Quilter Plc · LSE:QLT
Quilter — Investor Presentation (2020)
49 slides from Quilter's investor presentation, 2020
Slide 1: Investor presentation Winter 2020
Quilter Basic rBand Guidelines Our b rand a ssets 1 Investor presentation Winter 2020
Slide 2: Investment overview and Quilter's journey to date
Investment overview and Quilter’s journey to date
Slide 3: Quilter: a leading, UK-centric full-service wealth manager
Quilter: a leading, UK-centric full-service wealth manager Key Performance Indicators from continuing operations, excluding QLA H1 2020 H1 2019 ∆ ✓ Leading UK and cross-boarder wealth Financial: manager with £100bn+ of customer NCCF % 1.1 0.3 +267% assets NCCF/opening AuMA % 2 1 – Integrated flows £
Slide 4: Quilter has scale and leading position in chosen capabilities
Quilter has scale and leading position in chosen capabilities Comparison with listed UK peers Advice Platforms Solutions Total AuMA1 (£bn) Restricted Independent Advised International Multi-asset Discretionary (CF30’s)2 advisers Platform £110bn3 ✓ 1,808 ✓ 4,000+ firms ✓ £58bn AuA ✓ £21bn AuA ✓ £21bn
Slide 5: Industry dynamics: operate in an industry with secular growth potential
Industry dynamics: operate in an industry with secular growth potential ➢ Fifth largest wealth management market in the world¹ UK long-term savings market forecast² AuMA £trn ➢ A large and growing industry with continued secular growth drivers c.2.3 ➢ Savings responsibility shifted to the individual
Slide 6: Industry dynamics: Robust saving trends through market cycles and Covid-19 downturn
Industry dynamics: Robust saving trends through market cycles and Covid-19 downturn UK Platform industry net client cash flow¹ (LHS) vs FTSE All Share (RHS) £bn // £ FTSE All Share 4,500 12 Retail advised sales¹ 10 UK economy growth – rising spending, 4,000 investments, exports & manufacturing Chine
Slide 7: Industry drivers: Retirement demographics continuing advice demand
Industry drivers: Retirement demographics continuing advice demand UK England & Wales Population¹ (‘000 by age year, 2018) Turned 60 in 2019 1,000 – potentially requiring retirement advice 925 900 Baby boomers born in 1947 800 787 700 600 700k+ people turned 65 and 925k+ turned 50 in 2019 – potentia
Slide 8: Regulatory and fiscal changes driving disruption
Regulatory and fiscal changes driving disruption ➢ Provides customers with opportunity for consolidation and flexibility to manage retirement assets Pension reform ➢ Demand and complexity driving need for advice ➢ Increased longevity of client relationships for wealth managers versus compulsory annu
Slide 9: Fiscal changes driving complexity, changing client behaviour and need for advice
Fiscal changes driving complexity, changing client behaviour and need for advice Annual pension allowance ISA annual allowance £’000 Allowance £’000 tapered for over Junior ISA CAGR £150k earners 255 ISA 235 245 -16% 20.0 20.0 50 50 50 40 40 40 40 40 CAGR +11% 15.2 15.2 2008/09 2009/10 2010/11 2011/
Slide 10: Continued strong demand for Advice as cost of delivery increases
Continued strong demand for Advice as cost of delivery increases ➢ Adviser trend to serve fewer active clients continues: Market total revenue from adviser charges¹ Revenues on investment advice and related charges ➢ Compensation model from commission to fees £5.6bn ➢ New model built on ongoing clie
Slide 11: Advice: shift in how advisers serve their clients
Advice: shift in how advisers serve their clients Regulatory and market changes driving better quality of advice for fewer clients Adviser average client portfolio¹ Number of clients % Clients seen annually % active clients ➢ Adviser trend to serve fewer active clients: 350 Passive clients (seen les
Slide 12: Platform: savings and investments consolidating onto Platforms, particularly pensions
Platform: savings and investments consolidating onto Platforms, particularly pensions Pensions and investments Pension is ‘anchor’ product on Platforms play an important role in modern wealth consolidating onto platforms Platform management Total UK platform market Fund platforms by product AUA £bn1
Slide 13: Investment Solutions: continued growth in outcome-based, client-focussed solutions
Investment Solutions: continued growth in outcome-based, client-focussed solutions Global AuM split1 Quilter Solutions Typical asset allocation2 % / US$ trn Typical 40-85% mixed asset fund asset Discretionary portfolio service allocation 38 74 100% 100% ➢ Dedicated Quilter investment manager to desi
Slide 14: Industry dynamics: Business models adapted to changing regulation and evolving value chain
Industry dynamics: Business models adapted to changing regulation and evolving value chain Typical older / Pre-RDR Insurance Modern Wealth Manager models Customers • Product driven sales, ‘pushed’ • Customer driven solutions through incentive driven distribution channels • Commission models driving
Slide 15: Quilter has adapted its business model
Quilter has adapted its business model Our journey to deliver a modern UK focussed wealth manager UK & European Modern UK-focussed Life Assurer wealth manager Our transition to becoming ‘one Quilter’ Italy Acquired and built ➢ Sold European life books, single strategy Switzerland Advice Network & Na
Slide 16: Our journey to deliver a focussed UK wealth management business
Our journey to deliver a focussed UK wealth management business Sold Quilter Life Listed as Quilter plc Acquisition of Assurance; Old Mutual Wealth on LSE and JSE Lighthouse plc £375m return to Capital Markets shareholders confirmed Special Dividend: Showcase I Return of proceeds Sale of European li
Slide 17: Quilter's multi-channel advice-led model
Quilter’s multi-channel advice-led model An open, transparent, full-service model serving customers across the wealth spectrum High Net Worth Affluent Mass Affluent Open market, financial advisers Financial advice Quilter Private Client Quilter Financial Planning Quilter Financial Advisers Advisers
Slide 18: Business model in action
Business model in action Financial Advice Platforms & Wrappers Investment solutions Source Destination Affluent and Mass-Affluent Quilter Restricted Financial Planners (QFP & QFA) Multi-asset, risk-adjusted Quilter Investors Customers: Quilter Investment Platform solutions Switches Independent Finan
Slide 19: Performance
Performance Quilter
Slide 20: H1 2020 highlights: delivering through disruption
H1 2020 highlights: delivering through disruption Financial performance Strategic progress Operational improvement ➢ £71m adjusted profit before ➢ Significant Platform migration ➢ Optimisation initiatives on tax: Pleasing outturn in a scheduled for Q4 2020 track to deliver c.£50m cost challenging en
Slide 21: What drives our business: H1 2020 results
What drives our business: H1 2020 results Advice and Wealth Management Wealth Platforms Head office AuMA1 £44.1bn £76.6bn Revenue £197m £136m £2m Quilter Quilter Wealth Quilter Financial AuMA Planning Cheviot Investors Solutions International £23.3bn £20.8bn £56.2bn £20.4bn NCCF £0.2bn £0.3bn £1.0bn
Slide 22: H1 2020: Resilient performance
H1 2020: Resilient performance NCCF Average AuMA Revenue £bn £bn £m Integrated Revenue 1.4 1.4 2% 55 52 flows (£bn) margin (bps) 267% 103.2 105.1 -4% 1.1 348 335 0.3 H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 Expenses Adjusted profit before tax Adjusted diluted EPS £m £m Pence 26% 21% Operating
Slide 23: 2020: Improving net flows
2020: Improving net flows 5 Gross sales Gross outflows Net flows 1 o/w DB transfers o/w QC IM departures 4 ➢ Substantial improvement in net flows: 3 from £0.3bn to £1.1bn 0.5 ➢ Stable gross sales and integrated flows Gross sales / outflows (£bn) 2 ➢ Advisers highly engaged with clients, supporting t
Slide 24: Business initiatives
Business initiatives Quilter
Slide 25: UK Platform Transformation Programme
UK Platform Transformation Programme Mar – Dec 2019 2020 2021 Jul – Nov 2017 2018 Functional testing & Phased migrations Soft launch migration planning Build Design Final system code Migration Migration Migration Final Testing delivery rehearsals 1 2 migration First migration successfully undertaken
Slide 26: Optimisation: A phased, multi-year programme
Optimisation: A phased, multi-year programme Laying the path to Quilter becoming the best version of itself that it can be Phase 1: Phase 2: Operational efficiencies Streamline Widen scope of efficiency plan to Efficiency initiatives to deliver streamline the business post-PTP improvements in operat
Slide 27: Optimisation focussed on addressable cost base
Optimisation focussed on addressable cost base 2018 Addressable costs Contribution to Optimisation: A phased, multi-year approach Total costs optimisation 555 18 Phase: 1. Operational efficiencies 105 • Efficiency initiatives to deliver Programme improvements in operational of activity: performance
Slide 28: Optimisation Phase 1: £14m achieved in H1
Optimisation Phase 1: £14m achieved in H1 20 What we have done What we have left to do ➢ Simplification and unification of central support functions ➢ Fully transform our support functions into centres commenced of excellence ➢ Quick win tactical efficiencies delivered ➢ General ledger and integrate
Slide 29: Buyback programme update and dividend outlook
Buyback programme update and dividend outlook Return of QLA sale net proceeds: Share buyback programme Interim dividend Share buyback – Tranche 1 2020 2019 Total shares purchased 43.2 million Interim dividend 1.0p 1.7p¹ Total cash consideration £50.2 million Pay-out ratio² 41% 46% Average share pric
Slide 30: Cash and capital
Cash and capital Quilter
Slide 31: Continued strong solvency position
Continued strong solvency position Solvency II ratio 221% (3%) (2%) (1%) (16%) 197% 5% (2%) (25%) (12%) 178% ➢ Solvency II ratio reduced principally due to Share Buyback and Odd-lot Offer ➢ Provides capacity for strategic investments ➢ Liquidity a greater constraint than capital ➢ Strong capital pos
Slide 32: Holding company cash
Holding company cash (64) (95) (33) 27 ➢ Planned future expenditures include: (64) (5) (12) ➢ Dividends ➢ Continued return of net proceeds from QLA sale, via share buyback 815 ➢ PTP and Optimisation expenses 569 ➢ London property fit-out £m 1 Jan 2020 2019 Final Share buyback Head office External de
Slide 33: Capital management philosophy
Capital management philosophy ➢ Current year dividend On-going ➢ London office relocation cash needs ➢ Group capital requirements ➢ Working capital & interest ➢ Investing in the growth of the business Investing organically ➢ Platform Transformation Programme ➢ Optimisation programme Capital allocati
Slide 34: Investment case and 2020 outlook
Investment case and 2020 outlook
Slide 35: Quilter investment case
Quilter investment case A unique combination of capabilities, scale and market positions 1 Full-service wealth manager providing choice and delivering good customer outcomes 2 Leading positions across one of the world’s largest wealth markets with strong structural growth drivers Multi-channel propo
Slide 36: Key focus for H2 and beyond
Key focus for H2 20 and beyond … Continue to support advisers, employees and communities through disruption Complete Platform Transformation Programme Integrate acquisitions and deliver flow growth Execute Optimisation plans to drive operating leverage Return £375 million to shareholders 36
Slide 37: Appendix
Appendix Quilter
Slide 38: The new UK Platform is the heart of Quilter
The new UK Platform is the heart of Quilter Financial Advice Platforms & Wrappers Investment solutions Source 2019 Gross Flows 2019 Gross Flows Destination £6.0bn £6.0bn Advised by Managed by 13% £1.5bn 20% Quilter (2018: 11%) £1.8bn Quilter Investors Restricted Financial £1.5bn (2018: 19%) Planners
Slide 39: H1 2020: Advice and Wealth Management
H1 2020: Advice and Wealth Management Revenue Expenses Adjusted profit £m £m £m Operating 26% 21% margin +1% +8% 195 197 -18% 156 145 50 41 H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 ➢ Flows benefited y-o-y from reduction in Quilter Cheviot outflows and switching into KPIs H1 2020 H1 2019 Quilt
Slide 40: H1 2020: Wealth Platforms
H1 2020: Wealth Platforms Revenue Expenses Adjusted profit £m £m £m -10% Operating 37% 35% margin -6% 151 136 -16% 95 89 56 47 H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 ➢ Lower revenues primarily due to Quilter Investment Platform’s KPIs H1 2020 H1 2019 previously announced repricing and adver
Slide 41: Updated financial guidance
Updated financial guidance Previous guidance Updates to guidance ➢ Optimisation: £75m one-off costs to deliver optimisation phase 1 initiatives, with c.50% incurred by end of 2019 ➢ Target: Targeting c.2 percentage point improvement in ➢ Moved away from 2020 guidance in March due to significant Opti
Slide 42: Updated financial guidance continued
Updated financial guidance continued Previous guidance Updates to guidance ➢ No change to target over the medium-term – expect to ➢ Target: NCCF of 5% of opening AuMA (excluding QLA) per Net client cash flow build back to target following PTP completion and once annum over medium-term impact of COVI
Slide 43: Updated financial guidance continued
Updated financial guidance continued Previous guidance Updates to guidance Debt costs ➢ £200m subordinated debt at 4.478% ➢ No change ➢ Approximately 80% of post-tax operating profit from continuing operations into free cash, partially used to ➢ No change Cash conversion fund debt servicing costs an
Slide 44: Environmental, Social & Governance credentials
Environmental, Social & Governance credentials Quilter’s ESG strategy is set out in our Shared Prosperity Plan Theme 2025 commitments Lead KPIs UN SDGs ➢ Improve access to financial guidance and advice for customers ➢ Financial Adviser School graduates ➢ Promote financial wellbeing for all our colle
Slide 45: Register structure by geography
Register structure by geography Company analysis vs key benchmark data Quilter General Financials FTSE 250 51% 50% 43% 23% 21% 18% 17% 14% 14% 11% 8% 7% 2% 3% 1% UK South Africa North America Rest of Europe Rest of World As at 15 October 2020 45
Slide 46: Register structure over time
Register structure over time Company analysis over time As at 15 October 2020 46
Slide 47: Contacts
Contacts Investor enquiries John-Paul Crutchley UK john-paul.crutchley@quilter.com Keilah Codd UK keilah.codd@quilter.com Media enquiries Jane Goodland UK jane.goodland@quilter.com Tim Skelton-Smith UK tim.skelton-smith@quilter.com Camarco Geoffrey Pelham-Lane UK +44 203 757 4985 quilter@camarco.co.
Slide 48: Disclaimer
Disclaimer This presentation should be read in conjunction with the announcement published by Quilter plc on 11 August 2020. This presentation may contain certain forward-looking statements with respect to certain Quilter plc’s plans and its current goals and expectations relating to its future fina
Slide 49: Quilter Basic r B and Guidelines Our b rand a
Quilter Basic rBand Guidelines Our b rand a ssets 1