presentation 2017 Results 21 March 2018

18 Balance Sheet Strong self-financed capital structure Intangibles (including goodwill) principally related to James Hay at 46.2m, with Saunderson House at 7.5m Other non-current assets primarily property & equipment Strong liquid balance sheet with cash of 24.6m and debt free Investment in technology and fixed assets 4.4m in 2017 (2016: 6.3m) Regulatory capital resources of 49.5m, Pillar 1 requirement 6.6m, coverage ratio of 7.5 (2016: 7.0) and sufficient Pillar 2 requirements Reduction in net assets principally due to dividends paid in 2017 ( 5.2m) Balance Sheet Dec 17 m Dec 16 m % Intangibles % Other Non-current Assets % Cash % Other Current Assets % Total Assets % Provisions % Other Liabilities % Total Liabilities % Net Assets/Equity % 18 Investor Presentation 2017 Results 21 March 2018

19 Cashflow Total cash of 24.6m, compared to 28.2m in 2016, due to lower operating profits and material costs associated with resolution of legacy issues Capex of 4.4m in 2017 offset by receipt of deferred consideration of 4.0m and sale of Swavesey office 0.5m Head office and exceptional costs include payments associated with closure of Dublin office provided for in 2016, combined with current year costs associated with James Hay restructuring and legacy matters 2017 m 2016 m Cashflows from operating activities Capital expenditure (4.4) (6.3) Free cash flow Interest and tax (2.2) 0.2 Dividend from associate Disposals of subsidiaries Deferred consideration Head office restructuring and exceptional costs (6.6) - Dividends paid (5.2) (5.1) Repayment of long-term borrowings - (7.0) Share issues Net cash movement (3.8) (6.0) Opening cash Currency translation Closing cash Investor Presentation 2017 Results 21 March 2018

20 Operational Review 20 Investor Presentation 2017 Results 21 March 2018

21 James Hay Platform Helping clients manage their investment journey into and through retirement Platform market has benefitted from the movement of pension assets from defined benefit pensions schemes, with assets growing by 22% 1 and pension transfer volumes by 30% 2 in 2017 James Hay now administers more than 25.5bn of client assets, with total net flows of 3.4 billion, including market movement ( 1.2bn) Increase in average case size due to focused distribution strategy; Modular MiPlan average case size up from 425k to 445k More than 58,000 clients across SIPPs, SSAS, GIA and ISAs Customer retention rate has remained steady at 93% Number of SIPPs % Opening 52,391 52,101 +1% Additions 5,836 4, % Account consolidation (169) (531) -68% Attrition (3,134) (3,575) -12% Closing 54,924 52,391 +5% 1 Source: Platforum Q Source: Origo - Money Market Investor Presentation 2017 Results 21 March 2018

22 James Hay - Key performance indicators REVENUE ( 000) 46.2m -3% 47,478 46,169 ASSETS UNDER ADMINISTRATION ( BN) 25.5bn +15% TOTAL SIPPS 54,924 +5% 54,924 43,817 52,101 52,391 NEW SIPPS 5, % 12,084 4,042 ADJUSTED OPERATING PROFIT ( 000) 6.1m -14% 9,846 CLIENT RETENTION (%) 93% 0% 93% 93% 93% 8,042 4,396 5,836 7,085 6,079 *2015 includes 8,042 acquired SIPPs. 22 Investor Presentation 2017 Results 21 March 2018

23 (%) ( bn) ( 000) James Hay Consistent growth trajectory In the last four years 10.7bn increase in client assets (72%) Average case size up 23% ASSETS UNDER ADMINISTRATION TOTAL AVERAGE CASE SIZE Over 27,000 MiPlan clients added Tripled organic flow from top 25 IFA relationships Attrition down from 6.6% to 6.4% 6.6 ATTRITION (ANNUALISED) SOURCE OF NEW BUSINESS (% of clients) All other IFAs Next 225 IFAs Top 25 IFAs 23 Investor Presentation 2017 Results 21 March 2018

24 Saunderson House Independent wealth management Guiding our clients through the investment journey Revenue growth of 4%, mainly driven by increased discretionary revenues, average new client revenue in line with expectations Lower activity levels from existing advisory clients due to lower market volatility compared to 2016, following the Brexit referendum Operating margin improved to 27% 247 new clients with total clients increasing from 1,956 to 2,121 Attrition at 4% including non-active clients Focus on improving operational processes to deliver productivity gains Robust investment performance remains key to client proposition; investment performance above benchmark over 1, 3, 5 and 10 years Numerous industry awards won and overall brand awareness increasing in target markets 24 Investor Presentation 2017 Results 21 March 2018

25 Saunderson House - Key performance indicators Continued growth across clients, revenues and assets REVENUE ( 000) 32.2m +4% 30,987 32,223 ASSETS UNDER ADVICE ( BN) 5.1bn +11% TOTAL CLIENTS 2,121 +8% 1,956 2,121 27,499 1,809 NEW CLIENTS % ADJUSTED OPERATING PROFIT ( 000) 8.6m +22% 5,929 7,058 8,599 CLIENT RETENTION (%) 96% 0% % 96% 96% 25 Investor Presentation 2017 Results 21 March 2018

26 Outlook Focusing on client and asset growth, resolving legacy issues and delivering improved financial performance Re-pricing during 2017 combined with the interest rate rise in November 2017 will contribute to improved profitability for James Hay in 2018 Saunderson House discretionary offering growing ahead of expectations, broadening target market The Group Board is considering whether a sale of Saunderson House will accelerate Shareholder value Resolution of legacy matters remains a priority to allow both businesses to move forward and focus on achieving their potential Intention to reinstate progressive dividend at earliest opportunity 26 Investor Presentation 2017 Results 21 March 2018

27 Appendices 27 Investor Presentation 2017 Results 21 March 2018

28 Shareholder Base December 2017 Other Private/Retail 9.39% Kabouter 9.40% Private Moran Family Holding 5.54% BMO 9.04% Directors 11.00% Institutions 74.07% GVQ 8.79% Affiliated Managers 7.64% Other institutions 22.38% Farringdon 7.60% Allianz 4.56% FIL 4.66% 28 Investor Presentation 2017 Results 21 March 2018

29 Saunderson House performance for clients Equity-like returns with lower volatility 1 YEAR 3 YEARS 5 YEARS 10 YEARS Total p.a Vol. Total p.a Vol. Total p.a Vol. SHL Model Portfolio ARC Balanced Portfolio FTSE All Share Inflation (CPI) Returns to 28 February Sources: FE Analytics, Asset Risk Consultants, ONS 1 Wealth Management Balanced model. Portfolios for other risk profiles are constructed on the same basis with different weightings to the four asset classes as appropriate. Returns from other models are comparable on a risk adjusted basis. Performance figures are quoted on a total return basis, net of fund management charges and excluding any trail commission rebated. An indicative annual advisory charge of 0.75% has also been deducted. Actual advisory fees may differ. All returns are quoted in sterling unless stated otherwise. 2 ARC produces four sterling Private Client Indices (PCIs) which are comprised of the actual returns achieved by participating investment managers. Returns are submitted to ARC on a quarterly basis for the previous three month period. Prior to the submission of the actual returns data, ARC estimates the monthly PCI returns using a defined group of indices. The data supplied by participating managers are generated from unconstrained portfolios and must have returns dating back at least 12 months. All data submitted are net of all investment manager charges and fees. Additional advisory fees may be applicable. The ARC Balanced Portfolio shown above includes estimated figures for the month ending 28 February 2018 only. Each PCI is based on the monthly volatility of the MSCI World index less cash. The ARC PCI used here is based on 40-60% of the monthly volatility of the MSCI World index less cash. ARC risk bands are measured by volatility. Volatility is a measure of how much variability there has been in returns from financial assets and is widely used as a measure of risk. It is calculated from historical observations and is simply a measure of how widely spread observed returns have been from their average. The higher the volatility figure, the more the value of the portfolio or index in question has moved in either direction over the period. 3 The inflation data shown above are to 31 January Data to 28 February 2018 were not available at the time of publishing. 29 Investor Presentation 2017 Results 21 March 2018

30 Board of Directors John Gallagher Chairman John Cotter Group Chief Executive David Paige Senior Independent Director Colm Barrington Non-Executive Director Peter Priestley Non-Executive Director Robin Phipps Non-Executive Director Cara Ryan Non-Executive Director Kathryn Purves Non-Executive Director 30 Investor Presentation 2017 Results 21 March 2018

31 Contact details For further information, please contact: John Cotter Group Chief Executive Mark Dearsley Interim Group Chief Financial Officer