St. James's Place Plc · LSE:STJ
St. James's Place — H1 2020 Earnings Presentation
39 slides from St. James's Place's earnings presentation, Jul 28, 2020
Slide 1: Half-Year Results July 2020
HALF-Y EAR RESULTS JULY 2020
Slide 2: Andrew Croft, Chief Executive
01 ANDREW CROFT Chief Executive
Slide 3: Agenda
HALF YEAR RESULTS 2020 AGENDA Andrew Croft INTRODUCTION Craig Gentle FINANCIALS Ian Gascoigne THE PARTNERSHIP Andrew Croft BUSINESS UPDATE AND OUTLOOK Q&A 2 S T . J A M E S ’S P L A C E
Slide 4: Strong First Quarter
HALF YEAR RESULTS 2020 STRONG FIRST QUARTER Gross inflows Net inflows £4.04 billion £2.37 billion UP 12% UP 9% Continuing strong retention Annualised growth of 8.1% on opening FUM 3 S T . J A M E S ’S P L A C E
Slide 5: Second Quarter
HALF YEAR RESULTS 2020 SECOND QUARTER • Rapid adaptation to UK lockdown and social distancing measures • Operational resilience underpinned by investment in ‘Bluedoor’ admin platform − Electronic business processing capabilities − Enhanced self-serve admin functionality for advisers • Partnership ex
Slide 6: Innovative Solutions
HALF YEAR RESULTS 2020 INNOVATIVE SOLUTIONS MORE THAN 47% OF FORMS SENT VIA DOCUSIGN ARE BEING RETURNED BY CLIENTS WITHIN AN HOUR AND MORE THAN 75% WITHIN A DAY A NEW TOOL FOR PARTNERS AND CLIENTS TO CHAT AND SHARE DOCUMENTS SECURELY 5 S T . J A M E S ’S P L A C E
Slide 7: Second Quarter
HALF YEAR RESULTS 2020 SECOND QUARTER Gross inflows Net inflows £3.22 billion £2.15 billion 15% lower Just 5% lower Total gross inflows (six months) Total net inflows (six months) £7.26 billion £4.52 billion down only 2% up 2% 6 S T . J A M E S ’S P L A C E
Slide 8: Q2 Monthly Flows
HALF YEAR RESULTS 2020 Q2 MONTHLY FLOWS Gross inflows - £’Billion Net inflows - £’Billion 1.17 0.81 1.07 0.98 0.67 0.67 April May June April May June Gross inflows Net inflows 7 S T . J A M E S ’S P L A C E
Slide 9: Funds Under Management
HALF YEAR RESULTS 2020 FUNDS UNDER MANAGEMENT FUM £115.7 billion £140bn £120bn £100bn £80bn £60bn £40bn £20bn £0bn 2014 2015 2016 2017 2018 2019 H1 2020 8 S T . J A M E S ’S P L A C E
Slide 10: Adviser Growth
HALF YEAR RESULTS 2020 ADVISER GROWTH Total advisers up 1.2% to 4,324 4,500 • Total adviser numbers up 1.2% in H1 reflecting 4,000 decision to moderate recruitment activity 3,500 • Scale of Partnership 6% larger than a year ago 3,000 • Adapted recruitment activity – shift to digital 2,500 • Academy
Slide 11: Helping Our Community
HALF YEAR RESULTS 2020 HELPING OUR COMMUNITY • We remain committed to those individuals, small businesses and charities that need our support • Through the St. James’s Place Charitable Foundation, over £2 million has been donated in COVID-19 related support. • COVID-19 appeal has raised over £550,00
Slide 12: Craig Gentle, Financials
02 CRAIG GENTLE Financials
Slide 13: Agenda
HALF YEAR RESULTS 2020 AGENDA Cash result Embedded value and solvency Dividends 12 S T . J A M E S ’S P L A C E
Slide 14: Underlying Cash Result
HALF YEAR RESULTS 2020 UNDERLYING CASH RESULT Growth in net income from FUM reflects new business activity and maturing FUM, offsetting negative £393.4m £(174.5)m investment market impacts New business margin impacted £58.2m £(149.8)m by lower volumes and modest +10% operational gearing effect £218.
Slide 15: Gestation FUM – Underpinning Future Returns
HALF YEAR RESULTS 2020 GESTATION FUM – UNDERPINNING FUTURE RETURNS Contribution to the Cash result from maturing FUM £400m • FUM in gestation provides visibility around growth in net income from FUM £350m £300m • By 2026, the annual contribution to the post-tax cash result of FUM currently in gestat
Slide 16: Underlying Cash Result
HALF YEAR RESULTS 2020 UNDERLYING CASH RESULT Growth in net income from FUM reflects new business activity and maturing FUM, offsetting negative £393.4m £(174.5)m investment market impacts New business margin impacted £58.2m £(149.8)m by lower volumes and modest +10% operational gearing effect £218.
Slide 17: Expenses
HALF YEAR RESULTS 2020 EXPENSES £160m • 8% growth in establishment expenses, lower than guided: £140m − disciplined approach to discretionary expense; large majority of expense base relates to people and property £120m − expect full year establishment expense growth of 8% £100m • Operational develop
Slide 18: FSCS Levy
HALF YEAR RESULTS 2020 FSCS LEVY • FSCS levy even higher in 2020, up circa. 25% versus full year charge for 2019 • Reflects continued market failures, triggering FSCS claims • We welcome FCA goal to re-design the funding “ …all too often, the polluter doesn’t pay. The cost of bad system, agreeing wi
Slide 19: Tax Relief from Capital Losses
HALF YEAR RESULTS 2020 TAX RELIEF FROM CAPITAL LOSSES • Half year calculation of utilisation significantly inflated by H1 market movements • Only year-end calculation triggers a cashflow − Expect utilisation to be in the range of circa. £8-10 million as previously guided • We have therefore recorded
Slide 20: Investments
HALF YEAR RESULTS 2020 INVESTMENTS £25m • SJP Asia impacted by a more challenging revenue environment £20m − Strong focus on cost control − Estimate full year net investment similar to 2019 £15m • Rowan Dartington building FUM per investment executive − Market declines and volatility have impacted i
Slide 21: Underlying Cash Result
HALF YEAR RESULTS 2020 UNDERLYING CASH RESULT Growth in net income from FUM reflects new business activity and maturing FUM, offsetting negative £393.4m £(174.5)m investment market impacts New business margin impacted £58.2m £(149.8)m by lower volumes and modest +10% operational gearing effect £218.
Slide 22: Cash Result
HALF YEAR RESULTS 2020 CASH RESULT Variance includes £18 million +25% temporary benefit of excess -9% tax loss utilisation – expected £16.8m £124.7m to unwind in H2 2020 £114.4m £(6.5)m Expect back-office infrastructure costs of circa. £10 million in 2020 Underlying cash result Back-office infrastru
Slide 23: Embedded Value
HALF YEAR RESULTS 2020 EMBEDDED VALUE New business contribution 5% lower year on year, reflecting more modest volumes and £139.0m £0.1m £1.8m £(45.6m) higher expenses -10% £(8.0m) £(33.9m) £418.7m Positive persistency experience offset by modest reduction in £365.3m pensions regular contributions Ne
Slide 24: Embedded Value
HALF YEAR RESULTS 2020 EMBEDDED VALUE Negative investment variance of £329.7 million reflecting market weakness in H1 EEV NAV per share £(329.7)m of £12.78 £418.7m £(44.0)m £45.0m EEV operating profit Investment return variance Economic assumption changes EEV profit before tax 23 S T . J A M E S ’S
Slide 25: Combined Life Company Solvency Position
HALF YEAR RESULTS 2020 COMBINED LIFE COMPANY SOLVENCY POSITION Year H1 2020 H1 2019 FY 2019 • Solvency continues to be managed on the basis of holding assets Net assets in excess of client liabilities 554.4 442.5 337.7 to match client unit-linked liabilities Management solvency buffer 320.0 355.0 32
Slide 26: Dividend Recap
HALF YEAR RESULTS 2020 DIVIDEND RECAP • Encouraged that signs of ‘normal’ life returning to the UK, but fears remain over possible second wave and consequent impact on economies and investment markets globally • Board remains satisfied with decision in April to withhold 11.22 pence of dividends • Wi
Slide 27: Ian Gascoigne, Managing Director
03 IAN GASCOIGNE Managing Director
Slide 28: Andrew Croft, Chief Executive
04 ANDREW CROFT Chief Executive
Slide 29: Business Resilience
HALF YEAR RESULTS 2020 BUSINESS RESILIENCE • Gross inflows of £7.3 billion; net inflows of £4.5 billion • Funds under management closed at £115.7 billion, only 1% lower YTD • Underlying cash result £114.4 million • Embedded value operating profit of £418.7 million • EEV net asset value - £12.78 per
Slide 30: Supporting Clients Through Valued Advice
HALF YEAR RESULTS 2020 SUPPORTING CLIENTS THROUGH VALUED ADVICE • First half environment demonstrated value • Complements wider benefits, including: of trusted, long-term financial advice: − Long-term financial planning − Personal, timely communications − Utilising personal tax allowances − Behaviou
Slide 31: Global Investment Management Expertise
HALF YEAR RESULTS 2020 GLOBAL INVESTMENT MANAGEMENT EXPERTISE 30 S T . J A M E S ’S P L A C E
Slide 32: Carbon Emissions Report
HALF YEAR RESULTS 2020 CARBON EMISSIONS REPORT 31 S T . J A M E S ’S P L A C E
Slide 33: An Award Winning Proposition
HALF YEAR RESULTS 2020 AN AWARD WINNING PROPOSITION 32 S T . J A M E S ’S P L A C E
Slide 34: Recovery from Lockdown Begins
HALF YEAR RESULTS 2020 RECOVERY FROM LOCKDOWN BEGINS … • Tentative, phased re-opening of SJP offices – majority now open with remainder reopening in August/early September • 85% of Partner businesses operate from own offices (or from home) across the UK • Careful return to face-to face advice suppor
Slide 35: Outlook
HALF YEAR RESULTS 2020 OUTLOOK • Anticipate period of recuperation for UK over the summer • Expect value of Q3 new business to be similar or slightly lower than Q2 • Hopeful of momentum building through Q4 2020 • Another year of major net inflows, despite challenge of external environment 34 S T . J
Slide 36: Attractive Long-Term Market Opportunity
HALF YEAR RESULTS 2020 ATTRACTIVE LONG-TERM MARKET OPPORTUNITY • Large and growing market of mass affluent individuals Savings gap Advice gap • Responsibility for retirement income shifting from state to individual • Challenge of low interest rate environment • Financial planning complex and require
Slide 37: Emerging Stronger
HALF YEAR RESULTS 2020 EMERGING STRONGER New ways of working, face-to-face enhanced by a greater use of technology Continued investment in the Academy COVID-19 disruption provides recruitment opportunity Planning for client funds under management of £200 billion 36 S T . J A M E S ’S P L A C E
Slide 38: Summary
HALF YEAR RESULTS 2020 SUMMARY Number of advisers up 1.2% to 4,324 £4.5 billion of net inflows, 8% of opening funds under management (annualised) Funds under management of £115.7 billion Underlying cash result of £114.4 million EEV operating profit of £418.7 million 37 S T . J A M E S ’S P L A C E
Slide 39: Q&A
Q&A