2020 first half results Renato Mota, CEO David Coulter, CFO 18 February 2020
Business update Renato Mota, CEO
Foundation for transformation Financial highlights Statutory NPAT › Significant profit on sale of Ord Minnett $115.0 million › Funds growth offset by Protecting Your Super impacts and margin compression UNPAT from continuing operations › Gross margin impacts during 1H20 from legislative changes and competitive dynamics $56.6 million › Additional 3 months of ownership of ANZ Aligned Licensees (ALs) - ($11.3m) after tax loss vs 1H19 ($5.2m) › 1H20 ANZ P&I economic interest via coupon - $5.7m vs 1H19, $20.2m after tax › 1H20 uplift in governance costs - ($5.2m) Underlying NPAT › Discontinued operations (Ord Minnett and Perennial Value Management) $61.4 million › Net inflows of $1.5b FUMA up 5.2% from 30 June › Market movements of $6.7b $145.7 billion › Strong flows via Shadforth Portfolio Service (SPS) Attracting net inflows: › Expansion of ClientFirst operating model • Platform $756 million › Launch of eXpand • Advice $985 million Fully franked interim dividend per share › 92% payout ratio 16.0cps › Payment date 16 March 2020 Note: All comparisons to prior comparative period unless otherwise stated 3
Strategic priorities – transforming with purpose Stabilise Transform › Regulatory deliverables: › Grow: • 31 December 2019 APRA key license conditions - all • Completion of ANZ P&I (P&I) transaction in February 2020 with purchase price requirements implemented reduced by $125m (13%) • ASIC Royal Commission referral - no further action • Step-change in scale drives benefits for clients and accretion for shareholders • Revised cost synergies of $68m pre-tax p.a. (from $65m pre-tax p.a) to be › Advice review ongoing: no change to advice remediation realised in full from 1 July 2023 provision based on review performed to date › Focus: • Reshaping the business to focus on core › Strengthening our governance capability: Establishment of • Net proceeds from divestments of subsidiaries $105.0m post tax received in the Office of the Responsible Entity commenced half • Significant opportunity to streamline advice licensees › People & Culture: › Simplify: • Reshaped business, new industry environment • Removing operational complexity - delivering efficiencies • Executive review completed • Consolidating to one platform - Project Evolve on track for completion by end 2021 4
Business highlights Financial Advice Portfolio & Investment Ex-ANZ Wealth Segment Estate Administration Management Management › › › › $756m in net inflows Advice-led strategy Top 10 Performing Growth Additional 3 months of Fund – 1 year to attracting advisers -11 new loss making ALs vs pcp › Launch of Shadforth December 2019 1 advice practices joining in › Portfolio Service - Integration of ANZ ALs 2Q20 › delivering significant flows Complementary business creating best of breed › Open architecture a key › with no exposure to systems and processes Launch of eXpand to differentiator and provides institutional volatility and Highlights › Bridges advisers in Debt note interest of choice to clients key person risk September 2019 $8.2m pre-tax received in › › Growth in revenue › Increased adviser 1H20 vs $28.9m pcp Investment in governance underpinned by greater penetration through people, systems focus on client service and capability UNPAT* $26.4m $33.0m $19.6m ($5.0m) Sustainability through economic diversity * Sum of total UNPAT from continuing operations equates to $56.6m when Corporate segment is included – 1H20 UNPAT: ($17.4m) 1. Chantwest 5
P&I – Transforming scale and reach The transaction positions IOOF as the 5 th largest platform provider by FUAdmin Platform (FUAdmin) Total P&I FUAdmin at 31 December 2019 - $48.2b A$’b $0.8b 163.7 $4.0b 148.1 $2.0b 134.3 120.7 $14.7b Pro-forma 93.7 5th 90.4 2 $8.1b 48.2 1 45.5 25.3 $18.6b 25.3 15.0 Advised (retail) Advised (wrap) Smart Choice Employer Employer Super (closed) Source: Strategic Insights Analysis of Wrap, Platform and Master Trust Managed Funds data as at September 2019 1. For IOOF, FUAdvice and FUAdmin numbers have been sourced from the FUMA update for period ended 31 December 2019 Smart Choice Retail Other 2. ANZ P&I FUAdmin sourced from ANZ as at 31 December 2019 6
Highly complementary business delivering economies of scale Ex-ANZ Aligned Licensees Ex-ANZ P&I Financial Advice Portfolio & Estate Administration Investment Management Purchase $25m $825m price Completed 3 October 2018 Completed 1 February 2020 (reduced from $950m) • Four aligned advice licences 1 • Platform business across retail (advised • In-house multi-manager asset Business Overview and direct) and employer super management and research team FUMA at 31 December FuAdvice - $18.0b FUAdmin - $48.2b 2 FUM - $26.8b 3 2019 UNPAT 1H20 ($11.0m) $42.3m Excludes coupon interest Includes impact from Protecting Your Super, the removal of insurance admin fees and the removal of legacy commissions Gross margin 0.11% 0.40% % Cost to n/a 4 61.4% income % 1. Includes Elders Financial Planning which is 51% owned by millennium3 Financial Services. 2. Source: ANZ 3. Source: ANZ. Investment Management FUM are included within the Platforms FUAdmin. 4. Not applicable as results in negative ratio 7
Advice review progress – methodical disciplined approach Timeline of key events Feb Jun Feb Jun 2019 2020 2020 2019 No change to advice provision Advice provision $223m raised raised based on work concluded to Product remediation complete - expensed date $12m Roll out of ASIC 515 Standards › › Announced advice Establish IOOF Advice Remediation Governance review underway Forum › Final validation work for targeted advisers due March › Appoint PwC to assist in 2020 independent review of client › Broader testing identifies no further systemic issues files and assessment of › provision Initial process focused on Shadforth and Bridges - no further issues identified to date › Develop KRIs consistent › Structured independent remediation program set with ANZ AL up under Deloitte methodology › Identify target advisers › Lonsdale and Consultum review to commence › Independent review of target adviser files › › Estimate remediation Expect to commence remediation payments › Estimate program costs No change to the remediation provision based on work performed to date 8
Financial Results David Coulter, CFO
Financial results overview $’m 1H20 2H19 1H19 Change on PCP Statutory NPAT $115.0m ($47.1m) $135.4m ($20.4m) -15.1% Underlying NPAT $61.4m $98.1m $99.9m ($38.6m) -38.6% Underlying NPAT from continuing operations $56.6m $90.8m $93.1m ($36.4m) -39.1% Underlying EPS from continuing operations 16.2cps 25.9cps 28.5cps (12.3cps) -43.1% (cents) Cost to income ratio (%) 57.8% 53.5% 51.6% -6.2% 12.1% Dividend per share (cents) 16cps 19cps 25.5cps (9.5cps) -37.3% 10
Profit and loss breakdown 1H20 2H19 1H19 Change on pcp $’m % › Legislative change impact ($7.2m) Gross Margin 249.3 243.7 255.5 (6.2) -2.4% Other Revenue 5.9 8.5 6.6 (0.7) -10.5% › Uplift in governance ($5.2m) in 1H20 Operating Expenditure (164.2) (158.3) (149.9) (14.2) 9.5% › Additional 3 months of ANZ AL opex; 1H20 ($26.1m) vs 1H19 ($13.1m) Equity Accounted Profits (0.1) 0.0 0.0 (0.1) Large Net Non Cash (12.4) (5.0) (8.9) (3.6) 40.2% Underlying EBITA 78.4 89.5 103.3 (24.8) -24.0% › 1H20 ANZ P&I economic interest via coupon Net Interest 0.9 36.5 27.7 (26.7) -96.6% $8.2m vs 1H19, $28.9m pre-tax Income Tax & NCI (22.7) (34.6) (37.9) 15.2 -40.0% › UNPAT from continuing Additional 3 months of loss making ANZ Als - 56.6 90.8 93.1 (36.4) -39.1% operations ($16.1m) pre-tax loss vs 1H19 ($7.5m) › 1H20 Ord Minnett UNPAT $3.7m, Perennial Discontinued Operations 4.7 7.2 6.9 (1.8) -31.8% Value Management UNPAT $1.0m Underlying NPAT 61.4 98.1 99.9 (38.6) -38.6% 1H20 and 1H19 financial information presented on a continuing basis unless otherwise stated. 11
Group UNPAT analysis Ex-ANZ Ex-ANZ Wealth Management Wealth Management $16.9m $2.0m $3.3m ($12.6m) $14.6m $93.1m $7.5m $90.9m ($14.5m) ($3.6m) ($0.5m) ($17.9m) ($8.1m) $11.8m $56.6m ($35.3m) Opex Opex 1H19 FUMA Margin Opex Other ANZ AL's pre- ANZ P&I Tax 2H19 FUMA Margin Opex ANZ AL's pre- ANZ P&I Tax 1H20 UNPAT from (excluding excluding Ex- tax loss coupon UNPAT from (excluding excluding Ex- tax loss coupon UNPAT from ANZ Wealth continuing ANZ Wealth) ANZ Wealth interest continuing ANZ Wealth) interest continuing operations operations Mgmt operations Mgmt 12
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