St. James's Place Plc · LSE:STJ
St. James's Place — H1 2023 Earnings Presentation
40 slides from St. James's Place's earnings presentation, Jul 27, 2023
Slide 1: Embrace your future: 2023 Half-year results
Embrace your 2023 Half-year results
Slide 2: Introduction
Introduction Andrew Croft ci sJP
Slide 3: Agenda
Agenda 1. Andrew Croft Introduction 2. Craig Gentle Financial results 3. Andrew Croft Business update and outlook 4. Q&A 3
Slide 4: Market backdrop
Market backdrop ♦ Challenging environment for UK Inflation vs deposit rates vs fixed mortgage rates consumers in H1 12% − Inflation higher for longer 10% − Rising BOE base rates driving higher saving 8% and lending rates − Anaemic economic growth 6% ♦ Short-term pressures facing consumers, 4% but ne
Slide 5: New business highlights
New business highlights ♦ New business performance robust £bn Gross inflows Net inflows 10 ♦ £8.0 billion gross inflows 9 − Stable flows into longer term investment wrappers 8 − Softening in discretionary investments, esp 7 UT/ISAs 6 − Increasing deposits into Flagstone 3rd party cash management pla
Slide 6: Record funds under management
Record funds under management £bn ♦ FUM closed the period at £157.5 billion, 160 up 6% since end-2022 140 ♦ Increased more than three-fold since the end of 2013 120 100 80 60 40 20 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 H1 23 6
Slide 7: Consumer Duty
Consumer Duty ♦ Significant change in regulatory landscape − Underpinned by new principle that ‘firms act to deliver good outcomes for retail customers’ − Relevant to all firms engaged in retail financial services ♦ Welcomed opportunity to strengthen commitment to clients further and enhance deliver
Slide 8: Consumer Duty continued
Consumer Duty continued ♦ Key change for clients relates to introduction of annual product management fee cap for long duration bond and pension investments − Cap of 85bps annual product management charge on bond and pension investments when duration > 10 years − Rewards and encourages long-term cli
Slide 9: Financial results
Financi raig Gentle lL sJP
Slide 10: Summary financial results
Summary financial results Underlying cash result £207.1 million, up 4% EEV profit after tax £55.7 million EEV NAV per share £16.28 Robust Solvency II position Interim dividend 15.83 pence per share, up 2% 10
Slide 11: Underlying post-tax cash result
Underlying post-tax cash result Restated for new Like-for-like ♦ Underlying post-tax cash result of £m effective tax rate +10% of 23.5% £207.1 million 250 − Up 4% despite increase in corporation tax rate in current year 200 − Excluding corporation tax change, up 10% on a like-for-like basis 150 ♦ Re
Slide 12: Net income from FUM
Net income from FUM Restated for new Like-for-like ♦ Net income from funds under £m effective tax rate +6% of 23.5% management broadly unchanged: 400 − Gross of tax increase of 6%, offset by 350 increased rate of corporation tax 300 − More than £20 million benefit from contribution of maturing FUM i
Slide 13: FUM in gestation
FUM in gestation ♦ Gestation balance now stands at Gestation FUM future accumulated £47.2 billion – retention remains strong contribution to the £’million Cash result1 ♦ If the gestation balance was mature now, 2023 26.3 it would contribute c.£370 million per annum to the Cash result 2024 85.7 2025
Slide 14: Margin arising on new business
Margin arising on new business £m Restated for new Like-for-like ♦ Movement in margin arising from new effective tax rate 100 of 23.5% -17% business driven by: 90 − Lower gross inflows year on year 80 − Increased rate of corporation tax 70 − Modest operating deleverage 60 ♦ Structurally, the margin
Slide 15: Controllable expenses (post-tax)
Controllable expenses (post-tax) £m Restated for new Like-for-like ♦ Controllable expenses of £134.0 million effective tax rate 180 of 23.5% +8% are 2% up on the prior year, reflecting: − An 8% increase in pre-tax controllable 160 expenses, offset by 140 − An increase in the rate of corporation tax
Slide 16: Managing our resources
Managing our resources ♦ Controllable expenses do not vary with business volumes or income − c.50% relates to people costs − Other elements of controllable expenses also influenced by inflation e.g. property, technology ♦ Total pre-tax IFRS expense base of c.£2bn − Well over two thirds of expenses v
Slide 17: Net investment in Asia
Net investment in Asia £m ♦ Investment in Asia in H1 2023 includes the 14 impact of restructuring charges 12 − Closure of Shanghai operations − Modest Partner rationalisation 10 ♦ Anticipate net investment of c.£17 million for the FY 2023 8 ♦ Continue to expect to break-even in 2025 6 10.8 4 2 4.2 0
Slide 18: Net investment in DFM
Net investment in DFM £m ♦ Currently investing into back-office re- 6 platforming − Expect significant improvement from 2024 as investment programme completes ♦ Continue to expect net DFM investment of 4 £8 million for FY 2023 and breakeven in 2024 5.4 2 2.6 0 2022 2023 18
Slide 19: FSCS levy and regulatory fees
FSCS levy and regulatory fees ♦ FSCS levy and regulatory fees of £16.5 £’million 2023 2022 million, down 50% FSCS levy 10.2 27.1 − Decrease in levy costs for 2023 is due to Regulatory fees 6.3 5.8 a prior year FSCS surplus FSCS levy and regulatory fees 16.5 32.9 − We anticipate the levy returning to
Slide 20: Shareholder interest
Shareholder interest £m ♦ Shareholder interest is earned 30 on working capital and regulatory capital, not client related balances 25 ♦ Increased significantly year on year due to increases in the Bank 20 of England base rate ♦ If the base rate remains at 5%, 15 27.5 shareholder interest for 2023 co
Slide 21: Tax relief from capital losses
Tax relief from capital losses ♦ £2.1 million utilised in the first half − reflecting the full remaining stock of capital losses ♦ Capital loss recovery will no longer feature in the future cash result beyond the recognition of this amount 21
Slide 22: Underlying post-tax cash result
Underlying post-tax cash result Restated for new Like-for-like ♦ Miscellaneous £11.2 million in the first half £m effective tax rate +10% of 23.5% of 2023, broadly unchanged 250 ♦ Underlying post-tax cash result of £207.1 million 200 − Up 4% despite increase in corporation tax rate in current year 1
Slide 23: Embedded value
Embedded value £’million 2023 2022 ♦ Difference in year-on-year EEV profit after Funds management business 818.7 985.9 tax reflect: Distribution business (34.1) (33.5) − Positive operating assumption change in H1 Other (44.5) (38.2) 2022 EEV operating profit before 740.1 914.2 − Positive investment
Slide 24: EEV NAV per share
EEV NAV per share ♦ EEV NAV per share of £16.28, £ down 2% since 31 December 2022, 18 -2% reflecting: 16 − Modest EEV profit in the period 14 − Payment of final 2022 dividend in H1 2023 12 10 8 6 4 2 0 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 24
Slide 25: IFRS
IFRS IFRS 17 Result ♦ IFRS pre-tax analysis is dominated by equal and opposite policyholder tax £’million 2023 2022 movements of £169.3 million IFRS profit before tax 385.0 (295.5) ♦ IFRS profit after tax down 22% year on Policyholder tax credit/(charge) (169.3) 555.0 year, reflecting adverse short-
Slide 26: Combined life company solvency position
Combined life company solvency position 30 June 31 December 2023 2022 ♦ No underlying change to our solvency approach Net assets in excess of client liabilities 515.7 377.7 Management solvency buffer 355.0 355.0 ♦ Solvency remains robust, with SII ratio broadly unchanged as a result of: Management s
Slide 27: Dividends
Dividends ♦ Interim dividend set at 30% of the prior full year dividend, in line with guidance ♦ The Board has therefore declared an interim dividend of 15.83 pence per share 27
Slide 28: Business update
Business update Andrew Croft
Slide 29: Business priorities
Business priorities Building Delivering value to Our culture and community clients through being a leading our IMA responsible business Building and Being easier Continued protecting to do business with financial strength our brand and reputation 29
Slide 30: Building community
Building community Growing the Partnership ♦ The Partnership today: − 4,766 advisers, +73 in H1 2023 − Strong pipeline of advisers currently in training via our Academy − Confident in continued adviser growth 30
Slide 31: Building community: growing our presence
Building community Growing our presence ♦ New office opened in the Dubai International Finance Centre − Established SJP toe-hold in a large and fast growing wealth market − Targeting expats and globally mobile citizens − Complementary to Hong Kong and Singapore hubs and builds on their existing capa
Slide 32: Delivering value to clients through our IMA
Delivering value to clients through our IMA ♦ Gilts & Index Linked Gilts funds − Funds diversified by investing in global government bonds ♦ Japan fund − Dalton Investments appointed as co- manager, replacing existing co-manager. − New manager provides stronger focus on value ♦ Global Absolute Retur
Slide 33: Being easier to do business with
Being easier to do business with The SJP Advice Assistant ♦ Launched during H1 ♦ New tool that streamlines creation of advice sets for ISA business ♦ Leverages Salesforce and other datasets 33
Slide 34: Building and protecting our brand and reputation
Building and protecting our brand and reputation Wealth Account Survey ♦ 2023 results reveal continued strength across advocacy and value for money ♦ Softening in overall client satisfaction scores, consistent with broader industry trends ♦ Work ongoing to engage with advisers and clients in driving
Slide 35: Our culture and being a leading responsible business
Our culture and being a leading responsible business Transformative community impact ♦ Continued programme of fundraising activities across the SJP community − £5.1 million raised for SJP Charitable Foundation during H1 ♦ Impact study commissioned − Indicates c.3.5 million people directly supported
Slide 36: Outlook
Outlook ♦ Near-term consumer environment remains challenging ♦ But our business is resilient and advice remains key to supporting good client outcomes over time ♦ We’ve been here before and remain confident in our ability to capitalise on long-term market opportunity 36
Slide 37: Summary of results
Summary of results ♦ Gross inflows of £8.0 billion ♦ Net inflows of £3.4 billion ♦ Funds under management £157.5 billion ♦ Underlying cash result £207.1 million, up 4% ♦ Interim dividend of 15.83 pence per share 37
Slide 38: Q&A
Any The live Q&A session will commence at 9.30am 04
Slide 39: Appendix 1 – IFRS 17
Appendix 1 – IFRS 17 IFRS 17 Restatement ♦ Implemented IFRS 17 with immaterial H1 2022 H1 2022 financial impacts due to small scale of £’million IFRS 17 IFRS 4 insurance contracts IFRS profit before tax (295.5) (298.4) Policyholder tax credit/(charge) 555.0 555.0 ♦ More significant impacts on the IF
Slide 40: Appendix 2 - 2023 guidance summary
Appendix 2 - 2023 guidance summary ♦ Net income from FUM margin range in ♦ Net investment in DFM c.£8 million, second half c.55 to 57bps following expected to break-even in 2024 implementation of charge cap in H2 ♦ FSCS levy and regulatory costs of £16 ♦ Growth in controllable expenses to be million