Skip to main content
Advice Investments Wealth management
Search

Quilter plc reports record adjusted profit before tax of £110 million and a special interim dividend of 12.0 pence per share in its first results as a listed company

8 August 2018

Highlights

  • Assets under Management/Administration (“AuMA”) up 2% from 31 December 2017 to £116.5 billion (FY 2017: £114.4 billion) as a result of positive net flows of £2.2 billion, marginally offset by a weaker overall market performance of £0.1 billion.
  • Net Client Cash Flow (“NCCF”) (excl. Quilter Life Assurance) of £3.0 billion (H1 2017: £3.4 billion) representing 6% of NCCF/opening AuMA (annualised).
  • Integrated NCCF (excl. Quilter Life Assurance) up 17% to £2.8 billion (H1 2017: £2.4 billion).
  • Adjusted profit before tax of £110 million (H1 2017: £95 million), up 16% from H1 2017.
  • IFRS profit before tax from continuing operations of £17 million, up 240% (H1 2017: £5 million).
  • Diluted earnings per share of 18.7 pence (H1 2017: 5.1 pence) and adjusted diluted earnings per share of 5.5 pence (H1 2017: 4.4 pence), up 25%.
  • Special interim dividend of 12.0 pence per share, returning £221 million surplus proceeds from the sale of the Single Strategy business to shareholders.
  • Solvency II ratio of 195% after payment of special interim dividend (FY 2017: 154%).
  • Further strengthening of the Board with the appointments of Ruth Markland as Senior Independent Director, and Paul Matthews and Dr. Suresh Kana as Independent Non-Executive Directors.
  • UK Platform Transformation Programme now in testing phase and remains on time, on track and within previous cost guidance.
  • Business optimisation project now mobilised and underlying work streams in planning phase.
  • The Group continues to make good progress on delivering our voluntary remediation programme for customers as announced at the year end.

Paul Feeney, Chief Executive, said:

“I am delighted to announce a good set of results for our first reporting period since we listed on the London and Johannesburg stock exchanges. Growth in integrated flows of 17% and profit of 16% demonstrate the strength of the Quilter business model. We are also delighted to announce a special interim dividend of 12 pence per share, returning £221 million from the sale of our Single Strategy business to our shareholders.

We are focused on delivering what our customers want, an integrated wealth management offering that delivers good outcomes through the cycle. Our market offers significant growth opportunities and, while we have built a leading wealth management business, we are someway from demonstrating its full potential. Our priority now is to optimise the way we work to maximise the value of our integrated business for all our stakeholders over the coming years.”

Quilter highlights (from continuing operations* only)

H1 2018

H1 2017

Change

Investment Managers ("IMs")

     

AuMA (£bn)**

116.5

107.3

0.09

NCCF (£bn)**

2.2

3.2

(31%)

NCCF (excl. Quilter Life Assurance) (£bn)**

3.0

3.4

(12%)

NCCF/opening AuMA (excl. Quilter Life Assurance)***

6%

8%

(2pp)

Integrated NCCF (excl. Quilter Life Assurance) (£bn)**

2.8

2.4

17%

Productivity (£m)****

1.8

1.6

13%

Asset retention % (excl. Quilter Life Assurance)*****

91%

90%

1pp

Profit & loss

     

IFRS profit before tax from continuing operations (£m)

17

5

240%

IFRS profit after tax (£m)

342

94

264%

Adjusted profit before tax (£m)**

110

95

16%

Operating margin**

29%

27%

2pp

Revenue margin (bps)**

57

56

1 bp

Non-financial

     

Restricted Financial Planners ("RFPs")

1,590

1,582

1%

Investment Managers ("IMs")

168

159

6%

* Continuing operations represent Quilter plc excluding results of the Single Strategy business and Old Mutual Wealth Italy S.p.A (up to the date its sale completed on 9 January 2017)
** Alternative Performance Measures ("APMs") are detailed on page 18.
*** NCCF (annualised) as a % of opening AuMA (excluding Quilter Life Assurance)
* Average NCCF per Restricted Financial Planner.
***** Calculated as 1 – (gross outflow/opening AuMA). Outflows are calculated on an annualised basis.

Chief Executive’s Review

Execution

In the first half of 2018 we celebrated a significant moment in the history of Quilter. Six years after we set out to build a modern UK wealth management company and after two years of work to get the business ready for listing, on 25 June we demerged from Old Mutual plc and our stock began trading on the London and Johannesburg stock exchanges. We were delighted with the level of investor engagement and interest in Quilter from both new and existing investors throughout this process and we look forward to delivering prosperity for both our shareholders and broader stakeholders in the coming years.

I would particularly like to thank the teams within both Quilter plc and Old Mutual plc who worked tirelessly over the last two years to deliver this outcome which has been wholly focussed on delivering value for shareholders.

Despite all the work that has gone into the listing of Quilter plc, this is just the start of the next phase of Quilter’s development. For this reason, we are delighted to announce a good set of results for our first reporting period as an independent listed company.

After three years of essentially flat annual profits given the investment in the business, the return to growth with an increase in adjusted profit of 16% to £110 million is particularly pleasing. Our financial performance is discussed in more detail below.

Clients

While the listing process placed significant demands across the business, the operational performance we have delivered during the first half illustrates the strength of the proposition we are building for our customers and our shareholders as well as the energy and commitment of our employees.

Good customer outcomes are at the heart of everything we do. Delivering that starts with trusted advice. Client confidence in our proposition is demonstrated through the strength of our increased integrated flows. This holds true despite lower overall levels of flows across the industry and for us after the record levels of 2017 including a slowing of overall NCCF in the second quarter.

The strength of our integrated business model is shown by our NCCF and increased integrated flows. Excluding Quilter Life Assurance, NCCF was £3.0 billion, a reduction of £0.4 billion from the record levels of £3.4 billion a year ago. This represented 6% of opening AuMA and was ahead of our annualised target growth of 5% over the medium-term. Overall NCCF of £2.2 billion was down 31% on prior year (H1 2017: £3.2 billion) with this largely due to the pre-announced run off of the institutional life book within our Quilter Life Assurance business and the natural attrition of the rest of that book.

In total, our integrated flows excluding Quilter Life Assurance grew 17% from £2.4 billion in H1 2017 to £2.8 billion in H1 2018. The restricted channel within Quilter Financial Planning accounted for £0.6 billion (29%) of Quilter Wealth Solutions net inflows in 2018 and £1.4 billion (78%) of net flows into Quilter Investors in 2018, principally into the Cirilium and Generation fund ranges. Integrated net inflows from Quilter Financial Planning into Quilter Cheviot amounted to £117 million, of which £52 million was through Quilter Private Client Advisers (“QPCA”). Direct flows onto our platforms and into our overall propositions remain an important source of new business generation for us. During the period we attracted non-integrated NCCF totalling £1.7 billion (H1 2017: £2.2 billion).

The subdued levels of NCCF experienced at the start of the year from Quilter International continued into the second quarter. This reflected the impact of the record 2017 fourth quarter, which depleted the pipeline and our strategy to reduce the geographical footprint and focus on the quality of new business. NCCF for Quilter Cheviot was slower in the second quarter resulting in H1 2018 NCCF of £0.5 billion against £0.6 billion for H1 2017. However, the level of new client proposals continued to rise, with Q2 figures higher than Q1, providing comfort that the pipeline for new business remains strong.

We have also shown growth in AuMA which increased by 2% from £114.4 billion at 31 December 2017 to £116.5 billion at the end of H1 2018. Markets were challenging in the first quarter but recovered in the second quarter, with the FTSE 100 down 1% overall in H1 2018.

Performance

As we discuss in the financial review below, our financial metrics for the first half of 2018 were strong. Adjusted profit for the first half of 2018 was £110 million, an increase of 16% on the prior year, despite an increase in Head Office costs of £10 million from the prior period, principally reflecting the increase in costs to become a standalone listed group. Our IFRS profit after tax from continuing operations was £32 million, compared to a loss of £17 million in H1 2017. We achieved a 29% operating margin (H1 2017: 27%). 6 Quilter plc Interim Results 30 June 2018

We have added to our distribution capabilities within our QPCA business through the acquisition of Saint & Co, in Carlisle, DG Pryde in Duns outside Edinburgh, and A&M Financial Services based in Wiltshire. Across our appointed representative firms, we saw growth in adviser numbers, albeit this being lower than we had planned for. However, we saw good growth in Restricted Financial Planners within Charles Derby Group, in which we have a 10% shareholding, and have recruited newly appointed representative firms to our business, which overall have added a net 18 Restricted Financial Planners across the firm.

We have continued to deliver good medium and long-term investment performance for our clients. All of our discretionary and multi-asset funds are performing well against customer targets and have met the relevant target outcome. Within Quilter Investors we remain pleased with medium and long-term performance, especially in the Cirilium range. Short-term performance in certain portfolios has been held back somewhat by a range of factors but investment performance over the long-term remains a top priority.

During the last 12 months we have been investing in the Quilter Cheviot investment team and Investment Manager headcount has increased by 9 since June 2017 to reach 168 at June 2018. Since listing we have seen 12 resignations, which indicate that the IM headcount will fall back in the short-term to around the level of June 2017. This may lead to higher than trend outflows in 12 to 18 months’ time.

Stewardship

The sale of our Single Strategy asset management business, which completed at the end of June, was consistent with the execution of our strategy and vision of building the UK’s leading wealth management company. The full consideration from the sale of the business to its management team and funds managed by TA Associates was £583 million. We have received initial cash consideration of £576 million with a further £7 million expected by 2021.

Following the repayment of the £300 million senior unsecured term loan on the 29 June, the Board has decided to pay a special interim dividend of 12.0 pence per share from the proceeds of this transaction, equivalent to a return of capital to shareholders of £221 million representing the surplus capital proceeds from this disposal. All of our shareholders, those who were investors in Old Mutual plc and those who joined us since listing, will benefit from the investments we made to grow this business over the last five years. This special distribution underpins our philosophy towards running our business. We do not expect to retain excess capital without good reason and we are acutely aware that we are responsible for the stewardship of the capital that has been entrusted to us by our shareholders.

As we set out in our prospectus ahead of listing, we are not paying a normal interim dividend but we expect to declare a final dividend for 2018 when we announce our full year results in March 2019.

As we have previously said, we intend to grow our business and improve returns by:

  •  A relentless focus on ensuring good customer outcomes and strong investment returns while delivering quality customer service and building out our range of investment propositions and solutions;
  • Growing our Advice business by adding advisers through acquisitions and recruitment, embedding recently acquired firms and supporting the Financial Adviser School intake and graduates as well as supporting our advisers to improve their individual productivity;
  • Delivering the expected benefits from the implementation of our UK Platform Transformation Programme and investing in further training to support productivity; and
  • Focusing on our recently initiated optimisation review where we intend to drive operational leverage through delivering enhanced scale and efficiency.

We are making good progress in delivering our remediation programme for customers within our Quilter Life Assurance business. We are still confident that the existing £69 million provision established at year end remains sufficient to meet the costs of the remediation that we have identified as we have gone through the review process.

We were also delighted that Ruth Markland joined the Board, as the Senior Independent Director, upon our listing. Ruth’s extensive skills and her public company experience will be invaluable to the Board following our move into a listed environment. As noted in the prospectus, we are now fully compliant with the corporate governance code. We are also pleased to announce the appointments of Paul Matthews and Dr. Suresh Kana as Independent Non-Executive Directors, effective from 8 August 2018. Paul’s deep knowledge of our industry, particularly distribution, and Suresh’s extensive knowledge and experience in the South African business community, will make valuable additions to our Board.

Transformation

We are pleased to confirm that we remain on track and within budget with our UK Platform Transformation Programme. User acceptance and integration testing are well advanced, thousands of tests have been run, and defect fixing is underway. We are still planning for a soft launch either later this year or early in 2019. This will be on a limited basis and will be used to verify system functionality in a live environment. This will be followed by a phased controlled migration of our existing book. Maintaining high quality delivery is of utmost importance to us and we are preparing detailed migration plans to ensure customers and advisers remain well supported throughout the transition period.

Responsibility

We monitor employee engagement on a quarterly basis and are delighted that it has remained at a consistently high level throughout the period despite the significant work that that has been required to prepare us for listing. Quilter plc Interim Results 30 June 2018 7

Building an environment where our people can thrive is very important to me. One of the most important aspects of Quilter being liberated as a standalone business will be to reinforce the strength of our own identity and strengthen the ties that bind our people to deliver our purpose. Virtually all of our staff became shareholders in Quilter on listing and so have a direct stake in the outcomes of their efforts as we build the UK’s leading wealth management company.

Our purpose is to create prosperity for the generations of today and tomorrow. Whether it is an adviser in one of our appointed representative firms or within our QPCA business, the staff working in our Quilter Wealth Solutions or Quilter Life Assurance businesses, our international colleagues or the investment professionals within Quilter Investors or Quilter Cheviot, we all share a single goal – to build prosperity for our customers and for their families.

We also appreciate that organisations need to have a broader moral compass beyond profit maximisation. Our shared prosperity plan is at the centre of this which seeks to build financial knowledge and skills across society to enhance public financial capability and engagement. By equipping people to make better financial decisions, we enable more people to have a secure financial future and we aim to protect customer assets over the long-term through inclusive and responsible investment.

We were also delighted to launch The Quilter Foundation at listing. As a registered charity, the Foundation’s mission is to tackle the barriers to prosperity in our society – the flip side of the coin to our overarching corporate purpose. The Foundation’s first step towards its mission is an innovative and collaborative partnership which will support hundreds of thousands of young carers in the UK to overcome the barriers they face such as isolation, mental health issues and poor outcomes in education and employment. We believe that unpaid carers play a critical, but often overlooked, role in society and their contribution will be increasingly important as our society ages in the coming years.

Outlook

As I highlighted at our Capital Markets Showcase event earlier this year, our near-term agenda is focussed on three key priorities:

First, we need to successfully implement our new platform and execute a smooth migration for existing customers.

Second, we will continue to invest in growth by recruiting and building our Adviser and Investment Manager base.

Third, I want to ensure that we optimise our business so that we deliver increased operating leverage, and I look forward to updating the market on our plans with our full year results in March 2019.

These are all on track and we remain confident in our strategic path and the growth prospects that we set out in our prospectus ahead of listing. We are very much where we expected to be at this stage on the Quilter journey. While short-term market fluctuations and Brexit induced uncertainty may exacerbate market volatility or temper momentum in near-term flows, we operate in a large and fragmented market that has plenty of growth potential. We are a young company with a 250 year heritage and we’re just getting started.

Paul Feeney

Chief Executive

 

Click here to review full financial performance.

 Note: Neither the content of the Company's website nor the content of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

Disclaimer

This announcement may contain certain forward-looking statements with respect to certain Quilter plc’s plans and its current goals and expectations relating to its future financial condition, performance and results.

By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Quilter plc’s control including amongst other things, international and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing and impact of other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation and other regulations in the jurisdictions in which Quilter plc and its affiliates operate. As a result, Quilter plc’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in Quilter plc’s forward looking statements.

Quilter plc undertakes no obligation to update the forward-looking statements contained in this announcement or any other forward-looking statements it may make.

Enquiries:

Quilter Investor Relations
John-Paul Crutchley                                                    +44 20 7002 7016

Media enquiries
Quilter                                                                        +44 20 7 778 9550
Vee Montebello

Camarco                                                                     +44 20 3757 4985
Geoffrey Pelham-Lane

Aprio (South Africa)                                                    +27 11 880 0037
Julian Gwillim

 

Notes to editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £116.5 billion in customer investments (as at 30 June 2018).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Quilter Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

The Quilter plc businesses are being re-branded to Quilter over a period of approximately two years:

  • The Multi-asset business is now Quilter Investors
  • Intrinsic to Quilter Financial Planning
  • The private client advisers business is now Quilter Private Client Advisers
  • The UK Platform to Quilter Wealth Solutions
  • The International business to Quilter International
  • The Heritage life assurance business to Quilter Life Assurance
  • Quilter Cheviot will retain its name

 

This press release is for journalists only and should not be relied upon by financial advisers or customers.

Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.

This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.