Close Brothers Group plc · LSE:CBG
Close Brothers — FY2011 Earnings Presentation
40 slides from Close Brothers's earnings presentation, Sep 27, 2011
Slide 1: Preliminary Results 2011
Preliminary Results 2011 27 September 2011
Slide 2: Disclaimer
Disclaimer 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, forward-looking statements involve a number of risks, unc
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 Strictly private and confidential 3
Slide 4: Introduction: FY 2011 highlights
Introduction FY 2011 highlights • Good strategic progress and operational performance in core business – adjusted operating profit up 13% to £131 million – Strong performance in Banking, 34% increase in profit and 18% loan book growth to £3.4 billion – Solid performance from Securities in mixed mark
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 Strictly private and confidential 5
Slide 6: Financial Highlights
Financial Highlights Continuing operations £ million 2011 2010 % change Adjusted operating income 548.5 495.3 11% Adjusted operating profit 131.2 116.5 13% Adjusted EPS 64.8p 58.2p 11% Dividend per share 40.0p 39.0p 3% Key Financial Ratios Operating margin 24% 23% 1% Expense/income ratio 64% 64% - C
Slide 7: Financial Highlights: Exceptional items and discontinued operations
Financial Highlights Exceptional items and discontinued operations £ million 2011 2010 % change Exceptional items (46.9) (15.0) Of which: Impairment of investment in Mako1 (36.0) - Asset Management restructuring2 (15.4) - Investment gains3 4.5 - Impairment on investment assets4 - (15.0) Goodwill imp
Slide 8: Financial Highlights: Performance by division
Financial Highlights Performance by division Adjusted operating profit (continuing operations) • Banking delivered strong performance – 34% increase in adjusted operating profit – 18% loan book growth to £3.4 billion – Bad debt ratio improved to 2.1% % £ million 2011 2010 Change • Solid performance
Slide 9: Financial Highlights: Summary Balance Sheet
Financial Highlights Summary Balance Sheet • Increasing balance sheet efficiency Summary Balance Sheet – 18% increase in loan book to £3.4 billion 31 July 31 July £ million 2011 2010 Change – Managed reduction in treasury Assets assets to £1.4 billion Treasury assets1 1,405 2,035 (630) – Overall tot
Slide 10: Capital
Capital Strong capital position maintained % • Strong capital position maintained 18 Total capital ratio 15.8% Total capital ratio – Core tier 1 capital ratio of 13.1% and total 16 14.9% capital ratio of 14.9% 14 – Employing capital for loan book growth and 12 focused acquisitions in Asset Managemen
Slide 11: Funding
Funding Increasing diversity and enhancing maturity profile Funding position at 31 July 2011 • Strong funding position of £5.4 billion, £ million 1.6x loan book of £3.4 billion 6,000 5,402 5,402 • Further diversification of wholesale 5,000 funding, raising £1.0 billion through syndication, securitis
Slide 12: Treasury assets
Treasury assets Improved efficiency whilst maintaining appropriate level of liquidity Loan book and treasury assets • Focus on funding loan book efficiently whilst £ million maintaining appropriate level of high quality liquidity 5,000 • Managed reduction in overall treasury assets to £1.4 billion 4
Slide 13: Banking: Key figures
Banking Key figures £ million 2011 2010 % change Adjusted operating income 326.0 272.0 20% Adjusted operating expenses (154.5) (129.1) 20% Impairment losses on loans and advances (65.2) (63.4) 3% Adjusted operating profit 106.3 79.5 34% Closing loan book 3,435 2,913 18% Bad debt ratio1 2.1% 2.4% Key
Slide 14: Banking: Income analysis
Banking Income analysis Adjusted operating income by type Key figures £ million 350 2011 2010 % change 326.0 +20% -16% Net interest and fees 13.7 on loan book 312.3 255.6 22% 300 Property 272.0 42.9 (£ million) +18% 16.4 Average loan book 3,174 2,639 20% 250 (£ million) 36.5 Net interest margin1 9.8
Slide 15: Banking: Loan book analysis
Banking Loan book analysis Loan book size by business unit • 18% organic growth to £3.4 billion £ million • Retail loan book increased 23% 3,500 3,435 +18% – Increased new business in premium finance, particularly personal insurance 563 +3% 3,000 2,913 – Strong growth in motor finance 548 2,500 • Co
Slide 16: Banking: Key ratios
Banking Key ratios Margin and bad debt analysis • FY 2011 bad debt ratio reduced to 2.1% 12.0% – Improvement in Commercial – Retail remains at low levels 9.7% 9.8% 10.0% 9.4% • NIM remained strong at 9.8% 8.0% • Return on net loan book increased to 3.3% (FY 2010: 3.0%) 6.0% 4.0% 3.3% 3.0% 2.6% 2.4%
Slide 17: Securities: Key figures
Securities Key figures £ million 2011 2010 % change Adjusted operating income 158.7 162.2 (2)% Adjusted operating expenses (103.9) (102.9) 1% Adjusted operating profit 54.8 59.3 (8)% Of which: Winterflood 43.2 48.7 (11)% Seydler 9.0 4.9 84% Mako 2.6 5.7 (54)% Key Financial Ratios Operating margin 33
Slide 18: Securities: Income analysis
Securities Income analysis Adjusted operating income by business Key figures £ million 2011 2010 % change 180 Winterflood bargains 162.2 48k 47k 2% 158.7 -2% per day 160 5.7 2.6 -54% Winterflood income 24.9 £10.39 £11.18 (7%) 140 31.6 +27% per bargain 120 • Winterflood delivered resilient performanc
Slide 19: Asset Management: Key figures
Asset Management Key figures (continuing operations)1 £ million 2011 2010 % change Adjusted operating income 63.8 60.6 5% Adjusted operating expenses (72.4) (62.1) 17% Adjusted operating (loss)/profit (8.6) (1.5) Closing AuM 9,558 6,881 39% Of which: Private Clients 6,509 3,323 96% Institutional 3,0
Slide 20: Asset Management: Income analysis
Asset Management Income analysis (continuing operations) Adjusted operating income by type Key figures £ million 70 2011 2010 % change 63.8 +5% Average AuM 60.6 (£ million) 8,219 6,606 24% 60 6.5 (48)% 12.5 Revenue margin1 70 bps 73 bps 50 40 • 19% increase in management fees on AuM, reflecting: 30
Slide 21: Asset Management: Significant growth in Private Client assets
Asset Management Significant growth in Private Client assets in line with strategy Assets under Management Private Private £ million Clients Institutional Total £ million Clients Institutional Total Net new funds % of 8% (6)% 1% opening AuM 1 August 2010 3,3241 3,557 6,881 Market movement % of 9% 7%
Slide 22: Outlook: 2012 financial year
Outlook 2012 financial year • The group remains focused on developing and growing its core businesses • In Banking we continue to see good opportunities for growth • The Securities division is experiencing difficult market conditions but remains well positioned • The Asset Management division enteri
Slide 23: 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 Strictly private and confidential 23
Slide 24: Business Update: Implementing strategic priorities
Business Update Implementing strategic priorities • Clear strategy focusing activities around three core businesses with high quality, sustainable earnings – Capture growth in the Banking division, a leader in specialist finance – Maintain leadership in Securities, a leader in UK market-making throu
Slide 25: Business Update: Banking strategic priorities
Business Update Banking Strategic priorities • Take advantage of opportunities in current market to drive growth • Continued strong demand within our core markets – Enhanced sales capacity and broader distribution • Maintain specialist, predominately secured lending model and extend to adjacent area
Slide 26: Banking division: Sustainable growth throughout the cycle
Banking division Sustainable growth throughout the cycle Loan book at 31 July, £ billion AOP, £ million 3.5 120 3.0 100 Credit 2.5 crunch Easy credit 80 2.0 60 1.5 Bear Market 40 1.0 20 0.5 Recession 0.0 0 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Slide 27: Business Update: Securities strategic priorities
Business Update Securities Strategic priorities • Maintain Winterflood’s leadership position and deliver results in a range of market conditions – One loss day in 2011 financial year – Maintained position as a leading market maker in the UK – Resilient through recent volatile markets • Continue to e
Slide 28: Winterflood: Consistently profitable over time
Winterflood Consistently profitable over time £ million 60 50 49 5 year average (41) 47 40 43 10 year average (35) 40 38 39 35 30 20 24 24 17 10 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Adjusted operating profit 5 year ave 10 year ave Loss 23 15 5 5 4 1 14 7 4 1 days Strictly private and
Slide 29: Business Update: Asset Management strategic priorities
Business Update Asset Management Strategic priorities • Transform the division to become a leader in UK wealth and asset management • Focus on core activities – Sale of UK offshore, Cayman Islands and property funds • Build scale and distribution in Private Clients – Acquisition of Chartwell, Allenb
Slide 30: Asset Management: Proposition for Private Clients
Asset Management Proposition for Private Clients • 122 advisers • 53 investment • Goal-based planning professionals • Personal Client Plan • Multi-asset class Investment • Simple to complex – Lifestyle Advice Management solutions – Tax planning • Award-winning – Investment • Now – Legacy • Now Execu
Slide 31: Business Update: Conclusion
Business Update Conclusion • Good strategic and operational progress • Remain focused on implementing our strategy for our core businesses • Banking – focus on growth whilst maintaining model • Securities – maintained leading position • Asset Management – well underway to complete transformation Str
Slide 32: 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 Strictly private and confidential 32
Slide 33: Preliminary Results 2011
Preliminary Results 2011 27 September 2011
Slide 34: Appendix
Appendix Page 35 Loan book and lending statistics by business 36 Funding maturity profile 37 Discontinued operations 38 Segmental analysis Strictly private and confidential 34
Slide 35: Banking: Loan book and lending statistics by business
Banking Loan book and lending statistics by business 31 July 31 July 2011 2010 Change £ million £ million £ million % Retail 1,481.5 1,201.9 23% Premium finance 610.7 553.6 10% Motor finance 870.8 648.3 34% Commercial 1,390.7 1162.9 20% Invoice finance 311.5 262.1 19% Asset finance 1,079.2 900.8 20%
Slide 36: Funding maturity profile
Funding maturity profile Enhanced funding maturity 3-12 £ million Total <3 months months 1-2 years 2-5 years >5 years Loans and overdrafts from banks1 470 107 196 149 - - Debt securities in issue 548 - 350 - - 198 Subordinated loan capital 75 - - - - 75 Drawn facilities 1,093 107 546 149 18 273 Undr
Slide 37: Discontinued operations
Discontinued operations Sale of UK offshore and Cayman Islands businesses £ million 2011 2010 % change Operating income 31.5 36.4 (13)% Operating expense (29.5) (31.6) (7)% Operating (loss)/profit 2.0 4.8 (58%) Goodwill impairment (4.5) (6.5) Loss on disposal of discontinued operations (24.9) - - (L
Slide 38: Segmental analysis: Summary income statement
Segmental analysis Summary income statement Asset Continuing Discontinued £ million Banking Securities Management Group operations operations3 Total Year ended 31 July 2011 Adjusted operating income 326.0 158.7 63.8 - 548.5 31.5 580.0 Administrative expenses (142.2) (101.8) (72.0) (20.6) (336.6) (28
Slide 39: Segmental analysis: Summary balance sheet at July 2011
Segmental analysis Summary balance sheet at 31 July 2011 Asset £ million Banking Securities Management Group Total Cash and loans and advances to banks 668.4 24.7 15.1 1.1 709.3 Settlement balances, long trading positions and 706.9 loans to money brokers1 - - - 706.9 Loans and advances to customers
Slide 40: Segmental analysis: Summary balance sheet at July 2010
Segmental analysis Summary balance sheet at 31 July 2010 Asset £ million Banking Securities Management Group 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 brokers1 - 713.3 - - 713.3 Loans and advances to customers