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Agenda 1. Our Objectives David Nicol 2. Overview David Nicol David Nicol 3. Results Andrew Westenberger 4. Key Initiatives Stephen Ford Andrew Westenberger 5. Future Developments Stephen Ford 6. Outlook David Nicol Stephen Ford 7. Q&A 1
1. Our Objectives To be the leading Vision provider of personal discretionary wealth management in the UK Generate shareholder value by growing revenue and delivering a high Primary Goal quality service to our clients, efficiently Build a business to be Corporate Manage Be an proud of based on responsibly excellent values of client Objectives for long term employer service, teamwork and integrity Grow the number Maintain sufficient Strategic Grow our of clients we serve Improve our capital to maximise dividend in line and therefore the efficiency Priorities opportunities and with earnings revenue we cover risks generate 2
2. Overview Our strategic priorities Our strategic priorities Delivering good results Delivering good results 2013 2012 £’bn £’bn 21.3 18.2 Discretionary FUM +17% Growth £’m £’m + 245.5 205.5 Core income +19% Efficiency 283.7 260.4 Total income +9% 52.3 42.9 + ADJ PBT +22% Delivery 18.5% 16.5% Margin +2% 226% 123% Capital sufficiency = 14.9p 12.5p ADJ EPS +19% Shareholder Value 8.6p 7.15p Dividend +20% 3
2. Overview Delivered through management action Delivered through management action With disciplined approach With disciplined approach Completed and embedded Raised £38.6m to strengthen capital base Standard pricing − To withstand the risks Cost discipline − To ensure initiatives funded Restructuring of centre Announcing dividend policy to Branch consolidation maintain discipline and ensure returns passed to shareholders Underway Two new strategic priorities to Simplify and streamline underpin our long term goals: − Capital sufficiency Enhance service model − Dividend growth New technology Detailed KPIs – measure progress Building organic growth channels 4
2. Overview - Key Initiatives Current and planned initiatives driving margin and growth to deliver against strategic priorities Re-focus Adj EPS Adj EPS Simplify 12.5p 14.9p New services Technology- enabled 16.5% 18.5% 25%+ Growth- orientated Scalable 2012 2013 2016 Completed/ Underway Planned Embedded Onwards Standard pricing Simplify and Direct to Client Cost discipline streamline High Net Worth Restructuring of Enhance service centre model Branch New technology consolidation Organic growth channels Business to Business (BtoB) 5
2. Overview – New Dividend Policy Dividend in line with earnings 2014 onwards Interim dividend + variable final dividend Target dividend pay out ratio 60-80% (adjusted EPS) 6
3. Results: Key Themes 2013 2012 Change £bn £bn FUM Discretionary – good net inflows continuing - Discretionary 18.2 17% 21.3 - Advisory 7.7 -10% Advisory – outflows from service review 6.9 - Execution only 5.4 24% 6.7 £m £m Income Strong core income growth - Core 245.5 205.5 19% Improved pricing / reduced risk - Other 38.2 54.9 -30% 260.4 9% Total 283.7 Costs - Fixed operating costs (183.7) 3% Fixed costs under control (188.7) - Variable staff costs (34.6) 26% (43.7) 42.9 22% Strong underlying profit growth Adjusted profit before tax 52.3 PBT down – restructuring costs and provisions 29.9 -4% Statutory PBT 28.6 Free cash flow up due to lower investment capex – staying disciplined 14.1 Underlying free cash flow 24.6 on acquired growth 123% Balance sheet strengthened with capital raise £38.6m and profit retention Capital solvency 226% Margin improvement 16.5% Margin 18.5% 12.5p 19% Adjusted diluted EPS 14.9p Dividend growth in line with adjusted earnings 7.15p 20% Dividend 8.6p 7
3. Results - Details 2013 2012 Change £’m £’m % Core income 245.5 205.5 19% Other income 38.2 54.9 ‐ 30% Total income 283.7 260.4 9% Staff costs (105.3) (98.6) 7% Non ‐ staff costs (83.4) (85.1) ‐ 2% Total fixed operating costs (188.7) (183.7) 3% Profit before variable staff costs 95.0 76.7 24% Variable staff costs (43.7) (34.6) 26% Adjusted operating profit 51.3 42.1 22% Net interest 1.0 0.8 25% Adjusted profit before tax * 52.3 42.9 22% Amortisation of client relationships (12.5) (11.9) 5% Redundancy costs (4.8) (0.6) Gain on disposal of available ‐ for ‐ sale asset 0.9 ‐ Additional FSCS levy (1.1) (0.5) Onerous contract provisions (6.2) ‐ Exceptionals (11.2) (1.1) Profit before tax 28.6 29.9 ‐ 4% * Excluding redundancy costs, additional FSCS levy, onerous contract provisions, amortisation of client relationships and disposal of available ‐ for ‐ sale asset 8
3. Underlying Profit Growth – Income growth, operating leverage 23.8 Sept Sept 2012 2013 (9.1) 52.3 £m 42.9 18.6 (5.1) (1.6) 1.7 (14.4) (4.5) Branch Central Trail Interest Non Standard Market/ Increase Staff Staff Staff pricing FUM Profit Costs Costs Costs Growth Share (variable staff costs) 9
3. Funds Under Management Focus on discretionary service paying off – real growth above market Service review / de-risking driving advisory decline Sept 2013 Sept 2012 Change £'bn £'bn % Discretionary 21.3 18.2 +17 Advisory Managed 4.8 4.9 ‐ 2 Dealing 2.1 2.8 ‐ 25 Total Advisory 6.9 7.7 ‐ 10 Total Managed/Advised 28.2 25.9 +9 Execution Only 6.7 5.4 +24 Total Funds 34.9 31.3 +12 At 29 Sept 2013 At 30 Sept 2012 Indices FTSE APCIMS Private Investor Series Balanced Portfolio 3,315 3,014 +10 FTSE 100 6,513 5,742 +13 10
3. Fund Flow Good net inflows in primary discretionary service Service Net Market Total Inflow Outflows Switching Flow % Move % Delta % £’bn £'bn Discretionary 2.1 (1.0) ‐ 1.1 +6 2.0 +11 3.1 +17 Advisory ‐ Managed 0.1 (0.5) (0.2) (0.6) ‐ 12 0.5 +9 (0.1) ‐ 2 Advisory ‐ Dealing 0.1 (0.4) (0.5) (0.9) ‐ 31 0.2 +6 (0.7) ‐ 25 Total Advisory 0.2 (1.0) (0.7) (1.5) ‐ 19 0.6 +8 (0.8) ‐ 10 Total Managed/Advisory 2.3 (2.0) (0.7) (0.4) ‐ 2 2.7 +10 2.3 +9 Execution Only 0.9 (0.7) 0.7 0.9 +16 0.4 +7 1.3 +24 Total Funds 3.2 (2.7) 0.0 0.5 +2 3.1 +9 3.6 +12 11
3. Core Income Sustainable pricing – total core income +19% yoy vs 11% average FUM growth 2013 2012 Average Average Average Average Income Income FUM Yield FUM Yield £' bn £' m bps £' bn £' m bps Discretionary 20.0 192.7 96 17.1 156.3 91 17% 23% Advisory Managed 5.0 27.5 56 5.1 23.3 46 ‐ 3% 18% Dealing 2.5 7.2 29 3.0 12.8 42 ‐ 18% ‐ 44% Total Managed/Advised 27.5 227.4 83 25.2 192.4 76 9% 18% Execution Only 6.0 18.1 30 5.0 13.1 26 Total 33.5 245.5 73 30.2 205.5 68 Yoy change 11% 19% 12
3. Income Summary 2013 2012 Change £’m £’m Commissions 93.5 84.1 +11% Fees 152.0 121.4 +25% Core Income 245.5 205.5 +19% Financial Planning 11.7 9.3 Trail 14.8 29.2 Interest 11.7 16.4 Other Income 38.2 54.9 -30% Total Income 283.7 260.4 +9% 13
3. Costs Management actions during 2013 have brought costs under control £’m -3% +3% H2 reduction due to central function restructure +10% Headcount growth stopped 51.6 53.4 47.1 51.9 Control over discretionary spend +1% -7% nc 44.6 45.1 42.1 42.1 2013 Margin impact FY 2012 FY 2013 Change % Staff +7% 98.7 105.3 0.6 Non staff 89.7 -7% 4.9 84.2 (4.7) Insurance recovery (0.8) (1.4) Total fixed operating costs 183.7 4.1 188.7 +3% 14
3. Margin Progression 2012 2013 (1.4) 0.5 0.8 % (2.1) 1.9 1.1 0.6 0.6 18.5 16.5 5.5% Gross Savings (net 4.1%) Lower insurance Higher variable Central staff costs recovery staff pay out rate Professional/ Marketing Operational Other Other staff related costs Property/ infrastructure Staff cost/income 51.2 52.5 32.7 29.4 Non-staff cost/income 83.9 81.9 Interest (0.4) (0.4) Cost/Income ratio 83.5 81.5 15
3. Balance Sheet - strengthened, free cash flow improved Net intangible Profit Other P&L Capital raise/ 2013 2012 capex retention reserves AFS revaluation £’m 108.7 45.1 4.8 60.6 3.2 (5.0) (49.3) (48.2) Requirement 11.4 60.5 Surplus 123% 226% 16
3. Cash Flow 2013 2012 Change £’m £’m ∆ Statutory operating profit 26.6 29.1 Discontinued loss ‐ (3.5) Non cash adjustments 28.1 26.4 Pension contribution (3.0) (3.0) Underlying EBITDA broadly flat on EBITDA 51.7 49.0 2.7 continuing basis Interest/Tax (5.3) (4.5) Underlying cash from operations 46.4 44.5 1.9 No new teams post H1 Investment ‐ Teams (3.4) (6.9) Capex on new technology ‐ Fixed assets/software (19.6) (23.8) Sale of N+1 stake ‐ AFS Income 1.2 0.3 (21.8) (30.4) 8.5 Underlying free cash flow 24.6 14.1 10.5 Increase in shares in issue (mainly placing) Financing ‐ Dividends (18.1) (16.9) ‐ Net equity 41.7 (1.2) £38.6 raised on placing 23.6 (18.1) Non cash provisions Higher variable pay accruals Movement in working capital 17.6 (12.1) Receipt of insurance debtor Movement in cash 65.8 (16.0) 17
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