REG - Quilter PLC - Quilter plc - 2023 Full Year Results Part 1
06/03/2024 07:00
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RNS Number : 7224F Quilter PLC 06 March 2024
6 March 2024
Quilter plc preliminary results for the year ended 31 December 2023
Quilter delivers a 25% increase in adjusted profit to £167 million and a five
percentage point improvement in the operating margin to 27%
Steven Levin, Chief Executive Officer, said:
"2023 was a year of strong delivery. We wrote a higher level of new business
and delivered record profitability through higher revenues and 3% lower costs.
Our Affluent segment is delivering strong growth while our High Net Worth
segment is investing in growth which will be realised over the next few years.
The structural need to save for retirement combined with our growth plans and
focus on operational efficiency, supported by a strong balance sheet, means we
are well positioned as market conditions improve."
Highlights:
· Assets under Management and Administration ("AuMA") of £106.7
billion at 31 December 2023 increased by 7% over the year (31 December 2022:
£99.6 billion). This reflects supportive markets into year-end combined with
a modest contribution from net flows. Core business net inflows of £832
million (2022: £2,122 million) represented 1% of opening AuMA (2022: 2%).
This was supported by continued strong inflows into the Quilter channel with
net outflows in the IFA channel, reflective of challenging market conditions.
· Adjusted profit before tax increased by 25% to £167 million
(2022: £134 million).
· Revenue increased by 3% to £625 million (2022: £606 million)
supported by interest revenue generated on corporate cash balances. This was
coupled with robust expense discipline which delivered another year of lower
costs, despite inflationary pressures, supporting an increase in the operating
margin to 27% (2022: 22%).
· Target £45 million Phase One Simplification cost savings were
completed by end 2023, a year earlier than planned. An additional £50 million
of Simplification (Phase Two) savings are targeted for delivery by the end of
2025, with £8 million already attained on a run-rate basis by end-2023.
· Broad stabilisation in Quilter restricted adviser headcount which
declined by 1% on December 2022 levels. Detailed plans are in place to grow
Adviser headcount in 2024 and beyond.
· Adjusted diluted earnings per share increased 19% to 9.4 pence
(2022: 7.9 pence).
· IFRS profit after tax attributable to shareholders of £42 million
(2022: £175 million) with the year-on-year variance largely due to market
valuation changes in the policyholder tax charge. Basic earnings per share of
3.1 pence (2022: 12.2 pence).
· Proposed Full Year Dividend of 5.2 pence per share versus 4.5
pence per share for 2022, representing an increase of 16%.
· Solvency II ratio of 271% after payment of the recommended Final
Dividend (31 December 2022: 230%). In late 2023, we obtained a c.£80 million
capital benefit (14 percentage point Solvency II ratio contribution) from a
reduction in risk margin as a result of changes in the PRA's capital rules.
Key financial highlights
We assess our financial performance using a variety of measures including
alternative performance measures ("APMs"), as explained further on pages 18 to
20. In the headings and tables presented, these measures are indicated with an
asterisk: *.
Quilter highlights 2023 2022
Assets and flows - core business
AuMA* (£bn) 103.4 96.2
Gross flows* (£bn) 11.1 10.4
Net inflows* (£bn) 0.8 2.1
Net inflows/opening AuMA* 1% 2%
Assets and flows - reported
AuMA* (£bn) 106.7 99.6
Gross flows* (£bn) 11.2 10.5
Net inflows* (£bn) 0.1 1.8
Net inflows/opening AuMA* 0% 2%
Profit and loss
IFRS profit before tax attributable to shareholder returns (£m) 12 199
IFRS profit after tax (£m) 42 175
Adjusted profit before tax* (£m) 167 134
Operating margin* 27% 22%
Revenue margin* (bps) 47 48
Adjusted diluted EPS* (pence) 9.4 7.9
Recommended total dividend per share (pence) 5.2 4.5
Basic earnings per share (pence) 3.1 12.2
Quilter plc results for the year ended 31 December 2023
Investor Relations
John-Paul Crutchley UK +44 77 4138 5251
Keilah Codd UK +44 77 7664 9681
Media
Tim Skelton-Smith UK +44 78 2414 5076
Camarco
Geoffrey Pelham-Lane UK +44 77 3312 4226
Steven Levin, CEO, and Mark Satchel, CFO, will give a presentation via webcast
at 08:30am (GMT) today, 6 March 2024. The presentation will be followed by a
Q&A session.
The presentation will be available to view live via webcast or can be listened
to via a conference call facility. Details to join online or via conference
call can be found on our website: 2023 results and presentations | Quilter plc
(https://plc.quilter.com/investor-relations/results-and-presentations/2024-results-and-presentations/)
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 conflict in Ukraine
and the Middle-East, 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.
Chief Executive Officer's statement
Business performance
A year ago, I set out my plans to deliver better returns and drive faster
growth through building our distribution, enhancing our propositions, and
improving our operational efficiency. We have made good progress against each
of these targets but there is more to be done to deliver on Quilter's full
potential, which I discuss further below. In summary, 2023 was a good year for
Quilter. We delivered:
· record profitability under our current corporate perimeter
(following disposals of Quilter International and Quilter Life Assurance);
· increased new business flows across the Quilter channel and
improved our market share of new gross Platform flows in both the Quilter and
IFA channels, despite a lower new business market overall for the industry;
and
· improved efficiency, while investing to deliver faster growth and
higher returns in the longer-term.
Although higher than expected interest rates in 2023 led to a squeeze in
consumer incomes and reduced propensity to invest, we benefitted from higher
investment returns on shareholder funds. This, together with robust cost
management, delivered a strong increase in adjusted profit of 25% to £167
million (2022: £134 million).
I am pleased to report another year of lower costs, despite inflationary
headwinds. In 2022 we reduced costs by £8 million from the 2021 base level of
£480 million, and this year we reduced costs by a further £14 million,
taking the cost base to £458 million. That represents a decline of 3% in 2023
and contributed to an improvement in operating margin to 27% (2022: 22%), a
level that exceeds our 2025 target. We are now focused on our medium-term goal
of 30%.
Across our two segments:
· High Net Worth delivered steady income with higher costs
reflecting business investment through new adviser and investment manager
hires. This led to a decline in adjusted profit before tax to £41 million
(2022: £45 million).
· Modestly higher revenues in our Affluent segment of £393 million
(2022: £387 million) reflected the contribution from interest income on the
shareholder capital which supports the business, partially offset by mix
changes and the planned margin reduction on managed assets following the
Cirilium reprice at the end of the first quarter of 2023. Strong cost
management combined with a lower FSCS levy led to a 18% increase in adjusted
profit to £124 million for the year (2022: £105 million).
Group adjusted profit before tax of £167 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
£42 million compared to £175 million in 2022. Principal differences between
adjusted profit and IFRS profit are due to non-cash amortisation of intangible
assets, business transformation expenses (which are pre-funded and expensed as
incurred), finance costs and the impact of policyholder tax positions on the
Group's results. This latter item was negative in 2023 due to the gain in
markets and was significantly positive in 2022 reflecting the market decline
during that year. Business transformation expenses will remain elevated in
2024 and 2025, reflecting spend on anticipated change programmes, but are
expected to reduce substantially thereafter.
Total Group adjusted diluted earnings per share were 9.4 pence, an increase of
19% (2022: 7.9 pence). On an IFRS basis, we delivered basic EPS of 3.1 pence
per share versus 12.2 pence per share for 2022.
Flows and investment performance
Turning to flows, at an aggregate level, net flows in our core business were
1% of opening balances, with the reported Group position (after non-core
outflows) broadly flat. Although the Group position reflected muted activity
levels across the industry, we saw varied trends across the business. Notably,
both our Quilter channel and the level of new business onto our Platform were
good relative to market peers:
· Across the Quilter channel, we achieved a 16% increase in gross
flows to £513 million (2022: £443 million) in our High Net Worth segment,
and a 12% increase to £3.6 billion (2022: £3.2 billion) in our Affluent
segment.
· New IFA flows in Affluent were around 7% higher, despite lower
levels of new business across the market, and declined by a similar amount in
our High Net Worth business. We saw net outflows in both segments reflecting
higher levels of redemptions and acquisitions of IFA firms and a small number
of larger corporate/charity accounts heavily influencing this outcome in our
High Net Worth segment.
· Within Affluent, we were particularly pleased that we maintained
our position as the leading advised platform for new business flows during the
year and we attained the position of the largest UK Advised Platform by assets
during the second quarter of 2023 (according to Fundscape).
In terms of investment performance, High Net Worth has been strong,
outperforming the ARC PCI Steady Growth and Equity Risk peer groups over 1, 3
and 5 years. Within Affluent, we continued to deliver good performance from
our WealthSelect managed portfolio range. Cirilium Passive and Blend also
performed well. Pleasingly, since the change in manager for Cirilium Active
towards the end of 2022, the performance has improved. We are confident that
the fund is now much better positioned.
Business improvement
Distribution
In High Net Worth, we continue to build our advice capability across the UK
and internationally in our Dublin and Jersey offices. We also launched a brand
refresh in November to reinvigorate market awareness of our Quilter Cheviot
proposition and to bring the Financial Planning business under the Quilter
Cheviot brand. We plan to grow our client facing professional headcount
(investment managers and financial planners) to around 300 over time through
developing existing staff and external recruitment. Where appropriate, we will
look to take advantage of recent market dislocation by making modest bolt-on
acquisitions to bolster our advice business or add teams of investment
managers to accelerate our growth plans.
Within Affluent, our Quilter channel is building distribution on three fronts.
We are targeting increased:
· adviser numbers, where the position has broadly stabilised versus
the reductions seen in recent years. Total adviser headcount declined
marginally over the year reflecting a combination of natural attrition and
retirements. The loss of advisers directly as a result of market consolidation
was significantly lower than in the prior year;
· adviser productivity, where in 2023 we achieved a 22% increase in
annual gross flow per adviser to £2.8 million (2022: £2.3 million); and
· adviser assets managed within our propositions through back-book
transfers, which totalled c.£750 million during the year.
We continue to improve our share of gross market flows in the IFA channel.
Total new business flow from IFAs onto our Platform was up 7% year-on-year
despite lower market volumes overall. That led to an improvement in our share
of new IFA business to 8.0% from 7.4% in 2022. Notably, in the latter part of
the year our share of new business was ahead of our share of total assets
under administration for the first time in a number of years.
Proposition
Our Platform and investment solutions are both market-leading propositions. My
focus is on ensuring both remain competitively positioned and continue to
offer value to customers.
· The reprice of our Cirilium proposition coupled with improved
performance in the Active range repositioned the product and we continue to
see strong appetite for our Blend and Passive offerings.
· We meaningfully reduced our Platform administration fee to
clients, with this partially offset through a clearly communicated sharing
arrangement on the interest earned on Platform-held cash. We use our
purchasing power to obtain better interest rates than individual clients can
get themselves and pass the majority of this benefit onto clients. The overall
cost to us over an interest rate cycle is expected to be in line with the
basis point of Platform margin attrition that we guided to in March 2023 and
while interest rates remain elevated, the net outcome will be better returns
for clients and a broadly neutral impact on Platform margins for Quilter.
The nature of our business model meant we were well-positioned for the
introduction of Consumer Duty in July 2023. Our unique breadth of distribution
means that all our products and services are available across the market, to
both our financial advisers and independent financial advisers. That means
whether through investment performance or in terms of price/value/service
trade-offs, our products and solutions need to be competitive with third-party
alternatives. As such, the need to both demonstrate and deliver value is
central to our approach. Our unbundled pricing approach is aligned with
Consumer Duty principles and puts client choice at the heart of our business.
Notwithstanding this, Consumer Duty, rightly, creates an expectation on firms
to continuously improve how they deliver customer value. This is something
which we are focused on and, as well as the above, some of the initiatives we
implemented in 2023 included:
· Tiered Adviser Charging: A Platform upgrade to implement
automated tiered adviser charging meets a need that advisers have wanted from
industry players for some time. This makes it easy for advisers to put sliding
scale advice fees in place, linked to the value of their customers' assets.
Most importantly, it supports advisers as they adapt their own businesses to
be fully aligned with Consumer Duty principles.
· CashHub: Higher global interest rates means that cash is now seen
as an attractive investment alternative for retail clients. To support cash as
an asset class we introduced CashHub on our Platform in late 2023 for our
advisers and rolled it out to IFAs in early 2024. This allows clients to
manage their cash holdings alongside their other Platform assets, with instant
access, notice deposits and fixed deposits held at selected banks. This
provides market-leading rates together with the ability to maximise depositor
protection by parcelling deposits up into individual accounts across a number
of institutions, depending on client preference.
Also, in early 2024, we implemented a Platform software upgrade that ensured
that clients would not pay an administration fee on cash balances but also
allowed those cash balances to count towards the aggregate assets held by a
client group for tiered charging under our family linking arrangements. This
potentially allows cash held to reduce the overall charge that all members of
the family pay for their Platform administration services.
Strategic Transformation
We have strategic programmes underway in each of our principal franchises: the
High Net Worth segment, and, in Affluent, our IFA and Quilter channels. This
activity is underpinned at a Group level with the next stage of our
Simplification programme. Taking each in turn:
1. High Net Worth evolution
Over the last few years, we have built a Quilter-branded advice business in
our High Net Worth segment which has contributed significant incremental flows
to our business. For historical reasons our advice and investment management
businesses have been managed through different legal entities which
complicates integrated client servicing. In 2024, we plan to bring both teams
together in a single legal and regulated structure under the new Quilter
Cheviot brand, having applied to extend Quilter Cheviot's regulatory
permissions to include financial planning. Alongside the rebrand, this will
unify our market proposition for clients with often more complex financial
needs and allow us to manage client relationships in a far more seamless way.
We will implement this change as soon as necessary regulatory approvals are in
place.
2. Affluent: IFA Channel
One of the defining characteristics of Quilter is the breadth of the advice
proposition and distribution we support. Our dual channel distribution allows
our Platform and solutions to administer and manage flows generated by both
our own advisers and independent firms. This ensures we are strategically well
positioned for however the advice market evolves over time. Both our Platform
and investment solutions businesses have capacity to deliver strong operating
leverage and have operating metrics which are as good as any in the industry.
Our Platform administers c.£60 billion of assets on behalf of IFA firms which
are invested in both our and third-party funds. We aim to grow these assets by
increasing the active numbers of firms using our Platform and the share of
assets we administer for those firms.
We also offer our leading WealthSelect managed portfolio solution to firms on
our Platform, with a view to increasing the percentage of their assets we both
manage and administer. From early 2024, we have made WealthSelect available on
three third-party platforms which will also provide another source of new
business flows into our solutions.
3. Affluent: Quilter Channel Transformation
Our advice business advises on c.£15 billion of assets on our Platform and in
our solutions, and around £10 billion on third party platforms. This
integrated business has the potential to deliver higher returns, and our plans
to transform this channel are already delivering improved results. Our focus
is on increasing assets on our Platform, improving adviser productivity,
reducing support costs, and delivering a better customer experience. This work
is on track, and we are currently in the process of selecting preferred
suppliers to work with us on this programme.
We have been piloting Quilter Partners - a co-branded proposition with adviser
firms where flows are fully aligned with our investment solutions and
Platform. This allows us to participate in the growth of these firms while
retaining the entrepreneurial drive and focus of self-owned businesses. We
have been working with seven potential Quilter partner firms and will
undertake further transactions where there is mutual economic alignment for
firms to partner with us under this structure.
Adding new advisers to our business is a key contributor to future growth and
training new advisers will be an increasing contributor to that growth. We aim
to transition our Financial Adviser School into a profession-leading financial
advice Academy, and in 2024 we expect a marked step up in investment here. Our
target is for the new academy, coupled with new external hires, to deliver net
growth in restricted financial planners in 2024 with momentum increasing from
2025 onwards.
4. Simplification Phase Two
Following the sale of Quilter Life Assurance and Quilter International, the
initial stage of Simplification focused on reducing complexity in our business
and decommissioning legacy IT infrastructure. Targeted cost saves of £45
million from this programme were achieved by the end of 2023, on a run-rate
basis, a year earlier than originally planned.
Simplification phase two targets a further £50 million of annualised cost
savings to be achieved by the end 2025 on a run-rate basis, with a cost to
achieve of approximately £65 million, inclusive of spend on our Advice
transformation plans and High Net Worth initiatives. These savings arise from
the simplification of our governance and internal administration processes,
property rationalisation, coupled with IT and Operations efficiencies from our
investment in Advice technology. These additional cost savings will support
delivery towards our 30% operating margin ambitions and £8 million of this
target was delivered by end 2023 on a run-rate basis.
Shareholder returns
The strong profit performance we delivered in 2023 supports the increase in
the recommended final dividend of 3.7 pence per share (2022: 3.3 pence).
Together with the interim dividend of 1.5 pence per share, this brings the
recommended total shareholder payment to 5.2 pence per share, an increase of
16%. This represents a pay-out ratio of 61% (2022: 57%).
We have a strong balance sheet with a Solvency II ratio of 271% after an
accrual for payment of the final dividend. The overall ratio benefitted from a
change in the calculation of our risk margin which freed up around £80
million of capital and increased the Solvency II ratio by around 14 percentage
points. That capital is still in our regulated life company and is expected to
be passed back up to the holding companies later this year.
We also completed an Odd-lot Offer during the year which both reduced the cost
of managing our shareholder base and provided a mechanism for small
shareholders to sell their holdings in a cost-effective manner. The offer
completed in November 2023 with the Company acquiring just under 16 million
shares at a price of 88.1 pence (ZAR 20.09) per share. This reduced the number
of shareholders on our register by around 126,000 (c.60%). These shares have
been transferred into the Quilter Employee Benefit Trust and will be used to
meet obligations under future staff share awards under compensation plans.
Ongoing advice
Delivering advice is core to how we operate, and we have policies in place
that underline the need for advisers to meet their ongoing servicing
obligations. Our complaints related to ongoing servicing have remained at a
low and consistent level over the last four years.
Where our regular adviser oversight has determined that a customer may not
have received the servicing they have paid for, or where we have received
complaints from customers regarding ongoing servicing, this has been
investigated, and, where appropriate, remediation has been undertaken and
recognised as a normal business as usual expense.
Subsequent to the year-end, on 15 February 2024, the FCA wrote to around 20
advice firms, including Quilter, requesting information regarding ongoing
servicing. Consistent with our focus on delivering good customer outcomes, we
are commencing a review of historical data and practices across our network to
determine what, if any, further action may be required. This may lead to
remedial costs but it is too early to quantify.
Outlook
Market expectations are for a period of UK interest rate stability before
rates begin to decline around the middle of 2024. While that will eventually
lead to lower investment income, we welcome this transition as we expect lower
interest rates will support market performance and increase consumer focus on
longer-term savings products. With wage increases in the UK now outpacing
retail price inflation, the environment for longer-term saving is more
constructive than has been the situation for some time. Our expectation is
that flows will continue to improve over 2024 as consumer and market sentiment
returns to more normal levels.
We are focused on driving towards a 30% operating margin. We intend to
increase growth investment spend in 2024 and also expect the FSCS levy to
increase from current levels. While this will lead to a mid to high single
digit increase in operating expenses, our current expectation is for a modest
year-on-year increase in Adjusted Profit, excluding any potential costs
associated with the aforementioned review of historical advice.
The structural need to save for retirement combined with our growth plans and
focus on operational efficiency, supported by a strong balance sheet, means we
are well positioned as market conditions improve.
Steven Levin
Chief Executive Officer
Financial review
Review of financial performance
Overview
The Group achieved a strong improvement in adjusted profit performance in 2023
against the backdrop of ongoing geopolitical and macroeconomic uncertainty.
Inflationary and interest rate pressures continued to weigh on consumer
confidence and disposable income, resulting in a significant headwind to flows
as consumers held off on discretionary investment and drew down on savings to
service the increased cost of debt.
The Group's reported AuMA was £106.7 billion at the end of the year, a 7%
increase on the opening position (2022: £99.6 billion), representing positive
market movements towards the year-end of £7.0 billion and net inflows of
£0.1 billion. Average AuMA of £102.1 billion for 2023 was 1% lower than
prior year (2022: £102.8 billion). Adjusted profit before tax increased by
25% to £167 million (2022: £134 million) despite the subdued flow
environment, reflecting the continued delivery of cost management through our
Simplification programme and higher interest revenue earned on cash and
capital resources. This was partially offset by a 3% decline in net management
fee revenue due to lower average AuMA and a 1 bp decrease in revenue margin
predominantly due to planned pricing reductions.
Alternative Performance Measures ("APMs")
We assess our financial performance using a variety of measures including
APMs, as explained further on pages 18 to 20. In the headings and tables
presented, these measures are indicated with an asterisk: *.
Key financial highlights
Quilter highlights 2023 2022
Assets and flows - core business
AuMA* (£bn) 103.4 96.2
Gross flows* (£bn) 11.1 10.4
Net inflows* (£bn) 0.8 2.1
Net inflows/opening AuMA* 1% 2%
Productivity: Quilter channel gross sales per Quilter Adviser* (£m)(1) 2.8 2.3
Asset retention* 89% 92%
Assets and flows - reported
AuMA* (£bn) 106.7 99.6
Gross flows* (£bn) 11.2 10.5
Net inflows* (£bn) 0.1 1.8
Net inflows/opening AuMA* 0% 2%
Profit and loss
IFRS profit before tax attributable to shareholder returns (£m) 12 199
IFRS profit after tax (£m) 42 175
Adjusted profit before tax* (£m) 167 134
Operating margin* 27% 22%
Revenue margin* (bps)(2) 47 48
Return on equity* 8.5% 7.0%
Adjusted diluted EPS * (pence) 9.4 7.9
Recommended total dividend per share (pence) 5.2 4.5
Basic earnings per share (pence) 3.1 12.2
Non-financial
Total Restricted Financial Planners ("RFPs") in both segments(3) 1,489 1,502
Discretionary Investment Managers in High Net Worth segment(3) 174 179
(1)Quilter channel gross sales per Quilter Adviser is a measure of the value
created by our Quilter distribution channel.
(2)Revenue margin includes interest income on customer cash and cash
equivalents previously presented within "Other revenue" and now included
within "Net management fees".
(3) Closing headcount as at 31 December.
Net inflows for the core business of £0.8 billion for 2023 were lower than
the prior year (2022: £2.1 billion). Gross flows were 7% higher than the
prior year at £11.1 billion (2022: £10.4 billion), whilst higher outflows
reflected increased levels of client drawdown to offset pressures from higher
inflation and interest rates coupled with market consolidation activity.
In the Affluent segment core business, net inflows in the Quilter channel of
£1.6 billion were in line with the comparative year. Gross flows of £3.6
billion were 12% higher than the prior year (2022: £3.2 billion),
demonstrating the continued strength of our integrated channel. We continued
our focus on generating back book transfers in 2023, with c.£750 million of
assets under advice by Quilter Financial Planning transferring onto our
Platform from external platforms. Productivity, representing Quilter channel
gross sales per Quilter Adviser, increased to £2.8 million (2022: £2.3
million), in line with our objectives of increasing alignment in our Advice
business. Quilter channel gross outflows increased to £2.0 billion (2022:
£1.6 billion) primarily due to higher levels of client drawdown during the
year.
The IFA channel on Quilter Investment Platform recorded gross inflows of £5.3
billion, up 7% year-on-year (2022: £4.9 billion) reflecting our continued
performance in gaining market share of new business despite lower levels of
new business flow across the industry. The Quilter Investment Platform
continues to maintain the leading market share of gross sales against our
Retail Advised Platform peers, based on the latest available Fundscape data
(Q3 2023). Net outflows of £0.2 billion (2022: net inflow of £0.4 billion)
reflect higher levels of client led redemptions and headwinds from the impact
of industry consolidation. Our Platform has continued to win net positive
flows from competitor platforms over 2023. Net inflows as a percentage of
opening AuMA for the IFA channel on Quilter Investment Platform was nil%
(2022: 1%).
Fund flows via third-party platforms reported net outflows of £0.3 billion
(2022: net outflows of £0.6 billion), predominantly due to planned fund
closures.
Asset retention for the Affluent segment of 89% was below prior year (2022:
91%) due to increased withdrawal activity, inflationary pressure and interest
rate headwinds.
Within the High Net Worth segment, gross inflows of £2.2 billion were broadly
in line with the previous year (2022: £2.3 billion). Net flows were an
outflow of £0.1 billion (2022: net inflow of £0.9 billion) primarily due to
the slowdown in IFA flows and a small number of larger charity and corporate
account losses, which were offset by steady net inflows from the Quilter
channel. Asset retention fell 4 percentage points to 91% (2022: 95%)
reflecting the higher interest rate environment where some clients have opted
to redeem existing investments to repay debt obligations.
The Group's core business AuMA ended the year at £103.4 billion, up 7% from
the opening position (2022: £96.2 billion), due to positive year-end market
movements of £6.4 billion and net inflows of £0.8 billion. The Affluent
segment AuMA increased by 8% to £77.5 billion (2022: £71.5 billion) of which
£25.5 billion is managed by Quilter, versus the opening position of £22.7
billion. The High Net Worth Segment AuM was £27.0 billion, up 6% from the
opening position of £25.5 billion, with all assets managed by Quilter.
In total, £52.2 billion, representing 50% of core business AuMA, is managed
by Quilter across the Group (2022: £48.0 billion, 50%).
The Group's revenue margin of 47 bps was 1 bp lower than the prior year (2022:
48 bps). For assets administered within the Affluent segment, the revenue
margin was 27 bps in line with prior year. The revenue margin on assets
managed in the Affluent segment decreased by 6 bps to 41 bps as a result of
product mix changes, the planned reprice of the Cirilium Active range that
occurred at the end of the first quarter of 2023, and the introduction of AuM
scale discounts in the second half of the year. The High Net Worth segment's
revenue margin decreased by 1 bp to 71 bps primarily due to lower commission
revenue, partially offset by revenue from interest margin generated on client
balances.
Adjusted profit before tax increased by 25% to £167 million (2022: £134
million). Net management fees of £477 million were lower by 3% (2022: £490
million) primarily as a result of a decline in average AuMA year-on-year of 1%
to £102.1 billion (2022: £102.8 billion) and the planned reduction in net
management fee margins. Interest revenue generated on client funds included
within net management fees were £23 million (2022: £7 million). Other
revenue of £86 million decreased by 14% (2022: £100 million) reflecting
lower mortgage and protection business levels, reduced activity within the
market and slightly lower adviser headcount.
Investment revenue increased from £16 million in 2022 to £62 million in
2023, due to an increase in interest income earned on shareholder cash and
capital resources. This level of resources is expected to gradually decline as
a result of investment in the business and planned spend on business
transformation. Operating expenses decreased by 3% on the prior year to £458
million (2022: £472 million) primarily due to continued strong cost
management, lower FSCS levies and Simplification cost initiative savings
offset by higher inflation. The Group operating margin improved by 5
percentage points to 27% (2022: 22%).
The Group's IFRS profit after tax was £42 million compared to £175 million
for 2022. The year-on-year decrease in IFRS profit is largely attributable to
variances in policyholder tax outcomes which moved to an expense of £76
million in 2023 (due to net market gains) from a credit of £134 million (due
to net market declines) in 2022.
Adjusted diluted earnings per share increased 19% to 9.4 pence (2022: 7.9
pence).
Total net revenue*
Total net revenue 2023 (£m) Affluent High Net Worth Head Office Quilter plc
Net management fee*(1) 292 185 - 477
Other revenue* 70 20 (4) 86
Investment revenue* 31 6 25 62
Total net revenue* 393 211 21 625
Total net revenue 2022 (£m) Affluent High Net Worth Head Office Quilter plc
Net management fee*(1) 300 190 - 490
Other revenue* 79 21 - 100
Investment revenue* 8 1 7 16
Total net revenue* 387 212 7 606
(1)Net management fee includes the interest earned on client holdings in
Quilter Cheviot and Quilter Investment Platform.
Total net revenue for the Affluent segment was £393 million, an increase of
2% year-on-year (2022: £387 million). Net management fees of £292 million
were 3% lower than the prior year (2022: £300 million), primarily due to
lower average AuMA, the Cirilium Active reprice and the introduction of AuM
scale related discounts. A revised Platform pricing policy was introduced in
the second half of the year, coupled with an interest sharing arrangement on
cash balances held on the Platform. Interest margin generated on cash balances
held on the Platform reported within net management fees, amounted to £10
million in 2023 (2022: £nil million). Other revenue predominantly reflects
our share of income from the provision of advice within Quilter Financial
Planning. Recurring charges and fixed fees were lower than the prior year,
predominantly as a result of lower average levels of assets under advice and
reduced volumes of new mortgage business. Investment revenue of £31 million
(2022: £8 million) represents interest earned on shareholder capital held to
meet the regulatory capital requirements of the business.
Total net revenue in the High Net Worth segment was broadly unchanged at £211
million (2022: £212 million). Net management fees, which include interest
margin earned on cash balances of £13 million (2022: £7 million), were 3%
lower at £185 million (2022: £190 million) largely due to lower average AuM.
Investment revenue of £6 million earned on regulatory capital to support the
business (2022: £1 million) was higher than prior year due to higher interest
rates. Other revenue of £20 million (2022: £21 million), predominantly
reflects revenue generated in Quilter Cheviot Financial Planning, and was
broadly in line with prior year.
Operating expenses*
Operating expenses decreased by 3% to £458 million (2022: £472 million). Our
focus on embedding sustainable cost savings through business simplification
activities enabled us to achieve a lower cost base whilst absorbing
significant inflationary headwinds.
Operating expenses split (£m) 2023 2022
Operating Expenses As a percentage of revenues Operating Expenses As a percentage of revenues
Support staff costs 115 118
Operations 21 22
Technology 32 35
Property 30 31
Other base costs(1) 29 30
Sub-total base costs 227 36% 236 39%
Revenue-generating staff base costs 96 15% 92 15%
Variable staff compensation 74 12% 75 12%
Other variable costs(2) 45 7% 46 8%
Sub-total variable costs 215 34% 213 35%
Regulatory/professional indemnity costs 16 3% 23 4%
Operating expenses* 458 73% 472 78%
(1)Other base costs includes depreciation and amortisation, audit fees,
shareholder costs, listed Group costs and governance.
(2)Other variable costs includes FNZ costs, development spend and corporate
functions variable costs.
Total base costs reduced by 4% to £227 million (2022: £236 million). Base
costs as a percentage of revenues reduced 3 percentage points to 36% (2022:
39%). This reduction reflects the impact of the Business Simplification
programme which continued to deliver sustainable savings across support staff,
operations, technology and property. This is partially offset by the impact of
inflation during the year.
Revenue-generating staff base costs increased by 4% to £96 million (2022:
£92 million) and remain at a similar proportion of revenues as we continue to
invest in our people and proposition across our business segments to drive
growth.
Variable staff compensation of £74 million were at a similar level to 2022
(2022: £75 million).
Other variable costs remained stable at £45 million (2022: £46 million) with
increased development spend, which includes costs associated with enhancing
our proposition and the implementation of regulatory change such as the FCA's
Consumer Duty, offset by lower operating expenses associated with our
Platform.
Regulatory and professional indemnity costs decreased by 30% to £16 million
(2022: £23 million) predominantly reflecting the lower industry FSCS Levy in
2023. We expect these costs to increase again in 2024 and 2025.
Taxation
The UK corporation tax rate increased to 25% from 19% on 1 April 2023,
resulting in a UK blended corporate tax rate of 23.5% for the 2023 financial
year. The effective tax rate ("ETR") on adjusted profit before tax was 23%
(2022: 14%). The Group's ETR is broadly in line with the UK blended
corporation tax rate of 23.5% and there are no material movements for the
year. The Group's ETR is dependent on a number of factors, including future
changes in the UK corporation tax rate.
The Group's IFRS income tax expense was a charge of £46 million for the year
ended 31 December 2023, compared to a credit of £110 million for the prior
year. The income tax expense or credit can vary significantly year-on-year as
a result of market volatility and the impact market movements have on
policyholder tax. The recognition of the income received from policyholders to
fund the policyholder tax liability (which is included within the Group's IFRS
revenue) can vary in timing to the recognition of the corresponding
policyholder tax expense, creating volatility to the Group's IFRS profit or
loss before tax attributable to shareholder returns. An adjustment is made to
adjusted profit before tax to remove these distortions, as explained further
on page 10 and in note 5(b) to the condensed consolidated financial
statements.
Business Simplification
At our Capital Markets Day in November 2021, we announced a target of £45
million of annualised run-rate savings by the end of 2024. We delivered this a
year early. As announced at the half-year results in 2023, the Group expects
to achieve a further £50 million of annualised run rate savings by the end of
2025. Approximately £8 million of these additional savings were achieved
during 2023 on a run-rate basis.
As at 31 December 2023, the Simplification programme had delivered £53
million of annualised run-rate savings. An incremental £30 million of
annualised run-rate savings were achieved during 2023 largely through the
continued rationalisation of the Group's technology and property estates
together with a reduction in support costs as we simplify our structures and
organisation to support our two business segments, Affluent and High Net
Worth. During 2023, the Group spent £25 million on Simplification initiatives
(2022: £17 million). The implementation costs to deliver the remaining
annualised run-rate savings are estimated to be £78 million.
Lighthouse Defined Benefit to Defined Contribution ("DB to DC") pension
transfer advice provision
As reported previously, a provision was recognised in relation to DB to DC
pension transfer advice provided by Lighthouse advisers prior to our
acquisition of Lighthouse and their subsequent transitioning to our systems.
In 2020, the FCA commenced an enforcement investigation and required
Lighthouse to commission a skilled person review in relation to certain DB to
DC pension transfer advice by Lighthouse. The skilled person's review
concluded in December 2022 and, in May 2023, the FCA issued a public Final
Notice to Lighthouse setting out its findings. The FCA found that Lighthouse
had provided unsuitable DB to DC pension transfer advice but imposed no
financial penalty on Quilter. The FCA agreed that the remaining review work
can be conducted as a Group-managed past business review. At 31 December 2023,
a provision of £6 million (2022: £5 million) remains for the potential
redress of DB to DC pension transfer cases as part of the Group-managed past
business review.
Reconciliation of adjusted profit before tax* to IFRS profit
Adjusted profit before tax represents the Group's IFRS profit, adjusted for
specific items that management considers to be outside of the Group's normal
operations or one-off in nature, as detailed on page 29 in the condensed
consolidated financial statements. The exclusion of certain adjusting items
may result in adjusted profit before tax being materially higher or lower than
the IFRS profit after tax.
Adjusted profit before tax does not provide a complete picture of the Group's
financial performance, which is disclosed in the IFRS consolidated statement
of comprehensive income, but is instead intended to provide additional
comparability and understanding of the financial results.
Reconciliation of adjusted profit before tax to IFRS profit after tax (£m) 2023 2022
Affluent 124 105
High Net Worth 41 45
Head Office 2 (16)
Adjusted profit before tax* 167 134
Adjusting items:
Impact of acquisition and disposal-related accounting (39) (42)
Business transformation costs (28) (30)
Finance costs (19) (10)
Customer remediation (6) 12
Voluntary customer repayments - (6)
Exchange rate movement (ZAR/GBP) (2) 4
Policyholder tax adjustments (62) 138
Other adjusting items 1 (1)
Total adjusting items before tax (155) 65
Profit before tax attributable to shareholder returns 12 199
Tax attributable to policyholder returns 76 (134)
Income tax (expense)/credit (46) 110
IFRS profit after tax 42 175
The impact of acquisition and disposal-related accounting costs of £39
million (2022: £42 million) include amortisation of acquired intangible
assets.
Business transformation costs of £28 million were incurred in 2023 (2022:
£30 million). Simplification costs, as already noted in this financial
review, amounted to £25 million for 2023 (2022: £17 million).
The customer remediation expense of £6 million in 2023 (2022: income of £12
million) reflects an estimate of redress payable and additional legal,
consulting and other costs in 2023 related to the Group-managed past business
review of Lighthouse. In 2022, insurance proceeds in relation to claims in
respect of legal liabilities arising in connection with Lighthouse's DB to DC
pension transfer advice cases were received, contributing £12 million to the
Group's profit before tax. These impacts are excluded from adjusted profit on
the basis that the advice activities to which the charge and benefit relates
were provided prior to the Group's acquisition of the business.
Exchange rate movements for 2023 were an expense of £2 million (2022: £4
million income) which relate to foreign exchange movement on cash held in
South African Rand in preparation for payments to shareholders.
Policyholder tax adjustments to adjusted profit were a credit of £62 million
for 2023 (2022: charge of £138 million) in relation to the removal of timing
differences arising from market volatility that can, in turn, lead to
volatility in the policyholder tax charge between years. The recognition of
the income received from policyholders (which is included within the Group's
IFRS revenue) to fund the policyholder tax liability can vary in timing to the
recognition of the corresponding tax expense, creating volatility to the
Group's IFRS profit before tax.
Cash generation*
Cash generation measures the proportion of adjusted profit after tax that is
recognised in the form of cash generated from operations. The Group achieved a
cash generation rate of 82% of adjusted profit after tax over 2023 (2022:
75%).
Review of financial position
Capital and liquidity
Solvency II
The Group's Solvency II surplus is £972 million at 31 December 2023 (31
December 2022: £820 million), representing a Solvency II ratio of 271% (31
December 2022: 230%). The Solvency II information for the year to 31 December
2023 contained in this results disclosure has not been audited.
The Group's Solvency II capital position is stated after allowing for the
impact of the foreseeable dividend payment of £50 million (31 December 2022:
£45 million).
At At
31 December 31 December
Group Solvency II capital (£m) 2023(1) 2022(2)
Own funds 1,540 1,451
Solvency capital requirement ("SCR") 568 631
Solvency II surplus 972 820
Solvency II coverage ratio 271% 230%
(1)Filing of annual regulatory reporting forms due by 17 May 2024.
(2)As reported in the Group Solvency and Financial Condition Report for the
year ended 31 December 2022.
The 41 percentage point increase in the Group Solvency II ratio from the 31
December 2022 position is due to a number of favourable developments including
the reduction to risk margin as a result of changes to the UK Solvency II
rules, positive market variances, business initiatives, and the surpluses
recognised by the asset management and advice businesses. The increase in
solvency is partly offset by the effect of dividends to shareholders and the
capital movements associated with the Odd-lot Offer.
Composition of qualifying Solvency II capital
The Group's own funds include the Quilter plc issued subordinated debt
security which qualifies as capital under Solvency II. The composition of own
funds by tier is presented in the table below.
At At
31 December 31 December
Group own funds (£m) 2023 2022
Tier 1(1) 1,336 1,249
Tier 2(2) 204 202
Total Group Solvency II own funds 1,540 1,451
(1)All Tier 1 capital is unrestricted for tiering purposes.
(2)Comprises a Solvency II compliant subordinated debt security in the form of
a Tier 2 bond, which was issued at £200 million in January 2023.
The Group SCR is covered by Tier 1 capital, which represents 235% of the Group
SCR of £568 million. Tier 1 capital represents 87% of Group Solvency II own
funds. Tier 2 capital represents 13% of Group Solvency II own funds and 21% of
the Group Solvency II surplus.
Final Dividend
The Quilter Board recommended a Final Dividend of 3.7 pence per share at a
total cost of £50 million. Subject to shareholder approval at the 2024 Annual
General Meeting, the recommended Final Dividend will be paid on Tuesday 28 May
2024 to shareholders on the UK and South African share registers on Friday 19
April 2024 (the "Record Date"). For shareholders on our South African share
register, a Final Dividend of 89.02751 South African cents per share will be
paid on Tuesday 28 May 2024, using an exchange rate of 24.06149.
Holding company cash
The holding company cash statement includes cash flows generated by the three
main holding companies within the business: Quilter plc, Quilter Holdings
Limited and Quilter UK Holding Limited. The flows associated with these
companies will differ markedly from those disclosed in the statutory statement
of cash flows, which comprises flows from the entire Quilter plc Group
including policyholder movements.
Holding company cash (£m) 2023 2022
Opening cash at holding companies at 1 January 392 756
Return of capital to shareholders - (328)
Share repurchase and Odd-lot Offer (14) (28)
Cost of disposal of Quilter International - (23)
Single Strategy business sale - price adjustment provision (4) -
Debt issuance costs (2) -
Dividends paid (65) (78)
Net capital movements (85) (457)
Head Office costs and Business transformation funding (43) (52)
Net interest received 13 4
Finance costs (18) (9)
Net operational movements (48) (57)
Cash remittances from subsidiaries 176 163
Capital contributions, loan repayments and investments (86) (15)
Other net movements - 2
Internal capital and strategic investments 90 150
Closing cash at holding companies at the end of the year 349 392
Net capital movements
Net capital movements in the year totalled an outflow of £85 million. This
includes £65 million of dividend payments made to shareholders and £14
million relating to the Odd-lot Offer, £2 million relating to the issuance of
new debt, plus £4 million in final settlement following the disposal of the
Single Strategy business.
Net operational movements
Net operational movements were an outflow of £48 million for the year, which
includes £43 million of corporate and transformation costs, finance costs of
£18 million relating to coupon payments on the Tier 2 bonds and
non-utilisation fees for the revolving credit facility, and £13 million of
net interest received on money market funds, Group loans and cash holdings.
Internal capital and strategic investments
The net inflow of £90 million is principally due to £176 million of cash
remittances from the trading businesses, partially offset by £86 million of
capital contributions to support business operational activities and further
investment in the underlying business.
Shareholder information - Final Dividend
The Quilter Board has agreed to recommend to shareholders the payment of a
Final Dividend of 3.7 pence per share. This will be considered at the Quilter
plc Annual General Meeting which will be held on Thursday 23 May 2024. Subject
to shareholder approval, the Final Dividend will be paid on Tuesday 28 May
2024 to shareholders on the UK and South African share registers on Friday 19
April 2024 (the "Record Date").
Dividend Timetable
Dividend announcement in pounds sterling with South Africa ZAR equivalent Wednesday 6 March 2024
Last day to trade cum dividend in South Africa Tuesday 16 April 2024
Shares trade ex-dividend in South Africa Wednesday 17 April 2024
Shares trade ex-dividend in the UK Thursday 18 April 2024
Record Date in the UK and South Africa Friday 19 April 2024
Final Dividend payment date Tuesday 28 May 2024
From the opening of trading on Wednesday 6 March 2024 until the close of
business on Friday 19 April 2024, 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 17 April 2024 and Friday 19 April 2024, both dates
inclusive.
Additional information
For shareholders on our South African share register a Final Dividend of
89.02751 South African cents per share will be paid on Tuesday 28 May 2024,
based on an exchange rate of 24.06149. Dividend Tax will be withheld at the
rate of 20% from the amount of the gross dividend of 89.02751 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
Final Dividend will be 71.22201 South African cents per share. The Company had
a total of 1,404,105,498 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 adviser.
Supplementary information
Alternative Performance Measures ("APMs")
We assess our financial performance using a variety of measures including
APMs, as explained further on pages 18 to 20. These measures are indicated
with an asterisk: *.
For the year ended 31 December 2023
1. Key financial data
2023 gross flows, net flows & AuMA (£bn), unaudited AuMA Gross Net AuMA Of which managed by Quilter
flows
as at
(£m) flows as at 31 AuM as at
31 December
December
31 December
(£m)
2022 2023 2023
AFFLUENT SEGMENT
Quilter channel 15.4 3,608 1,608 17.2 13.3
IFA channel on Quilter Investment Platform 54.1 5,251 (164) 58.7 10.6
Funds via third-party platform 2.0 301 (316) 1.6 1.6
Total Affluent segment core business 71.5 9,160 1,128 77.5 25.5
HIGH NET WORTH SEGMENT
Quilter channel 2.4 513 369 2.9 2.9
IFA channel incl. Direct 23.1 1,681 (507) 24.1 24.1
Total High Net Worth segment 25.5 2,194 (138) 27.0 27.0
Inter-Segment Dual Assets(1) (0.8) (258) (158) (1.1) (0.3)
Quilter plc core business 96.2 11,096 832 103.4 52.2
Non-core 3.4 78 (695) 3.3 2.1
Quilter plc reported 99.6 11,174 137 106.7 54.3
Affluent AuMA breakdown (incl. Non-core):
Affluent administered only 50.0 4,823 270 53.2
Affluent managed and administered 17.0 3,369 1,520 20.6
Affluent external platform 7.9 1,046 (1,357) 7.0
(1) Inter-segment dual assets reflect funds managed by Quilter Cheviot and
administered by Quilter Investors and the Quilter Cheviot managed portfolio
service solutions available to advisers on the Quilter Investment Platform.
This is excluded from total AuMA to ensure no double count takes place.
2022 gross flows, net flows & AuMA (£bn), unaudited AuMA Gross Net AuMA Of which managed by Quilter
flows
as at
(£m) flows as at 31 December AuM as at
31 December
31 December
(£m) 2022
2021 2022
AFFLUENT SEGMENT
Quilter channel 16.6 3,218 1,636 15.4 11.5
IFA channel on Quilter Investment Platform 60.0 4,926 445 54.1 9.2
Funds via third-party platform 2.5 242 (621) 2.0 2.0
Total Affluent segment core business 79.1 8,386 1,460 71.5 22.7
HIGH NET WORTH SEGMENT
Quilter channel 2.5 443 353 2.4 2.4
IFA channel incl. Direct 26.2 1,827 539 23.1 23.1
Total High Net Worth segment 28.7 2,270 892 25.5 25.5
Inter-Segment Dual Assets(1) (0.2) (276) (230) (0.8) (0.2)
Quilter plc core business 107.6 10,380 2,122 96.2 48.0
Non-core 4.2 149 (335) 3.4 2.2
Quilter plc reported 111.8 10,529 1,787 99.6 50.2
Affluent AuMA breakdown (incl. Non-core):
Affluent administered only 55.9 4,894 1,027 50.0
Affluent managed and administered 17.3 2,621 1,166 17.0
Affluent external platform 10.1 1,020 (1,068) 7.9
(1)Inter-segment dual assets reflect funds managed by Quilter Cheviot and
administered by Quilter Investors and the Quilter Cheviot managed portfolio
service solutions available to advisers on the Quilter Investment Platform.
This is excluded from total AuMA to ensure no double count takes place.
Estimated asset allocation (%) 2023 2022
Fund profile by investment type, unaudited Total client AuMA Total client AuMA
Fixed interest 26% 25%
Equities 63% 65%
Cash 5% 7%
Property and alternatives 6% 3%
Total 100% 100%
1. Affluent
The following table presents certain key financial metrics utilised by
management with respect to the business units of the Affluent segment, for the
years indicated.
Key financial highlights 2023 2022 % change
Affluent Administered
Net management fees (£m)* 185 181 2%
Other revenue (£m)* 2 1 -
Investment revenue (£m)* 25 7 -
Total net revenue 212 189 12%
Net inflows (£bn)* 1.8 2.2 (18%)
Closing AuMA (£bn)* 73.8 67.0 10%
Average AuMA (£bn)* 69.6 68.3 2%
Revenue margin (bps)* 27 27 -
Asset retention (%)* 90% 93% (3) ppts
Affluent Managed
Net management fees (£m)* 107 119 (10%)
Other revenue (£m)* - 1 -
Investment revenue (£m)* 3 1 -
Total net revenue 110 121 (9%)
Net inflows (£bn)* 0.2 - -
Closing AuM (£bn)* 27.6 24.9 11%
Average AuM (£bn)* 25.9 25.3 2%
Revenue margin (bps)* 41 47 (6) bps
Asset retention (%)* 83% 87% (4) ppts
Advice (Quilter Financial Planning)
Net management fees (£m)* - - -
Other revenue (£m)* 68 77 (12%)
Investment revenue (£m)* 3 - -
Total net revenue* 71 77 (8%)
RFPs (number) 1,419 1,442 (2%)
2. High Net Worth
The following table presents certain key financial metrics utilised by
management with respect to the business units of the High Net Worth segment,
for the years indicated.
Key financial highlights 2023 2022 % change
Quilter Cheviot
Net management fees (£m)* 185 190 (3%)
Other revenue (£m)* 1 - -
Investment revenue (£m)* 5 1 -
Total net revenue 191 191 -
Net inflows (£bn)* (0.1) 0.9 -
Closing AuM (£bn)* 27.0 25.5 6%
Average AuM (£bn)* 25.9 26.4 (2%)
Revenue margin (bps)* 71 72 (1) bp
Asset retention (%)* 91% 95% (4) ppts
Discretionary Investment Managers (number)* 174 179 (3%)
Advice (Quilter Cheviot Financial Planning)
Net management fees (£m)* - - -
Other revenue (£m)* 19 21 (10%)
Investment revenue (£m)* 1 - -
Total net revenue* 20 21 (5%)
RFPs (number) 70 60 17%
Financial performance by segment
The following table presents a breakdown of financial performance by segment
and Quilter plc for the years indicated.
Affluent High Net Worth Head Office Quilter plc
Financial performance
2023 (£m)
Net management fee*(1) 292 185 - 477
Other revenue* 70 20 (4) 86
Investment revenue* 31 6 25 62
Total net revenue* 393 211 21 625
Operating expenses* (269) (170) (19) (458)
Adjusted profit before tax* 124 41 2 167
Tax (38)
Adjusted profit after tax* 129
Operating margin (%)* 32% 19% 27%
Revenue margin (bps)* 38 71 47
Affluent High Net Worth Head Office Quilter plc
Financial performance
2022 (£m)
Net management fee*(1) 300 190 - 490
Other revenue* 79 21 - 100
Investment revenue* 8 1 7 16
Total net revenue* 387 212 7 606
Operating expenses* (282) (167) (23) (472)
Adjusted profit before tax* 105 45 (16) 134
Tax (19)
Adjusted profit after tax* 115
Operating margin (%)* 27% 21% 22%
Revenue margin (bps)* 39 72 48
(1)Net management fee includes the interest earned on client holdings in
Quilter Cheviot and Quilter Investment Platform.
Alternative Performance Measures
We assess our financial performance using a variety of alternative performance
measures ("APMs"). APMs are not defined under IFRS, but we use them to provide
further insight into the financial performance, financial position and cash
flows of the Group and the way it is managed.
APMs should be read together with the Group's condensed consolidated financial
statements, which include the Group's statement of comprehensive income,
statement of financial position and statement of cash flows, which are
presented on pages 23 to 26.
Further details of APMs used by the Group in its Financial review are provided
below.
APM Definition
Adjusted profit before tax Adjusted profit before tax represents the Group's IFRS profit, adjusted for
specific items that management consider to be outside of the Group's normal
operations or one-off in nature, as detailed on page 29 in the condensed
consolidated financial statements. The exclusion of certain adjusting items
may result in adjusted profit before tax being materially higher or lower than
the IFRS profit after tax.
Adjusted profit before tax does not provide a complete picture of the Group's
financial performance, which is disclosed in the IFRS consolidated statement
of comprehensive income, but is instead intended to provide additional
comparability and understanding of the financial results.
A detailed reconciliation of the adjusted profit before tax metrics presented,
and how these reconcile to IFRS, is provided on page 10 of the Financial
review. Adjusted profit before tax is referred to throughout the Chief
Executive Officer's statement and Financial review, with comparison to the
prior year explained on page 8.
A reconciliation from each line of the Group's IFRS income and expenses to
adjusted profit before tax is provided in note 5(c) to the condensed
consolidated financial statements.
Adjusted profit after tax Adjusted profit after tax represents the post-tax equivalent of the adjusted
profit before tax measure, as defined above.
Revenue margin (bps) Revenue margin represents net management fees, divided by average AuMA.
Management use this APM as it represents the Group's ability to earn revenue
from AuMA.
Revenue margin by segment and for the Group is explained on page 8 of the
Financial review.
Operating margin Operating margin represents adjusted profit before tax divided by total net
revenue.
Management use this APM as this is an efficiency measure that reflects the
percentage of total net revenue that becomes adjusted profit before tax.
Operating margin is referred to in the Chief Executive Officer's statement and
Financial review, with comparison to the prior year explained in the adjusted
profit section on page 8.
Gross flows Gross flows are the gross client cash inflows received from customers during
the period and represent our ability to increase AuMA and revenue. Gross flows
are referred to in the Financial review on pages 7 to 8 and disclosed by
segment in the supplementary information on pages 14 to 15.
Net flows Net flows are the difference between money received from and returned to
customers during the relevant period for the Group or for the business
indicated.
This measure is a lead indicator of total net revenue. Net flows is referred
to throughout this document, with a separate section in the Financial review
on pages 7 to 8 and is presented by business and segment in the supplementary
information on pages 14 to 15.
Assets under Management and Administration ("AuMA") AuMA represents the total market value of all financial assets managed and
administered on behalf of customers.
AuMA is referred to throughout this document, with a separate section in the
Financial review on page 8 and is presented by business and segment in the
supplementary information on pages 14 to 15.
Non-core AuMA Non-core AuMA and associated gross and net flows represents assets managed on
behalf of businesses we have sold together with some legacy funds which are in
run-off and remain in outflow.
Average AuMA Average AuMA represents the average total market value of all financial assets
managed and administered on behalf of customers. Average AuMA is calculated
using a 7-point average (half year) and 13-point average (full year) of
monthly closing AuMA.
Total net revenue Total net revenue represents revenue earned from net management fees,
investment revenue and other revenue listed below and is a key input into the
Group's operating margin.
Further information on total net revenue is provided on pages 8 to 9 of the
Financial review and note 5(c) in the condensed consolidated financial
statements.
Net management fees Net management fees consist of revenue generated from AuMA, fixed fee revenues
including charges for policyholder tax contributions, interest earned on
client holdings, less trail commissions payable. Net management fees are
presented net of trail commission payable as trail commission is a variable
cost directly linked to revenue, which is a treatment and presentation
commonly used across our industry. Net management fees are a part of total net
revenue and is a key input into the Group's operating margin.
Further information on net management fees is provided on pages 8 to 9 in the
Financial review and note 5(c) in the condensed consolidated financial
statements.
Other revenue Other revenue represents revenue not directly linked to AuMA (e.g. encashment
charges, closed book unit-linked policies, adviser initial fees and adviser
fees linked to AuMA in Quilter Financial Planning (recurring fees)). Other
revenue is a part of total net revenue, which is included in the calculation
of the Group's operating margin.
Further information on other revenue is provided on pages 8 to 9 in the
Financial review and note 5(c) in the condensed consolidated financial
statements.
Investment revenue Investment revenue includes interest on shareholder cash balances (including
cash at bank and money market funds).
Further information on investment revenue is provided on pages 8 to 9 in the
Financial review and note 5(c) in the condensed consolidated financial
statements.
Operating expenses Operating expenses represent the costs for the Group, which are incurred to
earn total net revenue and excludes the impact of specific items that
management considers to be outside of the Group's normal operations or one-off
in nature. Operating expenses are included in the calculation of adjusted
profit before tax and impact the Group's operating margin.
A reconciliation of operating expenses to the applicable IFRS line items is
included in note 5(c) to the condensed consolidated financial statements, and
the adjusting items excluded from operating expenses are explained in note
5(b). Operating expenses are explained on page 9 of the Financial review.
Cash generation Cash generation is calculated by removing non-cash generative items from
adjusted profit after tax, such as deferrals required under IFRS to spread fee
income and acquisition costs over the lives of the underlying contracts with
customers. It is stated after deducting an allowance for net cash required to
support the capital requirements generated by new business offset by a release
of capital from the in-force book.
Cash generation is explained on page 10 of the Financial review.
Asset retention The asset retention rate measures our ability to retain assets from delivering
good customer outcomes and investment performance. Asset retention reflects
the annualised gross outflows of the AuMA during the period as a percentage of
opening AuMA. Asset retention is calculated as: 1 - (annualised gross outflow
divided by opening AuMA).
Asset retention is provided for the Group on page 7, and by segment on page
16.
Net inflows/opening AuMA This measure is calculated as total net flows annualised (as described above)
divided by opening AuMA presented as a percentage.
This metric is provided on page 7.
Quilter channel gross sales per Quilter Adviser This measure represents the value created by our Quilter distribution channel
and is an indicator of the success of our multi-channel business model. The
measure is calculated as gross flows generated by the Quilter channel through
the Quilter Investment Platform, Quilter Investors or Quilter Cheviot
(annualised) per average Restricted Financial Planner in both segments.
This metric is provided on page 7.
Return on Equity ("RoE") Return on equity calculates how many pounds of profit the Group generates with
each pound of shareholder equity. This measure is calculated as adjusted
profit after tax annualised divided by average equity. Equity is adjusted for
the impact of discontinued operations, if applicable.
Return on equity is provided on page 7.
Adjusted diluted earnings per share Adjusted diluted earnings per share is calculated as adjusted profit after tax
divided by the diluted weighted average number of shares.
A view of adjusted diluted earnings per share and the calculation of all EPS
metrics, is shown in note 8 to the condensed consolidated financial
statements.
Headline earnings per share The Group is required to calculate headline earnings per share in accordance
with the Johannesburg Stock Exchange Listing Requirements, determined by
reference to the South African Institute of Chartered Accountants' circular
1/2023 Headline Earnings. This is calculated on a basic and diluted basis. For
details of the calculation, refer to note 8 of the condensed consolidated
financial statements.
Dividend pay-out ratio The dividend pay-out ratio is an indicator of the total amount of dividends
paid to shareholders in relation to the Group's profits expressed as a
percentage. It is calculated by dividing the recommended total dividend (in £
millions) by the post-tax, post-interest adjusted profit (in £ millions).
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