Quilter Plc · LSE:QLT
Quilter — FY2019 Earnings Presentation
42 slides from Quilter's earnings presentation, Mar 11, 2020
Slide 1: Preliminary results 2019
Quilter Basic rBand Guidelines Our brand a ssets 1 Preliminary results 2019 11 March 2020
Slide 2: Disclaimer
Disclaimer This presentation should be read in conjunction with the announcement published by Quilter plc on 11 March 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 finan
Slide 3: Presentation agenda
Presentation agenda Business review Paul Feeney Financial review Mark Satchel Concluding remarks Paul Feeney Q&A 3
Slide 4: 2019 highlights: Pivotal year for Quilter
2019 highlights: Pivotal year for Quilter Continued strategic Solid financial performance progress Delivering for shareholders Robust revenue growth & First PTP migration completed 3.5p final dividend per share disciplined cost management Invested in revenue generation – 46% pay-out ratio ca
Slide 5: The new UK Platform is the heart of Quilter
The new UK Platform is the heart of Quilter 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 2019 UK Platform Switches AuA £57.2bn Third party £4.5bn £
Slide 6: UK Platform: the heart of the growth opportunity
Wealth Platforms UK Platform: the heart of the growth opportunity Products: Supporting growth across the generations Functionality: Market-leading, attractive to broader adviser base Junior ISA New Arrange withdrawals and income online New Pension Enhanced Flexi ISA capability New ISA Enha
Slide 7: Quilter Financial Planning: driving the growth opportunity
Advice & Wealth Management Quilter Financial Planning: driving the growth opportunity Growth in Quilter RFPs 2019 proofs of delivery: 137 Acquisition of Charles Derby Group, Lighthouse plc and 41 Prescient 3 57 1,799 Solid organic RFP growth, largely in 1H19; 2H19 focus on 1,621 integration of a
Slide 8: Quilter Financial Planning: driving the growth opportunity
Advice & Wealth Management Quilter Financial Planning: driving the growth opportunity 2019 proofs of delivery: Acquisition of Charles Derby Group, Lighthouse plc and Prescient Solid organic RFP growth, largely in 1H19; 2H19 focus on integration of acquired advisers, impacting productivity Fina
Slide 9: Quilter Investors: supporting the growth opportunity
Advice & Wealth Management Quilter Investors: supporting the growth opportunity Comprehensive suite of solutions meeting customer needs 2019 proofs of delivery: Cirilium Active New products launched and product suite refreshed Cirilium Passive Separation from Merian, infrastructure build-out Cir
Slide 10: Quilter Cheviot: continuing the growth opportunity
Advice & Wealth Management Quilter Cheviot: continuing the growth opportunity Continues to deliver strong gross sales despite disruption to IM team 2019 proofs of delivery: £bn 0.9 Gross sales Net flows Net flows excl. IM departures Strong investment performance over 1, 3, 5, 10 years 0.7 Year-o
Slide 11: Quilter International: repositioning for growth
Wealth Platforms Quilter International: repositioning for growth Refocused international presence 2019 proofs of delivery: Robust solution for HNW customer base – 41% growth in new UK business policies 17% reduction in expense base to drive profitability Rebranded to Quilter International, str
Slide 12: UK Platform Transformation Programme
UK Platform Transformation Programme Jul – Nov 2017 Mar – Dec 2019 2020 2018 Functional testing & Phased Build Soft launch migration planning migrations Design Testing Final system Migration Migration Migration code delivery rehearsals 1 2 Final mile of the journey… First migration implemented, with
Slide 13: UK Platform Transformation Programme: First migration achieved
UK Platform Transformation Programme: First migration achieved Delivers the full experience to first phase of advisers and their customers in a controlled, measured way Pleased with supportive early feedback Enhanced monitoring and support in place to identify and manage areas requiring servic
Slide 14: Building a modern, advice-led wealth manager
Building a modern, advice-led wealth manager Customer choice: at the heart of everything we do Open, transparent: no hidden fees Fair: Competitive product quality and pricing across the value chain Service: underpinning the whole proposition For the generations of today and tomorrow 14
Slide 15: Financial review
Financial review Mark Satchel 11 March 2020
Slide 16: Executive summary: solid outturn in 2019
Executive summary: solid outturn in 2019 Key Performance Indicators from continuing operations excluding QLA 2019 2018 ∆ Adjusted profit: Adjusted profit growth, up 3% Adjusted profit before tax incl. QLA £m 235 233 +1% - o/w QLA £m 53 57 (7%) Adjusted diluted basic earnings per share of 8.6p¹ A
Slide 17: Robust performance
Robust performance NCCF Average AuMA Total net fee revenue £bn £bn £m Integrated 4.7 2.6 4% Revenue net flows 55 55 (£bn) margin (bps) 12.4 101.9 105.7 -94% 5% 4.7 0.3 712 679 (7.3) 2018 2019 2018 2019 2018 2019 Market movement contribution Expenses Adjusted profit Adjusted diluted EPS £m £m Pence 2
Slide 18: Flows: flow trends impacted by lower DB transfers and IM departures
Flows: flow trends impacted by lower DB transfers and IM departures 5 Gross sales Gross outflows Net flows 5 o/w DB transfers o/w QC departures 4 4 3 3 2 2 Gross sales / outflows (£bn) 1 1 Net flows (£bn) 0 0 -1 -1 -2 -2 -3 -3 -4 -4 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q
Slide 19: Advice and Wealth Management: building foundations for growth
Advice and Wealth Management: building foundations for growth Revenue Expenses Adjusted profit £m £m £m Operating 27% 25% margin +9% +12% 407 304 7 373 +1% 271 102 103 2018 2019 2018 2019 2018 2019 Acquisitions Advice revenues up 18%, of which 16% from acquisitions KPIs 2018 2019 Lower productiv
Slide 20: Wealth Platforms: solid performance, improved profitability
Wealth Platforms: solid performance, improved profitability Revenue Expenses Adjusted profit £m £m £m (1%) (5%) Operating 34% 37% margin 7% 305 302 200 190 105 112 2018 2019 2018 2019 2018 2019 Wealth Solutions’ revenues up 4% KPIs 2018 2019 International revenues declined, with improved NCCF pe
Slide 21: Continued disciplined expense management
Continued disciplined expense management Expenses, before impact of acquisitions, better than “broadly flat” guidance Operating 30% 29% margin 3 14 11 “Broadly flat” 3 9 24 573 Investment External environment Management action 555 £m 2018 Acquisitions Property Inflation FSCS levy Optimisation Other
Slide 22: Optimisation Phase 1: £14m saving delivered, £24m run-rate achieved
Optimisation Phase 1: £14m saving delivered, £24m run-rate achieved 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 Gener
Slide 23: Quilter Life Assurance sale complete: capital return
Quilter Life Assurance sale complete: capital return Sale proceeds available for distribution (£m) Sale price 425 £375m surplus net proceeds to be returned; Interest accrued to completion 21 consulted shareholders on method of return Cash received 446 Rolling share buyback¹ programme to Dividend
Slide 24: Quilter Life Assurance: expense progression
Quilter Life Assurance: expense progression Stranded costs bridge from 2019 costs – operating margin target remains unchanged 2021 2019 2020 (ongoing) 17 43 Captured within 14 operating margin guidance 26 12 5 £m QLA 2019 costs Costs transferred to Non-transferring costs Transitional Service Initial
Slide 25: Continued strong solvency position
Continued strong solvency position Solvency II ratio 221% (41%) Solvency II ratio reduced by 10% 190% 52% (pro forma) principally due to QFP acquisitions (12%) 180% (3%) (5%) (5%) 4% Provides capacity for strategic investments including UK Platform Transformation Programme and bolt-on advice acq
Slide 26: Holding company cash
Holding company cash (65) 446 (375) (200) Totaling ~£120m 307 815 (61) (31) (4) (49) (9) 416 c.250 £m 1 Jan 2019 2018 Final Interim dividend Head office costs External debt Cash remittances Capital Other QLA proceeds 31 Dec 2019 Final dividend Capital return Odd-Lot Offer PTP London Property Optimis
Slide 27: Updated financial guidance
Updated financial guidance Previous guidance Updates to guidance No change to target over the medium-term but expect to build Target: NCCF of 5% of opening AuMA (excluding QLA) per Net client cash flow back to target by mid-2021 following PTP completion and once annum over medium-term impact of
Slide 28: Outlook and financial summary
Outlook and financial summary Outlook Comfortable with pre-results adjusted profit consensus, at pre-Coronavirus market levels Impact of Coronavirus needs to be evaluated; too early to be determined Earnings Expenses Balance sheet Prudently capitalised liquid Adjusted profit +3% to £182m C
Slide 29: Concluding remarks
Concluding remarks Paul Feeney 11 March 2020
Slide 30: Key focus for 2020
Key focus for 2020 Complete Platform Transformation Programme Integrate acquisitions and deliver flow growth Execute optimisation plans to drive operating leverage Return £375 million to shareholders 30
Slide 31: Building a modern, advice-led wealth manager
Building a modern, advice-led wealth manager Foundation Transformation Delivery 2020 & beyond Migrate remaining 2019 UK Platform Rebrand UK Platform & Quilter Life Assurance International 2018 sold Support adviser New UK Platform in soft acquisitions to drive flow Managed separation launch; Leverage
Slide 32: Q&A
Q&A Quilter
Slide 33: Appendix
Appendix 11 March 2020 Quilter
Slide 34: 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 35: Stock of AuMA supported by stronger market performance
Stock of AuMA supported by stronger market performance AuMA evolution from continuing operations £bn Integrated flows £4.7bn Integrated flows £2.6bn DB to DC transfers: £1.6bn DB to DC transfers: £0.8bn 55 4.7 55 12.4 7.3 0.3 5% 13%1 -7%1 0% 110.4 100.3 97.7 Opening NCCF Market 31 Dec 2018 NCCF Mark
Slide 36: Business model supports robust integrated flows
Business model supports robust integrated flows FTSE 1001 FTSE All Share1 NCCF: £7.6bn² NCCF: £4.7bn² NCCF: £0.3bn² Integrated flows: £5.2bn3 Integrated flows: £4.7bn3 Integrated flows: £2.6bn3 NCCF excl. Quilter Life Assurance2 2.3 2.0 1.9 1.9 1.5 1.4 1.1 1.3 1.2 1.2 1.0 1.0 1.0 0.7 0.7 0.6 0.5 0.5
Slide 37: Investment performance
Investment performance Quilter Cheviot cumulative returns Cirilium & Wealth Select Quilter Cheviot PCI performance vs. peers, as at 31 December 2019 Performance vs respective Investment Association sector average Cumulative returns: at 31 December 2019 +2.1 +1.1 +0.7 Relative (pp) -1.1 +2.2 +0.3 +1.
Slide 38: Group performance and Wealth Platforms division, including Quilter Life Assurance
Group performance and Wealth Platforms division, including Quilter Life Assurance Quilter Group Total net fee revenue Expenses Adjusted profit before tax¹ Adjusted diluted EPS £m £m Pence Revenue £m 57 57 margin Operating 3% 30% 29% margin (bps) 1% (16%) 3% 573 555 235 13.5 233 788 808 11.3 2018 201
Slide 39: 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 operating margin by 2020 (27%) and a further 2 percentage Optimi
Slide 40: Updated financial guidance continued
Updated financial guidance continued Previous guidance Updates to guidance No change to target over the medium-term and expect to Target: NCCF of 5% of opening AuMA (excluding QLA) per Net client cash flow build back to target by mid-2021 following PTP annum over medium-term completion and once
Slide 41: 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 42: Quil t er Basic r B and Guidelines Our b r and a ss
Quilter Basic rBand Guidelines Our brand a ssets 1