INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015 Profitability of - - PowerPoint PPT Presentation

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

• Profitability of Core Operations* increased 200.0% to £3.0m (H1 2014/15: £1.0m)
• Arrested decline in profitability. Reported profit £2.0m (H1 2014/15: loss £3.9m)
• Balance sheet strengthened. Net assets £86.9m (31/3/15: £68.9m). 148% regulatory capital surplus
• Progress made in-line with previously stated turn around strategy
• £16.3m placing in April 2015
• Disposal of non-core businesses: Charles Stanley Securities and Charles Stanley Financial

Solutions

• Re-organisation of Asset Management and Financial Planning divisions
• Charles Stanley Direct restructured
• Milestones for H2
• New rate card to be introduced from 1 December 2015
• Consultation for investment manager remuneration to be completed
• Substantial schedule of work ahead, 3-5 years timeline to completion

* Core Operations represents Charles Stanley’s continuing operations excluding assets Held for Sale, being Charles Stanley Securities and Charles Stanley Financial Solutions

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

*Rebased

£2.0m £(3.9)m H1 2016 H1 2015

Reported profit/(loss) before tax

£3.0m £1.0m H1 2016 H1 2015

Reported Core profit before tax

4.2% 1.5% H1 2016 H1 2015

Margin from Core Operations

£8.9m £8.7m £2.3m £2.9m £11.2m £11.6m H1 2016 H1 2015

Funds under management

Discretionary Advisory Managed 1.50p* 3.00p H1 2016 H1 2015

Interim Dividend per share

151.3 % 200.0 % 180.0 % £61.0m £42.8m £25.9m £26.1m 147.9% 105.7 % 30/09/2015 31/03/2015

Net Assets and Reg Capital Surplus

Tangible assets Intangible assets 39.9 % (50.0)% (3.4)%

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

H1 2016 H1 2015 % Change

FUMA (£bn) 20.0 20.2 (1.0)% Managed 11.2 11.6 (3.4)% Administered 8.8 8.6 2.3 % Core Operations Revenue (£m) 70.8 68.4 3.5 % Profit before tax (£m) 3.0 1.0 200.0 % EPS (p) 5.26 2.85 84.6 % Pre-tax margin (%) 4.2 % 1.5 % Reported profit/(loss) before tax (£m) 2.0 (3.9) 151.3 % Dividend per share (p) 1.5 * 3.0 (50.0)% * Rebased

FUMA movement in-line with WMA balance index over the period (1.0)% (FTSE 100: (8.5)%) Core Operations trending positively Exceptional costs and losses significantly reduced Dividend in-line with rebased policy

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

£bn H1 2016 H1 2015 % Change

Discretionary 8.9 8.7 2.3 % Advisory Managed 2.3 2.9 (20.7)% Total Managed 11.2 11.6 (3.4)% Advisory Dealing 2.0 2.2 (9.1)% Execution Only 6.8 6.4 6.3 % Total Administered 8.8 8.6 2.3 % Total Funds 20.0 20.2 (1.0)% FTSE 100 6,062 6,623 (8.5)% WMA Balanced 3,421 3,454 (1.0)%

Growth in discretionary and execution only via Charles Stanley Direct offset by market movement and declines in other services

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

Opening FUMA (1st Apr), £21.3bn Closing FUMA (30th Sep), £20.0bn Inflow from Existing and New Clients, £0.8bn Lost Clients, £(0.6)bn Market Movement, £(1.5)bn

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015 0.57 % 0.56 % 0.53 % 0.45 % 0.13 % 0.12 % 0.16 % 0.15 % 0.48 % 0.46 % 0.26 % 0.24 % 0.23 % 0.17 % 0.23 % 0.25 % 0.24 % 0.25 % 0.25 % 0.24 % 0.02 % 0.02 % 0.01 % 0.02 % 0.02 % 0.03 % 0.03 % 0.03 % 0.02 % 0.03 %

H1 '16 H1 '15 H1 '16 H1 '15 H1 '16 H1 '15 H1 '16 H1 '15 H1 '16 H1 '15 Discretionary Advisory managed Advisory dealing Execution only All categories

0.85 % 0.82 % 0.78 % 0.64 % 0.39 % 0.40 % 0.43 % 0.43 % 0.75 % 0.72 %

Income margins remain stable New rates to be introduced to end discount pricing on smaller accounts and price service levels appropriately

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

Improvement in fees due to improved fee revenue margin and continuing shift toward fee only tariffs Trading volumes up 10.3% by comparison to weak prior year comparatives. Second quarter activity was more subdued than first quarter in-line with market

£m H1 2016 H1 2015 % Change

Fees Commission Interest Total Revenue Net finance and other income Underlying income Underlying operating expenses Underlying profit

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

Adjusted Profit H1 2015, £1.0m Adjusted Profit H1 2016, £3.0m Fee Income, £1.7m Commission, £1.1m Remuneration costs, £1.9m Settlement, Client and Business Costs, £0.2m Marketing, £0.7m Interest, Finance & Other Income, £(0.5)m IT, £(0.9)m Establishment, £(0.1)m Professional Fees, £(1.4)m Admin and Other Costs, £(0.9)m

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

£m H1 2016 H1 2015 % Change

Underlying profit before tax of Core Operations Held for Sale items Adjusting Items Amortisation of client relationships Intangible and Investment Asset Impairment (1) Profit from sale of Matterley Undervalued (2) Other net exceptional costs Profit/(Loss) before tax

• 1. Current period Intangible and Investment Asset Impairment attributed to Charles Stanley Financial Solutions and Sutherlands Edinburgh
• 2. Unrealised profit in relation to deferred consideration payable

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

£26.5m £23.9m £6.8m £8.0m £26.2m £23.7m £59.5m £55.6m H1 2016 H1 2015

FuMA per CF30

Discretionary Advisory managed Non-managed £77.8k £69.2k £34.8k £28.7k

£112.6k £97.9k

H1 2016 H1 2015 Discretionary Income per CF30

Fees Commission

7.1 % 15.0 %

66.7 % 67.1 % H1 2016 H1 2015 Fees to Revenue Ratio 97.7 % 105.7 % H1 2016 H1 2015 Cost to Revenue Ratio

7.6 % (0.6)%

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

£m 30/09/2015 31/03/2015 30/09/2014

Goodwill and customer relationships 22.9 23.3 32.0 Software 3.0 2.8 2.4 Total intangible assets 25.9 26.1 34.4 Fixed assets 12.2 13.3 14.6 Other non-current assets 10.0 10.0 10.4 Total tangible non-current assets 22.2 23.3 25.0 Net cash 42.2 28.3 18.8 Working capital 7.0 1.9 8.2 Assets Held for Sale 3.1 4.2

• Total net current assets

52.3 34.4 27.0 Pension deficit 11.8 13.1 10.3 Mortgage 1.8 1.8 1.9 Total non-current liabilities 13.6 14.9 12.2 Net assets 86.9 68.9 74.2 Net tangible assets 61.0 42.8 39.8 Regulatory capital resources 55.7 37.7 38.8

£16.3m placing in April strengthened the group’s net cash, net tangible assets and regulatory capital resources Pension deficit reduced

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

Opening (1st Apr), £28.4m Closing (30th Sep), £42.3m Adjusted Operating Profit, £4.0m Share Placement, £16.3m Sale of Business, £0.6m Capex, £(0.4)m Borrowings, £(0.1)m Dividends, £(1.0)m Acquisition

• f Intangible

Assets, £(1.5)m Working capital , £(4.1)m

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

• Market conditions currently more subdued than earlier in the year
• Repricing
• New rate card from 1st December 2015 for new clients
• Phased implementation for existing clients
• Rebased Investment Manager remuneration
• Profit rather than revenue based
• 20% conduct element
• Intended to be implemented from 1st April 2016 and impact phased over 3 years
• Transition to new schemes expected to lead to a higher one-off Profit and Loss charge in

current year (no cash flow impact)

• Consultation in progress

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

• Complement bespoke discretionary investment management offering with suite of

asset management products

• Holistic wealth management offering
• Focused approach to intermediaries
• Closer integration of Charles Stanley Direct
• Sales training and support for investment manager population
• Continued focus on high levels of client delivery

Operating margin target of 15%+ in 2018

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

Investment Management Services division provides personal investment services to individuals, companies, trusts and charities and includes platform dealing, custody and SIPP and ISA administration services

£m H1 2016 H1 2015 % Change 2015

Revenue Costs Net finance and other income Profit before tax Margin Bargains Managed Non-managed Average Bargain Value (£) Funds (£bn) Managed Non-managed

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

4.7 % 12.8 % 17.7 % 19.0 % 45.9 % £0 to £100k £100k to £250k £250k to £500k £500k to £1m > £1m

IMS Proportion of funds by account size

41.3 % 26.2 % 17.0 % 9.3 % 6.1 % £0 to £100k £100k to £250k £250k to £500k £500k to £1m > £1m

IMS Proportion of clients by account size

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

£m H1 2016 H1 2015 % Change 2015

Revenue Costs Loss before tax Bargains Managed Non-managed Funds (£bn)

Asset Management division provides specialist asset management services through its Matterley range of funds, active and passive model portfolios, IHT services, and investment research to the Investment Management Services division and clients Funds and revenues increased despite the sale of the £85.7m Matterley Undervalued fund in December 2015. Costs increased due to the launch of the Matterley Bond fund in June 2015 which are not expected to recur at the same level in the second half

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

£m H1 2016 H1 2015 % Change 2015

Revenue Costs Loss before tax

The Financial Planning division provides financial planning and advice services The table above reflects the contribution from the continuing operations of the division and thus excludes Charles Stanley Financial Solutions, which is classed as Held for Sale. The division increased its gross revenue by 4.7% on the same period last year whilst

• perating costs have been reduced by 5.4%. As a result the division has reduced its operating loss to £0.8 million (H1 2014/15:
• perating loss £1.1 million).

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

£m H1 2016 H1 2015 % Change 2015

Revenue Costs (Loss) before tax Bargains Clients Funds (£bn) D2C Garrison & Fidelity

Charles Stanley Direct provides direct to client online dealing and fund broking services. Significant progress has been made reducing costs whilst continuing to grow the client and asset base

INTERIM RESULTS FOR THE HALF YEAR ENDED 31.09.2015

£m H1 2016 H1 2015 % Change 2015

Revenue Costs Profit/(Loss) before tax

Held for Sale activities comprise Charles Stanley Securities and Charles Stanley Financial Solutions. Charles Stanley Securities was sold to Panmure Gordon in July 2015 for an initial consideration of £1.5m. Deferred consideration maybe payable dependent upon the performance of the business through to July 2016 Conditional contracts were exchanged on 10 November 2015 for the sale of the Charles Stanley Financial Solutions to its management team, subject to FCA approval, for £2.0m and this has resulted in a £0.4m impairment charge to goodwill being made