Quilter plc (LON: QLT) interim results for the six months ended 30 June 2019
Quilter plc reports 5% growth in adjusted profit before tax to £115 million and an interim dividend of 1.7 pence per share
· Adjusted profit before tax up 5% to £115 million (H1 2018: £110 million), of which:
o £89 million, an increase of 7%, from Quilter excluding Quilter Life Assurance (‘QLA’) (H1 2018: £83 million); and
o £26 million from QLA (H1 2018: £27 million).
· Adjusted diluted earnings per share of 5.5 pence in line with H1 2018, of which:
o 4.1 pence from Quilter excluding QLA (H1 2018: 4.1 pence); and
o 1.4 pence from QLA (H1 2018: 1.4 pence).
· Agreed disposal of QLA, subject to regulatory approval, to ReAssure for consideration of £425 million representing 120% of end 2018 own funds (after taking into account dividend payments of £130 million made to Quilter during the course of 2019). The Board is currently minded to undertake a meaningful capital distribution from the net sale proceeds to shareholders with the method of capital return subject to shareholder consultation. We will update on the amount and method of distribution at the closing of the transaction, expected to be late 2019.
· IFRS loss before tax attributable to equity holders from continuing operations of £40 million (H1 2018: £nil), principally due to the period on period change in policyholder tax movements.
· Interim dividend of 1.7 pence per share.
· Operating margin stable at 29% including QLA (26% excluding QLA).
· Assets under Management/Administration (‘AuMA’) up 8% from 31 December 2018 to £118.4 billion (FY 2018: £109.3 billion), of which:
o £108.7 billion, an increase of 9%, from Quilter excluding QLA (FY 2018: £99.3 billion); and
o £12.1 billion, a decrease of 2%, from QLA (FY 2018: £12.4 billion).
· Gross sales (excluding QLA) of £6.0 billion (H1 2018: £7.9 billion, H2 2018: £6.3 billion).
· Net Client Cash Flow (‘NCCF’) (excluding QLA) of £0.3 billion (H1 2018: £3.0 billion) with a modest (£0.2 billion) outflow in the second quarter predominantly attributable to the impact of expected client redemptions in Quilter Cheviot of c.£0.8 billion.
· Integrated flows (excluding QLA) of £1.3 billion (H1 2018: £2.8 billion).
· Solvency II ratio of 181% after payment of interim dividend (FY 2018: 190%).
· UK Platform Transformation Programme is making good progress with final software testing in progress and validation of migration data integrity nearing completion. Initial migration expected by early 2020 and full programme expected to complete by around this time next year at an additional cost of approximately £25 million.
· Business optimisation and cost saving initiatives progressing well with £11 million of benefits realised for 2019 providing support to the first half operating margin.
Paul Feeney, Chief Executive Officer, said:
“Quilter produced a solid set of results for the first half of 2019, as evidenced by growth in adjusted profit before tax with revenues growing modestly faster than costs and a stable operating margin. We are focussed on making Quilter a simpler, more efficient wealth management business, and the announcement today of the sale of Quilter Life Assurance is a further significant step forward in this regard.
In addition to the Charles Derby Group acquisition announced in February 2019, I am delighted that we completed the acquisition of Lighthouse plc in June 2019, consolidating our place as the second largest retail advisory business in the UK. We are on a mission to make advice more valued and accessible, and want Quilter to be recognised as the best place to go for trusted financial advice in the UK.
We are building a business that is fit for the future. Good progress continues to be made on optimisation and with the UK Platform Transformation Programme, notwithstanding the additional costs announced today. While we have encountered some short-term delays, we are focussed on ensuring the programme is implemented to our desired quality and still expect to complete the programme by this time next year.
While the uncertain political environment in the UK evidenced in the latter half of 2018 has continued into 2019, gross new business sales have held up well at £6.0 billion. We experienced higher outflows in Quilter Cheviot following the resignation of some Investment Managers during 2018 putting pressure on net flows.
The Board declared an interim dividend of 1.7 pence per share, representing a pay-out ratio of approximately 46% of adjusted profit after tax and based on an expected one third/two thirds dividend split. This is consistent with the dividend policy outlined at the time of our Listing one year ago.”
Quilter plc also announced the sale of Quilter Life Assurance to ReAssure for £425m
· Following the strategic review, announced on 4 July 2019, Quilter and ReAssure are pleased to announce they have entered into an agreement for ReAssure to acquire Quilter’s heritage life and pensions division, Old Mutual Wealth Life Assurance Limited.
· Under the terms of the Transaction, Quilter plc is expected to receive:
£425m, in cash.
· The sale of Quilter Life Assurance will further act to solidify Quilter’s position as an advice led, modern wealth manager.
· The Transaction realises an attractive valuation for Quilter Life Assurance, strengthening the Group’s financial position.
· Consistent with its disciplined capital management policy, and in line with previous disposals, the Board currently expects to return a meaningful proportion of the net sale proceeds, after allowance for the costs of the Transaction, potential onerous contracts and capital requirements of Quilter following the Transaction.
· Quilter will update on the amount and method of distribution at the closing of the transaction, expected to be late 2019.
· The growth profile of the Group following the sale is expected to be enhanced since Quilter Life Assurance is in run-off. Further benefits of the Transaction include increased focus on the delivery of Quilter’s growth strategy and the execution of its optimisation initiatives.
· ReAssure is a leading closed life book consolidator focused on managing legacy life insurance products. They are a customer oriented organisation with a strong focus on delivering good policyholder outcomes and have a track record of high customer satisfaction.
· The Transaction is subject to receiving regulatory approvals from the PRA.
Commenting on the Transaction, Paul Feeney, Chief Executive Officer of Quilter, said:
“I am delighted we have agreed to sell Quilter Life Assurance to ReAssure. ReAssure is a highly regarded manager of closed book assets and has the experience to deliver continued high quality investment and administration services to clients of Quilter Life Assurance. The Quilter Board is currently minded to return a meaningful proportion of the net surplus proceeds arising from the transaction to shareholders and will consult with them on the most appropriate means of undertaking this.”
Further information on Quilter Life Assurance
Quilter Life Assurance, a wholly owned subsidiary of Quilter, is a substantially closed book of unit-linked policies. Formerly the core of Quilter’s UK business, Quilter Life Assurance consists of pensions, investment and savings, and protection products with both Retail and Institutional offerings. Quilter Life Assurance key financials include:
· Proforma MCEV: £406 million at end 2018 after dividend payments made in 2019 of £130 million.
· Proforma own funds of £354 million at end 2018 after dividend payments made in 2019 of £130 million.
· Gross assets: £12,324 million at end June 2019.
· Operating PBT: £26 million for the six months to end June 2019.
All current Quilter Executive Committee members will remain with Quilter post transaction.