Charles Stanley — FY2016 Earnings Presentation
42 slides from Charles Stanley's earnings presentation, June 2016
Slide 1: A strategic focus
Focusing on you A strategic focus Full year results 31 March 2016
Slide 2: Vision statement
Vision statement Our vision is to become the UK’s leading wealth manager by 2020. We define leading in terms of quality rather than quantity; we do not seek necessarily to become the biggest, but rather the best wealth manager in the UK. 1 FY Results: 31 March 2016
Slide 3: What we do
What we do 1. Investment Management 3. Financial Planning Services The Investment Management Services The Financial Planning division provides division offers a comprehensive flexible access to financial planning personalised service to private clients advice, working with clients to ensure namely;
Slide 4: Agenda
Agenda 1. Key messages 2. Financial results 3. Strategic implementation plan 4. Outlook Appendices 3 FY Results: 31 March 2016
Slide 5: 1. Key messages
CHARLES STANLEY, 1. Key messages
Slide 6: Key messages
Key messages Decline in profitability arrested and continued strong stewardship of financial resources Implementation of strategic plan proceeding Well positioned to build on progress made, offering a broad personalised service to our clients 5 FY Results: 31 March 2016
Slide 7: Strategic overview
Strategic overview Charles Stanley aims to become the UK’s leading wealth manager by 2020, focused on client satisfaction, employee engagement and producing a strong financial performance The Company will deliver holistic wealth management incorporating Investment Management, Asset Management, F
Slide 8: FY 2016 principal achievements
FY 2016 principal achievements Strategic Strategy review completed Divisions reorganised and reporting hierarchies streamlined to improve accountability and accelerate rate of change Detailed strategic implementation plans developed for each division Financial Balance sheet strengthened thro
Slide 9: FY 2016 principal achievements (continued)
FY 2016 principal achievements (continued) Operational Completion of client suitability review programme Revised interim variable remuneration arrangements agreed with Investment Management team for financial year 2017 Brand relaunched Defined benefit pension scheme closed to future service
Slide 10: Key challenges
Key challenges Difficult market conditions provided headwinds to trading, exemplified by 8.8% decline of FTSE 100 Slow organic fund inflows Concluding the variable remuneration consultation process has taken longer than originally anticipated. It is expected this will happen shortly The Grou
Slide 11: 2. Financial results
CHARLES STANLEY, 2. Financial results
Slide 12: FY 2016 financial headlines
FY 2016 financial headlines Funds under management and administration down 3.8% to £20.5bn (2015: £21.3bn) Revenues from Core Business down 3.3% to £136.3m (2015: £141.0m) Market headwinds: FTSE 100 down 8.8% Investment management and financial planning fees up, but lower levels of commissio
Slide 13: Financial summary - losses reduced, balance sheet strengthened
Financial summary - losses reduced, balance sheet strengthened 2016 2015 Change FUMA (£bn) 20.5 21.3 (3.8%) Decrease in FUMA in line with market (WMA Balanced Index -3.5%) Core Business Revenue (£m) 136.3 141.0 (3.3%) Revenues down mainly because of lower trading commission income, interest on clien
Slide 14: Funds under Management and Administration - performance in line with market
Funds under Management and Administration - performance in line with market FUMA movement year on year (£bn) 2016 2015 Change Discretionary funds 9.4 9.3 1.1% 1.1% growth in Discretionary funds due to new fund inflows Advisory Managed funds 2.6 3.0 (13.3%) Total Managed 12.0 12.3 (2.4%) Advisory Dea
Slide 15: Funds under Management and Administration - low levels of inflows and outflows
Funds under Management and Administration - low levels of inflows and outflows FuMA flows (£bn) 25.0 1.1 0.1 0.3 21.3 20.5 (0.2) (0.2) 20.0 (1.2) (0.7) 6.9 6.8 15.0 2.1 1.7 3.0 2.6 10.0 5.0 9.3 9.4 - Funds at 1 April Net Discretionary Advisory Advisory Dealing Execution-only Lost clients Market Fund
Slide 16: Revenues - pressure on margins
Revenues - pressure on margins 2016 2015 Change £m £m % Fees: Market based fees (excl. trail income) 65.2 64.0 1.9% Investment management and administration fee Administration Based Fee 18.2 16.9 7.7% improvements negated by decline of commission Trail income 2.8 5.2 (46.2%) income, trail and intere
Slide 17: Core Business operating expenses - improved cost control
Core Business operating expenses - improved cost control Core Business operating expenses (£m) 138.0 Expenses incurred by the Core Business areas fell 3.3%. 136.9 137.0 The bulk of the savings were achieved by reducing remuneration costs, down £3.9 million, driven by a 7.2% 136.0 reduction in headco
Slide 18: Core Business profitability - stable year on year
Core Business profitability- stable year on year Core Business profit (£m) 5.0 0.1 4.4 0.7 4.2 4.0 3.9 (0.1) 3.0 2.0 1.0 (3.2) - (1.6) (1.0) 2015 profit Fees Commission Interest Remuneration Other costs Finance and 2016 profit before tax costs other income before tax 17 FY Results: 31 March 2016
Slide 19: Reported loss before tax - significant improvement achieved
Reported loss before tax - significant improvement achieved 2016 2015 Change £m £m % Core Business profit before tax 4.2 4.4 (3.3%) Loss attributable to held for sale activities (0.5) (1.9) 73.7% Reduction in losses attributable to held for sale activities following sale of Charles Stanley Securitie
Slide 20: Reported profit to Core Business profit - adjusting items
Reported profit to Core Business profit - adjusting items Profit reconciliation (£m) 6.0 0.4 0.8 5.0 (0.2) 4.2 0.8 4.0 (0.8) 1.4 3.0 1.6 2.0 1.0 0.5 - (0.3) (1.0) Reported loss Loss on held for Amortisation of Transition bonus Dilapidations Exceptional Impairment of Profit on disposal Defined benefi
Slide 21: Balance sheet - strengthened through fund raising
Balance sheet - strengthened through fund raising 2016 2015 Change £m £m % Goodwill and customer relationships 22.3 23.3 (4.3%) No new teams acquired during 2016 Software 3.1 2.8 10.7% Ongoing investment in software Total intangible assets 25.4 26.1 (2.7%) Fixed assets 10.7 13.3 (19.5%) Depreciation
Slide 22: Cash flow - also improved
Cash flow - also improved Cash flow movements (£m) 60.0 1.6 2.7 48.1 50.0 16.6 (0.3) (2.5) 40.0 5.6 28.5 30.0 (0.5) (2.0) (1.6) 20.0 10.0 - Opening Adjusted Capex Borrowings Dividends Share Sale of Acquisition Working Cash Closing (1st Apr operating placement buiness of capital classified (31st Mar
Slide 23: Financial KPI's - progress
Financial KPI’s - progress 2016 2015 Business growth FUMA (£bn) 20.5 21.3 Core Business revenue growth (3.3%) 4.9% Operating efficiency IMS Managed funds per CF30 (£m) 40.8 41.3 Revenues per Financial Planner (£000) 222.2 211.1 Reported staff costs / revenue 68.6% 68.8% Reported total costs / revenu
Slide 24: 3. Strategic implementation plan
3. Strategic implementation plan
Slide 25: Strategic implementation - actions for FY 2017
Strategic implementation - actions for FY 2017 Q1 Q2 Q3 Q4 Group Completion of detailed divisional strategy implementation plans Project resource prioritisation agreed Investment Management Services Variable remuneration arrangements delivered Implementation of revised rate card 3 year phase in Invi
Slide 26: Strategic implementation - actions for FY 2017
Strategic implementation- actions for FY 2017 Q1 Q2 Q3 Q4 Charles Stanley Direct New website with streamlined on-boarding Review of pricing policy Enhanced digital marketing strategy Central Functions Head office move and London offices rationalisation Focus on process standardisation and scale to i
Slide 27: 4. Outlook
CHARLES STANLEY, 4. Outlook
Slide 28: Outlook
Outlook Strategy in place to deliver sustainable growth; now focused on implementing it Initial timeframes may be extended due to ongoing adverse market conditions and time invested in getting the right remuneration structure Achievement of 15% operating margin still regarded as attainable but
Slide 29: Appendices Divisional information
Appendices Divisional information
Slide 30: Core Business - divisional breakdown
Core Business - divisional breakdown Investment Management Asset Financial Charles Stanley Services Management Planning Direct Core Business £m £m £m £m £m 31 March 2016 Revenue 120.0 5.5 6.0 4.8 136.3 Expenses ( 112.4) ( 6.5) ( 7.2) ( 6.2) ( 132.3) Other income 0.2 - ( 0.1) 0.1 0.2 Operating profit
Slide 31: Investment Management Services - FUMA
Investment Management Services - FUMA IMS FUMA 2016 2015 Change Discretionary (£bn) 8.5 8.5 - Advisory Managed (£bn) 2.3 2.7 (14.8%) Total Managed (£bn) 10.8 11.2 (3.6%) Advisory Dealing (£bn) 1.7 2.0 (15.0%) Execution only (£bn) 5.0 5.3 (5.7%) Total 17.5 18.5 (5.4%) Average managed funds per CF30 (
Slide 32: Investment Management Services - Revenue
Investment Management Services - Revenue 2016 2015 Change Revenue Managed (£m) 87.6 88.8 (1.4%) Administered (£m) 23.9 28.6 (16.4%) Other (£m) 8.5 7.9 7.6% Total revenue (£m) 120.0 125.3 (4.2%) Revenue margins Discretionary (bps) 84.0 80.0 0.9% Advisory Managed (bps) 68.0 80.0 0.9% Managed (bps) 80
Slide 33: Investment Management Services - Cost analysis
Investment Management Services - Cost analysis IMS operating costs 2016 2015 Change Cost/income ratio 93.7% 92.4% 1.4% Headcount (number) 464 505 (8.1%) IMS operating costs 2016 (£m) IMS operating costs 2015 (£m) Fixed Fixed 20.5 21.5 Variable 42.0 Variable 44.4 Other direct operating Other direct o
Slide 34: Investment Management Services - Financial performance
Investment Management Services - Financial performance 2016 2015 Change £m £m % Fees 72.4 72.9 (0.7%) Commission 44.8 48.0 (6.7%) Interest 2.8 4.4 (36.4%) Revenue 120.0 125.4 (4.3%) Direct costs (68.0) (73.8) 7.9% Other income 0.2 0.2 - Contribution 52.2 51.8 0.8% Allocated costs (44.4) (42.0) (5.7%
Slide 35: Asset Management - Assets and financial performance
Asset Management - Assets and financial performance Asset Management FUMA 2016 2015 Change FUMA (£bn) 0.8 0.7 14.3% Revenue Margin (bps) 63 68 (7.4%) Asset Management financial performance 2016 2015 Change £m £m % Revenue 5.5 5.1 7.8% Direct costs (6.9) (6.7) (3.0%) Other income - - - Contribution (
Slide 36: Asset Management - Cost analysis
Asset Management- Cost analysis Asset Management operating costs 2016 2015 Change Cost/income ratio 118.2% 141.2% (16.3%) Headcount (number) 42 43 (2.3%) AM operating costs 2016 (£m) AM operating costs 2015 (£m) (0.4) Fixed Fixed 0.5 Variable Variable 1.9 2.3 3.5 3.7 Other direct operating Other dir
Slide 37: Financial Planning
Financial Planning Financial planner performance 2016 2015 Change % Revenue (£m) 6.0 5.7 5.3% Financial planners (number) 27 27 0.0% Revenue per financial planner (£000) 222.2 211.1 5.3% Financial Planning financial performance 2016 2015 Change £m £m % Revenue 6.0 5.7 5.3% Direct costs (5.0) (4.6) (
Slide 38: Charles Stanley Direct
Charles Stanley Direct 2016 2015 Change % Charles Stanley Direct platform (£bn) 1.4 1.2 16.7% Garrison (£bn) 0.4 0.4 0.0% Funds under administration (£bn) 1.8 1.6 12.5% No. of platform client accounts 31 March 28,537 22,051 29.4% 37 FY Results: 31 March 2016
Slide 39: Charles Stanley Direct
Charles Stanley Direct Charles Stanley Direct financial 2016 2015 Change performance £m £m % Revenue 4.8 4.8 - Direct costs (2.8) (4.8) 41.7% Other income - - - Contribution 2.0 - - Allocated costs (3.4) (2.5) (36.0%) Operating Profit/(loss) (1.4) (2.5) 44.0% Revenue margin (bps) 28 32 (12.6%) Contr
Slide 40: Core Business - cost breakdown
Core Business - cost breakdown Core Business operating costs 2016 2015 Change £m £m % Staff costs Fixed 51.2 52.3 (2.1%) Variable 41.7 44.5 (6.3%) Total staff costs 1 92.9 96.8 (4.0%) Other direct operating expenses 15.0 18.1 (17.1%) Total direct costs 107.9 114.9 (6.1%) Central costs 24.4 22.0 10.9
Slide 41: Core Business - Expenses
Core Business - Expenses Expenses breakdown (£m) FY '15 52.3 44.5 10.5 6.9 8.6 3.0 11.1 136.9 FY '16 51.2 41.7 12.0 7.3 8.9 2.3 8.9 132.3 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 40 F
Slide 42: Reconciliation of Core Business performance to Statutory performance
Reconciliation of presentation of Core Business performance to Statutory performance Charles Stanley Statutory discontinued Statutory Financial Adjusting operation: Charles Stanley Statutory Held for sale Core Business and Statutory profitability Core Business continuing Solutions items Securities G