Integrafin Holdings Plc · LSE:IHP
Integrafin — H1 2022 Earnings Presentation
39 slides from Integrafin's earnings presentation, May 2022
Slide 1: Results Presentation: Half year ended 31 March 2022
Results Presentation Half year ended 31 March 2022
Slide 2: Presentation team
Presentation team Alex Scott Jonathan Gunby IHP Chief Executive Officer IHP Executive Director – and IFAL CEO • Joined IntegraFin in 2009 • Joined IntegraFin in 2011 • 1997 – Twelve years in insurance • 1999 – Twelve years as Director of licence provision NMG Holdings • 30 years of financial service
Slide 3: The IHP Group strategy – focused on clients and UK advisers
The IHP Group strategy – focused on clients and UK advisers We provide services for clients and UK advisers We deliver enhanced value for our stakeholders by Growing Investing Managing • Growing FUD by • To deliver market leading • Controlling the cost base attracting and retaining software and stra
Slide 4: The IHP Group business model – proprietary technology based
The IHP Group business model – proprietary technology based Proprietary technology • We own and continually develop Transact and the T4A CURO back office system Operational efficiency • High standards of client service, combined with straight through processing for operational efficiency People exce
Slide 5: Operational overview: Transact and T4A
Early growth stage (acquired by IHP in 2021) - Provides the market leading investment platform for provides the market leading back office software for clients and UK advisers UK advisers Operational • FUD at £53.5bn • Software installed at > 80 client firms, with in excess of 2k licence-paying user
Slide 6: Half year 2022 - key financial results
Half year 2022 - key financial results Group revenue up 13% to £67m Transact platform PBT up 10% to £33.7m - FUD Clients margins maintained at 52% Continued investment in T4A – loss of £1.1m, and post combination payments of £1.5m 14% 219k (H1 21: £46.93bn) (up 9% from H1 21) The effect of T
Slide 7: Transact platform – record profits, and resilient margin
Transact platform – record profits, and resilient margin Resilient platform PBT Platform PBT margin at 52% (H1 2021: 52%) margin Record PBT Platform PBT grew by 10% - to £33.7m Platform revenue Platform revenue grew by 11% growth Investment in Platform costs grew by 13% - we invested in client facin
Slide 8: T4A – losses incurred as expected while developing the new software
T4A – losses incurred as expected while developing the new software T4A’s new T4A’s new CURO 365 software is on track for initial release by software the end of 2022 Software Headwinds from: developers in Ukraine; required changes to development safely transfer data to the Microsoft platform; ongoin
Slide 9: Investment in an additional 50 staff for FY22 and FY23
Investment in an additional 50 staff for FY22 and FY23 • During H1 2022 we increased investment costs and staff numbers to: • maintain service standards • further develop our software • enhance our operational systems • We will continue to invest by adding 50 software development and systems staff i
Slide 10: IHP Group financial performance
IHP Group financial performance
Slide 11: Transact platform - revenue increased by 11%
Transact platform - revenue increased by 11% £m H1 2022 H1 2021 Change The Transact investment platform is the primary driver of Group• revenue and profitability. The main revenue stream – annual Annual commission income - 58.4 51.8 +13% commission – grew by recurring 13% • Total platform revenue Wr
Slide 12: Transact platform – PBT increased by 10%, resilient PBT margin
Transact platform – PBT increased by 10%, resilient PBT margin £m H1 22 H1 21 Change • Transact platform PBT Total Transact revenue 65.3 58.6 +11% growth of 10% Cost of sales (0.5) (0.4) +25% • Operating expenses Net revenue 64.8 58.2 +11% increased by 13% - as we invested in more Total Transact ope
Slide 13: T4A – losses expected until the end of FY23
T4A – losses expected until the end of FY23 £m H1 22 H1 21 (Note 1) • T4A losses for the Total T4A income 1.7 0.7 period were £1.1m • The prior period only Cost of sales (0.2) - included 2.5 months of T4A reporting Net revenue 1.5 0.7 • T4A has grown Staff costs (2.0) (0.7) revenue, excluding the us
Slide 14: Group revenue margin decreasing as we reduce fee rates
Group revenue margin decreasing as we reduce fee rates Group revenue, and revenue yield £140 0.30 bps £m 0.29 £120 • Group revenue has grown 0.28 consistently £100 0.27 • The Group revenue yield £80 has decreased over time 0.26 as we have reduced charges for clients, and £60 grown FUD at the same 0.
Slide 15: Group costs increased by 24% - with a full period of T4A costs
Group costs increased by 24% - with a full period of T4A costs £m H1 2022 H1 2021 Change • The cost increase is partly Staff costs 23.7 20.3 +17% driven by T4A costs being for the full 6 month period in H1 Occupancy 1.2 0.4 +200% 22 – versus only 2.5 months in H1 2021 Regulatory and professional fee
Slide 16: Group staff numbers increased by 8%
Group staff numbers increased by 8% 31 March 22 31 March 21 Change • Platform (excl T4A) staff numbers Software increased to ensure high service development and IT standards infrastructure 117 123 -5% Operational and • Software development and IT staff support activities 419 381 +10% decreased late
Slide 17: Group reported PBT margin of 47%, underlying PBT margin of 50%
Group reported PBT margin of 47%, underlying PBT margin of 50% £m IHP Group IHP Group H1 22 H1 21 Revenue 67.0 59.4 • Group reported PBT for the Amortisation of deferred income liability period includes non - 3.8 underlying expenses of £1.5m – which is deferred Cost of sales (0.9) (0.6) post combina
Slide 18: Resilient Group PBT margin over time
Resilient Group PBT margin over time Group underlying PBT margin and Group reported PBT margin 60% • The reported Group PBT margin for H1 22 is at a level of 47% 55% • Since FY20 the reported Group PBT margin has reduced due to the new investment in T4A, and 50% continued investment in Transact • On
Slide 19: Strong cash reserves
Strong cash reserves Consolidated cash balance on the IHP balance sheet as at 31 March 2022 £m • Cash balances are held at regulated subsidiary £51.6m Cash not specifically allocated entities as well as at the IHP level to risk appetite purposes. • We hold £115.6m of cash to support specific regulat
Slide 20: Capital and cash allocation
Group capital and cash allocation approach Strong cash position - financial resilience On-going capital and Capital and cash allocation Evolving regulatory capital and liquidity requirements liquidity requirements Additional buffer for risk appetite purposes Enhance our proprietary software
Slide 21: Consistent delivery of dividends
Consistent delivery of dividends Dividend FY22 FY21 FY20 • We announced a first interim dividend for FY22 Per share of 3.2p Ordinary – first • This is a 7% increase on 3.2 pence 3.0 pence 2.7 pence interim the first interim dividend for FY21 Ordinary – second Not yet announced 7.0 pence 5.6 pence in
Slide 22: Outlook
Outlook Transact platform • The general economic outlook has deteriorated from the start of the year, including increased inflationary pressures • Geo political events and world stock market levels impact our FUD • These factors will impact platform revenue, and expenses, during FY22 • We are in a s
Slide 23: Business update on Transact and T4A
Business update on Transact and T4A
Slide 24: Transact's H1 22 net inflows increased by 16% compared to H1 21
Transact‘s H1 22 net inflows (£2.7bn) increased by 16% compared to H1 21 £2.5bn £2.15bn £2.09bn £1.99bn £1.97bn £1.98bn £2.0bn £1.70bn £1.58bn £1.47bn £1.5bn £1.40bn £1.34bn £1.31bn £1.29bn £1.29bn £1.23bn £1.10bn £1.0bn £0.84bn £0.80bn £0.73bn £0.5bn £0.0bn Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q
Slide 25: Transact platform - strong and consistent net inflows
Transact platform - strong and consistent net inflows Half year net inflows to the Transact platform as a percentage of opening FUD for each half year £3.0 8% Billions • We have delivered strong £2.5 7% and consistent net inflows to the platform 6% £2.0 • Our net inflows as a % of 5% opening FUD rem
Slide 26: The adviser platform market continues to grow strongly
The adviser platform market continues to grow strongly £600 Billions CAGR: 10% £500 £400 • The adviser platform market continues to grow strongly £300 • Total FUD for the market is well over £500bn £200 • The adviser platform market is expected to continue to grow at a similar rate over £100 the med
Slide 27: Transact continues to have a strong share of net inflows to the adviser platform market
Transact continues to have a strong share of net inflows to the adviser platform market 25% 21.46% 21.05% 20% 19.09% 18.28% • Transact’s share of the adviser platform market 15% 13.33% continues to grow • We are particularly pleased 9.59% 10% 8.42% 8.84% 9.03% 9.42% that our share of net inflows to
Slide 28: Ranking of gross and net inflows for H1 2022 for adviser platforms
Ranking of gross and net inflows for H1 2022 for adviser platforms TOP 5 ADVISER PLATFORMS TOP 5 ADVISER PLATFORMS BY GROSS INFLOWS H1 22 BY NET INFLOWS H1 22 Quilter £4.64bn Aviva £2.82bn Abrdn £4.50bn Transact £2.68bn Aviva £4.10bn True Potential £2.56bn Transact £4.07bn Abrdn £1.95bn Fidelity £3.
Slide 29: Ranking of gross and net inflows for Q2 2022 for adviser platforms
Ranking of gross and net inflows for Q2 2022 for adviser platforms TOP 5 ADVISER PLATFORMS TOP 5 ADVISER PLATFORMS BY GROSS INFLOWS Q2 FY22 BY NET INFLOWS Q2 FY22 Quilter £2.34bn Transact £1.39bn Abrdn £2.27bn Aviva £1.38bn Transact £2.10bn True Potential £1.20bn Aviva £2.00bn Quilter £1.00bn Fideli
Slide 30: Analysis of inflows to the Transact platform
Analysis of inflows to the Transact platform Gross inflows to the Transact platform during H1 FY22 comprised the following: • Inflows from existing advisers (i.e. registered and using the platform prior to H1 22) bringing new clients who put cash or investments onto the Platform: 61% • Inflows from
Slide 31: Growing client base and addressable market
Growing client base and addressable market Large market with growth opportunities Increasing client and adviser numbers 220,000 8,000 UK Investable Assets that could be available for UK 200,000 Platforms £3.0trn 7,000 180,000 160,000 6,000 UK Platform Market £906bn 140,000 5,000 120,000 4,000 UK Adv
Slide 32: Summary: Transact enjoys a strong growth profile
Summary: Transact enjoys a strong growth profile Growth in UK wealth market Industry drivers Growth in assets managed by financial advisers Growth in wealth managed by current advisers Increasing penetration of current advisers penetration Market New advisers joining Transact Strong growth profile f
Slide 33: Continued technological and operational improvements to meet client needs
Continued technological and operational improvements to meet client needs Platform investment continued throughout H1 22, making further enhancements that benefit the client and adviser online experience We expect that adviser users will continue to move clients onto Transact, as they experience the
Slide 34: Transact is consistently rated top for service
Transact is consistently rated top for service Investment Trends UK Adviser Technology & Business Report 2022 • Transact was rated the top platform in the UK Investment Trends Adviser Technology & Business Report 2022 • In this year’s study, Transact is rated first for overall satisfaction, portfoli
Slide 35: Regulatory developments
Regulatory developments • The FCA’s Consumer Duty – it will be applicable to both our investment firm (IFAL) and our life insurance firm (ILUK). This will set higher expectations for the standards of care that firms provide to consumers – with a specific focus on ensuring that consumers avoid harm •
Slide 36: T4A update
T4A update • Finalising the development of the new (cloud based) CURO 365 back office software for advisers • There have been headwinds for development due to some developers based in Ukraine, and required changes to ensure the safe and efficient transfer of data to Microsoft’s Power Platform • User
Slide 37: Group developments
2: IntegraFin Group developments
Slide 38: Group developments
Group developments • ESG developments – we have engaged an external firm (Willis Towers Watson) to give us guidance on how we can improve our environmental impact • We expect the specific environmental plan to be finalised by the end of the year, at which point we will provide further information •
Slide 39: Disclaimer
Disclaimer The information contained in this presentation has not been independently verified and no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein