Annual Presentation LHC3 plc Bond Investors 30 April 2019 - - PowerPoint PPT Presentation

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Annual Presentation LHC3 plc Bond Investors 30 April 2019 - - PowerPoint PPT Presentation

Annual Presentation LHC3 plc Bond Investors 30 April 2019 Disclaimer This presentation has been prepared by Allfunds Bank, S.A. (AFB) and its parent, LHC3 plc (LHC3). While the information c ontained in this presentation has been


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SLIDE 1

Annual Presentation

LHC3 plc Bond Investors

30 April 2019

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SLIDE 2

Disclaimer

2

This presentation has been prepared by Allfunds Bank, S.A. (“AFB”) and its parent, LHC3 plc (“LHC3”). While the information contained in this presentation has been prepared in good faith, neither AFB nor LHC3, nor any of their respective shareholders, directors, officers, agents, employees, or advisors, makes any representations or warranties (express or implied) as to, or in relation to, the fairness, accuracy, reliability or completeness of the information in this presentation, and liability therefor is expressly disclaimed. Accordingly, neither AFB nor LHC3, nor any of their respective shareholders, directors, officers, agents, employees, affiliates, representatives or advisors, takes any responsibility for, or will accept any liability, whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of the accuracy or completeness of the information in this presentation or for any of the opinions contained in this presentation or for any errors, omissions or misstatements or for any loss, howsoever arising from this presentation. The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice. The information contained in this presentation is the property of AFB and LHC3. This presentation may not be copied, published, reproduced or distributed in whole or in part at any time without the prior written consent of AFB. This presentation does not constitute a recommendation regarding any potential transaction. This presentation is intended to present background information on AFB, LHC3, their subsidiaries, their respective businesses and the industry in which they operate and is not intended to provide complete disclosure upon which an investment decision could be made. This presentation does not constitute investment, legal, accounting, regulatory, taxation or other advice, and neither this presentation nor the information in this presentation takes into account your investment objectives or legal, accounting, regulatory, taxation or financial situation or particular needs. In particular, any estimates, projections, forecasts, targets, prospects or opinions contained in this presentation necessarily involve significant elements of subjective judgment, analysis and assumption are based upon the best judgment of AFB, subject to change without notice, and each attendee or recipient should satisfy itself in relation to such matters. This presentation, the information contained in this presentation or any related oral presentation does not constitute, or form part of, any offer, invitation to sell or issue, or any solicitation of any offer to subscribe for, purchase or otherwise acquire any securities in AFB or LHC3, nor shall this presentation, or the fact of its communication, form the basis of, or be relied upon in connection with, or act as any inducement to enter into any contract or commitment whatsoever with respect to such securities. This presentation and the information in this presentation are not directed to, or intended for distribution to

  • r use by, any person or entity that is a citizen or resident located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or

regulation or which would require registration of licensing within such jurisdiction. This presentation contains “forward-looking statements” within the meaning of applicable securities laws, including statements with respect to AFB’s strategies, future opportunities and growth prospects, the strength of AFB’s balance sheet and expectations regarding revenues and EBITDA, as well as other information and statements that are not historical fact. These forward-looking statements regarding future events and the future results of AFB are based on current expectations, estimates, forecasts, and projections about the industry in which AFB operates, as well as the beliefs and assumptions of AFB’s

  • management. These forward-looking statements are only predictions and are subject to known and unknown risks, uncertainties, assumptions and other factors beyond AFB’s control that are difficult to

predict because they relate to events and depend on circumstances that will occur in the future. Therefore, AFB’s actual results may differ materially and adversely from those expressed or implied in any forward-looking statements. They are neither statements of historical fact nor guarantees of future performance. AFB therefore cautions against relying on any of these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, economic conditions globally, the impact of competition, political and economic developments in the countries in which AFB

  • perates, and regulatory developments in Spain, Europe and internationally. Any forward-looking statements made by or on behalf of AFB speak only as of the date they are made. Neither AFB nor LHC3

undertakes any obligation to update any forward-looking statements to reflect any changes in AFB’s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Accordingly, attendees and recipients should not place undue reliance on forward-looking statements due to their inherent uncertainty. This presentation includes certain financial measures that are not recognized by IFRS, including Adjusted EBITDA. Different companies and analysts may calculate these non-IFRS measures differently, so making comparisons among companies on this basis should be done very carefully. These non-IFRS measures have limitations as analytical tools, are not measures of performance or financial condition under IFRS and should not be considered in isolation or construed as substitutes for operating profit or net profit as an indicator of our operations in accordance with IFRS. We believe that the non-IFRS measures included in this presentation are useful to investors because they can provide a useful additional basis for comparing the current performance and condition of the underlying operations being evaluated by eliminating potential differences in results of operations and financial condition between periods or companies caused by factors such as depreciation and amortization methods, historical cost and age of assets, financing and capital structures, taxation positions or regimes and temporary accounting or non-recurring effects. By attending the meeting, or dialing into the teleconference, during which this presentation is made, or by reading this presentation, you agree to be bound by the limitations set out herein. Any failure to comply with these restrictions may constitute a violation of applicable laws. This document contains information that prior to its disclosure may have constituted inside information under European Union Regulation 596/2014 on market abuse.

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SLIDE 3

Today’s Presenters

3

Luigi Lubelli Chief Financial Officer Alvaro Perera Head of Corporate Development

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SLIDE 4

Business Per formance Over view

01

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SLIDE 5

2018 Key Achievements

5

Solid profitability and solvency, supporting future growth both organically and through acquisitions Intensified development & launch of new digital solutions Reinforcement and diversification of senior leadership team Continued strengthening of our distribution capabilities: scale, diversification, broad

  • ffering, global footprint

1 2 3 4

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SLIDE 6

Trends In Financial Performance

6

  • Avg. AuA (€bn)

Revenues (€m) Adjusted EBITDA (€m)

+22% +33% +25%

12A-18A CAGR 12A-18A CAGR 12A-18A CAGR

  • Adj. EBITDA Margin (%)

42% 40% 47% 12% 37% 21%

Growth (%)

33% 31% 39% (2%) 21% 17% 56% 36% 46% (9%) 24% 10% 68 96 134 197 220 302 367 2012 2018 2013 2014 2015 2016 2017 66 88 115 160 156 190 221 2015 2013 2012 2014 2016 2017 2018 36 76 111 101 124 137 55% 2012 69% 66% 56 2014 64% 2013 2015 64% 2016 66% 2017 62% 2018

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SLIDE 7

Successfully Widening Customer Footprint And Revenue Base

7

Total number of customers Revenue diversification (€mn)

CAGR16-18

19% 13% 44%

2016 168 (76%) 131 (84%) 26 (16%) 156 53 (24%) 221 2017 157 (83%) 33 (17%) 2018 190

UCITs remuneration Other revenues

+68 +7 31/03/2017 31/12/2018 623 548 +75

From Italy/Spain Other countries

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SLIDE 8

2018 Volume Performance

8

€ bn

  • Allfunds generated significant alpha in its AuA performance vs. the broader market as a result of new

client wins and secular growth from existing clients

  • C. 77% of AuA growth since 1Q17 came from new migrations

271.3 358.7 348.6 23.9 42.5 39.5 87.4 2.8 AuA 31/12/17 AuA 31/03/17(1) Organic Flows 5.4 11.0 Migrations Market effect AuA 31/12/18

  • 2.8%

Net Flows

+€ 13.9bn (-6.7%) (+3.1%) (+0.8%)

Organic Flows Migrations Market effect

AFB Eurostoxx 50 FTSE MIB IBEX 35

  • 14.3%
  • 15.0%
  • 16.1%
  • 6.2%
  • 2.8%%

Equity & Fixed Income composite(2)

(1) Latest available data provided at the Roadshow (2) Used for internal benchmarking purposes consisting of 50% Equity (60% Eurostoxx 50 and 40% MSCI World Index) and 50% Fixed Income (Barclays Capital US Bond Index)

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SLIDE 9

Significant Developments Since Issue Date

9

ALLFUNDS CONNECT ONBOARDING FOR FUND HOUSES ENNHANCED TELEMETRICS: DATA AND ANALYTICS

  • Opened new office in Sao Paulo,

Brazil

  • Agreement to acquire Nordic Fund

Marked signed March 2019

  • Reinforcement of Senior

Leadership Team to enhance the Value Creation Plan

Enlargement of international presence Senior Team reinforcements Office Openings Senior Team Recruitments

Milan London Santiago de Chile, Luxembourg Dubai Zurich Bogota Singapore Madrid

2000 2016 2018 2019 2015 2013 2011 2008 2005 2003

Luigi Lubelli CFO Salvador Mas Chief Digital Officer George Yaryura Chief Product Officer Jorge Calvino CHRO

Former Group CFO Founder

Previous Companies Sao Paulo Bond Offering

Sweden(1) (subject to regulatory approval)

(1) After the acquisition of Nordic Fund Market. See slide 11 for further details

  • In 2018, Allfunds acquired

to further enhance its Digital Front- End capabilities

Software company providing front-end white labelled advisor tools to Distributors and Fund Houses

Acquisition Launched several new digital tools: Intensified development & launch

  • f new digital solutions
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SLIDE 10

Finametrix

10

 Finametrix offers fintech solutions to wealth and asset management companies.  Created in 2014, more than 40 financial institutions are already using Finametrix fintech solutions to provide their bankers, advisors and final customers with the most usable and transparent solutions, in areas such as customer onboarding, reporting, advisory or portfolio management.  Finametrix technology is also a regtech solution for companies to fulfill their growing needs of legal compliance in areas such as MiFID2 or KYC, where innovation adds value to the client  Prior to its acquisition by AFB, Finametrix was fully owned by its 4 key managers who continue holding their roles – Salvador Mas: CEO, joined in 2015 – Francisco Mico: Head of Product, co-founder in 2014 – Luis Hoyos: CTO, co-founder in 2013 – Ignacio Saez: Head of Bus. Dev., joined in 2016

Description Owners / Key People Key Customers

Independent Asset Managers Financial Institutions Insurance firms

Introduction to Finametrix Strategic Rationale of Acquisition Strengthen Allfunds’ technological capabilities

3

Accelerate the development and roll-out of AFB’s fintech value proposition

4

Generate incremental revenues by upselling / cross-selling into existing customer base

2

Widen Allfunds’ existing revenue pool by providing more value-added services

1

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SLIDE 11

Upcoming in 2019: Nordic Fund Market Acquisition

11

NFM at a glance

  • Nordic Fund Market (“NFM”), fund platform subsidiary of Nasdaq Broker Services AB
  • Includes transfer of Investment Firm license (regulated by Swedish Finansinspektionen) to
  • perate in SE, FI and NO
  • Established in 2010, is one of the major providers of Fund Services in Sweden / Nordics (c.

€8bn intermediated AuA + OR activities)

  • >120 fund houses (2,200 mutual funds) and 12 distributors
  • Attractive size of the Swedish market and growth potential
  • Enhanced coverage and growth potential in the Nordic Region
  • Revenue upside, powered by AFB’s unparalleled leverage and capabilities

Deal scope Rationale AFB enhances its Nordic Coverage thanks to NFM

AFB has agreement with underlying ISIN Other: No agreement, temporarily under review, etc.

40% 60% # ISINs % AuAs %

2.2k €8bn

48% 52%

+1.1k ISINS (mostly local) Corresponding to c. €4.8bn of uncovered AuA in the region

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SLIDE 12

Fi nancial Results

  • ver view

02

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SLIDE 13

Profit & Loss

13

 Mainly due to:

  • AFB key Management hires
  • AFB 2.0. (eg., Digital, Finametrix, etc.)
  • Strengthening of our foreign offices’ team

3

 Robust top line growth, driven mainly by larger volumes

  • Avg. AuA up +21% in 2018
  • AuA ended 2018 at the same level as average AuA

in 2017 due to negative market movements in the second half

(1) Unadjusted EBITDA 2017 = €114.5mn; Unadjusted EBITDA 2018 = €131.3mn 1

 Focus of digital investments to generate non market- dependent revenues

2 € mn FY2017 FY2018 VAR 18

  • vs. 17

(%) Interest Income 0.8 2.1 +163% Interest Expenses (0.5) (1.5) +200% Net Interest Income 0.3 0.6 +100% Fee And Commission Income 1,020.4 1,333.5 +31% Fee And Commission Expense (831.2) (1,116.1) +34% Net Fee Income 189.2 217.4 +15% Gains (Losses) on Financial Assets and Liabilities Not Held for Trading Designated at Fair Value through Profit or Loss (Net)

  • (0.3)

n.a. Gains (Losses) on Financial Assets and Liabilities Held for Trading (Net) 0.1 0.1

  • Exchange Differences (Net)

0.1 0.1

  • Other Operating Income

0.6 5.1 +750% Other Operating Expenses (0.7) (1.9) +171% Gross Income 189.6 221.1 +17% Staff Expenses ex. One-offs (35.1) (46.2) +32% Other Administrative Expenses ex. One-offs (30.4) (37.8) +24% Total expenses ex. One-offs (65.6) (84.0) +28% Memo: Adjusted EBITDA(1) 124.0 137.1 +11% Depreciation (2.4) (5.9) +146% Provisions or Reversals of Provisions

  • n.a.

Impairment or Reversal of Impairment on Financial Assets Not Measured at Fair Value through Profit (Loss) (Net) 0.4 (0.4) (200%) Net Operating Income 112.5 125.0 +11% Impairment or Reversal of Impairment on Non-Financial Assets (Net)

  • n.a.

Tangible Assets

  • n.a.

Profit for the Period before Tax 112.5 125.0 +11% Tax Expense (37.3) (38.8) +4% Results for the Period 75.2 86.2 +15% 3 1 2

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SLIDE 14

Headcount Evolution

14

2018 was devoted to investing behind AFB’s evolution into a leading Wealthtech player (acquisition of Finametrix and organic digital initiatives) and international expansion

23 9 66 International expansion 2017 Internalisation BaU growth 2018 374 502 Wealthtech growth 30

1

 Internalisation of previously

  • utsourced resources in order to

reduce AFB’s cost base

1

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SLIDE 15

Balance Sheet

15

ASSETS (€ mn) FY2017 FY2018 LIABILITIES & EQUITY (€ mn) FY2017 FY2018 Cash, Cash Balances At Central Banks And Other Demand Deposits 737.9 711.4 Financial Liabilities Held For Trading 0.3 0.2 Financial Assets Held For Trading 0.5 0.4 Financial Liabilities Designated At FV Through P&L

  • Financial Liabilities At Amortized Cost

967.7 897.9 Financial Assets Not Designated For Trading Compulsorily Measured At FV Though P&L 0.2 0.4 Deposits- 796.3 730.2 Financial Assets At Amortized Cost 404.7 383.9 Credit Institutions 179.5 278.1 Loans And Advances 404.7 383.9 Customers 616.8 452.1 To Central Banks 6.1 6.5 Other Financial Liabilities 171.4 167.7 To Credit Institutions 395.8 344.6 To Customers 2.9 32.8 Provisions

  • Hedging Derivatives
  • Tax Liabilities:

8.7 4.5 Current 8.7 2.9 Tangible Assets 7.0 8.9 Deferred

  • 1.6

Intangible Assets(1) 7.5 25.5 Goodwill

  • 6.1

Other Liabilities 272.8 272.3 Other Intangible Assets 7.5 19.4 Total Liabilities 1,249.5 1,174.9 Tax Assets: 0.5 8.2 Current 0.0 7.6 Capital 27.0 27.0 Deferred 0.5 0.7 Retained Earnings 129.5 188.1 Profit Or Loss Attributable To Owners Of The Parent 75.3 86.2 Less: Interim Dividends (16.6) (29.0) Other Assets 306.4 308.5 Accumulated Other Comprehensive Income (0.1) 0.0 Minority Interests (Non Controlling)

  • Total Equity

215.1 272.4 Total Assets 1,464.6 1,447.3 Total Liabilities + Equity 1,464.6 1,447.3 Memorandum Items Loan Commitments Given

  • Financial Guarantees Given
  • Other Commitments Given

53.3 53.9  Strong cash position, mainly placed with the Bank of Luxembourg and Bank of Italy, as well as with highly solvent correspondent banks  Goodwill and intangibles arising from the acquisition of Finametrix

1 1 2 2

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SLIDE 16

Cash Flow Statement

16

€ mn FY2017 FY2018 VAR 18

  • vs. 17

(%) CASH FLOWS FROM OPERATING ACTIVITIES: Profit for the year 75.3 86.2 +14% Adjustments to obtain the cash flows from operating activities-

  • n.a.

Depreciation and amortisation 2.4 5.9 +142% Other adjustments 36.8 38.9 +6% Profit adjusted 114.5 131.0 +14% Collection/Payments for income tax (28.0) (42.8) +53% Total cash flow from operating activities 86.5 88.2 +2% CASH FLOWS FROM INVESTING ACTIVITIES: Tangible assets (1.6) (3.3) +105% Intangible assets (3.6) (22.3) +519% Total cash flow from investing activities (5.2) (25.7) +391% CASH FLOWS FROM FINANCING ACTIVITIES: Dividends (33.5) (14.5) (57%) Total cash flow from financing activities (33.5) (14.5) (57%) Effect exchange rate changes 0.1 0.1 (6%) NET INCREASE/(DECREASE) IN CASH OR CASH EQUIVALENTS 47.8 48.1 +0% Cash and cash equivalents at beginning of year 389.1 737.9 Cash and cash equivalents at end of the period 737.9 711.4 MEMORANDUM ITEMS: COMPONENTS OF CASH & CASH EQUIVALENTS AT END OF PERIOD Cash 0.0 0.0 (10%) Cash equivalents at central banks 342.3 345.3 +1% Other financial assets 395.6 366.1 (7%) TOTAL CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 737.9 711.4 (4%) Additional cash items related to Operating Activities: Net increase/(decrease) in operating assets: (175.0) 10.5 Net increase/(decrease) in operating liabilities: 476.0 (85.1)  Larger business volumes and revenue diversification

1 1

 Mainly driven by the acquisition of Finametrix

2 2 3

 Dividends paid to service interest on LHC3 notes

3 4

 Other Operating Activities Cash Flows items

  • Cash placed by customers of which

AFB is not the ultimate owner

  • Decrease in customer deposits (ie.,

decrease in Operating Liabilities)

4

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SLIDE 17

Capitalisation Overview (I)

17

Maintaining high CET1 ratios and generating significant excess capital

(1) After including 2018 not distributed P&L and announced dividend as of Dec-18 (paid in Mar-19)

€mn Dec-18 PF(1) Dec-18 Dec-17 % VAR. vs Dec-17 ABS % Credit Risk 493.7 493.7 478.4 15.3 3% Operational Risk 356.5 356.5 317.3 39.2 12% Settlement Risk (<4 days) 0.3 0.3 5.8 (5.5) (95%) Market Risk 8.4 8.4

  • n.a.

n.a. RWAs - Pillar 1 858.9 858.9 801.5 57.4 7% Credit and Settlement Risk (% of total RWA) 58% 58% 60% Operational Risk (% of total RWA) 42% 42% 40% CET1 245.5 187.9 145.0 42.9 30% CET1 ratio 29% 22% 18% 0.0 21% Excess capital 95.2 37.6 4.7 32.9 699%

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SLIDE 18

Capitalisation Overview (II)

18

(1) After including 2018 not distributed P&L and announced dividend as of Dec-18 (paid in Mar-19) (2) Note (2017): represents initial Interest Payment Retained Amount

€mn Dec-18 Dec-17 % VAR. vs Dec-17 ABS % OpCo FY Adj. EBITDA 137.1 124.0 13.1 11% Dividends Paid 14.5 33.5 (19.0) (57%) Issuer ("HoldCo") PF Cash Interest Expense 24.3 24.3

  • Additional Liquitity Available to HoldCo

Undrawn Revolving Credit Facility 60.0 60.0 60.0

  • Notional Excess Capital Buffer Available to the Allfunds Group

95.2 37.6 4.7 32.9 700% Issuer Available Bank Account Balance(2) 0.1 0.1 14.6 (14.5) (99%)

  • Add. Liquidity (incl. Capital Buffer) Available at HolCo

155.3 97.7 79.3 18.4 23% Credit Ratios Ratio of pro forma NFD of the Issuer to Adj. EBITDA 4.2x 4.5x (0.3x) (7%) Ratio of Adj. EBITDA to pro forma cash int. exp. 5.7x 5.1x 0.5x 11% Ratio of LTM Dividends paid to pro forma cash int. Exp. 0.6x 1.4x (0.8x) (57%) Ratio of LTM Dividends paid plus additional liquidity available to pro forma cash int. Exp. 4.6x 4.6x (0.0x) (1%)

De-leveraging with very significant coverage of interest

Dec-18 PF(1)

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SLIDE 19

Q&A

03

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SLIDE 20

Appendix

04

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SLIDE 21

Walkthrough From AFB Group Consolidated P&L to LHC3 P&L

21

€ mn AFB 2018 (Spanish GAAP) AFB: Elimination of Amortisation

  • n Goodwill

Liberty Partners Amortisation

  • n Intangible

Assets Goodwill Impairment Interest to Bond holders LHC4 / LHC3 standalon e costs LHC3 Group (IFRS) Interest and similar Income 2.1

  • 2.1

Interest expense and similar charges (1.5)

  • (1.5)

Net Interest Income 0.6

  • 0.6

Fee and commission income 1,333.5

  • 1,333.5

Fee and commission expense (1,116.1)

  • (1,116.1)

Net fee Income 217.4

  • 217.4

Gains/(Losses) on Financial Assets and Liabilities Not Held for trading designated at FVTPL (0.3)

  • (0.3)

Gains/(Losses) on Financial Assets and Liabilities Held for trading 0.1

  • 0.1

Exchange Differences 0.1

  • (0.1)
  • Other Operating Income

5.1

  • 5.1

Other Operating Expenses (1.9)

  • (1.9)

Gross Income 221.1

  • (0.1)

221.0 Staff Costs (47.1)

  • (47.1)

Other General Administrative Expenses (42.7)

  • (1.5)
  • (1.7)

(45.9) EBITDA 131.3

  • (1.5)
  • (1.8)

128.0 Interest expense and similar charges

  • (27.0)
  • (27.0)

Depreciation and Amortization (5.9) 0.6

  • (87.5)
  • (92.8)

Impairment Losses on Financial Assets (0.4)

  • (0.4)

Impairment Losses on Non Financial Assets

  • (362.0)
  • (362.0)

Profit Before Tax 125.0 0.6 (1.5) (87.5) (362.0) (27.0) (1.8) (354.2) Corporation Tax (38.8) (0.2) 8.0 26.1

  • 0.2

(4.7) Profit for the year from continuing operations 86.2 0.4 6.5 (61.4) (362.0) (27.0) (1.6) (358.9)

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SLIDE 22

22

Global presence

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SLIDE 23

Thank you.