Close Brothers Group Plc · LSE:CBG
Close Brothers — H1 2007 Earnings Presentation
33 slides from Close Brothers's earnings presentation, 2007
Slide 1: Close Brothers Group plc 2007 Interim Results
Close Brothers Group plc 2007 Interim Results
Slide 2: Overview
Overview 2007 H1 Results A strong headline performance • PBT £98m up 28% • EPS 46.8p up 30% • Dividend 12.0p up 14% Excellent result from Asset Management Satisfactory performance from Banking, Securities and Corporate Finance Strategic priorities: • continue to build on Asset Management growth • gr
Slide 3: Overview: Asset Management and Securities
Overview 2007 H1 Results Asset Management – record profit • PBT £43m (+130%) FuM £8.9bn (+16%) • Strong H1 both headline and underlying profit • Favourable market conditions • Ex-Singers team a success • Excellent private equity realisations Securities – Wins steady; Seydler down, as expected • Over
Slide 4: Overview: Corporate Finance and Banking
Overview 2007 H1 Results Corporate Finance – solid performance after last year’s exceptional H1 • Profit £7.4m • Busy in all sectors • M&A remains dominant • Good results from Europe Banking – profit steady, margins remain strong • Profit £37.4m; loan book flat • Tough markets in premium finance off
Slide 5: Highlights and Overview: Diversity of Activity and Income
Highlights and Overview Diversity of Activity and Income H1 H1 % 2006 2007 Profit by Activity Asset Management 22 39 Corporate Finance 10 7 Securities 25 19 Banking 43 35 100 100 Income by Type Interest 29 25 Fees 45 48 Dealing 24 20 Other 2 7 100 100 4
Slide 6: Results Highlights
Results Highlights £m H1 2006 H1 2007 Change Income Statement Operating income 252.6 284.0 +12% Pre-tax profit 76.5 97.8 +28% EPS (p) 36.0 46.8 +30% Interim dividend (p) 10.5 12.0 +14% Balance Sheet Total assets 4,896 4,839 Customer loans 1,862 1,863 Equity 614 702 5
Slide 7: Income Development
Income Development 300 £15.3m £284.0m £20.3m (£1.0m) (£3.2m) £20.6m £252.6m 250 £5.3m £56.1m £59.3m 200 £72.4m £m 150 £73.4m 100 £134.9m £114.6m 50 0 H1 2006 NetNet Fees Fees Net interest Net Interest Dealing Dealing Income Income Other OtherIncome Income H1 2007 Strong growth in fees and other inco
Slide 8: Income Statement
Income Statement £m H1 H1 2006 2007 Operating income (net) Interest 73.4 72.4 Fees 114.6 134.9 Dealing 59.3 56.1 Other 5.3 20.6 Total operating income 252.6 284.0 Administrative expenses (160.8) (171.0) Depreciation and amortisation (6.2) (6.1) Bad debts (9.1) (9.1) Total operating costs (176.1) (18
Slide 9: Balance Sheet
Balance Sheet January (£m) 2006 2007 Equity 614 702 Subordinated loan capital 75 75 Deposits by customers 1,873 2,027 Funds from banks 518 513 Non-recourse borrowings 200 150 Debt securities in issue 358 348 Securities trading liabilities 940 694 Other liabilities 318 330 4,896 4,839 Cash and short
Slide 10: Financial Highlights: KPIs
Financial Highlights : KPIs H1 2006 H1 2007 Operating margin 30% 34% Expense/income ratio 66% 62% Compensation ratio 44% 41% Return on opening capital (pre tax) 26% 30% Bad debt charge/avg loans 1% 1% 9
Slide 11: Growth and Diversity
Growth and Diversity H1 H1 H1 H1 £m 2006 2007 2006 2007 Operating Income Operating Profit Asset Management 62.0 95.7 18.6 42.7 Corporate Finance 30.5 27.8 8.8 7.4 Securities 62.5 60.4 21.8 20.4 Banking 96.7 97.8 36.9 37.4 Group 0.9 2.3 (9.6) (10.1) 252.6 284.0 76.5 97.8 10
Slide 12: The Financial Record: Profit before Goodwill and Tax
The Financial Record Profit before Goodwill and Tax 160 140 120 100 £m 80 60 40 20 0 2003 2004 2005 2006 2007 H1 H2 05-07: IFRS 03,04: UK GAAP 11
Slide 13: The Financial Record: EPS and Dividends
The Financial Record Earnings per Share* Dividends per Share 35 80 70 30 60 25 50 20 Pence Pence 40 15 30 20 10 10 5 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 H1 H2 Interim Final 05-07: IFRS 03,04: UK GAAP * before goodwill 12
Slide 14: Asset Management: H1 Review
Asset Management H1 Review Record H1 enhanced by £15m of gains Asset Management Profit 50 Underlying performance remained strong 45 38 40 FUM £8.9bn up 16% on H1 06; 8% on July 06 35 32 30 19 £m Private clients 25 17 43 20 17 15 • New team doing well 8 10 10 19 4 15 5 7 • Good results from offshore
Slide 15: Asset Management: Key Numbers
Asset Management Key Numbers H1 H1 2006 2007 Change Operating income (£m) 62.0 95.7 +54% Costs (£m) 43.4 53.0 +22% Pre-tax profit (£m) 18.6 42.7 +130% Operating margin 30% 45% Expense/income ratio 70% 55% Compensation ratio 44% 42% Net new money/opening FuM (annualised) 5.8% 7.0% 14
Slide 16: Asset Management: Funds under Management
Asset Management Funds under Management 16% growth 10 £0.4bn £8.9bn 9 £0.3bn £1.8bn 7% £7.7bn £(1.3)bn 8 7% 6% 7 2% 11% 12% 6 15% 18% £bn 5 17% 4 15% 3 2 47% 43% 1 0 06 31 Jan 06 Withdrawals/ Withdrawals/ New New funds Market effect Market effect funds Acquired funds 31 31 Jan Jan 07 redemptions red
Slide 17: Asset Management: Funds under Management
Asset Management Funds under Management 8% growth 10 £0.4bn £8.9bn 9 £1.0bn £8.2bn £(0.7)bn 7% 8 7% 7% 7% 11% 7 11% 6 15% 16% £bn 5 17% 4 17% 3 2 43% 42% 1 0 31-Jul-06 Withdrawals/ New funds Market effect 31-Jan-07 redemptions Equities Fixed Income Property Private Equity Hedge Funds Structured Dive
Slide 18: Asset Management: Funds under Management
Asset Management Funds under Management 8.9 9 8.2 8 7.7 7.1 7 6.1 6 5.7 5.0 5.5 5 £bn 4.6 4 3.7 3 2 3.2 2.4 2.5 2.7 2.7 1 0 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Private Clients Funds Good growth in private clients 17
Slide 19: Asset Management: Asset Gathering
Asset Management Asset Gathering Net and gross inflows up on H1 06 Strong private client inflows Net inflows 7% of opening FuM – a good performance Annualised £m FuM Market FuM at Net Inflows / In Out Net at Jul-06 Movement Jan-07 Opening FuM Private Clients 2,684 523 (145) 378 133 3,195 28.2% Funds
Slide 20: Asset Management: Looking forward
Asset Management Looking forward Further consolidation of wealth management businesses Build on recent multi manager acquisition Expect further PE realisations in H2 19
Slide 21: Corporate Finance: H1 Review
Corporate Finance H1 Review Good H1 performance after strong 06: Corporate Finance Profit • revenue £28m (2006 - £30m) • profit £7m (2006 - £9m) 20 17 15 UK M&A remains dominant in a buoyant market (58%) 10 10 8 £m 10 UK Restructuring (25%) and debt advisory (17%) 5 5 5 5 9 7 remained busy 4 5 5 1 S
Slide 22: Corporate Finance: Key Numbers
Corporate Finance Key Numbers H1 H1 2006 2007 Change Operating income (£m) 30.5 27.8 -9% Costs (£m) 21.6 20.4 -6% Pre-tax profit (£m) 8.8 7.4 -16% Operating margin 29% 27% Expense/income ratio 71% 73% Compensation ratio 54% 55% 21
Slide 23: Corporate Finance: Outlook
Corporate Finance Outlook M&A activity levels remain high Q3 pipeline good in all practice areas Growth through selective recruitment Watchwords remain ‘independence’ and ‘balance’ 22
Slide 24: Securities: H1 Review
Securities H1 Review Markets generally strong during H1 in UK Securities Profit 50 48 WINS had a solid half year with dealing and 40 38 36 26 operating margin holding firm 30 24 18 19 £m 20 15 10 20 22 20 New issue market quiet in Germany 17 9 2003 2004 2005 2006 2007 H1 H2 Seydler profit down after
Slide 25: Securities: Key Numbers
Securities Key Numbers H1 H1 2006 2007 Change Operating income (£m) 62.5 60.4 -3% Costs (£m) 40.7 40.0 -2% Pre-tax profit (£m) 21.8 20.4 -6% Operating margin 35% 34% Expense/income ratio 65% 66% Compensation ratio 42% 37% 24
Slide 26: Securities: Trading Highlights
Securities Trading Highlights Bargain numbers and profit per bargain broadly steady compared to H1 last year WINS remains leading RSP across the board by value and number of bargains MiFID – WINS now providing liquidity to and dealing on alternative market platforms – PLUS and Virt-X 25
Slide 27: Securities: Outlook
Securities Outlook Margins steady Reasonably positive start to H2, but markets currently uncertain 26
Slide 28: Banking: Review
Banking Review Long established, highly focussed asset Banking Profit based lender 80 74 70 70 70 63 H1 profit up 1% to £37.4m 60 36 35 37 50 32 £m 40 Consistent operating margin — 38% 30 20 34 35 37 37 31 Loan book steady overall 10 2003 2004 2005 2006 2007 Good growth in some areas (e.g. property)
Slide 29: Banking: Key numbers
Banking Key numbers H1 H1 2006 2007 Change Operating income (£m) 96.7 97.8 +1% Operating profit (£m) 36.9 37.4 +1% Loan book (£m) – period end 1,862 1,863 Bad debt charge (£m) 9.1 9.1 Bad debt % of avg loan book 1.0% 1.0% Return on average gross loans 3.8% 3.9% ROC 30% 28% Operating margin 38% 38% E
Slide 30: Banking: Period End Loan Books
Banking Period End Loan Books 2,000 £1,862m £1,863m 1,800 £174m Other incl. Healthcare 11% (9%) £198m 1,600 £145m £154m Invoice receivables 8% (8%) 1,400 £215m £174m 1,200 £186m Printing machinery 9% (11%) £252m £m 1,000 £365m Property 14% (10%) £389m 800 Transport, engineering & plant 21% (20%) 600
Slide 31: Banking: Objectives and Outlook
Banking Objectives and Outlook Liquidity remains high; at this point in the cycle we will be patient and not chase volume at the expense of margin Getting bank back on the growth track remains a priority • Actively seeking opportunities in UK and Europe but… • Increases costs We will remain diversif
Slide 32: Group: Outlook
Group Outlook Steady underlying performance in H1 + private equity gains Expect satisfactory underlying result in H2 + private equity gains 31
Slide 33: Group: Core Strategy
Group Core Strategy Specialisation Enhanced profits More consistent, Focus Reduced risk less cyclical profits Diversity Reduced volatility Steady and rising Blended exposure dividend Blended return to financial services Growth and diversity 32