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Quilter plc preliminary results for the year ended 31 December 2019
QUILTER PLC
(previously, Old Mutual Wealth Management Limited)
Incorporated under the Companies Act 1985 with registered number 06404270 and re-registered as a public limited
company under the Companies Act 2006)
ISIN CODE: GB00BDCXV269
JSE SHARE CODE: QLT
Quilter plc (the "Company")
NEWS RELEASE
11 March 2020
Quilter plc preliminary results for the year ended 31 December 2019
A year of significant strategic progress, underlying profit performance ahead of market
expectations and £375 million capital return with additional c.£30 million Odd-lot Offer announced
Highlights (including Quilter Life Assurance (“QLA”))
- Adjusted profit before tax up 1% to £235 million (2018: £233 million excluding Single Strategy business; 2018: £259 million including
Single Strategy business) of which £53 million (2018: £57 million) from QLA.
- Adjusted diluted earnings per share of 11.3 pence (2018: 13.5 pence, of which 1.2 pence is in respect of the Single Strategy business).
Management basis - continuing business (excludes QLA)
- Adjusted profit before tax for the Group up 3% to £182 million (2018: £176 million); for further details see overleaf.
- Adjusted diluted earnings per share from continuing operations of 8.6 pence (2018: 8.9 pence) reflecting more normal tax charge.
- Recommended final dividend of 3.5 pence per share (2018: 3.3 pence per share), bringing the total dividend for the year to 5.2 pence per
share (2018: 3.3 pence per share, excluding the special dividend of 12.0 pence per share).
- Assets under Management/Administration (“AuMA”) up 13% from 31 December 2018 to £110.4 billion (2018: £97.7 billion).
- Operating margin stable at 26% (2018: 26%), despite investment in distribution, supported by optimisation initiatives.
- Net Client Cash Flow (“NCCF”) of £0.3 billion (2018: £4.7 billion).
- Integrated net flows of £2.6 billion (2018: £4.7 billion).
Statutory results
- IFRS loss before tax attributable to equity holders from continuing operations of £53 million (2018: profit of £41 million) reflecting a higher
policyholder tax charge due to the increase in market levels during 2019.
- Diluted earnings per share of 7.8 pence (2018: 26.5 pence).
- Headline diluted earnings per share of 2.3 pence (2018: 10.5 pence).
- Solvency II ratio of 221% after payment of the recommended final dividend (2018: 190% (including QLA)).
Strategic progress
- The sale of the QLA business to ReAssure Group for £425 million (plus interest of £21 million) completed on 31 December 2019. The net
surplus proceeds of £375 million are planned to be returned to shareholders. A share buyback on both the London and Johannesburg
Stock Exchanges will commence imminently.
- Odd-Lot Offer to reduce number of shareholders by up to c.50% at a cost of up to c.£30 million announced alongside full year results.
- UK Platform Transformation Programme - initial migration of 38,500 accounts from 25,000 clients representing AuA of £4.3 billion
successfully transitioned over the weekend of 22/23 February 2020, in line with plan.
- Business optimisation and cost saving initiatives ahead of plan with £14 million of savings realised during the year with an end-2019 run
rate benefit of £24 million.
- Integration of Charles Derby completed and Lighthouse Group plc progressing in line with plan. Charles Derby rebranded to Quilter
Financial Advisers early in 2020.
- Quilter Investors disengagement from Transition Service Agreement with Merian completed six months ahead of schedule and on budget.
Paul Feeney, Chief Executive Officer, said:
“2019 was a pivotal year for Quilter. Not only were we pleased with a 3% increase in adjusted profit to £182 million, excluding QLA, after business
investment via acquisitions and new premises expenditure of around £10 million, it was also a great year for delivering on our transformation
agenda.
Our optimisation plans remain on track and our advice acquisitions will contribute to flows in the coming years. Quilter Investors is now a highly
scalable business with a broader range of solutions to meet client needs. Quilter International delivered strong performance in 2019 supported by a
focus on cost containment to offset revenue pressures.
The Board has proposed a final dividend of 3.5 pence per share to provide a full year dividend of 5.2 pence per share. We intend to undertake a
capital return of £375 million to shareholders from the net surplus proceeds from the Quilter Life Assurance sale, and a share buyback will
commence imminently. We have also announced an Odd-Lot Offer to provide small shareholders with a cost effective means of selling their shares.
2020 began well but the sharp Coronavirus induced market correction beginning in late February has created a level of uncertainty as to the outlook
for the remainder of 2020. It is currently too early to ascertain what impact market volatility will have on investor sentiment, NCCF and the
consequential impact this may have on revenues and profitability.
Notwithstanding short term market sentiment, we remain optimistic on the long-term secular opportunity across our markets and Quilter is
strategically well positioned to benefit from this. Completing the first migration onto our new UK platform in early February was a major milestone for
the Group. We are now focussed on delivering the second and final migration to a high quality outcome in the summer. Our new platform will
strengthen the cohesion between our different business capabilities and be a catalyst for faster growth.”
Quilter highlights from continuing operations (1) 2019 2018
Assets and flows
AuMA (£bn)(2) 110.4 97.7
Gross sales (£bn)(2) 12.3 14.2
NCCF (£bn) (2) 0.3 4.7
NCCF/opening AuMA (2) - 5%
Integrated flows (£bn) (2) 2.6 4.7
Productivity (£m) (2,3) 1.0 1.7
Asset retention/2 88% 91%
Profit & loss
IFRS (loss)/profit before tax attributable to equity holders from continuing operations (£m) (53) 41
IFRS (loss)/profit after tax from continuing operations (£m) (21) 66
Adjusted profit before tax before reallocation of QLA costs (£m)(2,4) 182 176
Adjusted profit before tax (£m) (2,4) 156 148
Operating margin2 26% 26%
Revenue margin (bps) (2) 55 55
Return on equity (2) 8.3% 9.8%
Non-financial
Restricted Financial Planners (“RFPs”) (6) 1,799 1,621
Investment Managers (“IMs”) (6) 167 155
Quilter highlights from continuing operations and Quilter Life Assurance 2019 2018
Profit & loss
Adjusted profit before tax (£m) (2) 235 233
Operating margin (2) 29% 30%
Revenue margin (bps) (2) 57 57
Adjusted diluted earnings per share (pence) (2,5) 11.3 12.3
1 - Continuing operations represent Quilter plc excluding results of QLA (for both 2018 and 2019) and the Single Strategy business (up to the date of sale which completed
on 29 June 2018).
2 - Alternative Performance Measures (“APMs”) are detailed on pages 5 to 7.
3 - Average integrated NCCF per Restricted Financial Planner.
4 - Adjusted profit from continuing operations includes £26 million of costs (2018: £28 million) previously reported as part of the QLA business to be reallocated from
discontinued to continuing operations, as these costs do not transfer to ReAssure on disposal at 31 December 2019. Of the £26 million of costs reallocated, £14 million
will recur in 2020 to provide services to ReAssure under the Transitional Services Arrangement, with corresponding income to cover these costs. Management actions
are being taken to manage the remaining costs, which are expected to continually decline over the next two years. Refer to page 16 for a full reconciliation.
5 - Adjusted diluted earnings per share in 2018 of 13.5 pence, of which 1.2 pence in respect of the Single Strategy business.
6 - Closing headcount as at the year end date.
Adjusted profit presented in this announcement
Adjusted profit is presented in this announcement in a number of ways, to provide readers with a view of adjusted profit for the total Group,
excluding QLA, and on a continuing and discontinued basis. A full reconciliation of these views is provided on page 16 and a definition of adjusted
profit is explained on page 5.
For adjusted profit before tax on a continuing basis, IFRS accounting standards require £26 million of costs (2018: £28 million), previously reported
as part of the QLA business, to be reallocated from discontinued to continuing operations, as these costs do not transfer to ReAssure on disposal at
31 December 2019. Of the £26 million of costs re-allocated, £14 million will be incurred in 2020 to provide services to ReAssure under the
Transitional Services Arrangement, with corresponding income to cover these costs. Management actions are being taken to manage the remaining
costs, which are expected to continually decline over the next two years.
Alternative Performance Measures (“APMs”)
We assess our financial performance using a variety of measures including APMs, as explained further on pages 5 to 7. In the headings and tables
presented from page 8 onwards, these measures are indicated with an asterix:
Shareholder information
The Quilter Board has agreed to recommend to shareholders the payment of a final dividend of 3.5 pence per share. This will be considered at the
Quilter plc Annual General Meeting, which will be held on Thursday 14 May 2020. The final dividend will be paid on Monday 18 May 2020 to
shareholders on the UK and South African share registers on Friday 3 April 2020.
Dividend Timetable
Dividend announcement in pounds sterling with South Africa ZAR Equivalent Wednesday 11 March 2020
Last day to trade cum dividend in South Africa Tuesday 31 March 2020
Shares trade ex-dividend in South Africa Wednesday 1 April 2020
Shares trade ex-dividend in the UK Thursday 2 April 2020
Record Date in UK and South Africa Friday 3 April 2020
Annual General Meeting Thursday 14 May 2020
Final dividend payment date Monday 18 May 2020
From the opening of trading on Wednesday 11 March 2020 until the close of business on Friday 3 April 2020, no transfers between the London and
Johannesburg registers will be permitted. Share certificates for shareholders on the South African register may not be dematerialised or
rematerialised between Wednesday 1 April and Friday 3 April 2020, both dates inclusive.
Additional information
For Shareholders on our South African share register a dividend of 72.78519 cents per share will be paid on Monday 18 May 2020 to shareholders,
based on an exchange rate of 20.79577. Dividend Tax will be withheld at the rate of 20% from the amount of the gross dividend of 72.78519 South
African cents per share paid to South African shareholders unless a shareholder qualifies for exemption. After the Dividend Tax has been withheld,
the net dividend will be 58.22815 South African cents per share. The Company had a total of 1,902,251,098 shares in issue at today's date.
If you are uncertain as to the tax treatment of any dividends you should consult your own tax advisor.
Odd-lot Offer
As part of our drive for greater efficiency and in line with our desire to act in the best interests of all our shareholders, the Board will today announce
the launch of an Odd-lot Offer, for shareholders registered on the London and Johannesburg Stock Exchanges. The Odd-lot Offer entails Quilter
making an offer to eligible shareholders (holders of less than 100 shares) to repurchase their shares at a 5% premium to the market price. Full
details will be provided in this morning’s announcement.
The proposed Odd-lot Offer will reduce the complexity and cost to Quilter of managing our shareholder base and will allow investors holding small
numbers of shares to dispose of their holdings in a timely and cost effective manner. Eligible shareholders can, of course, elect to retain their
shareholding in Quilter, if they so choose.
Odd-lot Holders will receive the final dividend on their Odd-lot Offer shares providing they still hold their shares on the dividend record date, Friday 3
April 2020.
Further information will be released to the market this morning and documentation for completion will be provided to eligible shareholders shortly.
Capital return
Following the completion of the sale of Quilter Life Assurance to Reassure Group plc for £425 million (and interest income of £21 million), the Quilter
Board intends to return the full net surplus sale proceeds (after disposal costs) of £375 million to shareholders. Quilter will commence a share
buyback on the London and Johannesburg exchanges imminently and it will be subject to staged Board and regulatory approvals. The Board will
keep the programme under review to make sure it continues to be the most efficient and effective means of returning capital to shareholders.
This short-form announcement is the responsibility of the directors and is only a summary of the information in the full announcement. Any
investment decisions by investors and/or shareholders should be based on consideration of the full announcement as a whole.
The full announcement can be found on the company’s website at www.quilter.com/investor-relations and
https://senspdf.jse.co.za/documents/2020/JSE/ISSE/QLTE/Quilter.pdf.
Copies of the full announcement may also be requested at the company’s registered office, at no charge, during office hours.
JSE Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd
Date: 11-03-2020 09:00:00
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