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Quilter plc interim results for the six months ended 30 June 2020

11 August 2020

Financial results ahead of market expectations in a challenging environment, demonstrating operational resilience and cost discipline with a strong balance sheet driving shareholder returns

Management basis - continuing business

  • Adjusted profit before tax for the Group of £71 million (H1 2019: £89 million) demonstrating a resilient performance in challenging markets.
  • Adjusted diluted earnings per share from continuing operations of 3.5 pence (H1 2019: 4.1 pence) supported by a lower tax rate and a modest reduction in average share count as a result of the Group’s capital return programme.
  • Interim dividend of 1.0 pence per share positioned at the low end of the Group’s target pay-out range with the Board to make a decision on the overall 2020 pay-out ratio with the Full Year Results in March 2021.
  • Assets under Management/Administration (“AuMA”) of £107.4 billion at 30 June 2020 (FY 2019: £110.4 billion) showing a recovery from the first quarter-end position of £95.3 billion.
  • Net Client Cash Flow (“NCCF”) of £1.1 billion representing a significant increase on the comparative period (H1 2019: £0.3 billion) due to lower outflows and stable gross sales of £5.8 billion (H1 2019: £6.0 billion).
  • Integrated net flows of £1.4 billion (H1 2019: £1.4 billion) demonstrating the consistency of the Group’s multi-channel model.
  • IFRS profit before tax attributable to equity holders from continuing operations of £46 million (H1 2019: loss of £40 million).
  • Operating margin of 21% (H1 2019: 26%) reflecting the challenging revenue environment.
  • Expense discipline maintained with year-on-year cost growth limited to £5 million despite incremental costs from acquired businesses of c.£12 million and an increase in the FSCS levy of £4 million, reflecting further savings from the Optimisation programme and additional savings of £15 million from management actions.

Statutory results

  • IFRS profit after tax of £43 million (H1 2019: loss of £17 million) supported by higher policyholder tax benefits due to market movements in the period.
  • Basic earnings per share of 2.4 pence (H1 2019: (0.9) pence).
  • Diluted earnings per share from continuing operations of 2.4 pence (H1 2019: (1.7) pence).
  • Solvency II ratio of 197% after payment of the interim dividend (H1 2019: 181% (including QLA)).

Strategic progress

  • UK Platform Transformation Programme on track.
    • Initial migration of 38,500 accounts from 25,000 clients representing Assets under Administration (“AuA”) of £4.3 billion (c.8% of Platform assets) in February 2020 has progressed well.
    • Significant migration encompassing c.75% of total Platform assets is targeted for the fourth quarter 2020, with the remaining migration planned for early 2021.
  • Capital return programme of £375 million initiated through a share buyback after full year results:
    • Tranche 1 of £50 million completed at an average price of 116.1 pence per share; and
    • Tranche 2 of up to £125 million initiated on 25 June 2020. £27 million of Tranche 2a completed up to close of business on 10 August 2020 at an average price of 144.1 pence per share.
  • Share register simplification through completion of the Odd-lot Offer at a price of 120.2 pence (ZAR 2813 cents) per share, which has reduced the total number of shareholders on the Quilter share register by c.45% at a cost of £21 million.

Paul Feeney, Chief Executive Officer, said: 

“The first half of 2020 was a uniquely challenging environment which has forced us all to reconsider the way we socially interact and undertake business activities. In terms of our financial performance, strategic progress and focus on operational improvement, I am pleased Quilter has come through this period extremely well and delivered for all our stakeholders – colleagues, clients, communities as well as our owners. I wish to acknowledge the fantastic efforts and resolute focus of my colleagues right across the organisation, whose dedication has made that happen in these very challenging times.

In response to revenue challenges in the first half of 2020, we pulled hard on the cost lever, both through structural cost reduction via our Optimisation programme and tactically with a planned reduction in discretionary expenditure of around £30 million this year. Our cautious outlook with broadly stable market conditions for the remainder of the year means we continue to expect revenue headwinds. As a consequence, we will maintain a firm handle on expenses with a modestly lower second half out-turn for costs anticipated to offset the expected impact from revenue headwinds.

We are pleased to see the significant pick-up in net flows across the business in the first half, with gross flows remaining resilient despite the market turmoil and retention rates improving. This gives us confidence that we can deliver improving flows as the Platform migration project completes. That project is now in its final stages with c.80% of total UK Platform assets expected to be migrated this year despite us adapting our plans to meet the logistical challenges presented by COVID-19. Our priority is to ensure adviser readiness to deliver a smooth and safe migration for all our customers and advisers.

Notwithstanding short-term uncertainties, Quilter remains well positioned in an industry with secular long-term growth prospects. The business is in good shape and we look forward to the future with confidence.”

Quilter highlights from continuing operations1

H1 2020

H1 2019

Assets and flows

 

 

AuMA (£bn)2

107.4

107.3

Gross sales (£bn)2

5.8

6.0

NCCF (£bn)2

1.1

0.3

NCCF/opening AuMA2

2%

1%

Integrated flows (£bn)2

1.4

1.4

Productivity (£m)2,3

1.5

1.6

Asset retention2

92%

88%

 

 

 

Profit & loss

 

 

IFRS profit/(loss) before tax attributable to equity holders from continuing operations (£m)2

46

(40)

IFRS profit/(loss) after tax from continuing operations (£m)

44

(32)

Adjusted profit before tax (£m)2

71

89

Operating margin2

21%

26%

Revenue margin (bps)2

52

55

Return on equity2

6.2%

9.2%

Adjusted diluted EPS from continuing operations (pence)2

3.5

4.1

Diluted earnings per share from continuing operations (pence)

2.4

(1.7)

 

 

 

Non-financial

                        

 

Restricted Financial Planners (“RFPs”)4

1,808

1,803

Investment Managers (“IMs”)4

169

163

 

1Continuing operations represent Quilter plc excluding results of Quilter Life Assurance (“QLA”) (for 2019) which was sold on 31 December 2019 to ReAssure.

2Alternative Performance Measures (“APMs”) are detailed and defined on pages 5 to 7.

 

 

 3Is the measure of the value created by integrated NCCF from our advice business per average Restricted Financial Planner.

 

 

 4Closing headcount as at 30 June.

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 11 onwards, these measures are indicated with an asterix: *.

 

Chief Executive Officer’s statement

Execution

The first half of 2020 was a more challenging environment than we have experienced for more than a generation. As a sector, we have become used to managing through financial market volatility, but a global pandemic leading to social lock-down, severe economic contraction and unprecedented market volatility present an altogether different scale of management challenges. At Quilter, our response to this environment has been to adopt a three-pillar approach focussed on maintaining staff health and safety, ensuring operational resilience to maintain high standards of client service, and rising to the challenge of broader social responsibility.

  • When the scale of the COVID-19 crisis became clear, our first concern was to ensure the health and safety of our staff and so we mobilised, at pace, to make sure colleagues could work from home as quickly as possible. By early April we had over 98% of Quilter staff working remotely, including all of our contact centre-based colleagues servicing our UK and International platforms whose roles are not traditionally enabled for remote working. Since that time, we have reconfigured our offices to enable staff to operate safely in a COVID-19 context and allowed a modest number of staff to return to the office environment, principally in locations beyond the UK mainland where measures to control the COVID-19 virus are at a more advanced stage. In the UK, a small number of staff have returned to the office, undertaken in line with Government guidelines and with staff operating in a socially-distanced manner.
  • Our second focus was to ensure continuity of excellent service to our clients and advisers. I am immensely proud of how all my colleagues across Quilter rose to that challenge. Technology enabled our remote working transition and in the space of three weeks from mid-March our IT teams implemented new network telephony systems and delivered thousands of laptops, headsets, docking stations, monitors and softphones to enable colleagues servicing clients and advisers to work effectively from home. Our teams have achieved outcomes during lock-down that we did not expect to be possible such as remotely implementing a significant CRM system upgrade for Quilter Cheviot. We have also used technology to deliver solutions such as digital signatures, with many legacy paper-based processes reengineered to allow a greater degree of automation and client focus. Online customer registrations on the UK Platform are up ten-fold versus last year as customers adapted their engagement preferences, and in the International business over half the interactions with advisers are now online through Wealth Interactive digital accounts.
  • Thirdly, while social responsibility has always been a cornerstone of Quilter’s culture, we have gone beyond our established practices to care for and support our customers, advisers and colleagues throughout this period:
    • We put in place specific support for network adviser firms, with deferred fee arrangements where needed.
    • We updated “Thrive”, our Quilter-wide well-being programme, to provide colleagues with appropriate mental, financial, physical and social wellbeing support to manage through lock-down, and subsequently rolled this out to 23,000 advisers across the UK as part of our “There for You” campaign.
    • Certain staff reductions within the organisation which were planned as part of our Optimisation plans in the second quarter were deferred. We did not think it appropriate to have those conversations with impacted staff during a period of peak pandemic and economic uncertainty and while the UK Government were implementing significant schemes to avoid increasing short-term redundancies. It was right to raise our focus beyond the short-term and offer temporary support.
    • Our Financial Adviser School recognised at an early stage of lock-down that a number of furloughed individuals across the UK might be concerned about their prospects and would be considering alternative career options. To further our goal of increasing adviser numbers across the industry, the School made the first unit of the Financial Adviser Diploma available on-line free to anyone who wanted to explore whether becoming a financial adviser was for them, and 300 people enrolled on the programme during lock-down.
    • The Quilter Foundation stepped up its financial support to all the charities we support including the Carers Trust where COVID-19 has placed an even heavier burden on young carers. I am pleased we were also one of the very first firms to contribute to the UK’s National Emergency Trust Appeal.
    • Given our financial strength and business circumstances, Quilter has not participated in any of the support schemes which the UK Government has put in place in response to the economic crisis.

In summary, I am delighted with how Quilter has operated through this period, from a human, business and a financial perspective. Our balance sheet strength and strong liquidity following the sale of Quilter Life Assurance meant the Board were comfortable paying our 2019 final dividend, and were able to take advantage of Quilter’s lower stock market price with our ongoing share buyback programme. The vast majority of our retail shareholders holding less than 100 shares participated in our Odd-lot Offer which provided an inexpensive and convenient way for them to exit their modest shareholdings. In aggregate over 200,000 shareholders participated in the offer resulting in the number of shareholders on our register nearly halving at a cost of £21 million.

Of course, the point of managing through challenging times is not just to survive but to ensure the business is better positioned to thrive in the new business conditions. To achieve this, we questioned and challenged established practices and cultural norms, and ensured those learnings were embedded within the organisation to deliver better outcomes and efficiencies. At Quilter, in some areas of our business, evolution which was expected to take three to five years has happened in the space of a similar number of months. For example, all our advisers are now communicating and conducting client business digitally, which, if sustained, will potentially drive significant productivity gains. The future has arrived early, and we will embrace this new normal by increasingly pivoting our business towards meeting the needs of our customer segments rather than expecting clients to fit our organisational structures and behaviours.

Despite the crisis, we have maintained our focus on integrating acquired businesses. We completed the re-brand of the Charles Derby business to form Quilter Financial Advisers, our mass-affluent National business which also includes Lighthouse Financial Advice and Lighthouse Mortgage and Protection. The integration of Lighthouse plc (“Lighthouse”) is progressing well with advisers adopting the Quilter Financial Planners proposition, advice standards and technology where appropriate. Generation of new client queries through our affinity relationships has remained strong despite the inevitable impact of COVID-19.

We have purposefully not undertaken any significant advice business acquisitions in 2020 as we focus on fully integrating those undertaken in 2019. During the course of the first half we recruited 106 Restricted Financial Planners, bringing our total to 1,808 net of departures. Limited net organic growth was a function of the external environment coupled with increased focus on individual adviser productivity which is an area of increasing importance to us and has led to some specific departures. Our pipeline of firms seeking to join our network remains strong. Our advisers have adapted well to remote working, engaging positively and proactively with clients via video and other means to deliver ongoing service and meet client needs.

Business performance

Profitability over the course of the first half of 2020 was impacted by external conditions. Given the market decline came in mid to late March, we benefited from good performance in the first quarter with a more challenging second quarter, reflecting both lower markets and the impact of the higher 2020 FSCS and regulatory levies of £15 million, the majority of which was charged in full in April, with a further £5 million expected in the second half.

Against this backdrop, I am satisfied with our adjusted profit before tax for the first half of 2020 of £71 million, against £89 million from continuing operations in 2019. Lower total net fee revenue of £335 million reflected a decline in revenue margins as a result of the mix shift in Quilter Investors and planned repricing on the Quilter Investment Platform. As previously guided, we expect further erosion of Quilter Investors’ margin in the second half as we grow assets in our newer lower margin products such as Cirilium Blend, Passive and Income solutions. Given the UK housing market moved into stasis during lock-down, we also expect temporarily lower revenues from the mortgage and protection business within Quilter Financial Planning until the measures taken by the Chancellor to support the housing market feed through into renewed activity.

Total expenses of £264 million in the first half grew by £5 million (2019: £259 million), demonstrating that our cost discipline has been maintained through Optimisation and complemented by a targeted programme to reduce discretionary expenses by £30 million this year. The cost base for the first half reflected a full period contribution from the QFP acquisitions made during 2019, which added £12 million of costs including restructuring spend, as well as a £4 million higher charge for the 2020 FSCS levy. We also accommodated stranded costs resulting from the sale of Quilter Life Assurance. Separately, incremental one-off 2020 COVID-19 related costs of £2 million arose from support arrangements and costs of additional equipment required to enable staff to work from home. Underlying costs, excluding the impact from acquisitions and COVID-19 related expenses, were lower than 2019.

Our operating margin declined to 21% (H1 2019: 26%, excluding Quilter Life Assurance) primarily reflecting the impact on revenues from a lower revenue margin coupled with the aforementioned cost drag from stranded costs, higher FSCS levies and unanticipated COVID-19 related costs. Our IFRS profit after tax was £43 million, compared to a loss of £17 million in the first half 2019.

Overall AuMA declined from £110.4 billion at 31 December 2019 to £95.3 billion at the end of the first quarter of 2020, recovering to £107.4 billion by end June 2020. The market decline began late in the first quarter, with March seeing significant rapid declines in a short period of time before a recovery in most global indices over the course of the second quarter. This led to average AuMA, the principal driver of net management fee revenue, for the period of £105.1 billion modestly ahead of £103.2 billion in the first half of 2019. As we look ahead to the second half, we expect a slightly higher level of average AuMA relative to the first half, assuming markets remain broadly stable. We expect subdued revenue momentum in the second half of 2020 to lead to broad stability in the operating margin, with a targeted improvement in 2021 of two percentage points from the eventual 2020 out-turn, as envisaged in our original optimisation targets.

Adjusted diluted earnings per share of 3.5 pence compared with 4.1 pence from Quilter’s continuing operations in the first half of 2019. On an IFRS basis, we delivered basic EPS of 2.5 pence versus a loss of 1.7 pence per share for the comparable period of 2019 on the same basis. Period-end shares declined by 2.4% or 46 million as a result of our share buyback. The Board will make a considered decision on the pay-out ratio and final dividend for 2020 shortly before the Full Year Results, which will be announced in March 2021, with that decision dependent on market conditions, progress on the share buyback and the business outlook at that time. The Board considers it appropriate to pay a 2020 interim dividend and has adopted a cautious position given the market uncertainties which remain. The interim pay-out ratio has been set at the lower end of the 40% to 60% target range with a declared 2020 interim dividend of 1.0 pence per share. This compares to a 2019 interim dividend of 1.7 pence per share (inclusive of a distribution of 0.43 pence per share in respect of Quilter Life Assurance’s profit contribution).

As indicated at the 2019 Full Year Results, the provision made in respect of certain Defined Benefit (“DB”) pension transfers for former British Steel Pension Scheme (“BSPS”) members undertaken by Lighthouse prior to its acquisition by Quilter remained under review. This has now been increased to £24 million net of anticipated deferred tax benefits and a prudent assumption regarding recoverability under Lighthouse’s professional indemnity insurance. £19 million of this net provision has been taken as an adjustment to the acquisition balance sheet of Lighthouse and £5 million has been taken to the IFRS P&L as a charge. This covers our current estimated liability for redress in respect of the BSPS pension transfers undertaken by Lighthouse. As previously indicated, we continue to work proactively with the FCA to ensure good customer outcomes for the clients involved.

Client flows

Delivering good customer outcomes through a trusted advice relationship is central to the Quilter business model. The Quilter Investment Platform is key to our business, providing the investment ‘wrappers’ and other functionality to meet both our client and their adviser needs, while our investment solutions provide the intellectual capability to deliver the outcomes our clients seek. Confidence in our proposition is demonstrated through both the continued attraction of our solutions to independent financial advisers and the resilience of our integrated flows.

While gross client cash flows into the business in the first half of 2020 remained stable at c.£6 billion, we saw substantial improvement in net flows. NCCF increased to £1.1 billion versus £0.3 billion in the comparable period of 2019. This reflected improved persistency in client assets across each of Quilter Cheviot, Quilter International and the Quilter Investment Platform. The overall level of DB to DC flows in the first half modestly increased on the comparable period of 2019. We welcomed the FCA announcement on plans to reform the DB transfer market which will help promote better, industry-wide, customer outcomes and their proposals are wholly consistent with Quilter’s existing approach to this business.

I am particularly pleased to see stable gross flows of c.£3 billion onto the Quilter Investment Platform in the period to end-June coupled with the increase in NCCF from £0.5 billion in 2019 to £1.0 billion in 2020. This stability provides a solid foundation from which our new platform will be able to deliver stronger flows once migration onto our new platform is completed.

Quilter International saw broadly stable gross flows, with lower redemptions driving an improvement in NCCF versus the prior year which has been supported by a focussed digital strategy to encourage advisers to consider “topping up” client investments. 

Across the business, overall levels of client retention improved to 92% versus 88% (89% excluding the impact of the specific team departure in Quilter Cheviot) in 2019.

Investment performance

Our investment propositions have continued to deliver good investment performance for clients. The medium and long-term performance at Quilter Cheviot continued to outperform relevant ARC benchmarks, remaining first or second quartile, to the end of March 2020. I was particularly pleased that Quilter Cheviot’s Climate Assets Fund, a fossil fuel-free strategy investing in the growth markets of sustainability and environmental technologies, celebrated its ten-year anniversary in June and has delivered consistently strong investment performance for investors, with top quartile rankings over one, three, five and ten years.

We continued to add to the Quilter Cheviot investment team and our Investment Manager headcount increased to 169 at the end of June 2020 from 167 in December 2019 and a low of 155 at the end of December 2018. We expect our new hires to contribute to support growth in Assets under Management over time.

The medium and longer-term performance of Quilter Investors’ multi-asset solutions has also remained good. While the performance on the biggest range, Cirilium Active, has been more disappointing on a one-year view, it has performed well in the recovery since 23 March 2020. This underperformance is being addressed with the investment team looking to rotate out of underperforming asset classes as markets rise. We have simplified and broadened the Quilter Investors product range through fund consolidation and new product launches, including our new multi-asset income suite and Cirilium Blend proposition. Both of these new investment propositions have raised significant assets and are performing well. Wealth Select has continued to perform well and we have broadened access to this range by adding it to our restricted adviser panel.

Transformation

In June 2020, I was pleased to announce two notable changes to my leadership team:

  • Firstly, I am delighted Bambos Hambi will be joining us in November from Aberdeen Standard Investments (“ASI”) as Chief Executive Officer of Quilter Investors. Bambos succeeds Paul Simpson who, as previously announced, will be retiring later this year. At ASI, Bambos was Head of Multi-Manager Strategies and led one of the biggest fund selection teams in the UK. Bambos is an industry veteran and holds a strong reputation for his down-to-earth, patient long-term investment approach – he will be a strong cultural fit with Quilter. I would like to thank Paul Simpson for building Quilter Investors into the business it is today and for overseeing its successful separation from Merian Global Investors.
  • Secondly, having built the second-largest advice business in the UK through a number of acquisitions over recent years in Quilter Financial Planning, we are now looking to drive the next phase of our business strategy with an increased focus on organic growth and closer pan-Quilter integration. To develop the business and drive this next phase of organisational strategy, I appointed Stephen Gazard as Chief Executive Officer. I would like to thank Andy Thompson for his support and leadership.

These appointments will support Quilter’s transformation agenda which is built on three core principles:

  • We will deliver our new UK Platform and the anticipated benefits following migration of existing clients and adviser firms;
  • We will make Quilter a simpler and more focussed business, delivering faster organic growth through closer business integration; and
  • We will optimise our business by delivering the cost reduction plans we set out in March 2019, improve operational leverage through scaling up our UK Platform and Investment Solutions business, and invest to drive productivity.

In respect of our UK Platform Transformation Programme, following a rigorous approach to validating our migration readiness plans, which incorporated two dry runs and three dress rehearsals, we undertook a successful initial migration of c.8% of the total platform assets under administration in February 2020. This represented the funds associated with around 60 adviser firms and 25,000 customers and demonstrates that our platform technology works well at scale. As the year has progressed, we have focused on supporting customers and advisers through the post migration period, incorporated adviser feedback to drive system improvements and taken lessons learned from our first migration into our planning for the second migration.

While it is early days, and it has been set against a period of market turbulence, we have seen evidence of a better flow dynamic from advisers who have switched to the new platform. For example, around half the firms who were in the first migration have written increased NCCF in first half of 2020 versus the prior period. In addition, there has been encouraging take up of some of the products we are now able to offer such as Junior ISAs.

Our second and final platform migration had been planned for late Summer 2020. The logistical constraints imposed by COVID-19, including its impact on independent financial adviser firms’ resource availability, remains a concern and has made our priority of ensuring a smooth adviser transition more of a challenge. Consequently, we have decided to modify our approach to ensure we are able to deliver good customer and adviser outcomes with a lower execution risk tolerance by splitting the planned second migration into two phases:

  • We expect to migrate the majority (c.75%) of total platform assets in the fourth quarter of 2020, with this covering c.2,000 adviser firms, including all network firms supported by Quilter Financial Planning, and
  • Undertake a final migration of the remaining assets during early 2021. This final group represents c.5,500 adviser firms who, in a number of instances due to limited existing platform functionality, only use Quilter as their second or third choice platform. We believe they will find our new platform proposition compelling and therefore view their successful migration as a gateway to a stronger business relationship over time.

By taking this approach, we expect to have migrated c.80% of Quilter Investment Platform’s assets by the end of 2020, with completion of the project expected in early 2021. The total costs associated with extending the programme in this way are expected to be around £200 million representing an increase of £15 million on previous guidance.

Our Optimisation programme continues to progress in line with plan. There are three strands to Optimisation – driving closer integration of activities across businesses, rationalising technology and discretionary spend processes, and driving efficiency as interdependencies are streamlined. By end-June, our net Optimisation run-rate savings increased by £8 million from that at the end of 2019. We realised a further £2 million saving in H1 against the 2018 cost baseline. While we delayed some staff restructuring activities given the COVID-19 situation, good progress on the overall programme has been maintained. Our new firm-wide general ledger is expected to come on stream in early 2021 and will bring opportunity for continued efficiencies.

As indicated in our first quarter trading update, the Group expects to reduce expenses by c.£30 million in 2020 through lower variable compensation, reduced marketing spend and other initiatives such as deferment of some development spend. By their nature, the majority of these savings are not anticipated to continue in a post-COVID-19 environment. In the first half of 2020 some £15 million of such savings were realised.

Finally, in terms of business improvement, we have delivered our planned CRM upgrade in Quilter Cheviot during the first half and within Quilter Financial Planning, we have largely completed the roll out of our back-office technology upgrade. This will enhance our straight-through processing capabilities and improve our advice control environment. We remain on track to deliver an upgraded payments system for advisers by the year end.

Stewardship

Monitoring employee engagement on a quarterly basis is an established process at Quilter that has been in place since prior to our Listing. We purposefully stepped up our colleague engagement over the period of lock-down with both myself and my Executive Committee sending regular weekly video messages to all staff across the organisation and encouraging direct feedback to help foster a greater spirit of involvement while colleagues were working remotely. I am delighted that our regular engagement reviews remain at a consistently high level.

Separately, we announced two changes to the Quilter Board since our AGM in May 2020:

  • We welcomed Tim Breedon to the Board at the beginning of June. Tim brings a unique blend of experience and expertise as a former CEO in a highly successful FTSE 100 savings and pensions business, and as a very seasoned non-executive director in both a FTSE 100 company and private equity backed businesses. He brings a deep understanding of UK regulated financial services, corporate governance in UK public companies, effective board challenge and support in building a sustainable business for the long-term.
  • Jon Little has recently taken on a new full-time role that will not allow him to commit the required time to his role with Quilter and he will step down from the Quilter Board on 30 September 2020. We thank him for his support since joining the Board in May 2017. His valued insights into the asset management industry have been very informative as we have reshaped our business. I wish him well in his future endeavours.

Outlook

We remain cautious in our market outlook given that the full economic impact of COVID-19 has yet to be felt, and there remains the potential risk for further local lock-downs and waves of infection. Other external geo-political factors, such as the US election in November 2020, deterioration in US-Sino relations and the conclusion of the Brexit transition period at the end of the year, may also cause bouts of market volatility.

While advice revenues were more robust than we anticipated in the first half of 2020, we expect a more muted contribution from the mortgage and protection business in the second half as the housing market restabilises. As already noted, we expect further margin erosion in Quilter Investors as a result of ongoing mix shift driven by client and adviser behaviour. Boosting accessibility to our Wealth Select range by adding it to our restricted adviser panel in Quilter Financial Planning is likely to improve asset retention and integrated flows but will have an additional impact on the revenue margin in Quilter Investors.

We remain focussed on controlling costs through both our Optimisation programme and other management initiatives. We expect the full year out-turn for costs to be marginally below the annualised first half level. Should markets remain around current levels, relative to the first half, we expect the impact in the second half of the ongoing mix shift within Quilter Investors and temporary lower revenues from the Advice business to be broadly offset by lower costs.

While our socially responsible approach to business meant we deferred certain Optimisation related restructuring in the first half of 2020, being responsible in our actions does not mean avoiding difficult decisions. We need to ensure Quilter is fit for the future and so our Optimisation plans remain on track to deliver planned cost savings and a year-on-year improvement of two percentage points in our operating margin by end-2021, albeit off a lower starting base, assuming markets remain broadly stable.

Notwithstanding short-term uncertainties, Quilter remains well positioned in an industry with secular long-term growth prospects. 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 migration to a high-quality outcome to ensure that the c.80% of client assets are transferred this year with a final migration of the remaining assets to follow in early 2021. Each of our businesses is well-placed to drive growth in their respective areas and we continue to believe the new platform will strengthen the cohesion between our different business capabilities and will be a catalyst for faster growth in the future.

Paul Feeney

Chief Executive Officer

 

Click here to review part one and part two of our full financial performance

 

Quilter plc results for the six months ended 30 June 2020

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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, the implications and economic impact of the COVID-19 pandemic, the implications and economic impact of several scenarios of the UK’s future relationship with the EU in relation to financial services, 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. Nothing in this announcement should be construed as a profit forecast.