Close Brothers Group plc · LSE:CBG
Close Brothers — H1 2008 Earnings Presentation
45 slides from Close Brothers's earnings presentation, 2008
Slide 1: Close Brothers Group plc 2008 Interim Results
Close Brothers Group plc 2008 Interim Results
Slide 2: Slide 2
Slide 3: Overview
) OVERVIEW Colin Keogh
Slide 4: Highlights and Overview: 2008 H1 Results Summary
Highlights and Overview 2008 H1 Results Summary An eventful 6 months and a sound set of results H1 07 Adjusted PBT £75.3m down 2% £76.7m Adjusted EPS 35.1p down 5% 36.8p Dividend 13.5p up 13% 12p A solid result from Banking – PBT £38m (up 1%) Respectable performance from Asset Management – PBT £18m
Slide 5: Highlights and Overview: Recent Offer Period
Highlights and Overview Recent Offer Period In an Offer Period since 8 November Uncertain and difficult time for customers and staff Various discussions came to naught in difficult markets and therefore terminated All options for delivering value were considered in comprehensive strategy review In t
Slide 6: Highlights and Overview: The Way Forward
Highlights and Overview The Way Forward Strategy remains clear: actively to manage our distinctive, diverse, specialist and soundly financed businesses to generate growth in profits, dividends and long term shareholder value Our diversity should stand us in good stead in difficult markets Specific a
Slide 7: Financial Review
FINANCIAL REVIEW Jonathan Howell
Slide 8: Overview of Results
Overview of Results Before Exceptional Items Six months ended 31 January 2008 2007 Change £m £m Operating income before exceptional items 253.0 262.9 (4)% Operating profit before exceptional items Asset Management 18.0 21.6 (17)% Corporate Finance 4.6 7.4 (38)% Securities 23.8 20.4 17% Banking 37.7
Slide 9: Overview of Results (continued)
Overview of Results (continued) Six months ended 31 January 2008 2007 Change £m £m Operating profit before exceptional items 75.3 76.7 (2)% Exceptional items - Advisers fees (5.5) - - Investment gains & performance fees - 21.1 Operating profit before tax 69.8 97.8 (29)% Tax and minority interest 23.
Slide 10: Balance Sheet
Balance Sheet As at 31 January Increase / 2008 2007 (decrease) £m £m £m Assets Cash, deposits and FRN’s 2,347 1,798 549 Loans and advances to customers 2,006 1,863 143 See page 7 Securities trading assets 610 782 (172) Goodwill 113 114 (1) Other assets 340 282 58 5,416 4,839 577 Liabilities Deposits
Slide 11: Balance Sheet Analysis
Balance Sheet Analysis Deposits by customers: £2,435m change + £408m • Deposits increased by over 20% since H1 2007 • Deposit base remains stable despite recent credit market difficulties and remains profitable Bank borrowings: £1,235m change + £291m • Broad spread of facilities in place • Committed
Slide 12: Financial Highlights: Key Ratios
Financial Highlights: Key Ratios Before exceptional items H1 2008 H1 2007 Operating margin* 30% 29% Operating profit before tax/operating income Expense/income ratio* 66% 67% (Administrative expenses + depreciation and amortisation) /operating income Compensation ratio* 44% 45% Staff costs/operating
Slide 13: Adjusted Earnings and Dividend Track Record
Adjusted Earnings and Dividend Track Record Adjusted Earnings per Share Ordinary Dividends per Share 90 40 = 11% C AGR r 80 = 22% 35 3 yea AGR 70 rC 3 yea 30 60 25 Pence Pence 50 20 40 15 30 10 20 10 5 0 0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 H1 H2 Interim Final Notes: 05-08: IFRS 04: U
Slide 14: Slide 14
Slide 15: Divisional Review
DIVISIONAL REVIEW Colin Keogh
Slide 16: Slide 16
Slide 17: Banking
) BANKING
Slide 18: Slide 18
Slide 19: Banking: Highlights
Banking Highlights Solid H1 performance Banking Profit H1 profit up 1% to £37.7m 80 70 70 74 72 60 Consistent operating 36 35 37 35 £m margin — 38% 40 20 34 35 37 37 38 Loan book up to £2.0bn (+2%) 0 since year end 2004 2005 2006 2007 2008 H1 H2 No increase in bad debts which remain at 1% 10 100111
Slide 20: Banking: Key Numbers
Banking Key Numbers H1 H1 2008 2007 Change £m £m Operating income 99.8 97.7 +2% Operating profit 37.7 37.4 +1% Loan book – period end 2,006 1,863 +8% Bad debt charge 9.6 9.1 Bad debt as % of average loan book 1.0% 1.0% Return on average gross loans 3.7% 3.9% ROC 26% 28% Operating margin 38% 38% Expe
Slide 21: Banking: Liquidity
Banking Liquidity Loan book covered more than two times by equity, deposits and bank facilities We borrow long and lend short Deposits equal 121% of loan book £bn £bn 5.0 2.5 4.0 2.0 3.0 1.5 2.0 1.0 1.0 0.5 0.0 0.0 Funding Loan book Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Equity Bank facilities Eq
Slide 22: Banking: Outlook
Banking Outlook We remain well funded We have seen demand increase in some areas and competitive pressures reduce Expect continued improvement in H2 and opportunities to accelerate growth 13 100111
Slide 23: Asset Management
) ASSET MANAGEMENT
Slide 24: Asset Management: Highlights
Asset Management Highlights A respectable result in a difficult Asset Management Profit and volatile market 78 80 • Profit £18m down 17% 60 38 35 £m 32 40 21 17 19 FuM £8.9bn down 2% 20 10 17 15 19 22 18 7 0 Difficult period for fund raising but 2004 2005 2006 2007 2008 H1 Exceptional H2 • Launched
Slide 25: Asset Management: Key Numbers
Asset Management Key Numbers H1 Change H1 2008 2007 £m £m Operating income 69.0 (28)% 95.7 Costs 51.0 (4)% 53.0 Pre-tax profit 18.0 (58)% 42.7 Pre-tax profit excluding exceptional items 18.0 (17)% 21.6 Adjusted operating margin 26% 29% Adjusted expense/income ratio 74% 71% Adjusted compensation rati
Slide 26: Asset Management: Asset Gathering
Asset Management Asset Gathering H1 2008 FuM at Market FuM at £m 31/07/07 In Out Net Movement 31/01/08 Private Clients 3,588 222 (231) (9) (99) 3,480 Funds 5,560 464 (431) 33 (204) 5,389 Total 9,148 686 (662) 24 (303) 8,869 12 months ago 8,211 1,001 (712) 289 397 8,897 Realisations and maturities ha
Slide 27: Asset Management: Outlook
Asset Management Outlook Our spread of services and asset classes gives some protection in volatile markets Property – UK likely to remain tough but Europe is holding up Joint venture initiative to capture expat wealth in Spain Will seek to reap benefits of ongoing restructuring and add scale Despit
Slide 28: Slide 28
Slide 29: Corporate Finance
) CORPORATE FINANCE
Slide 30: Corporate Finance: Highlights
Corporate Finance Highlights Corporate Finance Profit Reasonable H1 performance after 30 strong finish to FY2007: 25 22 20 17 Revenue £26m (2007 £28m) £m 15 10 10 8 15 Profit £5m (2007 £7m) 10 5 5 5 9 7 Excellent performance from France; 0 5 5 5 Germany ahead of H1 2007; UK 2004 2005 2006 2007 2008
Slide 31: Corporate Finance: Key Numbers
Corporate Finance Key Numbers H1 H1 2008 2007 £m £m Operating income 26.2 27.8 Costs 21.6 20.4 Pre-tax profit 4.6 7.4 Operating margin 18% 27% Expense/income ratio 82% 73% Compensation ratio 58% 55% 19 100111
Slide 32: Corporate Finance: Outlook
Corporate Finance Outlook Q3 pipeline looking better Anticipating growth in restructuring and debt advice We continue to attract good people at senior levels New office in Manchester and development of new sectors Emphasis on consolidating single European franchise and extending our international re
Slide 33: Securities
Winterflood ; == Securities @ Close Brothers ‘ Wins: | imited & SECURITIES
Slide 34: Securities: Highlights
Securities Highlights Markets difficult and volatile Securities Profit during H1 in UK and Germany 50 48 44 Trading has been weaker for 40 38 36 WINS and Seydler and overall 26 30 24 18 £m 19 well down on last year 20 10 20 22 20 24 Bargain numbers at WINS 17 slightly up but profit per bargain 0 200
Slide 35: Securities: Key Numbers
Securities Key Numbers H1 H1 2008 2007 £m £m Operating income 55.8 60.4 Costs 32.0 40.0 Pre-tax profit 23.8 20.4 Operating margin 43% 34% Expense/income ratio 57% 66% Compensation ratio 41% 37% 22 100111
Slide 36: Securities: Outlook
Securities Outlook Difficult markets look set to continue and business remains competitive Generating growth has been a challenge against a backdrop of margin pressure WINS core business remains strong with opportunities to diversify Seydler expands corporate broking operation into UK market and now
Slide 37: Outlook
) OUTLOOK
Slide 38: Group Outlook
Group Outlook H1 performance resilient against backdrop of challenging market conditions Outlook for global markets is uncertain • Likely to continue to affect Corporate Finance, Securities and Asset Management • Could lead to an increase in acquisition opportunities Banking should continue to impro
Slide 39: Appendix
) APPENDIX
Slide 40: Segmental Information
Segmental Information Asset Corporate £ million Management Finance Securities Banking Group Total For the six months ended 31 January 2008 Operating income 69.0 26.2 55.8 99.8 2.2 253.0 Operating expenses 51.0 21.6 32.0 62.1 11.0 177.7 Profit before exceptionals and tax 18.0 4.6 23.8 37.7 (8.8) 75.3
Slide 41: Segmental Information
Segmental Information Asset Corporate £ million Management Finance Securities Banking Group Total For the year ended 31 July 2007 Operating income 177.5 77.2 128.0 197.8 5.2 585.7 Operating expenses 120.9 54.7 83.9 126.1 27.3 412.9 Profit before exceptionals, 56.6 22.5 44.1 71.7 (22.1) 172.8 goodwil
Slide 42: Exceptional Items and Goodwill Impairment
Exceptional Items and Goodwill Impairment Six months ended Year ended 31 January 31 July 2008 2007 2007 £m £m £m Operating profit before exceptional items and goodwill impairment 75.3 76.7 172.8 Exceptional income Investment gains and private equity performance fees - 21.1 21.1 Exceptional expenses
Slide 43: Banking: Loan Book Analysis
Banking Loan Book Analysis £2,006m 2,000 £1,863m Printing machinery 6% (9%) £124m £174m £190m £154m Invoice receivables 9% (8%) £239m 1,500 £198m Other 12% (11%) £332m £352m £m 1,000 Insurance premiums 17% (19%) £339m £344m Motor vehicles 17% (18%) £369m 500 £252m Property 18% (14%) £389m £413m Tran
Slide 44: Asset Management: Funds under Management
Asset Management Funds under Management 2% fall 10 £0.7bn £9.1bn £(0.6)bn £(0.3)bn £8.9bn 9 7% 7% 8 8% 9% 9% 9% 7 6 15% 15% £bn 5 19% 21% 4 3 2 42% 39% 1 0 31-Jul-07 Withdrawals/ New funds Market effect 31-Jan-08 redemptions Equities Fixed Income Property Private Equity Hedge Funds Structured Well s
Slide 45: Disclaimer
Disclaimer Certain statements included or incorporated by reference within this presentation may constitute "forward-looking statements". By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially