Executing the Strategy Results presentation for FY 2018
Agenda 1. Key messages 2. Strategic update 3. Financial results 4. Outlook 5. Appendices Paul Abberley Ben Money-Coutts Results presentation for FY 2018 Chief Executive Chief Financial Officer Officer
1. Key messages 2. Strategic update 3. Financial results This has been a year in which we 4. Outlook completed the rationalisation of the Group’s non-core activities and began 5. Appendices to scale our holistic wealth management business to continue the improvement in profitability. Sir David Howard Chairman
FY 2018 – performance improved ― Reported revenue of £150.9m (FY 2017: £141.6m) ― Reported PBT of £11.4m (FY 2017: £8.8m) ― Core Business 1 PBT of £10.9m (FY17: £9.8m) Improved profitability ― Core Business operating margin of 8.8% 2 (FY 2017: 7.1%) ― Reported EPS of 17.23p up 40% (FY 2017: 12.35p) ― Cash balances increased 12.3% to £65.6m (FY 2017: £58.4m) Balance sheet strengthened ― Regulatory capital resources increased to £74.0m (FY 2017: £61.4m) Dividend ― Total 2018 dividend increased to 8.0p per share (FY 2017: 6.0p) Solid progress on all key metrics 1 The Core Business figures represent the results of the Group’s four main operating divisions, excluding held for sale activities and adjusted for one-off items. 2 Excluding the charge in respect of share options awarded to employed investment managers associated with their new remuneration arrangements. Page 3 Results presentation for FY 2018
FY 2018 - Operational progress in all areas of the Group ― Average FuMA up 10.5% ― Governance overhaul complete Group ― 94% client satisfaction, 62% Net Promoter ― Staff engagement score improved 73% Score (FY17: 67%) ― Continued implementation of new rate card, Investment Management ― Growth in discretionary funds by 7.7% from c.60% complete Services (IMS) new inflows and service upgrades ― Client reporting overhauled Asset Management (AM) ― Moved into profit for the year ― Complete review of the operating model ― IHT Solutions FuMA growth of over 30% ― Launched Personal Portfolio Service ― Recruitment programme of new financial Financial Planning (FP) ― Implementation of new business processing planners under way system ― Reinvigorated proposition ― Transfer of over £100m of Group assets to Charles Stanley Direct (CSD) ― Moved into profit in the second half of FY18 the CSD platform ― Addition of over 13,000 new accounts ― Rolled out a completely new CSD mobile app ― Expanded the intermediary sales team Support Functions ― Implemented MiFID II and GDPR ― Rationalised processes and identified ― Tight control of costs maintained efficiencies Page 4 Results presentation for FY 2018
1. Key messages 2. Strategic update 3. Financial results 4. Outlook The transformation of our Group continues apace with growth in our underlying financial performance, and 5. Appendices we need to ensure this broad-based progress also powers acceleration in our profitability. Paul Abberley Chief Executive Officer
Strategic Implementation: Sales and standardisation ― Improve business mix Investment Management Services ― Complete implementation of new rate card by 31 March 2019 (IMS) ― Increase dedicated sales resource ― Digitise client interactions ― Standardise operating processes Asset Management (AM) ― Dedicated sales support to be recruited ― Improve access for IMs to portfolio templates ― Focus on model portfolios, fiduciary management and IHT solutions ― Streamline transfers process to Personal Portfolio Services Financial Planning (FP) ― Recruit new financial planners ― Attract new clients and build partnership network ― Improve integration with Investment Management Services Charles Stanley Direct (CSD) ― Drive asset growth via multi-channel digital marketing and internal transfer of execution-only assets ― Deliver enhancements to the App including trading capability ― Automate operations and client user experience ― Streamline the operating model Support Functions ― Improve usage of IT functionality ― Centralise infrequent processes Page 6 Results presentation for FY 2018
1. Key messages 2. Strategic update 3. Financial results Charles Stanley achieved growth in both revenues and profits during 2018 and the 4. Outlook balance sheet continued to strengthen. We exited the last of our non-core activities at 5. Appendices the beginning of the year and all our ongoing divisions contributed to the improved performance. Ben Money-Coutts Chief Financial Officer
Financial highlights Reported basic Dividend per Core Business EPS (p) share (p) operating margin (%) 1 Core Business PBT Discretionary ↑ 33% (£m) funds ↑ 1.7% ↑ 40% (£bn) ↑ 11% FuMA (£bn) £10.9 8.0p 8.8% ↑ 8% 17.23p £9.8m ↓ -0.8% £12.3bn 7.1% £11.4bn £24.0bn £23.8bn 6.0p 12.35p £20.5bn £9.4bn 5.0p £4.2m 3.1% 0.61p 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 1 Excluding the charge in respect of share options awarded to employed investment managers associated with their new remuneration arrangements. Page 8 Results presentation for FY 2018
Financial Summary – Core Business FY 2018 FY 2017 Change £m £m % Revenue 150.4 138.6 8.5 Expenses (140.1) (129.1) 8.5 Other income 0.2 0.2 - Net finance income 0.4 0.1 300.0 Core Business profit 10.9 9.8 11.2 Adjusting items 0.5 (1.0) (150.0) Reported profit 11.4 8.8 29.6 8.8% 1 Core Business operating margin 7.1% Core Business EPS (p) 16.06 15.33 Dividend per share (p) 8.0 6.0 1 Excluding the charge in respect of share options awarded to employed investment managers associated with their new remuneration arrangements. Page 9 Results presentation for FY 2018
Funds under Management and Administration (FuMA) ― Average FuMA for the year up 10.5% . Closing FuMA FY 2018 FY 2017 Change down 0.8% due to weak markets in the last quarter of FY 2018 £bn £bn % Discretionary funds 12.3 11.4 7.9 ― Discretionary funds up 7.9% due to net inflows of £0.4bn Advisory Managed funds 1.8 2.4 (25.0) and upgrades of advisory services to higher margin Total managed funds 14.1 13.8 2.2 discretionary services (£0.6bn) Advisory Dealing funds 1.4 1.8 (22.2) ― Other service classes reduced due to market movements Execution-only funds 8.3 8.4 (1.2) (£0.2bn), transfers to discretionary (£0.6bn) and net Total administered funds 9.7 10.2 (4.9) outflows (£0.9bn) Total FuMA 23.8 24.0 (0.8) Average FuMA 24.3 22.0 10.5 ― CS Direct recorded an increase of 21% to £2.3bn AuA from organic growth and internal transfers FTSE UK Private Investor Balanced Index 4,050 4,122 (1.7) ― Inflows from new clients (£1.5bn) were offset by £1.3bn in lost clients, of which £0.3bn related to departed investment managers, and £0.4bn in market movement Page 10 Results presentation for FY 2018
FuMA movement – inflows of £1.5bn in FY18 FUMA (£bn) 30.0 1.5 25.0 24.0 23.8 0.3 1.0 0.4 20.0 15.0 \ 10.0 5.0 0.0 Funds at 1 April 2017 New clients Net outflows from existing Lost clients Market movement Funds at 31 March 2018 clients Page 11 Results presentation for FY 2018
FuMA – flows by service 2.0 Execution-only 1.5 Advisory Dealing 1.5 Advisory Managed 0 Discretionary 1.0 0.5 - (0.5) (0.3) (0.4) (1.0) (1.0) (1.5) (2.0) New clients Transfers Net inflow/(outflow) from existing Lost clients Market movement clients ― Net inflows from new clients were primarily directed to the higher margin discretionary service whilst outflows from lost clients were recorded in the execution-only and discretionary book, partly arising from departing teams Page 12 Results presentation for FY 2018
Core Business – Revenue FY 2018 FY 2017 Change £m £m % Fees 104.8 89.4 17.2 Commission 43.2 47.3 (8.7) Interest income 2.4 1.9 26.3 Total revenue 150.4 138.6 8.5 ― Significant improvement in fee income up 17.2% on prior year driven by higher average FuMA and upgrades to discretionary services Revenue margins: bps bps bps Investment Management Services 64.0 65.0 (1.0) ― Commission reduced by 8.7% as a result of a continued Asset Management 56.0 60.0 (4.0) shift of clients to fee-only tariffs and lower levels of Charles Stanley Direct 24.0 22.0 2.0 trading activity in the non-managed book. The impact of reduced commissions primarily affected Investment Group 62.0 64.0 (2.0) Management Services resulting in a 1bp decrease in revenue margin No. No. % Bargains: Commission earning 446,939 475,023 (5.9) Zero commission 525,378 381,659 37.7 All Commission Types 972,317 856,682 13.5 Page 13 Results presentation for FY 2018
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