Results presentation for FY 2018
― 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 a djusted 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
― 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 ― Moved into profit for the year ― Complete review of the operating model Asset Management (AM) ― 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
― 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
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
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
― 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 (£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
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
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
FY 2018 FY 2017 Change £m £m Staff costs: ― Staff costs are up 9.4% primarily due to sharing and Fixed 55.0 51.1 7.6% share based payments Variable 43.1 40.7 5.9% ― Other Expenditure items are up 6.4% due to investment IMs share options charge 1 2.3 - 100% and maintenance in IT infrastructure, in relation to the Total staff costs 100.4 91.8 9.4% implementation of regulatory changes, and increased Other costs 39.7 37.3 6.4% marketing spend Total costs 140.1 129.1 8.5% ― The headcount reduction is primarily due to teams leaving IMS and streamlining of support staff. We have Fixed staff cost/income ratio 36.6% 36.9% (0.3) increased our financial planners as we continue to grow Variable staff cost/income ratio 2 28.7% 29.4% (0.7) and invest in the business Total cost/income ratio 93.2% 93.1% 0.1 Headcount (number) 835 888 (53) 1 This represents the charge in respect of share options awarded to certain investment management teams under the revised the remuneration arrangements settled in FY17. 2 The calculation of this ratio excludes the IMs share option charge of £2.3m incurred during the year. Page 14 Results presentation for FY 2018
Fixed 3.9 Variable 2.4 IMs share options 1 2.3 1 Non-cash share based option arrangements associated with the remuneration agreement settled with our investment managers. Page 15 Results presentation for FY 2018
£m 16 0.1 0.5 14 0.7 1.9 1.1 12 11.4 1.0 10.9 0.6 10 8 6 4 2 0 Core Business Gain on part sale Gain on sale of EBS Profit on disposal Recovery on prior Amortisation of Impairment of Accelerated Reported profit profit before tax of shares held in Management PLC of investment in years FSCS levy client relationships freehold property amortisation of before tax Euroclear PLC Runpath Group leasehold Limited improvements Page 16 Results presentation for FY 2018
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