St. James's Place Plc · LSE:STJ
St. James's Place — FY2019 Earnings Presentation
46 slides from St. James's Place's earnings presentation, Feb 27, 2020
Slide 1: Full Year Results February 2020
FULL YEAR RESULTS FEBRUARY 2020
Slide 2: Andrew Croft, Chief Executive
01 ANDREW CROFT Chief Executive
Slide 3: Agenda
FULL-YEAR RESULTS 2019 AGENDA Andrew Croft INTRODUCTION Craig Gentle FINANCIALS Andrew Croft BUSINESS UPDATE AND OUTLOOK Q&A 2 S T . J A M E S ’S P L A C E
Slide 4: Quarterly Net Inflows 2008 – 2019
FULL-YEAR RESULTS 2019 QUARTERLY NET INFLOWS 2008 – 2019 £3bn • Full year net inflows of £9.0 billion • Equivalent to 9% of opening funds under management £2bn • 15% p.a. compound growth over 10 years £1bn £0bn 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3 S T . J A M E S ’S P L A C
Slide 5: Funds Under Management
FULL-YEAR RESULTS 2019 FUNDS UNDER MANAGEMENT Funds under management 2008-2019 £120bn +22% • Continued positive net inflows and strong investment returns driving FUM £117.0 billion £100bn • 19% p.a. compound growth over the last 10 years £80bn • Forward indicator of value creation £60bn for sharehol
Slide 6: Craig Gentle, Financials
02 CRAIG GENTLE Financials
Slide 7: Agenda
FULL-YEAR RESULTS 2019 AGENDA Adviser growth New business and Funds under Management Cash result Embedded value and solvency Dividends 6 S T . J A M E S ’S P L A C E
Slide 8: Adviser Growth
FULL-YEAR RESULTS 2019 ADVISER GROWTH Total advisers up 8% to 4,271 4,500 • Net addition of 317 advisers to the Partnership 4,000 • Continued investment into experienced 3,500 recruitment and Academy programmes 3,000 • 172 Academy graduates in 2019 with pipeline 2,500 of 458 ‘students’ currently enr
Slide 9: Funds Under Management
FULL-YEAR RESULTS 2019 FUNDS UNDER MANAGEMENT FUM reaches record £117.0 billion £120bn • Funds under management up 22% over the year £100bn • Driven by: £80bn strong flows £60bn strong retention strong investment performance £40bn £20bn £0bn 2014 2015 2016 2017 2018 2019 8 S T . J A M E S ’S P
Slide 10: Gross Inflows
FULL-YEAR RESULTS 2019 GROSS INFLOWS Flows resilient £5bn • Full year flows 4% lower year-on-year, reflecting £4bn more challenging external environment £4bn • Q4 return to modest growth in gross inflows £3bn • Improved investor sentiment and activity £3bn following general election result £2bn • Go
Slide 11: Underlying Cash Result
FULL-YEAR RESULTS 2019 UNDERLYING CASH RESULT Growth in average FUM reflected in net annual £781.2m £(356.3)m management fees Growth in reduction in fees £127.5m £(250.6)m in gestation reflects business mix in recent years £424.9m £23.2m £(14.3)m £(37.6)m £310.7m Decline in new business £273.1m marg
Slide 12: Net Income from FUM Margin
FULL-YEAR RESULTS 2019 NET INCOME FROM FUM MARGIN 2018 2019 70bps • Average blended post-tax margin on mature FUM in line with guidance range of 63-65bps 60bps • Abandonment of corporate tax rate cut means 50bps margin for 2020 likely to be similar to 2019 40bps 30bps 20bps 10bps 0bps Blended post-t
Slide 13: Emergence of Cash from FUM in Gestation
FULL-YEAR RESULTS 2019 EMERGENCE OF CASH FROM FUM IN GESTATION Gestation FUM future Gestation FUM future Year contribution to mature FUM contribution to cash result Assumes market values at end of December 2019 2020 £4.1bn £36.1m 2021 £9.2bn £81.3m Assumes no withdrawals, which might typically offse
Slide 14: Gestation FUM – Underpinning Future Returns
FULL-YEAR RESULTS 2019 GESTATION FUM – UNDERPINNING FUTURE RETURNS Contribution to the cash result from maturing FUM £400m • FUM in gestation provides visibility around growth in net income from FUM £350m £300m • By 2025, the annual contribution to the post-tax cash result of FUM currently in gestat
Slide 15: Expenses
FULL-YEAR RESULTS 2019 EXPENSES • 9% growth in establishment expenses, lower -£300m than guided: focused on investing to underpin -£250m future growth -£200m disciplined approach to discretionary expense -£150m • Academy investment up 30%, supporting -£100m growth in capacity • FSCS levy higher
Slide 16: Investments
FULL-YEAR RESULTS 2019 INVESTMENTS • SJP Asia impacted by market volatility, Hong -£40m Kong unrest and US/China trade rhetoric -£35m good operational progress achieved: now has 167 advisers and £934 million -£30m of SJP FUM; strong recruitment pipeline -£25m 2020 environment is challenging -£20
Slide 17: Cash Result
FULL-YEAR RESULTS 2019 CASH RESULT Strong progress made on Bluedoor journey – all UK £273.1m £(38.8)m business migrations now complete £(4.9)m £229.4m Focus is now on decommissioning legacy systems Expect residual cost of up to £10m in 2020, none thereafter Underlying cash result Back-office infrast
Slide 18: Embedded Value
FULL-YEAR RESULTS 2019 EMBEDDED VALUE £(9.9)m £7.5m £(55.6)m New business contribution £82.1m £(47.9)m lower, reflecting more modest £(65.7)m volumes and higher expenses £248.5m £952.0m Positive experience variance £793.0m of £82.1m reflects strong persistency in challenging market conditions New bu
Slide 19: Embedded Value
FULL-YEAR RESULTS 2019 EMBEDDED VALUE Positive investment variance of £768.6m reflecting strong £(27.0)m investment performance £768.6m vs assumptions £1,693.6m EEV NAV per share of 1,320.1 pence £952.0m Embedded value ignores c. £385m of unrecorded value linked to pre-2018 pension products EEV oper
Slide 20: Combined Life Company Solvency Position
FULL-YEAR RESULTS 2019 COMBINED LIFE COMPANY SOLVENCY POSITION Year 2019 2018 2017 • Solvency continues to be managed on the basis of holding assets Net assets in excess of client liabilities 337.7 366.4 360.1 to match client unit-linked liabilities Management solvency buffer 320.0 355.0 355.0 plus
Slide 21: Dividends
FULL-YEAR RESULTS 2019 DIVIDENDS 2019 More positive Visibility of cash A challenging outlook for emerging from year 2020 gestation FUM 5% increase In final dividend 20 S T . J A M E S ’S P L A C E
Slide 22: Business Update and Outlook
03 ANDREW CROFT Chief Executive BUSINESS UPDATE AND OUTLOOK
Slide 23: An Award Winning Proposition
FULL-YEAR RESULTS 2019 AN AWARD WINNING PROPOSITION 22 S T . J A M E S ’S P L A C E
Slide 24: Our Investment Management Approach
FULL-YEAR RESULTS 2019 OUR INVESTMENT MANAGEMENT APPROACH • After challenging close to 2018, buoyant markets in 2019 were reflected in strong returns for clients • Majority of portfolios outperforming ARC peer groups • Transfer of investment mandates from Woodford Investment Management to RWC and Co
Slide 25: Making a Positive Impact Through Our IMA
FULL-YEAR RESULTS 2019 MAKING A POSITIVE IMPACT THROUGH OUR IMA • Achieved A+ rating in latest UNPRI assessment, underlining progress in Responsible Investment • 90% of our fund managers are now signatories to the UNPRI, up from 70% a year ago • Committed to achieving 100% in 2020 • Developing repor
Slide 26: The Partnership
FULL-YEAR RESULTS 2019 THE PARTNERSHIP Number of Qualified advisers 2008-2019 4500 +317 • Partnership now totals 4,271 advisers, 4000 growth of 8% 3500 • Attracted a net 317 advisers through 3000 experienced recruitment and Academy programmes 2500 2000 • 9% p.a. compound growth over the last 10 year
Slide 27: St. James's Place Academy
FULL-YEAR RESULTS 2019 ST. JAMES’S PLACE ACADEMY • 458 people in ‘training’ • Supporting our aim to become more diverse over time Average age 34 71/29 male/female balance • Academy graduates proving successful: 14% of new flows across London region in 2019 26 S T . J A M E S ’S P L A C E
Slide 28: Chartered Advisers
FULL-YEAR RESULTS 2019 CHARTERED ADVISERS • 904 advisers across the Partnership have achieved Chartered status • 316 advisers have Fellow status • We aim to have a quarter of the Partnership achieve Chartered status by the end of 2020 27 S T . J A M E S ’S P L A C E
Slide 29: Our Bluedoor Journey
FULL-YEAR RESULTS 2019 OUR BLUEDOOR JOURNEY • All core UK business now processed on Bluedoor • Modern back-office administration platform Scalable and enhances operational resilience Enables improved client service Launch Opportunity to leverage capabilities • Focus now on decommissioning lega
Slide 30: FULL-YEAR RESULTS 2019 S T . J A M E S ’ S P
FULL-YEAR RESULTS 2019 29 S T . J A M E S ’S P L A C E
Slide 31: FULL-YEAR RESULTS 2019 S T . J A M E S ’ S P
FULL-YEAR RESULTS 2019 30 S T . J A M E S ’S P L A C E
Slide 32: Technology Partnership
FULL-YEAR RESULTS 2019 TECHNOLOGY PARTNERSHIP • Technology partnership to create a new CRM system Einstein analytics and diagnostic tools to support the Partnership • Key to drive for operational excellence 31 S T . J A M E S ’S P L A C E
Slide 33: Brand & Marketing
FULL-YEAR RESULTS 2019 BRAND & MARKETING • Commenced brand enhancement project • Opportunities to better communicate the value of advice and enhance awareness of SJP • Perceptions and brand need to evolve as the marketplace changes 32 S T . J A M E S ’S P L A C E
Slide 34: Investments
FULL-YEAR RESULTS 2019 INVESTMENTS 33 S T . J A M E S ’S P L A C E
Slide 35: Market Drivers
FULL-YEAR RESULTS 2019 MARKET DRIVERS • Size of market large & growing • Considerable savings gap • Demand for trusted face-to-face advice is growing • Structural, long-term pensions opportunity • Advice gap remains large • Intergenerational transfer of wealth Perfect environment for client-focused
Slide 36: Quarterly Net Inflows 2008 – 2019
FULL-YEAR RESULTS 2019 QUARTERLY NET INFLOWS 2008 – 2019 £3bn £2bn £1bn £0bn 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 35 S T . J A M E S ’S P L A C E
Slide 37: Quarterly Gross Inflows 2008 – 2019
FULL-YEAR RESULTS 2019 QUARTERLY GROSS INFLOWS 2008 – 2019 £5bn £4bn £3bn £2bn £1bn £0bn 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 36 S T . J A M E S ’S P L A C E
Slide 38: Gross Inflow Track Record
FULL-YEAR RESULTS 2019 GROSS INFLOW TRACK RECORD Gross inflows 2008-2019 £16bn • Strong track record of gross inflow growth £14bn • Compound 14% p.a. growth since 2007 £12bn £10bn £8bn £6bn £4bn £2bn £0bn 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 37 S T . J A M E S ’S P L A C E
Slide 39: So Much More Than Investment Return
FULL-YEAR RESULTS 2019 SO MUCH MORE THAN INVESTMENT RETURN Investment Relationship Advice Client net alpha alpha alpha outcomes Backed by a FTSE 100 company 38 S T . J A M E S ’S P L A C E
Slide 40: New Business Flows
FULL-YEAR RESULTS 2019 NEW BUSINESS FLOWS Non-discretionary Discretionary • Normal use of annual tax allowances • Proceeds from asset or business sale • Intergenerational wealth planning • Bonus • Pensions planning Gross • Inheritance • Less sensitive to market conditions inflows • More sensitive to
Slide 41: Gross Inflow Track Record
FULL-YEAR RESULTS 2019 GROSS INFLOW TRACK RECORD Gross inflows 2008-2019 £16bn • Gross flows 9% lower in 2008 £14bn • Recovery in 2010 once uncertainty removed £12bn £10bn £8bn £6bn +35% £4bn -9% £2bn £0bn 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 40 S T . J A M E S ’S P L A C E
Slide 42: Summary
FULL-YEAR RESULTS 2019 SUMMARY • Market leader - Partnership in good health • Academy performing well • Back-office transformation programme completed • Our client proposition and advocacy remain strong • Asia and Rowan Dartington are making operational progress • Profile of maturing FUM in gestatio
Slide 43: Summary
FULL-YEAR RESULTS 2019 SUMMARY Number of advisers up 8% to 4,271 £9.0bn of net inflows, 9% of opening funds under management Funds under management up 22% to £117.0bn Underlying cash result of £273.1m EEV operating profit of £952.0m Proposed final dividend of 31.22p 42 S T . J A M E S ’S P L A C E
Slide 44: Q&A
Q&A
Slide 45: Balance Sheet Developments
FULL-YEAR RESULTS 2019 BALANCE SHEET DEVELOPMENTS Year 2019 2018 • Business loans to Partners principally support Partner Business loans to Partners funded by the Group 316.0 295.5 succession planning, as well as Securitised business loans to Partners 160.5 99.0 business development Total business l
Slide 46: Balance Sheet Developments
FULL-YEAR RESULTS 2019 BALANCE SHEET DEVELOPMENTS Year 2019 2018 • Modest increase in borrowings in 2019 Corporate borrowings: bank loans 173.3 164.8 • Total reported borrowings distorted Corporate borrowings: loan notes 113.8 113.8 by value of non-recourse loan notes issued against securitised Tota