Close Brothers Group plc · LSE:CBG
Close Brothers — FY2010 Earnings Presentation
43 slides from Close Brothers's earnings presentation, Sep 28, 2010
Slide 1: Preliminary results 2010
Preliminary results 2010 28 September 2010
Slide 2: Cautionary statement
Cautionary statement Regarding information in this presentation Certain statements included or incorporated by reference within this presentation may constitute “forward-looking statements” in respect of the group’s operations, performance, prospects and/or financial condition. By their nature, forw
Slide 3: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Page 3
Slide 4: Introduction: Financial year 2010 highlights
Introduction Financial year 2010 highlights • Good performance – adjusted operating profit £121.3 million (2009: £113.7 million), up 7% • Very strong result in Banking – Record closing loan book up 23% to £2.9 billion (2009: £2.4 billion) – Highest profit contribution to date - £79.5 million (2009:
Slide 5: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Page 5
Slide 6: Financial highlights
Financial highlights Summary income statement, continuing operations1 £ million 2010 2009 % change Adjusted operating income2 531.7 502.1 6% Adjusted operating expenses3 (347.0) (328.5) 6% Impairment losses on loans and advances (63.4) (59.9) 6% Adjusted operating profit4 121.3 113.7 7% Operating ma
Slide 7: Financial highlights (continued)
Financial highlights Summary income statement, continuing operations (continued) £ million 2010 2009 % change Adjusted operating profit 121.3 113.7 7% Exceptional items and other adjustments of which: Exceptional items1 (15.0) (6.0) Impairment losses on goodwill (6.5) (19.0) Amortisation of intangib
Slide 8: Financial highlights: Performance by division
Financial highlights Performance by division Adjusted operating profit (continuing operations) • Banking had a very strong performance – Loan book at a record high % £ million 2010 2009 change – Strong net interest margin and disciplined lending Adjusted operating • Good performance in Securities 12
Slide 9: Financial highlights: Summary balance sheet
Financial highlights Summary balance sheet 31 July 31 July £ million 2010 2009 Change Assets Cash and loans and advances to banks1 611.2 198.2 413.0 Settlement balances, long trading positions and loans to money brokers2 713.3 728.9 (15.6) Loans and advances to customers 2,912.6 2,364.9 547.7 Non tr
Slide 10: Funding and liquidity
Funding and liquidity Maintained strong funding position whilst increasing long term flexibility Funding position at 31 July 2010 £ million 6,000 • Maintained strong overall funding position at 5,554 £5.6 billion, up from £5.4 billion and well above £2.9 billion loan book 5,000 – Facilities and grou
Slide 11: Capital
Capital Strong capital position maintained despite significant loan book growth £ million 31 July 31 July • Increased tier 1 capital to £603 million, and a 2010 2009 strong core tier 1 capital ratio of 13.9% – Reduced ratio reflects significant loan book Core tier 1 capital 603.3 581.9 growth Total
Slide 12: Banking: Key figures
Banking Key figures £ million 2010 2009 % change Adjusted operating income 272.0 235.5 15% Adjusted operating expenses (129.1) (121.6) 6% Impairment losses on loans and advances (63.4) (59.9) 6% Adjusted operating profit 79.5 54.0 47% Closing loan book 2,913 2,365 23% Bad debt ratio1 2.4% 2.6% Key F
Slide 13: Banking: Income analysis
Banking Income analysis Adjusted operating income by type Key metrics £ million % 300 272.0 +15% 2010 2009 change Treasury Net interest and 16.4 235.5 (15)% fees on loan book 250 Property (£ million) 256 216 18% 36.5 19.3 +19% Average loan book (£ million) 2,639 2,299 15% 200 30.8 Net interest margi
Slide 14: Banking: Loan book analysis
Banking Loan book analysis Loan book size by business unit £ million 2,913 +23% • Loan book at record high of £2.9 billion, up 3,000 23%, including 19% organic – 4% increase due to acquisition of £94 million 548 +12% 2,365 invoice financing loan book in January 2010 2,500 487 • Retail loan book incr
Slide 15: Banking: Key ratios
Banking Key ratios Margin and bad debt analysis 12.0% • Reduction in FY 2010 bad debt ratio to 2.4% – Shorter term Retail businesses benefited from modest improvement in economic 10.0% 9.7% 9.4% environment 8.6% – Longer term Commercial and Property yet 8.0% to see material improvement in bad debts
Slide 16: Securities: Key figures
Securities Key figures £ million 2010 2009 % change Adjusted operating income 162.2 167.8 (3)% Adjusted operating expenses (102.9) (102.9) - Adjusted operating profit 59.3 64.9 (9)% Of which: Winterflood 48.7 47.3 3% Seydler 4.9 1.5 227% Mako 5.7 16.1 (65)% Key Financial Ratios Operating margin 34%
Slide 17: Securities: Income analysis
Securities Income analysis Adjusted operating income by business Key metrics £ million 180 % 167.8 (3)% 162.2 2010 2009 change 160 16.1 5.7 (65)% Winterflood bargains per trading day 47k 42k 10% 24.9 +7% 140 23.3 Winterflood income per bargain £11.18 £11.98 (7)% 120 • Winterflood’s good performance
Slide 18: Asset Management: Key figures
Asset Management Key figures £ million 2010 2009 % change Adjusted operating income 97.0 95.0 2% Adjusted operating expenses (93.7) (83.0) 13% Adjusted operating profit 3.3 12.0 (73)% Closing FuM 7,428 6,839 9% Of which: Private Clients 3,871 3,349 16% Institutional 3,557 3,490 2% Key Financial Rati
Slide 19: Asset Management: Income analysis
Asset Management Income analysis Adjusted operating income by type Key metrics £ million 100 97.0 +2% 95.0 2010 2009 change 90 3.1 12.1 +290% Average FuM (£ million) 7,133 7,517 (5)% 80 Revenue margin1 73 bps 72 bps 1 bp 37.6 70 32.7 (13)% 60 • Reduction of 4% in management fees on FuM, despite stab
Slide 20: Asset Management: Resilient net new funds in Private Client business
Asset Management Resilient net new funds in Private Client business Movement in Funds under Management £ million Private Institutional Total • 9% increase in FuM due to market movements Clients – Broadly neutral net new funds as good Private Client inflows offset by Institutional 1 August 2009 3,349
Slide 21: Outlook: 2011 financial year
Outlook 2011 financial year • The group has made a sound start to the year – Banking division seeing continued good loan book growth – The Securities division made a more modest start to the year reflecting current market conditions – Asset Management likely to deliver a small loss in the year as in
Slide 22: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Page 22
Slide 23: Business update: Strategic priorities
Business update Strategic priorities • Focus activities around three divisions - Banking, Securities and Asset Management – Banking – a leader in specialised finance in the UK – Securities – through Winterflood, a leader in UK market-making – Asset Management – investing to become a leader in UK wea
Slide 24: Business update: Banking
Business update Banking • Build on specialised lending position and opportunities in environment • Streamlined divisional structure • Strengthened management team • Developed new products and extending existing lines – Retail – expand beyond second hand motor market to new car and franchise dealers
Slide 25: Business update: Banking
Business update Banking • Added front line loan origination capacity – Commercial – around 30 new sales staff – Retail – increased front line sales by around 30 people – Property – additional 5 business development staff • Efficient investment for growth – Overall headcount up 11% – Expense/income r
Slide 26: Business update: Banking market share growth
Business update Banking • Significant growth in loan book with demonstrable growth in market share – Asset – share of new business grew from 4% to 6% – Invoice – 13% of independent market, up from 8% – Motor – share of used car independent dealership market increased from 5% to 9% – Premium – approa
Slide 27: Business update: Securities - Winterflood
Business update Securities - Winterflood • Key driver of the Securities business – Contributed over 80% of divisional profit • Leading UK market-maker • Registered in over 3,300 UK securities – double nearest competitor • Model focused on trading and technology • Market-maker, not a proprietary trad
Slide 28: Business update: Securities - Winterflood
Business update Securities - Winterflood • Maintain market leadership in core market-making businesses – Continue to invest in technology • Opportunities to expand outside non-core business: – US – build out broker/dealer relationships – Europe – explore market opportunities to capture retail order
Slide 29: Business update: Securities - Seydler and Mako
Business update Securities Seydler • Well positioned for : – Development of Frankfurt floor based trading platform – Increased equity and debt capital market activity Mako • Continue to have strong position in core derivatives market-making business – Well placed when market conditions improve • Gro
Slide 30: Business update: Asset Management
Business update Asset Management • Subdued financial performance but significant transformation and change • Assessed capabilites, strengths and existing businesses • Build on opportunities in current environment – Significant change in the landscape driven by regulation • Undertook research to iden
Slide 31: Asset Management: strategic approach and progress
Business update Asset Management – strategic approach and progress Private Clients Institutional UK affluent UK HNW Institutional £100k to £1m £1m to £5m £10m + Discrete channels to market Investment capabilities Brand • Progress on the UK wealth strategy: – Defined strategy – project team, £860 mil
Slide 32: Asset Management: timeline
Business update Asset Management – timeline 2009 2010 2011 2012 2013 UK Private Clients Research Proposition development & infrastructure IFA acquisitions Client funds flows Institutional Proposition development Client funds flows Investment capability Integrate & build expertise Page 32
Slide 33: Business update: Conclusion
Business update Conclusion • Good overall result in financial year 2010 • Banking – performing well, looking to further extend leadership position • Securities – good businesses. Winterflood – leader and well positioned as market volumes return • Asset Management – undergoing transformation with cle
Slide 34: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Page 34
Slide 35: Preliminary results 2010
Preliminary results 2010 28 September 2010
Slide 36: Appendix
Appendix Page 37 Segmental analysis 40 Banking loan book breakdown 41 Banking lending statistics 42 Group net expenses 43 Funding maturity profile Page 36
Slide 37: Segmental analysis: Summary income statement
Segmental analysis Summary income statement Asset Continuing Discontinued £ million Banking Securities Management Group operations operations Total Year ended 31 July 2010 Adjusted operating income 272.0 162.2 97.0 0.5 531.7 - 531.7 Administrative expenses (118.3) (100.9) (91.9) (20.6) (331.7) - (33
Slide 38: Segmental analysis: Summary balance sheet at July 2010
Segmental analysis Summary balance sheet at 31 July 2010 Asset £ million Banking Securities Management Group1 Total Cash and loans and advances to banks 493.5 26.8 90.4 0.5 611.2 Settlement balances, long trading positions and loans to money brokers2 - 713.3 - - 713.3 Loans and advances to customers
Slide 39: Segmental analysis: Summary balance sheet at July 2009
Segmental analysis Summary balance sheet at 31 July 2009 Asset £ million Banking Securities Management Group Total Cash and loans and advances to banks 27.9 24.3 145.3 0.7 198.2 Settlement balances, long trading positions and loans to money brokers1 - 728.9 - - 728.9 Loans and advances to customers
Slide 40: Banking: Loan book breakdown
Banking Loan book breakdown 31 July 31 July 2010 2009 Change £ million £ million £ million % Retail 1,201.9 995.4 21% Premium finance 553.6 455.5 22% Motor finance1 648.3 539.9 20% Commercial 1,162.9 882.3 32% Invoice finance2 262.1 170.3 54% Asset finance 900.8 712.0 27% Property 547.8 487.2 12% Cl
Slide 41: Banking: Typical lending statistics by business
Banking Typical lending statistics by business Typical LTV %1 Average loan size2 Typical loan maturity3 Asset finance 80% £21.0k 3 yrs Premium finance 90% £0.6k 10 mths Property finance 50-60% £754.5k 12-18 mths Motor finance 75% £4.5k 2-3 yrs Invoice finance 80% £222.7k 2-3 mths Notes: Figures are
Slide 42: Group net expenses
Group net expenses Consistent underlying performance Group central functions £ million 2010 2009 % change • Controlled costs despite investing in central resources Adjusted operating – FY 2010 adjusted operating expenses of 0.5 3.8 (87%) income £21.3 million flat on prior year and broadly in line wi
Slide 43: Funding maturity profile
Funding maturity profile Overall funding position remained strong 3-12 £ million Total <3 months months 1-2 years 2-5 years >5 years Loans and overdrafts from banks1 762 397 215 150 - - Promissory notes 219 - - - 21 198 Subordinated loan capital 75 - - - 30 45 Loans against FRN portfolio 402 - 402 -