Charles Stanley Interim Results Presentation Six months ended 30 - PowerPoint PPT Presentation

Charles Stanley Interim Results Presentation Six months ended 30 September 2019 21 November 2019

Agenda 1. Interim Results for the six months ended 30 September 2019 2. Business transformation and outlook Appendices Paul Abberley Ben Money-Coutts Chief Executive Officer Chief Financial Officer

1. Financial results 2. Business transformation and Growth in top line revenues has contributed outlook to an increase in underlying profit up 71.9% to £9.8m (H1 2019: £5.7m) Ben Money-Coutts Chief Financial Officer

H1 2020 – Progress of key financial metrics FuMA (£bn) 25.0 24.6 24.1 1.4 1.2 1.3 1.7 1.5  FuMA stood at £24.6bn at 30 September 2019 representing a 2.1% 1.5 increase from £24.1bn at 31 March 2019 8.0 8.7 8.2  Discretionary assets increased by £0.8bn or 6.1% to £13.9bn in Steady Advisory Dealing improvement of H1 2020 and now represent 56.5% of total FuMA Advisory Managed  Charles Stanley Direct up 6.7% to £3.2bn (FY 2019: £2.7bn) FuMA Execution-only 13.9 13.2 13.1  Advisory Managed, Dealing and Execution-only experienced Discretionary marginal declines H1 19 FY 19 H1 20 Underlying 1 profit margin 2  Revenues grew by 9.9% to £85.4m (H1 2019: £77.7m) Good growth in  Underlying 1 profit before tax up 71.9% to £9.8m(H1 2019: £5.7m) revenues, profits,  Underlying 1 profit margin 2 up 190bps to 11.2% (H1 2019: 9.3%) margin and  Reported profit before tax up 58.8% to £8.1m (H1 2019: £5.1m) 11.2% dividend 9.3%  Interim dividend increased by 9.1% to 3.0 pence per share (H1 2019: 8.4% 2.75 pence per share) H1 18 H1 19 H1 20 Dividend per share (p)  Net assets £110.1m, of which £77.9m 3 is cash Strong balance  Regulatory capital solvency ratio at 206% sheet 3.00p 2.75p 2.50p 1 The underlying figures represent the Group results excluding adjusting items 2 This represents the underlying profit as defined in note 1 above and excluding the charge in respect of non-cash share options awarded to certain investment management H1 18 H1 19 H1 20 Page 3 teams under the revised remuneration arrangements settled in 2017, expressed as a percentage of the underlying revenues 3 Cash includes both cash and cash equivalents of £67.9m and Treasury Bills reported as financial assets at amortised cost of £10m

Underlying profit before tax history – good half year performance £13.0m £11.6m £11.0m £11.0m £9.8m £9.5m £9.0m £5.9m £5.6m £7.0m £5.6m £3.3m H2 £5.0m £9.8m H1 £3.0m £5.7m £5.4m £4.8m £3.9m £1.0m (£1.5m) (£1.0m) (£3.0m) FY 16 FY 17 FY 18 FY 19 H1 20 Page 4

FuMA as at 30 September 2019 - up 2.1% Advisory Advisory Execution Discretionary Managed Dealing only Total £bn £bn £bn £bn £bn  Discretionary funds grew Funds at 1 April 2019 13.1 1.5 1.3 8.2 24.1 6.1%  The acquisition of Myddleton Croft Limited New clients 0.3 - - 0.1 0.4 on 1 August 2019 contributed £0.1bn to Service level transfers - - (0.1) 0.1 - FuMA Net outflow from existing clients (0.1) - - (0.3) (0.4)  CS Direct achieved a 6.7% Lost clients (0.3) (0.1) (0.1) (0.4) (0.9) increase in FuMA to £3.2bn Net organic outflows (0.1) (0.1) (0.2) (0.5) (0.9)  Other service categories Investment performance 0.9 0.1 0.1 0.3 1.4 experienced marginal declines Funds at 30 September 2019 13.9 1.5 1.2 8.0 24.6 Percentage change in the period 6.1% - (7.7%) (2.4%) 2.1% Page 5

Financial summary H1 2020 H1 2019 Change £m £m  Strong growth in revenues coupled with good cost discipline has led to Revenue 85.4 77.7 9.9% a material increase in both the Expenses (75.4) (72.4) (4.1%) underlying profit before tax and Net finance income and other non-op income (0.2) 0.4 (150.0%) profit margin Underlying 1 profit before tax 9.8 5.7 71.9%  Underlying 1 profit margin 2 Adjusting items 3 (1.7) (0.6) (183.3%) increased to 11.2% (H1 2019: 9.3%) Profit before tax 8.1 5.1 58.8%  Adjusting items represent Tax expense (1.3) (0.9) (44.4%) restructuring costs (£1.2m) and Profit after tax 6.8 4.2 61.9% amortisation of client lists (£0.5m)  Lower effective tax rate of 16.2% Underlying profit margin 2 11.2% 9.3% (H1 2019: 17.2%) primarily due to the utilisation of tax losses acquired Underlying EPS 16.13p 9.27p 74.0% with Pan Asset Reported EPS 13.36p 8.31p 60.8% Dividend per share 3.00p 2.75p 9.1% 1 The underlying figures represent the Group’s results excluding adjusting items 2 This represents the underlying profit as defined in note 1 above and excludes the charge in respect of non-cash share options awarded to certain investment management teams under the revised remuneration arrangements settled in 2017, expressed as a percentage of the underlying revenues 3 Refer to appendices for a breakdown of the adjusting items Page 6

Revenue up 9.9% H1 2020 H1 2019 Change £m £m Revenue growth in all Investment Management Services 77.0 70.7 8.9% divisions Charles Stanley Direct 4.5 3.5 28.6% Financial Planning 3.9 3.5 11.4% 85.4 77.7 9.9% H1 2020 H1 2019 Change £m £m Increase in fee income Fees 61.1 54.7 11.7% compensating for declining Commission 19.1 19.7 (3.0%) commissions Interest income 5.2 3.3 57.6% 85.4 77.7 9.9% H1 2020 H1 2019 Change Improvement in revenue margins due to completion bps bps bps of repricing, service mix Investment Management Services 1 73.3 65.7 7.6 change and growth of Charles Stanley Direct 28.9 23.9 5.0 Financial Planning revenues Group 69.9 62.7 7.2 Page 7 1 The H1 2019 figures have been restated to reflect the amalgamation of the Asset Management division into the Investment Management Services division with effect from 1 April 2019

Underlying expenditure well controlled  Underlying expenditure increased by 4.1% to £75.4m  Fixed staff cost increased by £1.4m H1 2020 H1 2019 Front office Support to £26.5m due mainly to the recruitment of additional financial divisions Functions Total Total planners to grow that division £m £m £m £m  Variable staff costs increased by (14.3) (12.2) (26.5) (25.1) Fixed staff costs £1.1m to £28.7m as a result of (23.9) (4.8) (28.7) (27.6) Variable staff costs higher variable compensation of (9.0) (11.2) (20.2) (19.7) Other direct costs £2.2m increasing in line with higher profits and contractor costs rose (47.2) (28.2) (75.4) (72.4) £0.6m, offset by a one-off reduction of £1.7m in the non-cash charge for the share option 31.0% 32.3% Fixed staff cost/income ratio scheme for investment managers 33.6% 35.5% Variable staff cost/income ratio 23.7% 25.4% Other direct costs/income ratio  Non-staff costs increased by £0.5m to £20.2m due to a doubling of the Closing headcount 869 849 FSCS levy to £2.1m. This cost is outside the Company’s control. Other non-staff costs reduced Page 8

Divisional breakdown Investment  Profitability of IMS and CSD Management Charles Financial divisions improved substantially Services 1 Stanley Direct Planning Total Six months ended 30 September 2019 due to higher revenues from Revenue 77.0 4.5 3.9 85.4 relatively stable cost base Direct fixed staff costs (10.7) (0.5) (3.1) (14.3) Direct variable staff costs (23.2) - (0.7) (23.9)  Financial Planning revenues up Other direct operating expenses (6.7) (1.4) (0.9) (9.0) 11.4% but as expected costs up 21.1% due to recruitment of additional Allocated costs (24.7) (1.9) (1.6) (28.2) financial planners (numbers up Operating profit/(loss) 11.7 0.7 (2.4) 10.0 28.5%) and 33% increase in central Net finance and other non-operating income (0.2) - - (0.2) cost absorption. Management remain confident the division will Profit/(loss) before tax 11.5 0.7 (2.4) 9.8 move into profit once new planners’ revenues per capita meet Six months ended 30 September 2018 target of £350k Profit/(loss) before tax 7.2 0.2 (1.7) 5.7 1 The H1 2019 figures have been restated to reflect the amalgamation of the Asset Management division into the Investment Management Services division with effect from 1 April 2019 Page 9