St. James's Place Plc · LSE:STJ
St. James's Place — FY2020 Earnings Presentation
48 slides from St. James's Place's earnings presentation, Feb 25, 2021
Slide 1: Full Year Results 25 February 2021
FULL YEAR RESULTS 25 FEBRUARY 2021
Slide 2: Andrew Croft: Review of 2020
01 ANDREW CROFT Review of 2020
Slide 3: Agenda
FULL YEAR RESULTS 2020 AGENDA Andrew Croft 2020 Review Craig Gentle 2020 Financial Results Andrew Croft 2025 ambitions Craig Gentle 2025 ambitions – Financial commentary Andrew Croft Summary Q&A 2 S T . J A M E S ’S P L A C E
Slide 4: Growing our business in 2020
FULL YEAR RESULTS 2020 GROWING OUR BUSINESS IN 2020 Gross inflows £14.3 billion Net inflows £8.2 billion, 7% of opening FUM 11% increase in funds under management to £129.3 billion Continued growth in a difficult environment 3 S T . J A M E S ’S P L A C E
Slide 5: Board changes
FULL YEAR RESULTS 2020 BOARD CHANGES Paul Manduca Iain Cornish Baroness Patience Chair Designate Chairman Wheatcroft Independent Non-Executive Director 4 S T . J A M E S ’S P L A C E
Slide 6: Building the Partnership
FULL YEAR RESULTS 2020 BUILDING THE PARTNERSHIP • Deliberately slowed experienced recruitment activity • Adapted the Academy - Deferred new intakes - Moved existing cohorts to virtual engagement • Partnership increased to 4,338 advisers 5 S T . J A M E S ’S P L A C E
Slide 7: The Partnership – supporting clients
FULL YEAR RESULTS 2020 THE PARTNERSHIP–SUPPORTING CLIENTS • Partnership exhibited agility to continue serving clients • Employed greater use of digital channels • Focused on communication of timely, relevant information for clients, together with maintaining personal engagement 6 S T . J A M E S ’S
Slide 8: An award-winning proposition
FULL YEAR RESULTS 2020 AN AWARD-WINNING PROPOSITION C@LWMA CITY OF LONDON WEALTH MANAGEMENT AWARDS WINNER 2020 WINNER) ONLINEPERSONAL WEALTHAWARDS 2020 BEST ADVISORY SERVICE Wealth Management Company of the Year . 4 eee nmcelarer investors AWARDS 2020 Top Rated 2020 fs Frersonal hice Fina —— HU aa)
Slide 9: Strengthening our investment approach
FULL YEAR RESULTS 2020 STRENGTHENING OUR INVESTMENT APPROACH • Redesigned global equity offering • Evolved fixed income fund range • Developments support growing scale of FUM and future proof our proposition for clients 8 S T . J A M E S ’S P L A C E
Slide 10: InRetirement funds
FULL YEAR RESULTS 2020 IN RETIREMENT FUNDS • Three newly launched funds aiming to tackle challenge of sustainable decumulation in retirement: - Prudence InRetirement - Balance InRetirement - Growth InRetirement 9 S T . J A M E S ’S P L A C E
Slide 11: Investing in technology
FULL YEAR RESULTS 2020 INVESTING IN TECHNOLOGY 10 S T . J A M E S ’S P L A C E
Slide 12: Investing in technology
FULL YEAR RESULTS 2020 INVESTING IN TECHNOLOGY A NEW TOOL FOR PARTNERS AND CLIENTS TO CHAT AND SHARE DOCUMENTS SECURELY MORE THAN 47% OF FORMS SENT VIA DOCUSIGN ARE BEING RETURNED BY CLIENTS WITHIN AN HOUR AND MORE THAN 75% WITHIN A DAY 11 S T . J A M E S ’S P L A C E
Slide 13: A responsible business
FULL YEAR RESULTS 2020 A RESPONSIBLE BUSINESS ST. JAMES’S PLACE SAREONEMISSIONS RepoRy CHARITABLE FOUNDATION BUSINESS IN THE COMMUNITY £9 million raised Principles for Responsible Investment ePRI (12) ST. JAMES’S PLACE
Slide 14: Craig Gentle: Financial results
02 CRAIG GENTLE Financial results
Slide 15: Agenda
FULL YEAR RESULTS 2020 AGENDA New business and the Partnership Cash result Embedded value and solvency Dividends 14 S T . J A M E S ’S P L A C E
Slide 16: Gross inflows
FULL YEAR RESULTS 2020 GROSS INFLOWS 2020 shape of gross inflows - £’billion 15 • 2020 gross inflows of £14.3 billion 14.33 • Represents 12% of opening FUM 12 • Mix of new business weighted towards 9 pensions ~ 60% of inflows 6 4.04 4.02 3 3.22 3.05 0 Q1 Q2 Q3 Q4 FY 20 15 S T . J A M E S ’S P L A C
Slide 17: Net inflows
FULL YEAR RESULTS 2020 NET INFLOWS 2020 shape of net inflows - £’billion 10 • Retention of existing client investments remained strong ~96%, reflecting work 8 8.25 of advisers in supporting clients • Full year net inflows of £8.2 billion, 6 representing 7% of opening FUM 4 2 2.37 2.29 2.15 1.44 0 Q1
Slide 18: Funds under management
FULL YEAR RESULTS 2020 FUNDS UNDER MANAGEMENT Funds under management closed at a record £129.3 billion £140bn +11% £120bn £100bn £80bn £60bn £40bn £20bn £0bn 2016 2017 2018 2019 2020 17 S T . J A M E S ’S P L A C E
Slide 19: The Partnership
FULL YEAR RESULTS 2020 THE PARTNERSHIP Total advisers increased to 4,338 4,500 • Total adviser numbers increased to 4,338 4,000 • Adapted recruitment activity – shift to digital 3,500 • Academy programme moved to online delivery 3,000 and new entrants deferred 2,500 2,000 1,500 1,000 500 0 2015 2016
Slide 20: Net income from funds under management
FULL YEAR RESULTS 2020 NET INCOME FROM FUNDS UNDER MANAGEMENT Net income from FUM up 7% - £’million 500 • Growth in net income from FUM of 7% reflects 455.9 contribution from new UT/ISA business and 400 424.9 maturing of FUM in gestation, offsetting impact of investment markets 300 • Margin on matur
Slide 21: Gestation FUM – underpinning future returns
FULL YEAR RESULTS 2020 GESTATION FUM–UNDERPINNING FUTURE RETURNS Contribution to the Cash result from maturing FUM - £’million 400 • FUM in gestation provides visibility around 350 growth in net income from FUM 300 • By 2026, the annual contribution to the post- tax cash result of FUM currently in g
Slide 22: Margin arising from new business
FULL YEAR RESULTS 2020 MARGIN ARISING FROM NEW BUSINESS Margin arising from new business down 8% - £’million 140 • Reduction reflects lower new business 120 127.5 volumes coupled with gearing impact 116.8 of modest fixed expenses 100 • Consistent with H1 outturn 80 60 40 20 0 2019 2020 21 S T . J A
Slide 23: Controllable expenses (post-tax)
FULL YEAR RESULTS 2020 CONTROLLABLE EXPENSES (POST-TAX) Split of controllable expenses - £’million 300 • 7% growth in establishment expenses: - disciplined approach continued 250 - people, property and core IT account for 85%+ 200 • Operational development costs accelerated: - facilitation of remote
Slide 24: Asia
FULL YEAR RESULTS 2020 ASIA Asia income vs expenses (pre-tax) - £’million 25 • SJP Asia FUM now c.£1.2 billion, up 26% 20 • Reached EEV break even in 2020 • Improvement in full year net investment 15 versus 2019 - Revenue higher than 2019, benefiting from 10 ongoing maturing of FUM in gestation - Fo
Slide 25: DFM
FULL YEAR RESULTS 2020 DFM DFM income vs expenses (pre-tax) - £’million 30 • Rowan Dartington FUM now £2.9 billion, up 3% 25 • Volatility impacted flows and income vs plan, but net cash result modestly ahead of 2019 20 • 2020 progress on enhancing alignment 15 alongside IMA to drive future growth •
Slide 26: Cash result
FULL YEAR RESULTS 2020 CASH RESULT Underlying cash result and cash result - £’million 300 • Underlying cash result of £264.7 million; strong outcome given market and 250 operating conditions 200 • Cash result of £254.7 million, up 11% 150 100 50 0 2019 2020 Underlying cash result Cas h result 25 S T
Slide 27: Embedded value
FULL YEAR RESULTS 2020 EMBEDDED VALUE Year 2020 2019 • New business contribution £766.3 million, driving EEV EEV operating profit (£’million) 919.0 952.0 operating profit result EEV profit before tax (£’million) 1176.0 1693.6 • Positive investment variance more modest than for 2019 EEV NAV per share
Slide 28: Combined life company solvency position
FULL YEAR RESULTS 2020 COMBINED LIFE COMPANY SOLVENCY POSITION Year 2020 2019 • Solvency managed on the basis of holding assets to match client Net assets in excess of client liabilities 424.6 337.7 unit-linked liabilities plus the MSB Management solvency buffer 345.0 320.0 • Solvency position remai
Slide 29: 2020 dividends
FULL YEAR RESULTS 2020 2020 DIVIDENDS • Withheld 11.22 pence per share of 2019 proposed final dividend to be paid to shareholders as interim dividend in Q1 2021 • 2020 final dividend of 38.49p, representing 78% pay-out ratio to the underlying cash result 28 S T . J A M E S ’S P L A C E
Slide 30: Andrew Croft: 2025 ambitions
03 ANDREW CROFT 2025 ambitions
Slide 31: UK market opportunity – aggregate wealth
FULL YEAR RESULTS 2020 UK MARKET OPPORTUNITY–AGGREGATE WEALTH UK aggregate wealth by age cohort 30% 27% • Retail wealth large & growing 25% 24% 23% • Longer life expectancy 20% • Individual responsibility for retirement and long-term care 15% • 87% of total UK wealth is in the hands 10% 10% 10% of t
Slide 32: UK market opportunity – challenges to saving
FULL YEAR RESULTS 2020 UK MARKET OPPORTUNITY–CHALLENGES TO SAVING • Interconnected world • Complex tax regulations and increasing tax burden • Sustained low interest rate environment 31 S T . J A M E S ’S P L A C E
Slide 33: The value of advice
FULL YEAR RESULTS 2020 THE VALUE OF ADVICE “Advice improves financial literacy, confidence and delivers greater control, reassurance and piece of mind” 32 S T . J A M E S ’S P L A C E
Slide 34: The UK savings gap
FULL YEAR RESULTS 2020 THE UK SAVINGS GAP ‘UK citizens will on average outlive savings UK savings gap by 10 years’ set to reach £350 billion by 2050 * Financial Times 33 S T . J A M E S ’S P L A C E
Slide 35: The UK advice gap today
FULL YEAR RESULTS 2020 THE UK ADVICE GAP TODAY • 33k number of qualified advisers in the UK • Half the number per capita than US and Australian markets • External market for advisers is expected to reduce • Emphasises the importance of the Academy - 244 ‘students’ currently in Academy - 350 new entr
Slide 36: Looking to the future – our planning assumptions
FULL YEAR RESULTS 2020 LOOKING TO THE FUTURE–OUR PLANNING ASSUMPTIONS • New business growth of c.10% per annum - Driven by combination of growth in the Partnership and productivity gains • Core target of £200 billion of FUM by 2025 • Containing expense growth to 5% per annum - Enables targeted inves
Slide 37: Craig Gentle: 2025 ambitions – financial commentary
FULL YEAR RESULTS 2020 04 CRAIG GENTLE 2025 ambitions – financial commentary
Slide 38: Our 2025 ambition – FUM of £200+ billion
FULL YEAR RESULTS 2020 OUR 2025 AMBITION–FUM OF £200+ BILLION Driving new business • Achieving growth in gross inflows of 10% per annum over the medium-term • Driven by a combination of adviser growth and productivity gains Investing in our future • Deploying technology to better support advisers an
Slide 39: Our 2025 ambition – how we get there
FULL YEAR RESULTS 2020 OUR 2025 AMBITION–HOW WE GET THERE A changing use of resources • Pivoting away from headcount growth towards technology and smart operating processes • Growth in total controllable costs (sum of establishment expenses, operational and strategic development costs, and the Acade
Slide 40: Containing expense growth
FULL YEAR RESULTS 2020 CONTAINING EXPENSE GROWTH Controllable expenses (post-tax) - £’million • Planned 5% growth in total controllable expenses: 2020 2021 2022 - Establishment expenses flat on 2020 Establishment expenses 200.0 Flat - Operational and strategic development Operational and strategic d
Slide 41: Future dividends
FULL YEAR RESULTS 2020 FUTURE DIVIDENDS • Shift in mix towards pensions is structural for our planning horizon • IFRS requires deferral of initial cash margin arising on new business - Quantum of deferral is greater for investment bonds and pensions • Sustained mismatch in timing of emergence of cas
Slide 42: Andrew Croft: Summary
05 ANDREW CROFT Summary
Slide 43: Summary
FULL YEAR RESULTS 2020 SUMMARY Gross inflows £14.3 billion; Net inflows £8.2 billion 11% increase in funds under management to £129.3 billion Robust financial performance, cash result up 11% to £254.7 million Withheld 2019 dividend amount of 11.22 pence per share reinstated 38.49 pence per share fin
Slide 44: A live Q&A session will commence at 9:20 am
A live Q&A session will commence at 9:20 am.
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Slide 46: Appendices
APPENDICES
Slide 47: Guidance summary (Part 1)
FULL YEAR RESULTS 2020 GUIDANCE SUMMARY (PART 1) New business - Gross inflows to grow c.10% per annum over the medium-term Cash result - 2021 margin on mature FUM to remain in range of c.63-65bps - Controllable expense growth to be contained to 5% per annum - 2021 establishment expenses flat on 2020
Slide 48: Guidance summary (Part 2)
FULL YEAR RESULTS 2020 GUIDANCE SUMMARY (PART 2) Cash result continued - Tax relief from capital losses to be utilised at rate of c.£8-10 million per annum - Asia to move to positive cash result by 2025 - DFM to move to positive cash result by 2024 Dividends - Full year dividends to be set consideri