Charles Stanley — H1 2017 Earnings Presentation
34 slides from Charles Stanley's earnings presentation, November 2016
Slide 1: Strategy on track
Focusing on you Strategy on track Interim results for six months ended 30 September 2016
Slide 2: Agenda
Agenda 1. Key messages 2. Financial results 3. Strategic implementation plan 4. Outlook Appendices 1 Interim results, six months to 30 September 2016
Slide 3: 1. Key messages
CHARLES STANLEY, 1. Key messages
Slide 4: Key messages
Key messages Group returned to profitability Agreement reached in relation to investment managers’ variable remuneration arrangements Turnaround programme complete and implementation phase of transformation gathering pace with focus on delivering enhanced client experience, growing revenues an
Slide 5: Update on remuneration proposals
Update on remuneration proposals Consultation concluded - investment managers representing approximately 90% of FUMA have currently accepted 2 new schemes to take effect from 1 April 2017, 1 each for employed and self-employed investment managers Both schemes profit based (revenues less direct
Slide 6: Operational highlights - positive momentum across all divisions
Operational highlights - positive momentum across all divisions Restructured Investment Management Services management team providing improved stewardship Created a range of risk-rated pooled vehicles being readied for launch Reorganised the Financial Planning division’s management team and co
Slide 7: 2. Financial results
CHARLES STANLEY, 2. Financial results
Slide 8: 1H17 Financial headlines
1H17 Financial headlines Financial highlights Business highlights Profit before tax from Core Business FuMA 1H 2017 £4.2m 30 September 2016 £22.5bn 1H 2016 £3.5m 30 September 2015 £20.0bn Reported profit before tax Discretionary funds 1H 2017 £3.6m 30 September 2016 £10.6bn 1H 2016 £2.0m 30 Septembe
Slide 9: Financial summary
Financial summary 1H17 1H16 Change FUMA (£bn) 22.5 20.0 13% Increase in FUMA broadly in line with markets Revenues down due to lower trading commission, interest on client Core Business revenue (£m) 68.8 70.8 (3%) cash balances and trail commission exceeding increase in fee income Core Business prof
Slide 10: Funds under Management and Administration
Funds under Management and Administration FUMA movement year on year (£bn) 1H17 1H16 Change Although average FuMA during the first half were 3% higher than prior year, the closing FuMA at 1H16 were 13% ahead 10.6 8.9 19% reflecting strong market growth post BREXIT and creating Discretionary funds po
Slide 11: Funds under Management and Administration - movements
Funds under Management and Administration - movements FUMA flows (£bn) 23.0 2.0 22.5 22.5 22.0 21.5 0.2 0.5 21.0 20.5 20.5 (0.7) 20.0 Funds at 1 April 2016 New clients Net inflow from existing Lost clients Market movement Funds at 30 September clients 2016 10 Interim results, six months to 30 Septem
Slide 12: Funds flows by category
Funds flows by category £bn 2.0 2.0 1.5 1.0 0.5 0.5 0.2 - - (0.5) (0.7) (1.0) New clients Transfers Net inflow from existing Lost clients Market movement clients Discretionary managed Advisory managed Advisory dealing Execution-only 11 Interim results, six months to 30 September 2016
Slide 13: Revenues
Revenues 1H17 1H16 Change £m £m % Fees: Fee Income 44.1 40.9 8% Trail Income 0.4 3.1 (87%) Fee income improvement in the period negated by a Total fees 44.5 44.0 1% decline in other revenue streams, mainly trail commission Commission 23.0 24.8 (7%) Interest 1.3 2.0 (35%) Total revenue 68.8 70.8 (3%)
Slide 14: Core Business operating expenses - improved cost control
Core Business operating expenses - improved cost control £m 68 Expenses incurred by the Core Business areas fell 3.1% 67.4 67 The largest proportion of savings were achieved by reducing remuneration costs, down £1.2 million, driven 66 by a 5.4% reduction in headcount to 898 employees (1.2) (0.3) 0.5
Slide 15: Core Business profitability - steady increase
Core Business profitability - steady increase £M 7.0 3.2 6.0 5.0 0.7 4.2 4.0 3.5 (2.7) 0.9 3.0 1.2 2.0 (1.8) (0.7) 1.0 - 1H16 Profit Fees Trail Commission Interest Remuneration Other costs Finance & Other 1H17 Profit Before Tax Costs Income Before Tax 14 Interim results, six months to 30 September 2
Slide 16: Reported performance and breakdown of adjusting items
Reported performance and breakdown of adjusting items 1H17 1H16 £m £m Core Business profit before tax 4.2 3.5 Adjusting items London Office Rationalisation: 1. Net gain on surrender of long term lease 3.2 - 2. Overlapping rent and occupancy costs (1.9) - 3. Dilapidations (0.9) - Amortisation of clie
Slide 17: Balance sheet
Balance sheet 1H17 FY16 Change £m £m % Total intangible assets 23.9 25.4 (6%) Fixed assets 9.0 10.7 (16%) Other non-current assets 11.1 9.9 12% Total tangible non-current assets 20.1 20.6 (2%) Cash 54.9 48.1 14% Increase in cash position partly due to the proceeds received on the Working capital (0.
Slide 18: Cash flow - also improved
Cash flow - also improved (£m) 1.3 0.2 54.9 55.0 5.6 3.9 50.0 (1.7) (0.7) 48.4 1.2 (1.5) (1.8) 45.0 40.0 Opening (1st Adjusted Capex Acquisition of Purchase of Dividends Sale of Proceeds from Proceeds from Dividends Closing (30th Apr 2016) operating intangible available for business surrender of sal
Slide 19: Financial KPIs
Financial KPIs 1H17 1H16 FY16 FUMA (£bn) 22.5 20.5 20.5 Core Business revenue growth (2.8%) 3.5% (3.3%) IMS Managed funds per CF30 (£m) 48.0 38.8 40.8 Revenues per Financial Planner (£000) 218 172 198 Reported staff costs / revenue 66.1% 65.8% 68.6% Reported total costs / revenue1 101.2% 97.6% 100.5
Slide 20: 3. Strategic implementation plan
3. Strategic implementation plan
Slide 21: Strategic implementation - actions for FY 2017
Strategic implementation - actions for FY 2017 Q1 Q2 Q3 Q4 Group Completion of detailed divisional strategy implementation plans Completed Project resource prioritisation agreed Completed Investment Management Services Variable remuneration arrangements delivered Completed Implementation of revised
Slide 22: Strategic implementation - actions for FY 2017
Strategic implementation - actions for FY 2017 Q1 Q2 Q3 Q4 Charles Stanley Direct New website with streamlined on-boarding Completed Review and implementation of pricing policy Completed Enhanced digital marketing strategy Completed Central Functions Head office move and London offices rationalisati
Slide 23: 4. Outlook
CHARLES STANLEY, 4. Outlook
Slide 24: Outlook
Outlook Market conditions remain favourable Conclusion of the remuneration consultation is a significant milestone Strategy in place to deliver sustainable growth; management are focused on detailed implementation plans and staff engaged to make it happen Medium term 15% operating margin tar
Slide 25: Appendices
CHARLES STANLEY, Appendices
Slide 26: Share plan for employed investment managers
Share plan for employed investment managers Creation of a new share plan for up to an additional 5% of current issued share capital. Acceptance of revised contract terms by employed investment managers is conditional on the new Share Plan being established which in turn is conditional on sharehold
Slide 27: Defined benefit pension scheme
Defined benefit pension scheme 1H17 FY16 £000s £000s Fair value of scheme assets 28,798 26,561 Recent actions taken to limit the Group’s exposure to Present value of defined benefit obligation (44,035) (36,651) volatility of pension surplus/(deficit): Scheme deficit (15,237) (10,090) Closed to accru
Slide 28: Core Business - divisional breakdown
Core Business - divisional breakdown Investment Asset Financial Charles Stanley Management Core Business Management Planning Direct Services £m £m £m £m £m 30 September 2016 Revenue 59.8 3.1 3.8 2.1 68.8 Expenses (53.8) (2.9) (5.8) (2.8) (65.3) Other income 0.2 - - - 0.2 Operating profit / (loss) 6.
Slide 29: Investment Management Services - financial performance
Investment Management Services - financial performance 1H17 1H16 Change £m £m % Revenue 59.8 61.3 (2%) Direct costs (30.3) (32.6) 7% Other income 0.2 0.1 100% Contribution 29.7 28.8 3% Allocated costs (23.5) (23.3) (1%) Operating Profit/(loss) 6.2 5.5 13% Contribution margin 49.7% 47.0% Operating ma
Slide 30: Asset Management - financial performance
Asset Management - financial performance 1H17 1H16 Change £m £m % Revenue 3.1 2.8 11% Direct costs (2.8) (2.9) 3% Contribution 0.3 (0.1) 400% Allocated costs (0.1) (0.3) 67% Operating Profit/(loss) 0.2 (0.4) 150% Contribution margin 9.7% (3.6%) Operating margin 6.5% (14.3%) Headcount (number) 33 34
Slide 31: Financial Planning - financial performance
Financial Planning - financial performance 1H17 1H16 Change £m £m % Revenue 3.8 4.1 (7%) Direct costs (3.6) (3.6) - Contribution 0.2 0.5 (60%) Allocated costs (2.2) (1.4) (57%) Operating Profit/(loss) (2.0) (0.9) (122%) Contribution margin 5.3% 12.2% Operating margin (52.6%) (22.0%) Financial planne
Slide 32: Charles Stanley Direct - financial performance
Charles Stanley Direct - financial performance 1H17 1H16 Change £m £m % Revenue 2.1 2.6 (19%) Direct costs (1.2) (1.5) 20% Contribution 0.9 1.1 (18%) Allocated costs (1.6) (1.8) 11% Operating Profit/(loss) (0.7) (0.7) - Revenue margin (bps) 22 30 (27%) Contribution margin 42.9% 42.3% Operating margi
Slide 33: Core Business - cost breakdown
Core Business - cost breakdown 1H17 1H16 Change £m £m % Revenue 68.8 70.8 (3%) Staff costs Fixed 24.6 25.4 (3%) Variable 20.9 21.3 (2%) Total staff costs 1 45.5 46.7 (3%) Other direct operating expenses 19.8 21.4 (7%) Total direct costs 65.3 68.1 (4%) Central costs 0.0 (0.7) 100% Total costs 65.3 67
Slide 34: Core Business – expenses breakdown
Core Business – expenses breakdown (£m) 1H16 21.3 25.4 6.1 3.5 5.2 1.2 4.7 67.4 1H17 20.9 24.6 6.1 3.2 4.0 1.3 5.2 65.3 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Fixed Staff Costs Variable Staff Costs IT Costs Establishment Costs Professional Fees Marketing Costs Admin Costs 33 Interim results, si
Charles Stanley Group — H1 2017 Earnings Presentation on 6ix