Close Brothers Group plc · LSE:CBG
Close Brothers — FY2013 Earnings Presentation
39 slides from Close Brothers's earnings presentation, Sep 24, 2013
Slide 1: Preliminary Results FY 2013
Preliminary Results FY 2013 24 September 2013
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 2013 highlights
Introduction FY 2013 highlights • Achieved a strong performance – Adjusted operating profit1 up 24% to £167 million • Continued to deliver good returns for shareholders – Adjusted earnings per share2 of 83.1p, up 23% – Return on opening equity3 of 16% • Well positioned for future growth – Maintained
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: Adjusted operating profit
Adjusted operating profit Increasing contribution from all 3 divisions Growth in AOP • Total AOP up 24% to £167 million £ million – Increasing contribution from all 170 3 divisions 8 • Banking performed strongly, with 160 1 good loan book growth and lower bad debts – AOP up 17% to £158 million 150 2
Slide 7: Summary Income Statement
Summary Income Statement Strong growth in profit Summary Income Statement • 10% growth in income % – Strong growth in Banking and £ million 2013 2012 change increased contribution from Asset Management Adjusted operating income 582.9 531.7 10% • Expenses increased 8% to £366 Adjusted operating expen
Slide 8: Balance sheet assets
Balance sheet assets Simple balance sheet with focus on asset quality Total assets • Loan book and treasury assets now £ million >80% of total assets 8,000 • Loans and advances to customers up 13% to £4.6 billion 7,000 6,835 6,356 – Predominantly secured, supported 561 by consistent approach to cred
Slide 9: Funding
Funding Diverse range of funding sources with prudent maturity profile Good access to diverse funding sources Prudent maturity profile £ million £ million, at 31 July 2013 7,000 6,272 7,000 6,272 5,859 135% 6,000 6,000 5,000 5,000 4,646 2,953 3,448 4,015 4,000 4,000 2,7762 71% 3,000 3,000 2,000 2,00
Slide 10: Capital
Capital Capital ratios strengthened further Capital ratio 31 July 31 July % % Total £ million 2013 2012 change Total 16 14.5% 14.7% Core tier 1 capital 692 621 11% Total regulatory capital 763 703 9% 12 Core tier 1 Core tier 1 Risk weighted assets 5,189 4,860 7% 8 12.8% 13.3% 4 • Strong capital posi
Slide 11: Banking
Banking Continued strong performance % • Income up 10% to £396 million £ million 2013 2012 change Net interest and fees on loan – Driven by continued good loan 386.6 354.0 9% book growth book1 Treasury & other 9.6 7.5 28% Adjusted operating income 396.2 361.5 10% • Expenses of £188 million, up 11% –
Slide 12: Banking: Loan book growth
Banking Continued good loan book growth Loan book size by business unit • Good loan book growth of 13% £ million 5,000 • Retail increased 12% 4,646 +13% – Continued strong growth in Motor finance 4,500 4,126 from new and existing dealers 894 +14% 4,000 782 • Commercial increased 13% 3,500 – Growth i
Slide 13: Banking: Margin and bad debts
Banking Strong margin and low bad debts driving consistently high returns Performance ratios • Net interest margin of 8.8% – Reduction on prior year reflecting 10% 9.4% growth in lower margin, lower 9% 8.8% risk products 8% • Bad debt ratio improved to 1.2% 7% – Reduction across Retail, Commercial a
Slide 14: Securities
Securities Improved performance overall % • Overall AOP up 5% to £26 million, £ million 2013 2012 change notwithstanding continued low Adjusted operating income 106.3 101.4 5% investor risk appetite Adjusted operating expenses (80.6) (76.9) 5% AOP1 25.7 24.5 5% • Slight improvement in Winterflood, w
Slide 15: Securities: Winterflood income and expenses
Securities Slight improvement in Winterflood’s performance, notwithstanding continued low investor risk appetite Winterflood’s income and expenses Key figures £ million 2013 2012 80 Average bargains per day 47k 47k Income per bargain £6.33 £6.18 70 Loss days 8 13 60 50 • Performance slightly improve
Slide 16: Asset Management
Asset Management Returned to profitability as planned % • Good income growth of 12% to £78 £ million 2013 2012 change million Adjusted operating income 78.1 69.6 12% – Growth in both investment Adjusted operating expenses (74.1) (73.9) - management and advice income AOP 4.0 (4.3) • Stable cost base
Slide 17: Asset Management: AuM
Asset Management Overall AuM increased with improved mix AuM • Total AuM increased 9% to £9.1 £ million billion with improved mix 10,000 • Strong inflows of £1.2 billion across core distribution channels – Through own advisers, investment 9,000 1,201 managers, and third party IFAs (1,413) 972 • Net
Slide 18: Asset Management: Income drivers
Asset Management Income drivers – AuM and revenue margin • Revenue margin expansion driven Assets under Management by improved mix of assets £ million 10 – Overall margin 88 bps, up from 77 £9.1bn bps in prior year £8.3bn 8 4.0 • Total advised assets up 9% to £5.1 3.6 Total billion 6 Managed £6.2bn
Slide 19: 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 19
Slide 20: Business update: Simple business model and clear strategy
Business update Simple business model and clear consistent strategy • Strong performance in FY 2013 reflects strength of our Strong performance in FY 2013 business model Adjusted operating profit (£ million)1 • Prudent and conservative approach in uncertain markets has served our clients well 167 •
Slide 21: Business update: Long-term relationships
Business update Long-term relationships underpinned by strong expertise Long-term relationships and high level of service 500 front-line lenders From >40 offices Supporting over 23,000 SMEs in the Commercial businesses and a further 1.8 million individuals Around 90 experienced traders at Winterfloo
Slide 22: Banking: Differentiated lending model
Business update Banking – Differentiated lending model • £4.6 billion loan book Strong key ratios ‒ Predominantly secured 12% ‒ Small ticket sizes 8% ‒ Conservative loan-to-value ratios ‒ Short-term maturities 4% 0% • High touch, high service model 2008 2009 2010 2011 2012 2013 ‒ National network of
Slide 23: Banking: Long-term track record of growth
Business update Banking – Long-term track record of growth • Lending model supports our strong Loan book growth in all market conditions returns £ billion 5 • Maintained strong market position through all market conditions 4 – 13% loan book growth in FY 2013 – 10 year loan book CAGR of 11% 3 2 • Sen
Slide 24: Banking: Well positioned for continued performance
Business update Banking – Well positioned to deliver continued strong performance Good growth potential in existing markets • Good demand for specialist, tailored finance solutions • Benefiting from reputation as trusted, reliable lender • Differentiated model and well-established distribution netwo
Slide 25: Winterflood: Flexible cost model
Business update Winterflood – Flexible cost model maximises profitability in all market conditions • Continued profitability demonstrates resilience of Winterflood’s business model in difficult market conditions • Highly variable cost base enables capacity to be retained for when markets improve • M
Slide 26: Winterflood: Focus on core market-making
Business update Winterflood – Continued focus on core market-making activities • Market leading position maintained through commitment to providing continuous liquidity in all market conditions • Achieves best execution for clients at competitive prices – Willing to make prices in any size for UK, E
Slide 27: Securities: Well positioned for recovery
Business update Securities – Well positioned for any sustained recovery • Market conditions have been difficult UK retail market average daily volumes1 – Low risk appetite 70k – Volumes in retail market have recovered 60k slightly but remain close to cyclical lows – New money raised on AIM continues
Slide 28: Asset Management: Completed restructuring
Business update Asset Management – Completed restructuring and developed scalable model • Significant transformation over 3 years Strong external recognition – Returned to profitability in FY 2013 as expected 1 • Stabilised fixed cost base – Increasing operating leverage as business develops scale •
Slide 29: Asset Management: Progress towards medium-term targets
Business update Asset Management – Continued progress towards medium-term targets FY 2011 FY 2013 FY 2015 Revenue margin 71 bps 88 bps ~ 100 bps Operating margin (13)% 5% 15% • Developing propositions • Organic gross inflows • Organic net inflows Strategic progress • Acquisitions • Integrating acqui
Slide 30: Asset Management: Clear path to profit growth
Business update Asset Management – Clear path to profit growth Generating profit growth as a single, integrated business • Organic revenue growth – Increased growth in AuM › Growth in all core distribution channels – Revenue margin improvement › Sales of integrated private client proposition • Incre
Slide 31: Outlook
Outlook • The group is well positioned looking ahead to 2014 – In Banking we continue to see good opportunities for growth – Securities remains well placed to benefit from any sustained improvement in trading conditions – In Asset Management we expect continued progress towards our medium-term targe
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 FY 2013
Preliminary Results FY 2013 24 September 2013
Slide 34: Appendix
Appendix Page 35 Segmental analysis 38 Funding maturity profile 39 Banking Strictly private and confidential 34
Slide 35: Segmental analysis: Summary income statement
Segmental analysis Summary income statement Asset £ million Banking Securities Management Group Total Full year to 31 July 2013 Adjusted operating income 396.2 106.3 78.1 2.3 582.9 Administrative expenses (168.8) (78.7) (72.6) (22.6) (342.7) Depreciation and amortisation (19.0) (1.9) (1.5) (0.7) (23
Slide 36: Segmental analysis: Summary balance sheet July 2013
Segmental analysis Summary balance sheet at 31 July 2013 Asset £ million Banking Securities Management Group Total Cash and loans and advances to banks 984.4 24.8 15.3 0.7 1,025.2 Settlement balances, long trading positions and - 595.5 - - 595.5 loans to money brokers Loans and advances to customers
Slide 37: Segmental analysis: Summary balance sheet July 2012
Segmental analysis Summary balance sheet at 31 July 2012 Asset £ million Banking Securities Management Group Total Cash and loans and advances to banks 789.7 14.8 11.9 0.4 816.8 Settlement balances, long trading positions and - 598.5 - - 598.5 loans to money brokers Loans and advances to customers 4
Slide 38: Funding maturity profile
Funding maturity profile Prudent funding maturity 3-12 £ million Total <3 months months 1-2 years 2-5 years >5 years Debt securities in issue 851 1 - 350 500 - Subordinated loan capital 77 2 - - - 75 Loans against FRN portfolio 18 18 - - - - Drawn facilities1 946 21 - 350 500 75 Undrawn facilities 2
Slide 39: Banking: Loan book and lending statistics
Banking Loan book and lending statistics by business 31 July 31 July 2013 2012 % Loan book £ million £ million change Retail 1,906.0 1,707.8 12% Motor finance 1,278.3 1,086.8 18% Premium finance 627.7 621.0 1% Commercial 1,845.7 1,635.9 13% Asset finance 1,482.3 1,327.2 12% Invoice finance 363.4 308