Charles Stanley — FY2017 Earnings Presentation
44 slides from Charles Stanley's earnings presentation, June 2017
Slide 1: Return to profitability
Return to profitability Investor presentation for financial year ended 31 March 2017
Slide 2: Agenda
Agenda 1. Key messages 2. Strategic update 3. Financial results Paul Abberley CEO 4. Competitor benchmarking 5. Outlook 6. Q&A 7. Appendix Ben Money-Coutts CFO 1 Full year results 17
Slide 3: Key messages from FY17 – Return to profitability
Key messages from FY17 – Return to profitability • Reported PBT £8.8m (2016: loss £0.3m) Group returned to profitability • Core business PBT £9.8m (2016: £4.2m) Core Business operating margin • 7.1% (2016: 3.1%) Dividend • Increased 20% to 6.0p per share (2016: 5.0p) Balance sheet strengthened • Yea
Slide 4: Operational highlights – Positive momentum across all divisions
Operational highlights – Positive momentum across all divisions Investment Management Services • Variable reward proposal signed off with 96% team & asset (IMS) retention • Product offering refreshed with IFAs and smaller clients Asset Management (AM) especially in mind Financial Planning (FP) • Div
Slide 5: 2018 focus – prospects
2018 focus – prospects Revenue growth Operational efficiencies • Organic: • Continued transfer to discretionary • Increased share of wallet transfer • Rationalising front office procedures • Financial Planning: • Restructuring Operations department • Increasingly used as a tool to retain clients • I
Slide 6: 2. Strategic update
CHARLES STANLEY, 2. Strategic update
Slide 7: Strategic implementation – FY 2017
Strategic implementation – FY 2017 Q1 Q2 Q3 Q4 Group Completion of detailed divisional strategy implementation plans Achieved Project resource prioritisation agreed Achieved Investment Management Services New variable remuneration arrangements delivered Achieved Implementation of revised rate card 3
Slide 8: Strategic implementation – FY 2017
Strategic implementation – FY 2017 Q1 Q2 Q3 Q4 Charles Stanley Direct New website with streamlined onboarding Achieved Review and implementation of pricing policy Achieved Enhanced digital marketing strategy Achieved Support Functions Head office move and London offices rationalisation Achieved Focu
Slide 9: 3. Financial results
CHARLES STANLEY, 3. Financial results
Slide 10: Financial headlines
Financial headlines FuMA Discretionary Funds Core Business profit Reported Core Business Dividend per share before tax and profit/(loss) before earnings per share margin tax and margin 17% 6.0p £24.0bn 20% £9.8m 21% £11.4bn 15.33p £8.8m £20.5bn 5.0p 133% £9.4bn H2, 4.5p 122% H2, 3.5p 100
Slide 11: Financial summary
Financial summary FY17 FY16 £m £m Revenue 138.6 133.5 Expenses (129.1) (129.5) Other income 0.2 0.2 Operating profit 9.7 4.2 Net finance income 0.1 0.1 Loss on sale of business - (0.1) Core Business profit before tax 9.8 4.2 Held for sale - (0.5) Adjusting items (1.0) (4.0) Reported profit before ta
Slide 12: Funds under Management and Administration (FuMA)
Funds under Management and Administration (FuMA) FY17 FY16 Change £bn £bn Discretionary funds 11.4 9.4 21.3% FuMA at the end of the year was 17.1% higher than Advisory Managed funds 2.4 2.6 (7.7%) at prior year end mainly due to strong investment performance Total managed 13.8 12.0 15.0% Advisory
Slide 13: FuMA Movement – Up 17.1% YoY
FuMA Movement – Up 17.1% YoY 1.4 New clients +40.0% 3.0 £3.5bn Net inflow/(outflow) from existing clients 0.5 +17.1% +14.0% Lost clients (40.0%) £bn (1.4) Market movements 25 +86.0% 3.5 24.0 24 23 22 21 20.5 20 Funds at 1 April 2016 Movement Funds at 31 March 2017 12 Full year results 17
Slide 14: Funds growth by service type
Funds growth by service type Discretionary Advisory Dealing (0.1) 0.8 New clients +8.5% New clients 0.0% 0.2 Transfers +3.2% Transfers (5.9%) 1.5 £2.0bn £0.1bn +21.3% 0.3 Net inflow/(outflow) from +5.9% 0.2 Net inflow/(outflow) from existing clients (2.1%) existing clients 11.8% (0.2) Lost clients (
Slide 15: Core Business – Revenue
Core Business – Revenue FY17 FY16 Change £m £m Strong improvement in fee income and small increase in commission income more than offset Fees: the anticipated fall of trail commission and interest Fee income 88.5 79.3 11.6% income on client cash. These now represent just Trail commission 1.0 4.2 (
Slide 16: Core Business – Expenditure
Core Business – Expenditure FY17 FY16 Change £m £m Fixed staff costs reduced due to overall headcount Staff costs: reduction whereas variable staff costs have risen as a result of improved profitability leading to higher Fixed 50.9 53.7 (5.2%) bonuses Variable 40.9 37.7 8.5% Total staff costs 91.8
Slide 17: Core Business profitability – Increased significantly
Core Business profitability – Increased significantly £m 10 9.2 9.8 8 6 4.2 4 2 0.8 (3.2) 0 0.7 0.1 (1.6) (0.4) -2 FY16 profit before Trail commission Interest income Remuneration Gain/(loss) on Commission Other costs Fees FY17 profit before tax costs sale of business tax 16 Full year results 17
Slide 18: Reported performance and breakdown of adjusting items
Reported performance and breakdown of adjusting items £m 10 9.8 9 3.2 8.8 8 7 (3.1) 6 0.7 0.4 5 0.1 (1.6) 4 (0.7) 3 2 1 0 Core Business Overlapping rent Amortisation of Impairment of Dilapidations Profit on part sale Refund of under- Net gain on Reported profit profit and occupancy client relationsh
Slide 19: Balance sheet strengthened
Balance sheet strengthened FY17 FY16 Change £m £m Intangible assets down £4.2m year on year (“YoY”) due to amortisation of client relationships and software (£3.3m) and impairment of goodwill Total intangible assets 21.2 25.4 (16.5%) relating to Southampton branch (£0.7m) Total tangible non-curren
Slide 20: Cash flow – 21% higher YoY
Cash flow – 21% higher YoY £m 60 9.5 58.4 55 50 48.4 5.6 45 (2.6) 1.6 (2.5) (1.1) 1.2 0.2 (1.8) 40 Cash as at 1st Purchase of Dividends paid Purchase of Acquisition of Dividends Net proceeds Proceeds from Proceeds from Net cash from Cash as at 31 Apr 2016 property, plant to equity available for inta
Slide 21: 4. Competitor benchmarking
CHARLES STANLEY, 4. Competitor benchmarking ud a
Slide 22: Competitor benchmarking
Competitor benchmarking This chart compares Charles Stanley to other listed wealth management companies and shows their profit before tax margins and FuMA growth. The size of each bubble represents each company’s market capitalisation as a proportion of discretionary funds profit before tax % Market
Slide 23: Competitor benchmarking – Financial KPIs
Competitor benchmarking – Financial KPIs Selected Peer Charles Stanley Group Reported pre-tax margin 6% 24% Managed assets per FOP £m 47 71 Managed revenue per FOP £k 394 508 Revenue margin on managed assets 82bps 87bps Total non-staff costs as % revenue 26.3% 21.4% Source: Compeer and Charles Stanl
Slide 24: 5. Outlook
CHARLES STANLEY, 5, Outlook
Slide 25: Outlook
Outlook Strategy in place to deliver sustainable growth; management are focused on detailed implementation plans and staff engaged to make it happen 24 Full year results 17
Slide 26: 6. Q&A
CHARLES STANLEY, 6. Q&A
Slide 27: 7. Appendix
CHARLES STANLEY, 7. Appendix
Slide 28: The Charles Stanley Group – About Us
The Charles Stanley Group – About Us One of the UK’s leading Origins traced back History both of independently-owned directly to 1792 organic growth and investment groups so 1792 helping to make us growth our interests lie with one of the UK’s by acquisition you and not others leading wealth managem
Slide 29: The Charles Stanley Group – About Us
The Charles Stanley Group – About Us Charles Stanley Group Investment Charles Stanley Management Asset Management Financial Planning Direct Services • Personal investment • Matterley funds • Holistic approach • Charles Stanley Direct – management • Multi-manager portfolio • Pensions and retirement o
Slide 30: The Charles Stanley Group – Our network offices
The Charles Stanley Group – Our network offices Bath Guildford Reading Beverley Ipswich Southend-on-Sea Birmingham Isle of Wight Tunbridge Wells Bournemouth Leeds Wimborne Cambridge Leicester Cardiff London Dorchester Manchester Network of 24 offices Eastbourne Norwich across the UK Edinburgh Oxford
Slide 31: Financial KPIs
Financial KPIs FY17 FY16 Business growth FuMA growth 17.1% (3.7%) Discretionary FuMA growth 21.3% 0.8% Core Business revenue growth 3.8% (3.3%) Operating efficiency IMS Managed funds per CF30 (£m) 42.6 32.1 Revenues per Financial Planner (£k) 268 197 Core Business staff costs / revenue 66.2% 68.5% C
Slide 32: FuMA 10-year trend
FuMA 10-year trend £bn 25.0 17% 10 Year CAGR: - Charles Stanley 9% 6% - WMA Index 3% (4%) 14% 20.0 15% 6% 15.0 13% 48% 4% 24.0 21.3 20.5 10.0 20.1 (21%) 17.7 15.4 14.5 12.8 11.0 5.0 8.7 - FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 31 Full year results 17
Slide 33: FuMA by service type
FuMA by service type FuMA by service level FuMA by client type 12% Private clients 4% ISAs Discretionary 35% Trusts/Estates Advisory managed 7% 41% Corporate 47% Advisory dealing 7% Charities Execution only IFAs 10% Other 8% 10% 19% Size of clients FuMA by value Size of clients by number 4% 15% < £2
Slide 34: Core Business – Expenses breakdown
Core Business – Expenses breakdown £m FY16 53.7 37.7 11.8 7.1 8.4 2.3 8.5 129.5 FY17 50.9 40.9 11.7 6.7 6.8 2.8 9.3 129.1 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 Full year results
Slide 35: Core Business – Divisional breakdown
Core Business – Divisional breakdown IMS AM FP CSD Core Business £m £m £m £m £m FY 2017 Revenue 122.7 6.6 5.0 4.3 138.6 Expenditure (109.0) (6.1) (7.8) (6.2) (129.1) Other income 0.2 - - - 0.2 Operating profit/(loss) 13.9 0.5 (2.8) (1.9) 9.7 Net finance income 0.1 - - - 0.1 Profit/(loss) before tax
Slide 36: IMS – Financial performance
IMS – Financial performance FY17 FY16 Change £m £m Revenue 122.7 117.2 4.7% Direct Costs: Fixed (19.8) (20.7) 4.3% Variable (35.5) (35.3) (0.6%) Other direct operating expenses (9.7) (10.3) 5.8% Other Income 0.2 0.2 0.0% Contribution 57.9 51.1 13.3% Allocated costs (44.0) (43.3) (1.6%) Operating Pro
Slide 37: IMS – FuMA and revenue margins
IMS – FuMA and revenue margins FY17 FY16 Change £bn £bn Discretionary (£bn) 10.3 8.5 21.2% Advisory managed (£bn) 2.1 2.3 (8.7%) Total managed (£bn) 12.4 10.8 14.8% Advisory dealing (£bn) 1.8 1.7 5.9% Execution only (£bn) 6.1 5.0 22.0% Total administered (£bn) 7.9 6.7 17.9% Total FuMA (£bn) 20.3 17.
Slide 38: IMS – FuMA analysis
IMS – FuMA analysis FuMA by service level FuMA by client type 10% Private clients 5% ISAs 30% Discretionary 7% Trusts/Estates Advisory managed 41% Corporate Advisory dealing 51% 8% Charities Execution only IFAs 9% 10% Other 10% 19% Size of clients FuMA by value Size of clients by number 7% 16% < £25
Slide 39: AM – Financial performance
AM – Financial performance FY17 FY16 Change £m £m Revenue 6.6 5.5 20.0% Direct costs (3.6) (4.6) 21.7% Contribution 3.0 0.9 233.3% Allocated costs (2.5) (1.9) (31.6%) Operating Profit/(loss) 0.5 (1.0) 150.0% Revenue margin (bps) 59 60 (1) Contribution margin 45.5% 16.4% Operating margin 7.6% (18.2%)
Slide 40: AM – FuM analysis
AM – FuM analysis FuM by portfolio FuM by client type 17% IHT Private clients 19% 26% ISAs Model portfolio Trusts/Estates 7% Corporate Open-ended investment 9% funds 1% Charities 60% Centralised investment 6% IFAs 16% portfolios 4% Other 35% Size of clients FuM by value Size of clients by number 5%
Slide 41: FP – Financial performance
FP – Financial performance FY17 FY16 Change £m £m Revenue 5.0 6.0 (16.7%) Direct costs (5.2) (5.1) (2.0%) Contribution (0.2) 0.9 (122.2%) Allocated costs (2.6) (2.2) (18.2%) Operating Profit/(loss) (2.8) (1.3) (115.4%) Contribution margin (4.0%) 15.0% Operating margin (56.0%) (21.7%) No. of Financia
Slide 42: CSD – Financial performance
CSD – Financial performance FY17 FY16 Change £m £m Revenue 4.3 4.8 (10.4%) Direct costs (3.0) (2.8) (7.1%) Contribution 1.3 2.0 (35.0%) Allocated costs (3.2) (3.3) 3.0% Operating Profit/(loss) (1.9) (1.3) (46.2%) Revenue margin (bps) 22 28 (6) Contribution margin 30.2% 41.7% Operating margin (44.2%)
Slide 43: CSD – AuA analysis
CSD – AuA analysis Users AuA by account type 220,000 Website traffic 17% 200,000 Investment account 180,000 38% ISAs 160,000 10% SIPP 140,000 CS Investment 120,000 Choices 100,000 34% Size of clients AuA by value Size of clients by number 3% 1% 18% 18% 9% 1% < £50k < £50k £50k to £100k £50k to £100k
Slide 44: Full year results 17
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