St. James's Place Plc · LSE:STJ
St. James's Place — FY2022 Earnings Presentation
45 slides from St. James's Place's earnings presentation, Feb 28, 2023
Slide 1: 2022 Full-year results
Your future, 2022 Full-year results
Slide 2: Introduction
Introduction Andrew Croft sJP
Slide 3: Agenda
Agenda 1. Andrew Croft New business update 2. Craig Gentle Financial results 3. Andrew Croft Business update and outlook 4. Q&A 3
Slide 4: A strong year for new business
A strong year for new business Robust new business performance despite difficult increasingly challenging trading conditions − £17.0 billion of new client inflows; second best year for gross inflows in our history − £9.8 billion of net inflows; 6.4% of opening FUM Fully advised model is key − suppor
Slide 5: Advice adds value for clients
Advice adds value for clients https://www.morningstar.com/en-uk/lp/value-of-advice-guide https://www.vanguard.co.uk/content/dam/intl/europe/documents/en/whitepapers/assessing-the-value-of-advice-eu-en-pro.pdf https://ilcuk.org.uk/wp-content/uploads/2019/11/ILC-What-its-worth-Revisiting-the-value-of-
Slide 6: Gross and net inflows: actual vs plan
Gross and net inflows: actual vs plan £bn Gross inflows Net inflows Despite 2022 challenges, we remain 40 on target for 2025 plan £35.2bn 35 £33.1bn 17.0 Two years to 31 December 2022: 30 17.3 − Actual performance on cumulative gross inflows has exceeded plan by c.£2.1 billion 25 − Actual performanc
Slide 7: Funds under management
Funds under management £bn FUM closed the period at £148.4 billion 160 − Positive net inflows offset by negative 140 market returns 120 FUM growth of 16% per annum compound over 10 years 100 2025 FUM ambition remains £200 billion 80 60 40 20 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 7
Slide 8: Financial results
Financi raig Gentle l sJP
Slide 9: Record financial results
Record financial results Underlying cash result £410.1 million, up 2% EEV operating profit £1,589.7 million, up 3% EEV NAV per share £16.66, up 1% Robust Solvency II position Full year dividend 52.78 pence per share (subject to shareholder approval of final) 9
Slide 10: Net income from FUM
Net income from FUM Net income from funds under £m management is up 5% to £607.7 million: +5% 600 − Consistent net inflows − Benefitted in excess of £40 million from 500 maturing FUM in gestation − Impacted by significant global market falls 400 Post-tax margin on mature FUM remains 607.7 within our
Slide 11: FUM in gestation
FUM in gestation Gestation balance now stands at Gestation FUM £45.5 billion – retention remains strong £’million future contribution to the Cash result Lower than at 31 December 2021 due 2023 47.9 to market falls 2024 111.3 If the gestation balance was mature now, 2025 176.2 it would contribute ove
Slide 12: Margin arising on new business
Margin arising on new business £m Movement in margin arising from new 160 business driven by: 140 − Lower gross inflows year on year -16% 120 − Higher allowances set with reference to productivity in 2021 100 80 146.4 60 122.4 40 20 0 2021 2022 12
Slide 13: Controllable expenses (post-tax)
Controllable expenses (post-tax) £m Controllable expenses of £277.9 million 300 +5% for 2022 are 5% up on prior year and in line with plan 250 Expect to contain growth in controllable expenses for 2023 to no more than 8% 200 on a pre-tax basis: 150 − Disciplined expense management 264.6 277.9 contin
Slide 14: Managing our resources
Managing our resources Total pre-tax IFRS expense base of c.£2bn − Well over two thirds of expenses vary with new business volumes or are matched by corresponding income, e.g. advice fees Controllable expenses do not vary with business volumes or income − Around half relates to people costs, so are
Slide 15: Net investment in Asia
Net investment in Asia £m Asia result in 2022 reflects market and 14 economic challenges 12 -17% -17% Expect restructuring charge in 2023, reflecting action to position the cost base 10 for the future Contributing to anticipated net 8 investment of c.£14 million for the year 13.6 6 11.3 Continue to
Slide 16: Net investment in DFM
Net investment in DFM £m Delivered a result in line with guidance 12 +14% Remain on track for break-even in 2024 10 Road to break-even is not linear due to spend on the back-office re-platforming 8 project DFM will therefore see a significant 6 improvement from late 2023 onwards 10.9 9.6 2023 net in
Slide 17: FSCS levy and regulatory fees
FSCS levy and regulatory fees FSCS levy of £27.3 million, down 3% £’million 2022 2021 − Industry levy costs have reduced, offset FSCS levy 27.3 28.1 by our increased market share Regulatory fees 12.7 9.7 − Expect the charge for 2023 could reduce FSCS levy and regulatory fees 40.0 37.8 further to app
Slide 18: Shareholder interest
Shareholder interest £m Shareholder interest is interest earned 18 on working capital and regulatory capital, +156% 16 not client related balances 14 It has increased significantly year on year due to increases in the Bank 12 of England base rate 10 If the base rate remains at 4%, 8 15.9 shareholder
Slide 19: Tax relief from capital losses
Tax relief from capital losses £20.7 million utilised in 2022 Level of utilisation largely due to significant market falls We expect to utilise the remaining stock of £2.1 million in 2023 After this £2.1 million is utilised, there will be no further tax relief from capital losses 19
Slide 20: Miscellaneous
Miscellaneous £16.5 million for 2022, up £4 million from 2021 Increase due to: − Increase in matched funding for the St. James’s Place Charitable Foundation − Market-driven movements in the fair value of a number of assets held on the balance sheet 20
Slide 21: Underlying cash result
Underlying cash result Underlying cash result up 2% to £m £410.1 million 450 +2% No one-off items for the year so the 400 total Cash result is also £410.1 million, 350 up 6% 300 Record financial result in a very challenging operating environment 250 200 401.2 410.1 150 100 50 0 2021 2022 21
Slide 22: Embedded value
Embedded value £’million 2022 2021 Unwind of the discount rate is sensitive New business contribution 977.2 1,002.2 to interest rate changes, and so is up Unwind of the discount rate 440.7 275.8 60% year on year Experience variance 89.0 89.5 Operating assumption change booked in 2022 for unit trust
Slide 23: Embedded value
Embedded value £’million 2022 2021 3% growth in EEV operating profit Funds management business 1,725.8 1,662.9 Significant market falls drove a negative Distribution business (58.8) (24.4) investment return variance Other (77.3) (93.1) Economic assumption change driven by EEV operating profit 1,589.
Slide 24: EEV NAV per share
EEV NAV per share EEV NAV per share of £16.66, £ up 1% in the year 18 +1% 16 14 12 10 8 6 4 2 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 24
Slide 25: IFRS
IFRS £’million 2022 2021 IFRS profit after tax up 41% year on year IFRS profit before tax 0.7 842.4 IFRS analysis is dominated by equal Policyholder tax credit/(charge) 501.1 (488.6) and opposite policyholder tax movements of £501.1 million IFRS profit before shareholder tax 501.8 353.8 − Distorts p
Slide 26: Combined life company solvency position
Combined life company solvency position 31 December 31 December No underlying change to our solvency 2022 2021 approach Net assets in excess of client liabilities 377.7 392.5 Ratio at 31 December 2022 has benefited Management solvency buffer 355.0 355.0 from two temporary effects which arose Managem
Slide 27: Dividends
Dividends Full-year dividend set at 70% of the Underlying cash result, in line with guidance The Board has therefore proposed a final dividend of 37.19 pence per share, bringing the full-year dividend to 52.78 pence per share 27
Slide 28: 2023 guidance summary
2023 guidance summary Net income from FUM margin range 59 – Net investment in DFM c.£8 million, 61bps for the year following the increase expected to break-even in 2024 in corporation tax FSCS levy expense c.£15 million Growth in controllable expenses to be Shareholder interest of c.£40 - £50 contai
Slide 29: Business update
Business update Andrew Croft
Slide 30: Our business priorities
Our business priorities Delivering value Our culture and Building to advisers and clients community being a leading through our investment responsible proposition business Building and Being easier protecting Continued to do business our brand and financial strength with reputation 30
Slide 31: Building community
Building community Growing the Partnership The Partnership today: − 4,693 advisers, +137 in 2022 − Strong pipeline of advisers currently in training via our Academy 31
Slide 32: Building community
Building community Developing the Partnership Utilising technology to evolve how we deliver learning and development − Recently launched new My House app for advisers and employees − Expanded roll-out of virtual reality adviser training Delivering targeted support to the Partnership 32
Slide 33: Being easier to do business with
Being easier to do business with Driving Salesforce adoption The SJP app Rolled out across the Partnership in 2021 Key stage of our programme to deliver 2022 focused on increasing adoption and our next generation client experience adviser engagement Rolled out to groups of clients in 2022. W
Slide 34: Delivering value to clients through our IMA
Delivering value to clients through our IMA Launch of new Polaris range of fund-of- fund solutions − Aimed at clients in accumulation stage of their financial journey − Highly diversified and automatically rebalanced − Actively managed − Four different levels of equity exposure Complements InRetirem
Slide 35: Our culture and being a leading responsible business
Our culture and being a leading responsible business Made good progress against our Net Zero commitments − Already exceeded interim 2025 target to reduce carbon footprint of client investments by 25% Driving transformative community impact − SJP community raised £10.5 million for the SJP Charitable
Slide 36: Building and protecting our brand and reputation
Building and protecting our brand and reputation Launched refreshed brand in early 2022 Good feedback from stakeholders Positive reputation reflected in industry awards 36
Slide 37: Our market opportunity
Our market opportunity The market for advice is large and growing, driven by: − Demographic trends and growing pools of investable wealth − Complexity of tax, savings and investment − Shift in responsibility for retirement savings from employer and the state to individuals − Growing savings gap − Co
Slide 38: Power of Partnership
Power of Partnership Fundamental to our business model and success for 30+ years Strong alignment in driving great client outcomes Benefit from complementary capabilities and shared focus 38
Slide 39: Building trusted relationships through face-to-face advice
Building trusted relationships through face-to-face advice Client engagement has evolved over time − Access to data and technology has shifted behaviours and expectations for many, but not all, clients We continue to invest in technology to support adviser-client engagement, not replace it Strong ad
Slide 40: The evolution of our client and adviser base
The evolution of our client and adviser base Proportion of new clients and advisers Our client base is evolving over time <30 years old 30% − Proportion of new clients <30 years old has nearly doubled over past 10 years 25% Academy supports evolution of the Partnership 20% − Proportion of new advise
Slide 41: Advisers: building productivity over time
Advisers: building productivity over time 2013 cohort of new advisers under 30 years old: Productivity of younger advisers naturally gross inflows per annum in first 10 years more modest in early years With support, productivity increases over time Strong evidence that younger advisers create long-t
Slide 42: Investing in the Academy, taking a long-term view
Investing in the Academy, taking a long-term view Academy a clear success − Partnership now includes more than 1,000 advisers who joined through this route − Facilitates succession planning and development of great Partner businesses − Helps improve diversity − Increases our ability to serve and sup
Slide 43: Outlook
Outlook 2023 has continued in much the same way that 2022 ended Encouraged by indications that inflationary and economic outlooks are improving If sustained, positive for consumer confidence and SJP new business and FUM in due course Remain confident in 2025 ambitions 43
Slide 44: Summary of results
Summary of results New business highlights − Gross inflows of £17.0 billion − Net inflows of £9.8 billion, 6.4% of opening FUM (annualised) − Funds under management £148.4 billion Financial highlights − Underlying cash result £410.1 million, up 2% − EEV operating profit of £1,589.7 million, up 3% −
Slide 45: Q&A
Any The live Q&A session will commence at 9.30am 04