Quilter plc interim results for the period ended 30 June 2024

07 August 2024

Quilter first half results deliver a 164% uplift in core net inflows to £1.7 billion, a 28% increase in adjusted profit to £97 million, and an operating margin of 29%

Steven Levin, Chief Executive Officer, said:

“We delivered a strong performance in the first half of 2024, combining record adjusted profit, consistently strong Quilter channel flows, significantly increased Platform IFA flows, and good progress on delivering our efficiency initiatives. Our work to transform Quilter is delivering tangible results, but we have more to do to reach the ambitious goals we have set for ourselves.”

Highlights:

• Total Assets under Management and Administration (“AuMA”) of £113.8 billion at the end of June 2024, an increase of 7% on 31 December 2023 (£106.7 billion) driven by total reported net inflows of £1.5 billion (H1 2023: £0.2 billion) and positive market movements of £5.6 billion.
  • Core gross inflows of £7.4 billion increased by 35% (H1 2023: £5.5 billion), with the second quarter contribution higher than the first.
  • Core net inflows totalled £1.7 billion, an increase of 164% (H1 2023: £0.7 billion). This reflected continued good performance from the Quilter channel in both High Net Worth and Affluent segments and significantly improved IFA channel flows onto the Quilter Platform.
  • Net and gross Platform flows increased meaningfully in both quarters. Notably, second quarter Platform flows were ahead of the first, with significantly increased IFA channel flows contributing to much stronger net flows relative to the first half of 2023.
  • Non-core net outflows of £0.2 billion (H1 2023: £0.5 billion) relate to assets still managed on behalf of businesses sold.
• Adjusted profit before tax increased by 28% to £97 million (H1 2023: £76 million), delivering an operating margin of 29%, an increase of five percentage points (H1 2023: 24%).
  • Total net revenue increased by 5% to £329 million (H1 2023: £312 million) with an increase in revenue generated on corporate cash balances partially offset by planned revenue margin attrition. This was coupled with strong expense discipline which delivered a third consecutive decline in first half costs. These reduced by £4 million to £232 million in the period, despite inflationary pressures.
• Simplification phase II cost savings on track with £26 million of the £50 million target achieved on a run-rate basis at end June 2024.
• Adjusted diluted earnings per share increased 21% to 5.2 pence (H1 2023: 4.3 pence).
• IFRS profit after tax attributable to shareholders of £13 million (H1 2023: £5 million) with the period-on-period variance largely due to market valuation changes in the policyholder tax charge. Basic earnings per share of 1.0 pence (H1 2023: 0.4 pence).
• Ongoing Advice Evidence review underway with Skilled Person appointed in June 2024. Expect to update by early 2025.
• Interim Dividend of 1.7 pence per share, equal to one third of last year’s Total Dividend (H1 2023: 1.5 pence per share).
• Solvency II ratio of 268% after payment of the Interim Dividend (31 December 2023: 271%).

Key financial highlights

We assess our financial performance using a variety of measures including alternative performance measures (“APMs”), as explained further on pages 15 to 17. In the headings and tables presented, these measures are indicated with an asterisk: *.

Chief Executive Officer’s statement

Business performance

I am pleased with our first half 2024 performance, which combined:

1. record first half adjusted profit;
2. higher Platform flows with good momentum maintained in the Quilter channel and very significant growth in the IFA channel; and
3. excellent progress on efficiency initiatives.

With UK inflation easing, consumers’ disposable income has improved, leading to early signs of incremental discretionary saving. We expect new business levels across the industry in 2024 to be higher than in 2023. Interest rates also remained supportive in the first half, sustaining the investment return generated on shareholder funds which, together with strong cost management, led to a 28% increase in first half adjusted profit to £97 million (H1 2023: £76 million). While expected lower interest rates in the second half will reduce investment income, we would also expect lower rates to support market levels and increase client focus on long-term saving, both of which are supportive for new business flows and revenue growth.

Since 2021, we have reduced first half costs by £16 million to £232 million (H1 2023: £236 million) through consecutive annual declines, despite an inflationary backdrop. Over the three-year period, this has led to an increase in the operating margin of 11 percentage points to 29% (H1 2023: 24%).

Affluent segment revenues increased 6% to £206 million (H1 2023: £195 million) reflecting higher average AuMA and net inflows, partially offset by planned lower revenue margins from repricing of both the Platform and Cirilium investment range last year. Strong cost management combined with a lower-than-expected FSCS levy which led to a 33% increase in adjusted profit to £72 million for the half year (H1 2023: £54 million).  

High Net Worth segment revenues increased 4% to £112 million (H1 2023: £108 million) reflecting higher average AuMA on a slightly lower revenue margin. Operating expenses modestly increased to £87 million (H1 2023: £85 million) reflecting planned business investment. The segment contribution to adjusted profit before tax was 9% higher at £25 million (H1 2023: £23 million).

Adjusted profit before tax of £97 million represents the Group’s IFRS profit, adjusted for specific items that management consider to be outside of normal operations or one-off in nature. The Group’s IFRS profit after tax was £13 million compared to £5 million in H1 2023. Principal differences between adjusted profit and IFRS profit are due to non-cash amortisation of intangible assets, business transformation expenses and the impact of policyholder tax positions on the Group’s results.

In the preliminary results announcement on 6 March 2024, the Group committed to undertake a review of historical data and practices across the Appointed Representative firms (“AR Firms”) in the Quilter Financial Planning network (“QFP network”). The purpose of this review is to determine, based on the available evidence, if the AR Firms in the QFP network have met their ongoing servicing obligations to customers and, if not, remediate customers to the extent appropriate. Following discussion with the FCA, this review is being conducted by a Skilled Person, and the Skilled Person was appointed in June 2024. The Group expects to provide an update on the Skilled Person review by early 2025.

Group adjusted diluted earnings per share were 5.2 pence, an increase of 21% (H1 2023: 4.3 pence). On an IFRS basis, we delivered basic earnings per share of 1.0 pence per share versus 0.4 pence per share for H1 2023.

The Board has set the Interim Dividend at one third of last year’s Total Dividend, equivalent to 1.7 pence per share, and will decide on the appropriate level for the Final Dividend in early 2025. That decision will reflect underlying business performance, the operating environment, the strength of our balance sheet together with any potential costs and remediation activity relating to the Ongoing Advice Evidence review.

Flows and investment performance

• Quilter channel: Our High Net Worth segment delivered a 45% increase in gross flows to £386 million (H1 2023: £266 million) and our Affluent segment increased gross flows by 16% to £2.1 billion (H1 2023: £1.8 billion), with this leading to higher net flows in the half. Annualised net flows as a percentage of opening balances in the Quilter channel were 21% and 12% for the High Net Worth and Affluent segments respectively.

• IFA channel: New business volumes in both segments were significantly higher than the prior period, increasing by 30% to £1,146 million (H1 2023: £884 million) for the High Net Worth segment and increasing by 50% to £3.8 billion (H1 2023: £2.6 billion) in the Affluent segment reflecting market share improvement. Elevated outflows continued in the High Net Worth segment, with the notable loss of one particular large low margin fund mandate in the second quarter. As a result, net inflows in the High Net Worth segment were muted in the half.
• Within Affluent, our Platform momentum continues to accelerate. First quarter Platform net flows of £1,048 million were the highest since early 2018 and we surpassed this level, reaching £1,164 million, in the second quarter. Notably, both gross and net flows from the IFA channel were higher in the second quarter than the first. Our overall market share of new business continues to steadily improve and continues to remain above our share of stock. I am also pleased to report that the proportion of assets on our Platform that are both administered and managed by us continues to increase with our pension and investment bond retirement propositions the primary product destination for net flows.

In Affluent, our Multi-Asset strategy funds are well diversified and therefore tend to lag in markets where performance is driven by narrow breadth from relatively few stocks. As a result, Quilter Investors investment performance over the last 6 months has lagged due to the strong performance of the “Magnificent 7” stocks in the US equity market where the funds remain underweight. Notwithstanding this, our WealthSelect managed portfolio range continued to deliver solid performance with the Cirilium fund range delivering a weaker out-turn.

High Net Worth investment performance has been strong, outperforming the ARC PCI Steady Growth and Equity Risk benchmark indices over 1-, 3- and 5-years (latest figures to end March). Core Discretionary and Managed Portfolio Solutions have all outperformed their respective PIMFA benchmarks over the 12 months to end June, with MPS also outperforming the respective IA sectors.

Strategic Transformation

Our change programmes remain on track and are underpinned at a Group level by our Simplification programme. Taking each in turn:

1. High Net Worth

Our Quilter Cheviot branded advice business continued to deliver strong flows into our Discretionary and Managed Portfolio Solutions. Our application to extend permissions to provide advice from the Quilter Cheviot legal entity has progressed well and an approval date in September 2024 has been agreed with the FCA. This will allow us to bring our advice and investment management teams together in a single regulated entity. It is our intention to undertake a phased client transition which will complete by the end of the first quarter of 2025.

2. Affluent: Quilter Channel

Although numbers of restricted advisers have declined modestly from the end December proforma level, this largely reflects expected natural attrition from retirements while new recruitment has been muted reflecting a broader focus on the regulatory investigations underway across the industry. We actively manage planned retirements to ensure that we largely retain departing adviser client assets under our National Retirement Plan.

We continued to invest in our Quilter Partners proposition, which combines investment and Platform alignment with the entrepreneurial drive and focus of owner-operated businesses. Five partner hub firms have now signed, and we are in discussion with a further three partner hub firms which are expected to become Quilter Partners in the second half of the year.

Our goal of delivering a more efficient operating model, increased adviser productivity and improved client experience through a range of technology and process solutions is progressing to plan, with delivery over a 2–3-year horizon. We are already seeing some early benefits and cost savings from these initiatives. 

3. Affluent: IFA Channel

Initiatives to improve market share contributed to a meaningful year-on-year increase in gross IFA Platform flows which, in turn, led to a significant increase in net flows. Net IFA flows onto Platform increased to £964 million in the first half (H1 2023: £17 million). This has been achieved by increased support to adviser firms through the provision of value-added tools and services, the attractiveness of our family linking pricing and continued propositional developments such as faster payment services and our CashHub offering.

4. Simplification Phase II

Our second stage Simplification plans target £50 million of cost savings by end 2025 on a run-rate basis from the simplification of our governance and internal administration processes together with our Advice and High Net Worth initiatives. £26 million of these savings were delivered by end-June 2024 on a run-rate basis. This programme will support our goal of operating sustainably above our 30% operating margin target in the medium term.

Culture

Building the right culture where all our people can truly thrive is also important to me. We have launched a new three-year inclusion and diversity action plan to expand upon the success of our original action plan, launched in 2022. Our commitment to increase the proportion of senior leadership roles held by women to 40% by 2025, including Executive Committee and direct reports, has already been achieved. At 30 June 2024, 45% of Quilter's senior leadership roles are held by women. In 2020, 2% of Quilter’s senior leadership roles were held by ethnically diverse colleagues. That proportion had increased to 9% as of 30 June 2024, and we are committed to increasing this further to 13% by 2027.

Outlook

The first half of 2024 has been a period of strong progress and reflects my focus on delivering strong business performance while fundamentally changing the way we work. My objectives are simple – 1) to remain absolutely customer focused while making Quilter more efficient and responsive to the external environment; and 2) to deliver the faster growth and higher returns our shareholders expect.

We expect lower second half investment income reflecting a gradual decline in interest rates and planned capital investment to grow our business. When combined with normal revenue margin attrition, this is likely to largely offset the income benefit from net flows leading to broadly stable second half revenues, assuming normal markets. We are also planning for higher second half costs to fund investment in growth initiatives and our brand. While this means second half profit is unlikely to match the level of the first half, our strong cost discipline means that the expected cost out-turn for the year is anticipated to be modestly lower than the c.£490 million level guided at our Full Year results in March.

The new UK Government has an agenda of stimulating growth in order to create fiscal capacity for future public spending. While there has been a commitment not to increase the primary taxes, potential for changes in other taxes, such as CGT or IHT, is likely to stimulate demand for financial advice. A pension policy review is expected to focus on areas such as auto-enrolment and adjusting contribution thresholds, both of which have limited direct impact on Quilter. However, we anticipate that this review may well broaden to consider pension freedoms, particularly in providing greater support to individuals accessing their pensions for the first time. This is likely to be closely associated with the Advice Guidance Boundary Review, where we are engaging with the Government and Regulators and for which we are actively positioning our business.

More broadly, the secular growth characteristics that support our business – the need to take personal responsibility to save for retirement – remains intact and we remain focused on supporting our clients to achieve their goals in this regard. Our plans to build distribution, enhance propositions and drive efficiency will continue to deliver strong outcomes for all our stakeholders in the years ahead. We look forward to the future with confidence - both in our ability to deliver on our potential and to continue delivering good outcomes for our clients.

Steven Levin

Chief Executive Officer

Please follow this link for the full announcement.

Quilter plc results for the period ended 30 June 2024

Steven Levin, CEO, and Mark Satchel, CFO, will give a presentation via webcast at 08:30am (BST) today, 7 August 2024. The presentation will be followed by a Q&A session.

The presentation will be available to view live via the webcast or can be listened to via a conference call facility. Details on how to join online or via conference call can be found on our website: 2024 results and presentations | Quilter plc

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 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, the implications and economic impact of the conflicts in the Ukraine and the Middle East, economic political uncertainty, 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.