IFG Group plc: Strategy and Trading Update (757517)
December 13 2018 - 1:02AM
UK Regulatory
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release.
IFG Group plc (IFP)
IFG Group plc: Strategy and Trading Update
13-Dec-2018 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
Strategy and Trading Update
13 December 2018
This announcement contains inside information.
This announcement outlines the strategies for both businesses and provides
an update on current trading.
Key Highlights
Strategy Update
· The Group is focused on developing and optimising two strong and
self-reliant businesses which will enhance its strategic optionality.
· Providing clarity on, and resolving, legacy issues remains a priority
for the Group.
· James Hay is enhancing its platform solution to support expansion into
the wider investment platform market, including General Investment
Accounts ("GIA"s) and Investment Savings Accounts ("ISA"s) which are
expected to represent approximately one third of new business AUA by 2021.
· James Hay is targeting c.7% annual growth in revenue over the next three
years, with operating margin improving from c.19% in the first half of
2018 to c.25% by 2021.
· Saunderson House is continuing to expand its addressable market by
leveraging its discretionary managed service ("DMS") offering to attract
younger clients and clients outside its traditional segments of lawyer and
accountants.
· Saunderson House is targeting c.9% annual growth in revenue over the
next three years, with improving operating margin over the same period.
Trading Update
· The Group continues to deliver robust results and is trading in line
with our expectations.
· The Group maintains a strong balance sheet, retaining cash to cover the
worst-case outcomes in respect of Elysian and other legacy matters that
are yet to be resolved.
· James Hay's new client wins of c.4,000 to 31 October 2018 are c.22% down
on the first ten months of 2017, driven by equity market volatility and
the slowdown in defined benefit transfers impacting the SIPP market.
Assets under Administration at 31 October 2018 were GBP26bn, up 2% from 31
October 2017, with net inflows largely offset by adverse market movements.
· Saunderson House's new client wins were 208 to 31 October 2018, broadly
in line with the first ten months of 2017. Assets under Advice at 31
October 2018 were GBP5bn, broadly unchanged from 31 October 2017, with net
inflows offset by adverse market movements.
Kathryn Purves, Group Chief Executive, commented:
"We believe that in developing strong, deliverable strategies with
attractive growth profiles for each of James Hay and Saunderson House, and
minimising Group costs, we are enhancing longer term strategic optionality
for the Group. Our businesses continue to deliver strong results, trading in
line with expectations. I am encouraged by the opportunities for both
businesses and expect this to translate into real value for shareholders in
the medium term."
Enquiries:
Kathryn Purves, Group Chief Executive, +44(0) 203 8876181
Gavin Howard, Group Chief Financial Officer, +44(0) 203 8876181
Group
We continue to make good progress on the key areas identified as near-term
priorities in the Interim Results, each of which enhances the longer-term
strategic optionality for the Group.
We remain focussed on developing two attractively positioned, self-reliant,
independent businesses by putting comprehensive business plans in place
(including setting more granular and ambitious targets), strengthening the
management teams and transferring certain group resources (compliance/risk
areas) into the respective businesses. As part of this, Simon Jackson,
previously at Brooks MacDonald, will join Saunderson House as CFO in January
2019 and Gavin Howard, Group CFO, has taken on the role of James Hay CFO
alongside his Group role.
IFG Group continues to focus on delivering operational and cost efficiencies
within the group function. As previously announced we have significantly
reduced the size of the Board, we continue to make further reductions in the
costs of the group executive/central team and are reviewing options to
sublet excess property. The Group remains on target to achieve annual cost
savings of GBP1m, with the full impact of these savings visible in the second
half of 2019.
Resolution of legacy matters within James Hay remains a priority. The Group
has continued its engagement with HMRC to attempt to address their concerns
(and the associated, previously reported, protective assessments) in
relation to Elysian Fuels. However, there remains significant uncertainty as
to potential outcomes and this issue will take further time to resolve. The
wider reviews of NSIs and SSAS Loanbacks are now substantially progressed.
Discussions with HMRC in relation to associated sanction charges are
progressing and these are expected to fall within existing provisions. James
Hay continues to engage with the FCA, and its insurers, and is addressing
any potential customer detriment in relation to the NSI book - the
remediation of this book is presently expected to be covered by existing
provisions. The review of the legacy dual trustee SIPP/SSAS book,
highlighted in the interim results, is progressing and we expect to update
the market on the scale of the exposure in the year end results. Following
this, we believe we will have reviewed all material risk areas within the
two businesses, providing a robust position for future growth.
We are seeing increased market volatility and political uncertainty in
relation to Brexit. Equity market volatility may continue for some time,
however, the direct impact on both Saunderson House and James Hay is
expected to be relatively limited. Saunderson House's revenue, despite
growth in DMS, remains heavily weighted to time and materials, and in times
of volatility can typically increase, and James Hay's fees are only
partially driven by market values. However, continued uncertainty may impact
clients' willingness to invest and any economic slowdown could have a
negative impact on both businesses.
James Hay
Review
The platform market continues to be an attractive growing market supported
by long-term structural growth drivers. James Hay has a strong position
within the high net worth, trusted adviser-led SIPP platform market with
significantly higher than average case sizes and a powerful brand in
relation to pension expertise. The business will continue to focus on
developing its pricing and proposition to retain and attract high net worth
clients through a distribution strategy focussed on a defined segment of
core advisers.
Building on its strong base, James Hay plans to develop from its current
position as a trusted SIPP expert to address the wider platform market,
supporting client through their investment life cycle. This will be
delivered through accelerating James Hay's expansion into the GIA and ISA
market, significantly increasing its addressable market.
Over the next three years, MiPlan, James Hay's market leading,
platform-based product, which typically delivers higher margins, is expected
to increase from c.50% of AUA currently to more than two thirds of AUA by
2021. The older, more complex business lines within James Hay will comprise
a decreasing proportion of the overall book, with a number of products
already closed to new business. This will result in an increasingly
efficient, higher margin business with fewer manual processes.
James Hay expects to maintain its spend on IT systems and its platform in
line with historical levels, underpinning its product expansion, supporting
growth prospects and building out its investment platform. This continued
investment is expected to deliver robust and scalable systems and create
substantial efficiency through streamlining and automating operational
processes, resulting in an improvement in cost per case.
Financial Targets
We anticipate strong growth in the wider investment market, with GIA and ISA
expected to account for approximately one third of new business AUA by 2021.
James Hay is expected to deliver approximately 7% annual revenue growth over
the next three years and an improvement in operating margin to over 25%,
driven by capturing increased revenues through its expanded proposition and
delivering cost efficiencies.
Current Trading
New client wins continue at a lower level than in 2017 with c.4,000 in the
first ten months of the year, c.22% down on the first ten months of 2017. We
believe this reflects equity market volatility and the slowdown in defined
benefit transfers impacting the SIPP market. Assets under Administration at
31 October 2018 were GBP26bn, up 2% from 31 October 2017. The increase in the
Bank of England Base Rate announced in August 2018 has flowed through to
improved revenues due to interest income increasing from GBP5.5m in the first
half to a projected GBP6.5m in the second half, despite lower cash balances in
the second half.
Saunderson House
Review
The UK wealth management sector, particularly in relation to high net worth
clients, remains an attractive and growing market. Saunderson House is well
positioned within this sector and is focussed on providing a wholly
independent, full service wealth management offering. It is a leading,
trusted adviser to high earning professional services executives in which it
has an attractive and differentiated advisory and DMS proposition.
Saunderson House plans to continue to increase penetration within its key
accounts whilst at the same time expanding its addressable market to younger
clients in the wealth accumulation stage, capturing expected
intergenerational wealth transfers and targeting wider professional services
and additional horizontal segments.
Over the next three years, Saunderson House's DMS offering, making up c.60%
of new clients currently, is expected to continue to grow strongly. The DMS
offering has enabled Saunderson House to attract younger clients who are at
the wealth accumulation stage of their life; and the number of clients in
the 35 to 50 age group has more than doubled since the launch of DMS,
building a long term, diversified and robust client bank. This strategy is
expected to embed long term value in the business, notwithstanding the
short-term impact on average AUM per client, due to the fact that these
clients are accumulating wealth with Saunderson House. With Saunderson
House's exceptionally high client retention rates these clients are expected
to remain with the business for a significant period of time.
Intergenerational wealth transfers are also a key focus for Saunderson
House, building relationships with clients' wider families in a structured
way. Saunderson House now has over 1,000 dependent clients (not included in
core client numbers), which should ensure that Saunderson House is well
positioned as the wealth they manage is handed down the generations.
Saunderson House will continue to expand its marketing into wider
professional services beyond lawyers and accountants. Whilst it takes time
to build brand awareness and traction in wider segments, Saunderson House is
starting to see the results of this focus with c.50% of new client wins in
2018 being generated from outside London accountancy and law firms. This
contributes to the development of a more diversified and robust client base
and expands the reach of Saunderson House's brand. Traditionally, Saunderson
House has developed its own advisers. However, the management team believes
that there are likely to be opportunities to recruit individuals or teams,
with existing assets under management, to accelerate growth, particularly in
a segment which is increasingly competitive and which is subject to
increasing regulatory overheads.
Saunderson House has invested in technology to support its growth with a new
portfolio management system ("PMS") built to support its investment
offering. This has already been introduced for the DMS offering, enabling a
significant increase in DMS clients with no corresponding increase in staff
numbers. There are further opportunities for Saunderson House to optimise
efficiency by rolling the PMS out to the advisory service. This is expected
to be delivered in H2 of 2019 with the benefits being realised from 2020
onwards.
Financial Targets
Saunderson House is expected to deliver approximately 9% annual revenue
growth over the next three years by growing clients number to almost 3,000
clients, with improving operating margin over the same period. DMS is
projected to continue its strong growth trajectory and is projected to
represent over 20% of AUA and revenues by 2021.
Current Trading
Saunderson House achieved 208 new client wins across both advisory and
discretionary management services in the ten months to 31 October 2018,
broadly in line with the same period in 2017, and now serves 2,321 clients,
up c.10% from 31 October 2017. Assets under Advice at 31 October 2018 were
GBP5bn broadly unchanged from 31 October 2017 with net inflows offset by
adverse market movements.
ISIN: IE0002325243
Category Code: TST
TIDM: IFP
LEI Code: 213800DDLICUJ14JTY47
OAM Categories: 3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 6871
EQS News ID: 757517
End of Announcement EQS News Service
(END) Dow Jones Newswires
December 13, 2018 02:02 ET (07:02 GMT)
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