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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Quilter Plc | LSE:QLT | London | Ordinary Share | GB00BNHSJN34 | ORD 8 1/6P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.50 | 1.27% | 120.00 | 119.80 | 120.10 | 120.20 | 117.70 | 119.00 | 132,307 | 12:11:29 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Finance Services | 4.49B | 42M | 0.0299 | 40.17 | 1.66B |
From Jul 2022 to Jul 2024
TIDMQLT
RNS Number : 2131S
Quilter PLC
08 March 2023
8 March 2023
Quilter plc preliminary results for the year ended 31 December 2022
Robust outturn for 2022 in a challenging market - key strategic priorities improving growth and higher profitability
Steven Levin, Chief Executive Officer, said:
"Delivering a broadly similar 2022 operating performance to 2021 was a pleasing outturn given more challenging market conditions during the year. Since my appointment as Chief Executive in November 2022, I have been focussing on what more we need to do to realise Quilter's potential. While we are well positioned across the UK wealth industry, I believe we can go further to improve performance. My plan is to build on our existing distribution strengths, enhance our client propositions and drive greater efficiency across our business to ensure we deliver faster growth and higher profitability".
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: *.
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Quilter highlights from continuing operations(1) 2022 2021
===================================================================== ====== ======
Assets and flows
AuMA* (GBPbn)(2) 99.6 111.8
Gross flows* (GBPbn)(2) 10.5 13.2
Net inflows* (GBPbn) (2) 1.8 4.0
Net inflows/opening AuMA*(2) 2% 4%
Profit and loss
IFRS profit before tax from continuing operations
attributable to equity holders* (GBPm)(2) 199 12
IFRS profit after tax from continuing operations (GBPm) 175 23
Adjusted profit before tax* (GBPm) (2) 134 138
Operating margin*(2) 22% 22%
Revenue margin* (bps)(2) 47 48
Adjusted diluted EPS from continuing operations* (pence)(2) 7.9 7.4
Recommended total dividend per share from continuing
operations (pence) 4.5 4.0
Basic earnings per share from continuing operations
(pence) 12.2 1.4
(1) Continuing operations represent Quilter plc, excluding the results
of Quilter International. Adjusted profit before tax for Quilter International
in 2021 was GBP50 million. Adjusted diluted EPS from Quilter International
in 2021 was 3.0 pence per share.
(2) Alternative Performance Measures ("APMs") are detailed and defined
on pages 18 to 20.
Highlights - Continuing business (excluding Quilter International for comparative data)
-- Assets under Management and Administration ("AuMA") of GBP99.6 billion at the end of December 2022, a decrease of 11% from 31 December 2021 (GBP111.8 billion) principally due to adverse market movements of GBP14.0 billion and:
o Quilter Investment Platform net inflows of GBP2.2 billion (2021: GBP3.5 billion) representing 3% of opening AuMA (2021: 5 %), reflecting an industry wide slowdown in gross flows.
o Quilter High Net Worth net inflows of GBP0.9 billion (2021: GBP1.1 billion) representing 3% of opening AuMA (2021: 4%).
o Net outflows of GBP1.1 billion (2021: net outflows GBP0.6 billion) of assets held on third-party platforms reflecting non-core, legacy business in run-off partially offset by the transition of assets advised by Quilter Financial Planning on other platforms to the Quilter Investment Platform.
-- Broadly stable revenues of GBP606 million (2021: GBP618 million) largely supported by net interest income on corporate cash balances coupled with strong expense discipline delivering a reduction in costs, despite inflationary pressures. We delivered adjusted profit before tax of GBP134 million (2021: GBP138 million) and a stable operating margin of 22%.
-- Excellent progress made on plans to deliver additional cost efficiencies and proposition enhancements.
-- Final Dividend of 3.3 pence per share versus 2.8 pence for 2021, bringing the recommended total dividend for the year to 4.5 pence per share, an increase of 13% on the continuing business dividend for 2021 of 4.0 pence per share.
-- Special capital return of GBP328 million to shareholders from the sale of Quilter International through a B share issue coupled with share consolidation. Our total share count has declined by c.25% since our Listing in 2018.
-- Adjusted diluted earnings per share from continuing operations of 7.9 pence (2021: 7.4 pence).
-- Basic earnings per share from continuing operations of 12.2 pence (2021: 1.4 pence).
-- Solvency II ratio of 230% after payment of the recommended Final Dividend (December 2021: 275%).
Quilter plc results for the year ended 31 December 2022
Investor Relations John-Paul Crutchley UK +44 77 4138 5251 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 host a presentation and Q&A session via webcast at 08:30am (GMT) today, 8 March 2023.
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
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 certain forward-looking statements with respect to 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 and the conflict in Ukraine, 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
Before I get into the detail of our performance in 2022, I should extend my thanks to my predecessor, Paul Feeney, for his decade of service to Quilter as well as his long-standing support for me personally.
Turning now to the business, clearly, the operating environment has a meaningful influence on the flows we can attract and revenues we generate from the assets we manage and administer on behalf of our clients. 2022 was a particularly challenging year for the entire wealth management industry due to lower equity markets and higher bond yields. In that context, I am pleased we delivered a resilient adjusted profit outturn of GBP134 million (2021: GBP138 million) and a stable operating margin of 22% during the year.
Current market conditions are very different from those we anticipated at our Capital Markets Day in late 2021, prior to the war in Ukraine. This has led us to rebase some of the targets we set out then. Notwithstanding this, my focus will always be on managing the things within our control to deliver the best outcomes we can for all our stakeholders and, as I discuss below, my priority is on improving the revenue momentum and cost efficiency of our business.
Business Strategy and Transformation
Over the last ten-years, we have built a business that covers the full spectrum of the UK wealth industry. While we are well-positioned to meet the needs and provide good customer outcomes to our High Net Worth and Affluent clients, my initial assessment is that there is more to be done to ensure we are delivering on our potential as a business. We have three core channels through which we serve clients, each of which generated around GBP200 million of revenues per annum in 2022:
-- Our High Net Worth segment operates under the Quilter Cheviot and Quilter Private Client Advisers brands. This business continues to perform well. While the growth rate of this business in terms of new flows has been good relative to peers, I believe we have the capacity to perform better. We will continue to drive our growth plans by improving productivity, as well as adding investment managers and dedicated financial advisers to enhance the support and value we provide to clients.
We serve Affluent clients through two channels:
-- First, our Quilter Channel where we provide platform and investment solutions through our restricted adviser network. While there is understandably a focus on absolute adviser numbers as a proxy for growth in this business, it is more important to me that we have a productive adviser force which is fully aligned with our propositions, that the business continues to deliver good customer outcomes and that we deliver an appropriate return to shareholders.
-- Second, the IFA Channel where our platform business provides investment administration and investment solutions to the IFA market. The enhanced capability of our new platform allows us to support a wider range of IFA firms and to meet a broader spectrum of customer needs than has historically been the case. We continue to add new firms and generating stronger flows from this channel is a key priority for me.
Since my appointment as Chief Executive Officer on 1 November 2022, I have been reviewing what we have done well and what we need to do better.
In terms of what has gone well, we have successfully reshaped our business since Listing, transformed our platform technology, delivered significant cost reduction programmes, paid around GBP1 billion to shareholders through special capital returns, enhanced our investment propositions to include ESG overlays as well as variants to meet client risk and style preferences, and maintained excellent levels of service to our clients and advisers.
But we can do better. This is a business with a huge amount of potential, and we are not yet delivering the growth of which we are capable. To drive improvement in our business, with customer outcomes at the core of this, my focus is on building distribution, enhancing propositions, and driving efficiency, and for these to deliver better customer outcomes and a significant increase in profitability. Taking each in turn:
-- Distribution - one of the core strengths of Quilter is our two large scale distribution channels: IFAs and our own Quilter Channel advisers. We are strongly positioned in each channel, but we recognise the market in which we operate has evolved with sponsor-backed consolidation becoming an increasingly disruptive force.
This has had two implications for Quilter. First, where IFAs who use our platform have been acquired, it can lead to outflows from our business as they consolidate their business elsewhere. Secondly, in the Quilter Channel we have lost some of our own advisers to consolidators. On the former, our counter is to leverage our new platform by growing our franchise with larger IFA firms. Progress is in line with expectations, but it is, by nature, a gradual build. On the latter, we are continuing to look at ways to ensure Quilter is attractive to advisers and that they are aligned with our propositions to provide good customer outcomes. We are also finessing our exit proposition for retiring advisers to protect our core franchise and ensure the Quilter proposition remains attractive compared to our peers.
-- Proposition - here we need to be more agile, responsive and both customer and market focussed. Quilter Investors performance was strong in 2022, with all strategies outperforming their comparators except Cirilium Active. Over the last quarter, we've reviewed our investment capabilities and decided to unify management of all our Cirilium funds under a single team to ensure greater consistency of investment style and performance, and to better align our solutions with our customer needs. This action led to the departure of the two Cirilium Active portfolio managers. To reinvigorate the market positioning of Cirilium Active under the new team, we intend to reduce pricing at the end of March with an expected mid-single digit impact on the revenue margin on our Affluent Managed Assets on a full year basis. Finally, we will be launching a responsible investment multi-asset range which mirrors the well-received action we took with WealthSelect in early 2022.
We have an award winning platform with market leading functionality. But we see increasing price competition and we need to be more competitive. We have planned actions on our Platform pricing to defend our existing flow, provide better value to customers and accelerate growth in new business. I expect this initiative to lead to around a basis point of margin attrition over the next 18 months over and above the basis point per annum to which we have historically guided, but with this expected to be more than offset by greater flows and revenues over time.
-- Efficiency - we will update on additional efficiency plans later this year. We have made good progress with our Optimisation and Simplification programmes, but our cost base remains high. We have acquired businesses, particularly in advice, and not always integrated as far as we could. That has led to cumbersome business processes, unnecessary complexity and higher costs. So, there is opportunity to further simplify our business to improve the way we manage ourselves and the way we support our customers and advisers. Getting the operating margin in our business to a satisfactory level is an absolute priority for me.
All of the above is intended to drive a meaningful step-up in profitability and to make us a better business for our customers. I am determined to deliver the growth and returns our shareholders expect. Whilst some aspects of our plans might impact revenues and operating margin in the short term, we are confident they will lead to higher overall revenues and a faster growth rate in the medium term.
Flows and Investment Performance
Advice is central to all Quilter propositions and our goal is to deliver good customer outcomes in all that we do. That means providing excellent client and adviser support while delivering value including consistent investment returns, over time, in line with client risk and ESG preferences.
In 2022 we faced two particular challenges:
-- First, across the industry, new business activity was hindered by 'risk off' sentiment following Russia's invasion of Ukraine in February which contributed to inflationary shocks from higher energy and food prices and cost-of-living pressures. This has naturally reduced the propensity for most households to save and invest beyond regular pension saving.
-- Secondly, as I already noted, the adviser market has been going through a period of structural change with an increasing amount of private equity capital looking to back advice consolidation vehicles. As a result, we have seen a number of smaller independent firms seeking to move their clients to these new businesses which impacted on flows in our UK Platform which administers funds on behalf of clients of these firms.
While we have performed well in the current market with Quilter generating the largest share of gross flows across the retail advised industry based on the latest Fundscape data (to end December 2022), our net flows have been below the level we target.
Turning to investment performance, our Wealth Select portfolios continued to deliver strong performance while our Cirilium Active proposition remained stylistically out of favour. The management team who delivered a strong track record with our Cirilium Blend range have taken over the management of Cirilium Active with a view to revitalising performance.
2022 was a more challenging year for investment performance in our High Net Worth division and, over three years, we have slipped into 3rd Asset Risk Consultants ("ARC") quartile although the cumulative difference between 2nd and 3rd quartile is just over 1.2%. We have delivered outperformance over a 10 year period.
Business Performance
Our overall assets under management and administration declined by 11% over the course of the year to GBP99.6 billion with the reduction in revenues limited to 2% to GBP606 million (2021: GBP618 million). Lower management fee revenues were partially offset by higher levels of interest income from the corporate capital and cash held in our business. We reduced operating expenses by GBP8 million from 2021 levels to GBP472 million despite the impact of much higher than usual inflation across our business.
Across our two segments, High Net Worth delivered revenue stability, despite lower markets supported by a higher contribution from net interest income reflecting higher UK interest rates. Higher operating expenses of GBP11 million largely reflected planned business investment and led to a similar decline in profit to GBP45 million.
A 5% decline in revenues in our Affluent segment to GBP387 million reflected weaker markets and the repositioning of our adviser base contributing to the reduction in other income. Strong cost management combined with a lower overall FSCS charge limited the decline in profits to GBP6 million for the Affluent segment with a contribution of GBP105 million for the year.
Within our Head Office segment, we reduced operating expenses for managing the Group in 2022 by GBP6 million. In addition, higher interest rates contributed to an increase in net interest income generated on our available cash and capital resources which support our regulatory capital and liquidity requirements. Both factors contributed to a reduction in the net cost of the segment to GBP16 million from GBP29 million in 2021.
The Group's IFRS profit from continuing operations after tax was GBP175 million compared to GBP23 million in 2021. Adjusted profit before tax of GBP134 million for 2022 (2021: GBP138 million) 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. 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 income statement, but is instead intended to provide additional comparability and understanding of the financial results. Principal differences between this measure and our IFRS profit is largely due to non-cash amortisation of intangible assets, our business transformation expenses and the impact of policyholder tax positions on the Group's results. This latter item was significantly positive in 2022 because of the decline in markets over the course of the year.
Business transformation expenses will remain elevated in 2023 reflecting the pre-funded expenditure on our Simplification programme and other cost reduction initiatives and is expected to reduce substantially thereafter.
Total Group adjusted diluted earnings per share were 7.9 pence, an increase of 7% (2021: 7.4 pence from continuing operations). We target mid-teens compound annual growth rate in EPS to 2025 from the 2020 base. Compound growth of 23% from the 2020 base represents a strong performance against that metric. However, given the planned actions being taken to accelerate growth, the rate of EPS growth is likely to be slower over the remaining target period. On an IFRS basis, we delivered basic EPS from continuing operations of 12.2 pence per share versus 1.4 pence per share for the comparable year of 2021 on the same basis.
The Board is pleased to recommend a Final Dividend of 3.3 pence per share versus 2.8 pence for 2021, bringing the total dividend for the year to 4.5 pence per share, an increase of 13% on the continuing business dividend for 2021 of 4.0 pence per share (total dividend 5.6 pence per share, including 1.6 pence per share in respect of Quilter International distribution).
During the year, shares in issue declined by 252 million as a result of our share buyback programme which completed in January 2022 and our B Share Scheme and Share Consolidation which returned net surplus proceeds of GBP328 million to shareholders following the disposal of Quilter International in November 2021. Since Listing our capital return programme from disposals has reduced our total share count by around a quarter.
Responsible Business and Stewardship
Ensuring Quilter is a business whose actions go beyond making a profit, has been a core part of the culture we have built since we listed. For me, this comes down to how we act and how we invest.
How we act:
Our fundamental commitment to acting responsibly is reflected in the excellent level of customer and adviser service we provide, mirrored by our commitment to being a responsible employer. The Quilter Foundation makes a positive contribution to the communities in which we operate and this year the charity launched a local community fund to further expand its impact.
During 2022, we significantly increased our focus on climate action. We set ourselves carbon reduction targets for both Scope 1 and Scope 2 emissions for our operations and expect to release a fuller climate action strategy (including Scope 3, emissions were possible) later in 2023.
How we invest:
There are two approaches to being a responsible investor:
-- Risk mitigation: the integration of ESG factors and stewardship within the advice and investment process.
-- Specific responsible investment-related objectives; this builds on the risk mitigation and relates to linking products or strategies to specific responsible investment related outcomes or objectives.
Our focus has been on strengthening the integration of ESG factors within our advice and investment processes and building on our active ownership work through our stewardship activity including exercising our voting rights and engaging with our underlying investments, be they companies or funds. This is reflected in our achievement in retaining signatory status of the Stewardship Code for 2022. In addition, we have also significantly expanded our range of dedicated responsible investment solutions both in our High Net Worth and Affluent segments.
Outlook
My goal is to deliver the service and propositions our customers need alongside rates of growth and returns our shareholders expect. I am focussed on driving towards that outcome at pace. We anticipate investor sentiment will slowly recover this year supporting a gradual improvement in IFA net flows coupled with another strong net flow performance from the Quilter Channel and a solid out-turn from our High Net Worth segment. The weighted average of these growth rates suggests an improvement in Group net flows to a bit over 2% this year. We expect this to improve to 4-5% as market activity normalises and we deliver the business initiatives I have set out, we clearly aspire to build momentum further from this level.
The Group's income levels depend to a large extent on market levels and interest rates. Assuming these remain broadly stable through 2023, then the Group's Adjusted Profit will again depend on careful cost control as well as the pace of our focused investment in customer proposition initiatives. Overall, our expectation is that these factors may lead to a decline in Adjusted Profit for 2023, although we currently anticipate the outcome being modestly ahead of current market expectations.
Given the changed market and economic environment since our Capital Markets Day in November 2021, we now expect to reach a 25% operating margin in 2025, rather than our previous target of 2023. Given our business mix, we continue to believe that an appropriate operating margin for our business should be higher than 30% and that clearly remains the longer-term goal which we are focussed on.
Steven Levin
Chief Executive Officer
Financial review
Review of financial performance
Overview
The Group delivered a robust set of results during 2022 against the backdrop of a recessionary global economic environment, with higher inflation, which reduced the value attributed to equity and bond investments. Accordingly, investor sentiment for wealth and savings solutions reduced during the year.
Against this backdrop, the Group's AuMA ended the year at GBP99.6 billion, down 11% from the starting position at the beginning of the year with GBP14.0 billion of negative market movements more than offsetting net inflows of GBP1.8 billion. Average AuMA for the year was GBP102.8 billion compared to GBP105.3 billion in the comparative year. Adjusted profit before tax was GBP134 million, down 3% on the prior year (2021: GBP138 million), reflecting lower revenues given the lower average AuMA for the year, offset by good cost discipline despite the cost-of-living and inflation pressures.
In this section, unless indicated otherwise all results are presented excluding Quilter International in both the current year and prior year comparative, following its sale to Utmost Group in November 2021.
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 from continuing operations (1) 2022 2021
==================================================================== ======= ======
Assets and flows
AuMA* (GBPbn)(2) 99.6 111.8
------- ------
Of which Affluent 74.9 83.3
Of which High Net Worth 25.5 28.7
Inter-segment dual assets (0.8) (0.2)
Gross flows* (GBPbn)(2) 10.5 13.2
------- ------
Of which Affluent 8.5 10.5
Of which High Net Worth 2.3 2.7
Inter-segment dual assets (0.3) 0.0
Net inflows* (GBPbn)(2) 1.8 4.0
------- ------
Of which Affluent 1.1 2.9
Of which High Net Worth 0.9 1.1
Inter-segment dual assets (0.2) 0.0
Net inflows/opening AuMA*(2) 2% 4%
Gross flows per adviser* (GBPm)(2, 3) 2.3 2.3
Asset retention*(2) 92% 91%
Profit and loss
IFRS profit before tax from continuing operations
attributable to equity holders* (GBPm)(2) 199 12
IFRS profit after tax from continuing operations (GBPm) 175 23
Adjusted profit before tax* (GBPm)(2) 134 138
Operating margin*(2) 22% 22%
Revenue margin* (bps)(2) 47 48
Return on equity*(2) 7.0% 8.3%
Adjusted diluted EPS from continuing operations* (pence)(2) 7.9 7.4
Recommended total dividend per share from continuing
operations (pence) 4.5 4.0
Basic earnings per share from continuing operations
(pence) 12.2 1.4
Non-financial
Total Restricted Financial Planners ("RFPs") in both
segments (4) 1,502 1,623
Discretionary Investment Managers in High Net Worth
segment(4) 179 170
--------------------------------------------------------------------- ------- ------
(1) Continuing operations represent Quilter plc, excluding the results
of Quilter International. Adjusted profit before tax for Quilter International
in 2021 was GBP50 million. Adjusted diluted EPS from Quilter International
in 2021 was 3.0 pence per share.
(2) Alternative Performance Measures ("APMs") are detailed and defined
on pages 18 to 20.
(3) Gross flows per adviser is a measure of the value created by our
Quilter distribution channel.
(4) Closing headcount as at 31 December.
Net inflows of GBP1.8 billion for the year were 55% lower than the prior year (2021: GBP4.0 billion). The more challenging macroeconomic and geopolitical environment contributed to lower investment activity across the wealth management industry, with this notably evidenced through subdued gross inflows. Net inflows are stated inclusive of net outflows from assets on third-party platforms of GBP1.1 billion (2021: GBP0.6 billion). Gross flows for the Group were 20% lower than the prior year at GBP10.5 billion (2021: GBP13.2 billion), primarily as a result of lower flows into the Quilter Platform. This was due to lower investor confidence and the wider impacts of rising interest rates and inflation on the cost-of-living, leading to an industry-wide slow-down. As a consequence, net inflows as a percentage of opening AuMA were 2% (2021: 4%). Detailed analysis on net flows by business segment is shown in the Supplementary Information section of this announcement.
-- The Affluent segment's net inflows of GBP1.1 billion were down 62% on the prior year (2021: GBP2.9 billion) due to GBP1.3 billion lower net inflows in the Quilter Investment Platform against a strong prior year comparative, and net outflows of GBP1.1 billion (2021: net outflows of GBP0.6 billion) in assets managed by Quilter on third-party platforms in relation to legacy and closed books of business. Net inflows of GBP2.2 billion onto the Quilter Investment Platform were down 37% (2021: GBP3.5 billion), with lower gross sales in the IFA channel being a specific contributing factor. The Quilter distribution channel performed broadly in line with the prior year where the Platform is winning a greater share of sales from our own advisers, weighted towards pensions, and we established a simplified procedure to allow us to accelerate back book transfers. This is offset with lower overall market activity as investor confidence reduced during the course of 2022. Gross flows on the Quilter Investment Platform of GBP7.5 billion (2021: GBP9.0 billion) were 17% lower as clients reacted to the macro environment. Pension and ISA product sales comprise GBP5.5 billion (2021: GBP6.4 billion). Persistency for the Affluent segment remained good and slightly ahead of historical levels at 91% (2021: 90%).
-- The High Net Worth segment recorded net inflows of GBP0.9 billion which were down 18% from the prior year (2021: GBP1.1 billion), and continued to deliver a robust performance with good flows from the Quilter channel offsetting a slowdown in IFA flows. Gross inflows of GBP2.3 billion were down on 2021 of GBP2.7 billion, offset by lower outflows compared to the prior year. This reflects improved persistency at 95% versus 94% in 2021.
The Group's AuMA ended the year at GBP99.6 billion, down 11% from the opening position at the start of 2022 (2021: GBP111.8 billion), due to the fall in global equity and bond indices. The Affluent segment AuMA of GBP74.9 billion decreased by 10% (2021: GBP83.3 billion) of which GBP24.9 billion is managed by Quilter, down on the opening position at the start of 2022 (2021: GBP27.4 billion). High Net Worth's AuM was GBP25.5 billion, down 11% from opening 2022 (2021: GBP28.7 billion), with all assets managed by Quilter. In total, GBP50.2 billion of AuMA is managed by Quilter across the Group (2021: GBP56.0 billion).
The Group's revenue margin of 47 bps was 1 bp lower than the prior year (2021: 48 bps). For assets administered within the Affluent segment, the revenue margin remained in line with the prior year at 27 bps. For assets managed in the Affluent segment, the revenue margin decreased by 2 bps to 47 bps as a result of anticipated mix shifts in underlying assets towards lower margin products. Within the High Net Worth segment the revenue margin decreased by 2 bps to 69 bps, primarily due to lower commission and contract charges.
Adjusted profit before tax decreased by 3% to GBP134 million (2021: GBP138 million). The decline in net management fees to GBP483 million (2021: GBP500 million) broadly matched the decline in average AuMA year-on-year (2022: GBP102.8 billion compared to 2021: GBP105.3 billion). Other revenue increased by 4% to GBP123 million (2021: GBP118 million) reflecting interest income earned on cash and capital resources, offset by lower mortgage and protection new business levels and lower adviser headcount . Operating expenses in 2022 were GBP472 million, down 2% on the prior year (2021: GBP480 million) primarily due to continued cost discipline, lower FSCS levies and the Optimisation and Simplification cost initiatives delivering the intended cost reductions. These decreased expenses have been partially offset by higher annualised FNZ charges following the late Q1 2021 launch of the Platform and inflationary increases. The Group's operating margin was 22%, in line with the prior year.
The Group's IFRS profit after tax from continuing operations was GBP175 million, compared to GBP23 million for 2021. The increase in IFRS profit is largely attributable to policyholder tax credits resulting from market losses up to December 2022 of GBP134 million compared to market gains in the prior year (2021: tax charge GBP73 million).
Adjusted diluted earnings per share for continuing operations increased 7% to 7.9 pence (2021: 7.4 pence).
Total net fee revenue*
Total net fee revenue from continuing operations High Head Continuing 2022 (GBPm) Affluent Net Worth Office operations ---------------------------- --------- ----------- -------- ------------ Net management fee* 300 183 - 483 Other revenue* 87 29 7 123 ------------------------------ --------- ----------- -------- ------------ Total net fee revenue* 387 212 7 606 ------------------------------ --------- ----------- -------- ------------ Total net fee revenue from continuing operations High Net Continuing 2021 (GBPm) Affluent Worth Head Office operations ---------------------------- --------- --------- ------------ ------------ Net management fee* 311 189 - 500 Other revenue* 95 23 - 118 ------------------------------ --------- --------- ------------ ------------ Total net fee revenue* 406 212 - 618 ------------------------------ --------- --------- ------------ ------------
Total net fee revenue for Affluent was GBP387 million, down 5% from the prior year (2021: GBP406 million). Net management fees of GBP300 million were 4% down on the prior year (2021: GBP311 million) due to the impact of lower average AuMA which decreased by 2% to GBP77.1 billion in 2022 (2021: GBP78.5 billion), and anticipated changes in fund mix in Quilter Investors where the proposition continues to evolve into a broader mix of investment strategies. Other revenue predominantly reflects revenue generated from the provision of advice within Quilter Financial Planning. Within the revenue generated by advice, mortgage and protection, recurring charges and fixed fees were at lower levels than the prior year due to lower markets and lower average adviser headcount. This decrease is offset with increased interest income earned on cash balances that support the capital and liquidity requirements of the business.
Total net fee revenue in High Net Worth was GBP212 million, in line with the prior year. This was principally driven by Other revenue in Quilter Cheviot, up GBP8 million (2021: GBPnil) due to interest received from clients' cash assets as a result of the rise in UK base rate. The Other revenue balance predominantly reflects the revenue generated from Quilter Private Client Advisers which was at similar levels to those of 2021. Net management fees decreased by 3% compared to the prior year which is aligned to a similar decrease in the average AuM. This also includes an expected reduction in commission revenue as the proportion of clients on fee-only propositions continues to increase.
Operating expenses*
Operating expenses decreased by GBP8 million to GBP472 million (2021: GBP480 million) as a result of continued cost discipline as we emerged from the 2020/2021 pandemic and faced into higher UK inflationary pressures and suppressed market conditions.
2022 2021
Operating expense split As a As a
(GBPm) percentage percentage
Continuing of Continuing of
operations revenues operations revenues
------------------------ ------------------------ ---------------------------------- ---------------------------------- ---------------------------------
Support staff costs 118 127
Operations 22 27
Technology 35 42
Property 31 31
Other base costs(1) 30 25
-------------------------- ------------------------ ---------------------------------- ---------------------------------- ---------------------------------
Sub-total base costs 236 39% 252 41%
Revenue-generating staff
base costs 92 15% 83 13%
Variable staff
compensation 75 12% 80 13%
Other variable costs(2) 46 8% 36 6%
-------------------------- ------------------------ ---------------------------------- ---------------------------------- ---------------------------------
Sub-total variable costs 213 35% 199 32%
Regulatory/professional
indemnity costs 23 4% 29 5%
Operating expenses* 472 78% 480 78%
-------------------------- ------------------------ ---------------------------------- ---------------------------------- ---------------------------------
(1) Other base costs includes depreciation and amortisation, audit fees,
shareholder costs, listed-related costs and governance.
(2) Other variable costs includes FNZ costs, development spend and corporate
functions variable costs.
Support staff costs decreased by 7% to GBP118 million (2021: GBP127 million) primarily driven by Business Simplification activities delivering sustainable benefits.
Operations costs decreased by 19% to GBP22 million (2021: GBP27 million) which reflects the move to the outsourced operations model within the Quilter Investment Platform for the full period in 2022, and a simpler operational base following the business divestments made in preceding years. FNZ costs are reflected in Other variable costs.
Technology costs decreased as we continue to rationalise our infrastructure following the sale of Quilter International. Further reductions are due to the elimination of dual running costs following the completion of the Platform Transformation Programme and ongoing Business Simplification activity.
Property costs remained stable at GBP31 million (2021: GBP31 million) driven by an increase in operating costs because of higher occupancy post pandemic, and the rising inflationary cost associated with utility usage which were offset by the property portfolio consolidation in 2022.
Other base costs increased by 20% to GBP30 million (2021: GBP25 million) driven by annualised depreciation charges post completion of property portfolio projects.
Revenue-generating staff base costs have increased by 11% to GBP92 million (2021: GBP83 million) reflecting the competitive environment in which we operate and as a consequence of continued investment in both Affluent and High Net Worth segments, which included increasing the number of discretionary managers and the build out of the combined advice and investment proposition in High Net Worth. In particular, the Group invested in the development of further business activities located in Dublin, Ireland within the High Net Worth segment.
Variable staff compensation decreased by 6% to GBP75 million (2021: GBP80 million) with reductions in share-based payment accruals reflecting global equity market falls and further reductions relating to the business performance against the backdrop of an increasingly volatile global economy which negatively impacted markets and investor sentiment throughout 2022.
Other variable costs increased by 28% to GBP46 million (2021: GBP36 million) principally due to operating expenses associated with the new platform and increased development spend following the deferral of change activity during the pandemic.
Regulatory and professional indemnity costs decreased by 21% to GBP23 million (2021: GBP29 million) largely driven by reduced FSCS levy costs to Quilter of GBP6 million as a result of an overall lower industry levy.
Taxation
The effective tax rate ("ETR") on adjusted profit before tax was 14% (2021: 9%). The Group's ETR is lower than the UK corporation tax rate of 19% principally due to utilisation of previously unrecognised deferred tax assets in relation to trade losses. 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 credit of GBP110 million for the year ended 31 December 2022, compared to a charge of GBP62 million for the prior year. The income tax credit in 2022 is largely due to adverse movements in the market values of unit-linked assets during the year compared to favourable movements in those assets during 2021. The income tax expense or credit can significantly vary 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 equity holders. An adjustment is made to adjusted profit before tax to remove these distortions, as explained further on page 10 and in note 5(b) of the condensed consolidated financial statements.
Optimisation
The Optimisation programme, which we announced in 2018, has now completed, achieving its target of annualised run-rate cost savings of GBP65 million. Total implementation costs since inception of GBP87 million are GBP4 million below the original GBP91 million estimate. In 2022, we successfully deployed the final delivery of our Group-wide general ledger system and further consolidated our data centre and data reporting solutions within the IT estate. No further costs are expected on this programme.
Business Simplification
Quilter's Business Simplification programme continues to track towards the proposed GBP45 million target announced at the Capital Markets Day in November 2021, with costs to achieve expected to be GBP55 million. In 2022, we completed the initial phase of simplification of our organisational structure following re-segmentation of the business. Further savings have been delivered across our Group functions with ongoing rationalisation of our property and technology estates being key contributors. To date the programme has delivered GBP23 million of annualised run-rate cost savings with an implementation cost of GBP17 million.
Lighthouse DB 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 Lighthouse transitioning to our systems and controls following our acquisition of Lighthouse.
A provision of GBP5 million (31 December 2021: GBP29 million) remains for the potential redress of British Steel Pension Scheme cases and other DB to DC pension transfer cases. This includes anticipated costs of legal and professional fees associated with the redress activity. The provision reflects (i) the outcome of the suitability review on a case-by-case basis for all cases identified as being in scope of the skilled person review relating to DB to DC pensions transfers by Lighthouse, (ii) redress calculations performed by the skilled person using the methodology designed following discussions and in collaboration with the FCA, as well as the offers made to customers who received unsuitable advice which caused them to sustain a loss, and (iii) an estimate for cases to be considered as part of the subsequent Group-managed past business review (covering an extension of the population of non-British Steel customers who were included in the skilled person review) with the current skilled person acting as reviewer. The provision decreased by GBP4 million during 2022, recognised as a reduction within expenses of the Group (and excluded from adjusted profit before tax), in order to reflect the results of the redress calculations performed under the skilled person review, and an estimate for cases to be considered as part of the past business review. During the year GBP4 million of additional legal, consulting, and other costs were incurred. Redress on British Steel Pension Scheme cases and other DB to DC pension transfer cases of GBP19 million and professional fees of GBP3 million were paid during the year. Payments are expected to be completed during 2023. Subject to FCA confirmation, we anticipate that the skilled person review will conclude during 2023. The FCA has agreed that the remaining review work described above (relating to certain Lighthouse non-British Steel customers who received DB pension transfer advice) can be conducted as a Group-managed past business review.
Professional indemnity insurance coverage in relation to claims in respect of legal liabilities arising in connection with Lighthouse cases has been confirmed and the proceeds received, contributing GBP12 million to the profit of the Group, which has also been excluded from adjusted profit before tax.
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 32 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 income statement, but is instead intended to provide additional comparability and understanding of the financial results.
Reconciliation of adjusted Y ear ended 31 December
profit before tax to IFRS 2021
profit after tax (GBPm)
Year ended Continuing Discontinued Total
31 December operations operations(1)
2022
Affluent 105 111 50 161
High Net Worth 45 56 - 56
Head Office (16) (29) - (29)
----------------------------------- ------------ ----------- -------------- -----
Adjusted profit before
tax* 134 138 50 188
Reallocation of Quilter
International costs - (10) 10 -
----------------------------------- ------------ ----------- -------------- -----
Adjusted profit before
tax after reallocation* 134 128 60 188
Adjusting for the following:
Impact of acquisition and
disposal-related accounting (42) (41) - (41)
Profit on business disposals(2) - 2 90 92
Business transformation
costs (30) (51) (19) (70)
Managed Separation costs - (2) - (2)
Other adjusting items (1) - - -
Finance costs (10) (10) - (10)
Policyholder tax adjustments 138 (7) - (7)
Customer remediation 12 (7) - (7)
Voluntary customer repayments (6) - - -
Exchange rate gain (ZAR/GBP) 4 - - -
--------------------------------- ------------ ----------- -------------- -----
Total adjusting items
before tax 65 (116) 71 (45)
----------------------------------- ------------ ----------- -------------- -----
Profit before tax attributable
to equity holders* 199 12 131 143
Tax attributable to policyholder
returns (134) 73 - 73
Income tax credit/(expense) 110 (62) - (62)
----------------------------------- ------------ ----------- -------------- -----
Profit after tax(3) 175 23 131 154
----------------------------------- ------------ ----------- -------------- -----
(1) 2021 discontinued operations include the results of Quilter International.
(2) In 2021, the discontinued operations profit on business disposals of GBP90 million resulted from the disposal of Quilter International. The GBP2 million continuing operations profit on business disposals resulted from the disposal of LighthouseCarrwood Limited. See note 4(a) for details.
(3) IFRS profit after tax.
The impact of acquisition and disposal-related accounting costs of GBP42 million (2021: GBP41 million) include amortisation of acquired intangible assets. These costs remained stable on those of the prior year.
Business transformation costs of GBP30 million were incurred in 2022 (2021: GBP70 million, of which GBP51 million was on continuing operations) consisting of:
-- Business Simplification costs of GBP17 million (2021: GBPnil). In 2022, the Group simplified its structures to support the two segments, Affluent and High Net Worth, with further work planned into 2024. During the year, we also delivered early Simplification benefits related to our property strategy and technology estate enabled by the completion of the Platform Transformation Programme and sale of Quilter International. To date the programme has delivered GBP23 million of annualised run-rate cost savings with an implementation cost of GBP17 million.
-- The Optimisation programme incurred costs of GBP6 million (2021: GBP22 million). The Optimisation programme commenced in 2018 to provide closer business integration, create central support, rationalise technology and reduce third-party spend and is now complete, delivering annualised run-rate cost savings of GBP65 million. This programme concluded during 2022.
-- Restructuring costs following the disposal of Quilter Life Assurance of GBP3 million in 2022 (2021: GBP1 million), including property exit costs after the conclusion of the Transitional Service Agreement with ReAssure.
-- The Platform Transformation Programme concluded in 2021 with lifetime costs of GBP202 million. No further costs were incurred in 2022 (2021: GBP28 million).
-- Investment in business costs of GBP4 million were incurred in 2022 (2021: GBPnil) as the Group continues to enable and support advisers, clients and improve productivity through better utilisation of technology.
Policyholder tax adjustments were a credit of GBP138 million for 2022 (2021: debit of GBP7 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 periods. 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 attributable to equity holders.
The customer remediation adjustment of GBP12 million of income in 2022 (2021: expense of GBP7 million) reflects the impact of the insurance proceeds received, final redress calculations performed compared with the provision estimated, as part of the ongoing skilled person review , and subsequent Group-managed past business review with the current skilled person acting as reviewer. Insurance proceeds in relation to claims in respect of legal liabilities arising in connection with Lighthouse DB to DC pension transfer advice have been received, contributing GBP12 million to the profit of the Group. These impacts are excluded from adjusted profit on the basis that the advice activities to which the charge and benefit relates was provided prior to the Group's acquisition of the business. Additionally, a provision release of GBP4 million was recognised in the current period (2021: net increase in provision of GBP7 million), with further costs recognised of GBP4 million in relation to the additional population to be reviewed as part of that Group-managed past business review , including associated professional costs. Further details of the provision are provided in note 16.
The voluntary customer repayments of GBP6 million (2021: GBPnil) relate to revenue previously recognised in respect of Final Plan Closure (FPC) receipts.
Foreign exchange movements for 2022 were GBP4 million (2021: GBPnil) and relate to foreign exchange gains on cash held in South African Rand in preparation for the capital return and Final Dividend payments in May 2022. Cash was converted to South African Rand upon announcement of the details of the capital return and dividend payment providing an economic hedge for the Group. The foreign exchange gain is equally offset by an amount recognised directly to retained earnings. See note 5(b)(viii) to the Group's condensed consolidated financial statements for further detail.
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 75% of adjusted profit after tax over 2022 (2021: 76%).
Review of financial position
Capital and liquidity
Solvency II
The Group's Solvency II surplus is GBP820 million at 31 December 2022 (31 December 2021: GBP1,030 million), representing a Solvency II ratio of 230% (31 December 2021: 275%). The Solvency II information for the year to 31 December 2022 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 GBP45 million (31 December 2021: GBP62 million).
At At
31 December 31 December
Group Solvency II capital (GBPm) 2022(1) 2021(2)
------------------------------------------------------- ----------- ---------------------
Own funds 1,451 1,617
Solvency capital requirement ("SCR") 631 587
Solvency II surplus 820 1,030
-------------------------------------------------------- ----------- ---------------------
Solvency II coverage ratio 230% 275%
-------------------------------------------------------- ----------- ---------------------
(1) Filing of annual regulatory reporting forms due
19 May 2023.
(2) As reported in the Group Solvency and Financial
Condition Report for the year ended 31 December 2021.
The 45 percentage point decrease in the Group Solvency II ratio from the 31 December 2021 position is primarily due to the capital return to shareholders of GBP328 million from the net surplus proceeds arising from the sale of Quilter International to Utmost Group, partly offset by the net profit recognised in the period.
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 (GBPm) 2022 2021
---------------------------------------- ------------- -------------------
Tier 1(1) 1,249 1,412
Tier 2(2) 202 205
----------------------------------------- ------------- -------------------
Total Group Solvency II own funds 1,451 1,617
----------------------------------------- ------------- -------------------
(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 GBP200 million in February
2018.
The Group SCR is covered by Tier 1 capital, which represents 198% of the Group SCR of GBP631 million. Tier 1 capital represents 86% of Group Solvency II own funds. Tier 2 capital represents 14% of Group Solvency II own funds and 25% of the Group surplus.
Dividend
The Board recommended a Final Dividend of 3.3 pence per share at a total cost of GBP45 million. Subject to shareholder approval at the 2023 Annual General Meeting, the recommended dividend will be paid on 22 May 2023 to shareholders on the UK and South African share registers on 21 April 2023 (the "Record date"). For shareholders on our South African share register, a Final Dividend of 72.78087 South African cents per share will be paid on 22 May 2023, using an exchange rate of 22.05481. This will bring the dividend for the full year to 4.5 pence per share (2021: 4.0 pence per share).
At our Capital Markets Day on 3 November 2021, we announced a revised Group dividend policy. The new policy sets a target pay-out range of 50% to 70% of post-tax, post-interest adjusted profits, revised from 40% to 60% of post-tax adjusted profits previously and applies for the 2022 financial year.
Share buyback programme
Early in 2022, the Company completed the share buyback programme that was initiated to return to shareholders the net surplus sale proceeds (after disposal costs) of GBP375 million from the disposal of Quilter Life Assurance. The share buyback programme was subject to staged regulatory and Board approvals and a total of 264.1 million shares were purchased and cancelled at an average price of 141.97 pence per share.
Capital Return (the "B Share Scheme" and the "Share Consolidation")
In March 2022, following the completion of the sale of Quilter International at the end of November 2021, the Company proposed to return the majority of the net surplus sale proceeds to shareholders through the issuance and redemption of a new class of redeemable B Shares followed by an Ordinary Share consolidation on a six new Ordinary Shares for seven old Ordinary Shares basis.
Following receipt of regulatory approval and shareholder approval at a General Meeting held on 12 May 2022, the B Shares, with nominal value of 20 pence per share, were issued to shareholders on 23 May 2022. The B Shares were subsequently redeemed on 24 May 2022 in the form of a payment of 20 pence per old Ordinary Share for shareholders on our UK share register. For shareholders on our South African share register, this equated to a return of 401.33300 South African cents per old Ordinary Share, using an exchange rate of 20.06665 South African cents to one pence, the average rate achieved on 7 and 8 March 2022 (the two days immediately preceding the announcement of the Capital Return). In total, GBP328 million of capital was returned to our shareholders through the B Share Scheme.
The six for seven Share Consolidation was executed on a contemporaneous basis with the effect of reducing the number of shares in issue to c.1.4 billion, a c.500 million decrease in the number of shares in issue since the Company was Listed on 25 June 2018. Following the Share Consolidation, the new Ordinary Shares have a nominal value of 8 1/6 pence.
Debt issue
In early January 2023, the Company announced plans to issue a new subordinated debt instrument in order to refinance its existing GBP200 million 4.478 percent Fixed Rate Reset Subordinated Notes due 2028 on their first call date of 28 February 2023. A new issue of GBP200 million 8.625 percent Fixed Rate Reset Subordinated Notes due April 2033 was completed on 18 January 2023.
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 are not directly comparable to those disclosed in the statutory statement of cash flows, which comprises flows from the entire Quilter plc Group including policyholder movements.
GBPm 2022 2021
-----
Opening cash at holding companies at 1 January 756 517
-------------------------------------------------------------- ----- ---------------------
Single Strategy business sale - warranty - (2)
Quilter International sale proceeds - 481
Return of capital to shareholders (328) -
Share repurchase (28) (197)
Cost of disposal (23) -
Dividends paid (78) (89)
-------------------------------------------------------------- ----- ---------------------
Net capital movements (457) 193
-------------------------------------------------------------- ----- ---------------------
Head Office costs, Business Simplification and Optimisation
programme funding (52) (74)
Interest received 4 -
Interest costs (9) (9)
-------------------------------------------------------------- ----- ---------------------
Net operational movements (57) (83)
-------------------------------------------------------------- ----- ---------------------
Cash remittances from subsidiaries 163 184
Net capital contributions, loan repayments and investments (15) (53) Other net movements 2 (2) -------------------------------------------------------------- ----- --------------------- Internal capital and strategic investments 150 129 -------------------------------------------------------------- ----- --------------------- Closing cash at holding companies at end of the year 392 756 -------------------------------------------------------------- ----- ---------------------
Net capital movements
Net capital movements in the year were an outflow of GBP457 million. This includes GBP328 million of capital returned to shareholders following the sale of Quilter International, GBP28 million relating to the share repurchase programme, dividend payments made to shareholders of GBP62 million in May 2022 and GBP16 million in September 2022, plus GBP23 million of costs relating to the disposal of Quilter International.
Net operational movements
Net operational movements were an outflow of GBP57 million for the year and include GBP52 million of corporate and transformation costs. Interest paid of GBP9 million relates to coupon payments on the Tier 2 bond and non-utilisation fees for the revolving credit facility, with GBP4 million interest received on money market funds and cash holdings.
Internal capital and strategic investments
The net inflow of GBP150 million is principally due to GBP163 million of cash remittances from the trading businesses, partially offset by GBP15 million of net capital contributions to support business operational activities.
Shareholder information
The Quilter Board has agreed to recommend to shareholders the payment of a Final Dividend of 3.3 pence per share. This will be considered at the Quilter plc Annual General Meeting which will be held on Thursday 18 May 2023. The final dividend will be paid on Monday, 22 May 2023 to shareholders on the UK and South African share registers on Friday, 21 April 2023.
Dividend Timetable
Dividend announcement in pounds sterling Wednesday, 8 March 2023
with South Africa ZAR Equivalent
Last day to trade cum dividend in Tuesday, 18 April 2023
South Africa
-------------------------
Shares trade ex-dividend in South Wednesday, 19 April 2023
Africa
-------------------------
Shares trade ex-dividend in the UK Thursday, 20 April 2023
-------------------------
Record Date in UK and South Africa Friday, 21 April 2023
-------------------------
Final Dividend payment date Monday, 22 May 2023
-------------------------
From the opening of trading on Wednesday 8 March 2023 until the close of business on Friday, 21 April 2023, 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 19 April 2023 and Friday 21 April 2023, both dates inclusive.
Additional information
For shareholders on our South African share register a dividend of 72.78087 South African cents per share will be paid on Monday 22 May 2023, based on an exchange rate of 22.05481 . Dividend Tax will be withheld at the rate of 20% from the amount of the gross dividend of 72.78087 South African cents per share paid to South African shareholders unless a shareholder qualifies for exemption. After the Dividend Tax has been withheld, the net dividend will be 58.22470 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.
Odd-lot Offer
Following our Odd-lot Offer in 2020, as part of our continued drive for greater efficiency and in line with our desire to act in the best interests of all our shareholders, we are considering undertaking another Odd-lot Offer. The potential Odd-lot Offer is subject to shareholder approval at the Company's Annual General Meeting and other requisite approvals. If approved, Quilter will make an offer to eligible shareholders (holders of less than 200 ordinary shares) to repurchase their shares at a modest premium to the market price. The Odd-lot Offer will reduce the complexity and cost to Quilter of managing our unusually large shareholder base and will allow shareholders holding small numbers of shares to dispose of their holdings in a timely and cost effective manner, without any dealing fees. Eligible shareholders can elect to retain their shareholding in Quilter plc.
Further information will be provided to eligible shareholders in due course.
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 2022
1. Key financial data
Of which
managed
by Quilter
AuMA* AuMA* AuM as
as at 31 Gross Net as at at
2022 FY gross flows, net flows & December flows* Flows* 31 December 31 December
AuMA (GBPbn), unaudited 2021 (GBPm) (GBPm) 2022 2022
--------- ------- ---------------- ------------
AFFLUENT SEGMENT
Q uilter channel 11.7 2,554 1,823 11.7 7.8
IFA channel 60.0 4,926 445 54.1 9.2
Non-core business 1.5 35 (75) 1.2 -
Sub-total (Quilter Platform) 73.2 7,515 2,193 67.0 17.0
---------------------------------- --------- ------- ---------------- ------------ ------------
Via other platforms
Quilter channel(1) 4.9 664 (187) 3.7 3.7
IFA channel 2.5 242 (621) 2.0 2.0
Non-core businesses 2.7 114 (260) 2.2 2.2
Sub-total 10.1 1,020 (1,068) 7.9 7.9
---------------------------------- --------- ------- ---------------- ------------ ------------
Total Affluent Segment 83.3 8,535 1,125 74.9 24.9
---------------------------------- --------- ------- ---------------- ------------ ------------
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 111.8 10,529 1,787 99.6 50.2
---------------------------------- --------- ------- ---------------- ------------ ------------
AuMA breakdown:
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
Quilter channel 19.1 3,661 1,989 17.8
IFA channel 88.5 6,719 133 78.4
Non-core business 4.2 149 (335) 3.4
---------------------------------- --------- ------- ---------------- ------------ ------------
(1) Inter-segment dual assets reflect funds sold by Quilter Cheviot
and managed by Quilter Investors and the Quilter Cheviot bespoke managed
portfolio services solution available to advisers on the Quilter Investment
Platform. This is excluded from total AuMA to ensure no double count
takes place.
Of which
managed
by Quilter
AuMA* AuMA* AuM as
as at 31 Gross Net as at at
2021 FY gross flows, net flows & December flows* Flows* 31 December 31 December
AuMA (GBPbn), unaudited 2020 (GBPm) (GBPm) 2021 2021
--------- ------- ---------------- ------------ ------------
AFFLUENT SEGMENT
Q uilter channel 9.6 2,606 1,830 11.7 8.0
IFA channel 52.8 6,333 1,690 60.0 9.3
Non-core business 1.4 103 (24) 1.5 -
Sub-total (Quilter Platform) 63.8 9,042 3,496 73.2 17.3
----------------------------------- --------- ------- ---------------- ------------ ------------
Via other platforms
Quilter channel(1) 4.9 950 195 4.9 4.9
IFA channel 2.4 312 (451) 2.5 2.5
Non-core businesses 2.8 175 (340) 2.7 2.7
Sub-total 10.1 1,437 (596) 10.1 10.1
----------------------------------- --------- ------- ---------------- ------------ ------------
Total Affluent Segment 73.9 10,479 2,900 83.3 27.4
----------------------------------- --------- ------- ---------------- ------------ ------------
HIGH NET WORTH SEGMENT
Quilter channel 2.1 462 360 2.5 2.5
IFA channel incl. Direct 23.2 2,234 699 26.2 26.2
Total High Net Worth Segment 25.3 2,696 1,059 28.7 28.7
----------------------------------- --------- ------- ---------------- ------------ ------------
Inter-segment dual assets (1) (0.2) - 8 (0.2) (0.1)
Quilter plc 99.0 13,175 3,967 111.8 56.0
----------------------------------- --------- ------- ---------------- ------------ ------------
AuMA breakdown:
Affluent administered only 49.2 6,030 1,793 55.9
Affluent managed and administered 14.6 3,012 1,703 17.3
Affluent external platform 10.1 1,437 (596) 10.1
Quilter channel 16.4 4,018 2,385 19.1
IFA channel 78.4 8,879 1,946 88.5
Non-core business 4.2 278 (364) 4.2
----------------------------------- --------- ------- ---------------- ------------ ------------
(1) Inter-segment dual assets reflect funds sold by Quilter Cheviot and managed by Quilter Investors and the Quilter Cheviot bespoke managed portfolio services solution available to advisers on the Quilter Investment Platform. This is excluded from total AuMA to ensure no double count takes place.
Estimated asset allocation (%) 2022 2021
Fund profile by investment type, unaudited Total
client Total client
AuMA AuMA
------------------------------------------- ------- ------------
Fixed interest 25% 24%
Equities 65% 67%
Cash 7% 4%
Property and alternatives 3% 5%
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 periods indicated.
Key financial highlights 2022 2021 % change ==================================== ====================== ==================== ====================== Affluent Administered Net management fees (GBPm)* 181 184 (2%) Other revenue (GBPm)* 8 5 60% ------------------------------------ ---------------------- -------------------- ---------------------- Total net fee revenue 189 189 - ------------------------------------ ---------------------- -------------------- ---------------------- Net inflows (GBPbn)* 2.2 3.5 (37%) Closing AuM (GBPbn)* 67.0 73.2 (8%) Average AuM (GBPbn)* 68.3 68.6 - Revenue margin (bps)* 27 27 - Asset retention (%)* 93 91 2 ppt ==================================== ====================== ==================== ====================== Affluent Managed Net management fees (GBPm)* 119 127 6% Other revenue (GBPm)* 2 - - ------------------------------------ ---------------------- -------------------- ---------------------- Total net fee revenue 121 127 (5%) ------------------------------------ ---------------------- -------------------- ---------------------- Net inflows (GBPbn)* - 0.9 - Closing AuM (GBPbn)* 24.9 27.4 (9%) Average AuM (GBPbn)* 25.3 26.1 (3%) Revenue margin (bps)* 47 49 (2) bp Asset retention (%)* 87 85 2 ppt ==================================== ====================== ==================== ====================== Advice (Quilter Financial Planning) Net management fees (GBPm)* - - - Other revenue (GBPm)* 77 90 (14%) ------------------------------------ ---------------------- -------------------- ---------------------- Total net fee revenue* 77 90 (14%) ------------------------------------ ---------------------- -------------------- ---------------------- RFPs (number) 1,442 1,563 (8%) ------------------------------------ ---------------------- -------------------- ----------------------
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 periods indicated.
Key financial highlights 2022 2021 % change ========================================= ==== ==== ===================== Quilter Cheviot Net management fees (GBPm)* 183 189 (3%) Other revenue (GBPm)* 8 - - ----------------------------------------- ---- ---- --------------------- Total net fee revenue 191 189 1% ----------------------------------------- ---- ---- --------------------- Net inflows (GBPbn)* 0.9 1.1 (18%) Closing AuM (GBPbn)* 25.5 28.7 (11%) Average AuM (GBPbn)* 26.4 26.8 (1%) Revenue margin (bps)* 69 71 (2) bps Asset retention (%)* 95% 94% 1 ppts Investment managers (#)* 179 170 5% ========================================= ==== ==== ===================== Advice (Quilter Private Client Advisers) Net management fees (GBPm)* - - - Other revenue (GBPm)* 21 23 (9%) ----------------------------------------- ---- ---- --------------------- Total net fee revenue* 21 23 (9%) ----------------------------------------- ---- ---- --------------------- QPCA RFPs (number) 60 60 - ----------------------------------------- ---- ---- ---------------------
Financial performance by segment
Financial performance
from continuing operations High Head Continuing
2022 (GBPm) Affluent Net Worth Office operations
----------------------------- --------- ----------- -------- ------------
Net management fee* 300 183 - 483
Other revenue* 87 29 7 123
------------------------------- --------- ----------- -------- ------------
Total net fee 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 69 47
------------------------------- --------- ----------- -------- ------------
Financial performance
from continuing operations High Net Continuing
2021 (GBPm) Affluent Worth Head Office operations
----------------------------- --------- --------- ------------ ------------
Net management fee* 311 189 - 500
Other revenue* 95 23 - 118
------------------------------- --------- --------- ------------ ------------
Total net fee revenue* 406 212 - 618
Operating expenses* (295) (156) (29) (480)
------------------------------- --------- --------- ------------ ------------
Adjusted profit before
tax*(1) 111 56 (29) 138
Tax (13)
------------
Adjusted profit after
tax* 125
--------- --------- ------------
Operating margin (%)* 27 26 22
Revenue margin (bps)* 40 71 48
------------------------------- --------- --------- ------------ ------------
(1) Total adjusted profit before tax including Quilter International for 2021: GBP50 million . See note 5(a) to the condensed consolidated financial statements.
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 income statement, statement of financial position and statement of cash flows, which are presented on pages 23 to 27.
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 32 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 income statement,
but is instead intended to provide
additional comparability and understanding
of the financial results.
Adjusted profit before tax is presented
for the continuing Group (excluding
Quilter International), for discontinued
operations (Quilter International),
and for the total Group for continuing
and discontinued operations.
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
7.
A reconciliation from each line item
on the IFRS income statement to adjusted
profit before tax is provided in
note 5(c) to the condensed consolidated
financial statements on page 35.
----------------------------------------------
Adjusted profit after tax Adjusted profit after tax represents
the post-tax equivalent of the adjusted
profit before tax measure, as defined
above.
----------------------------------------------
Adjusted profit before tax after Adjusted profit before tax after
reallocation reallocation reflects adjusted profit
before tax including certain costs
within continuing operations relating
to Quilter International that did
not transfer to Utmost Group on completion
of the sale, as detailed above.
A reconciliation from each line item
on the IFRS income statement to adjusted
profit before tax after reallocation
is provided in note 5(c) to the condensed
consolidated financial statements
on page 35.
----------------------------------------------
IFRS profit before tax attributable IFRS profit before tax attributable
to equity holders to equity holders represents the
profit after policyholder tax ("tax
attributable to policyholder returns")
but before shareholder tax (" tax
attributable to equity holders").
The tax charge for the Group's UK
life insurance entity, Quilter Life
& Pensions Limited, comprises policyholder
tax and shareholder tax. Policyholder
tax is regarded economically as a
pre-tax cost to the Group, in that
it is based on the return on assets
held by the Group's life insurance
entity to match against related unit-linked
liabilities in respect of clients'
policies, and for which the Company
charges fees to clients. As such,
policyholder tax can be a charge
or credit in any period depending
on underlying market movements on
those assets held to cover linked
liabilities.
Shareholder tax is the remaining
tax after deducting policyholder
tax and is more reflective of the
profitability of the entity.
This metric is included on the face
of the Group's income statement on
page 32 and is included in the adjusted
profit before tax to IFRS profit
after tax reconciliation in note
5(a) to the condensed consolidated
financial statements.
----------------------------------------------
IFRS profit before tax from continuing This profit metric is calculated
operations (excluding amortisation, using the Group's IFRS profit before
policyholder tax adjustments, business tax, from continuing operations and
disposal impacts and other one-off is adjusted to exclude amortisation
items) of intangible assets, policyholder
tax adjustments, business disposal
impacts and other one-off items as
disclosed in the reconciliation in
the Group's Annual Report. This metric
is used as the basis for remuneration,
which is explained in the Remuneration
report in the Group's Annual Report.
----------------------------------------------
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 7
of the Financial review.
----------------------------------------------
Operating margin Operating margin represents adjusted
profit before tax divided by total
net fee revenue.
Management use this APM as this is
an efficiency measure that reflects
the percentage of total net fee 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 7.
----------------------------------------------
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 page 7 and disclosed
by segment in the supplementary information
on pages 15 to 16.
----------------------------------------------
Net flows Net flows is 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 fee revenue. Net flows
is referred to throughout this document,
with a separate section in the Financial
review on page 7 and is presented
by business and segment in the supplementary
information on pages 15 to 16.
----------------------------------------------
Assets under Management and Administration AuMA represents the total market
("AuMA") 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 7
and is presented by business and
segment in the supplementary information
on pages 15 to 16.
----------------------------------------------
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 fee revenue Total net fee revenue represents
revenue earned from net management
fees and other revenue listed below
and is a key input into the Group's
operating margin.
Further information on total net
fee revenue is provided on page 7
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, 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 fee revenue
and is a key input into the Group's
operating margin.
Further information on net management
fees is provided on page 8 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, non-linked Protect policies,
adviser initial fees and adviser
fees linked to AuMA in Quilter Financial
Planning (recurring fees). Other
revenue is a part of total net fee
revenue, which is included in the
calculation of the Group's operating
margin.
Further information on other revenue
is provided on page 8 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 fee 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 8 of the Financial
review.
----------------------------------------------
Cash generation Cash generation is calculated by
removing non-cash generative items
from adjusted profit before 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
11 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 6 , 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 6.
----------------------------------------------
Gross flows per adviser Gross flows per adviser is a measure
of the value created by our Quilter
distribution channel and is an indicator
of the success of our multi-channel
business model. Gross flows per adviser
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.
Gross flows per adviser is provided
on page 6.
----------------------------------------------
Return on Equity ("RoE") Return on equity calculates how many
pounds of profit the Group generates
from continuing operations with each
pound of shareholder equity. This
measure is calculated as adjusted
profit after tax divided by average
equity. Equity is adjusted for the
impact of discontinued operations,
if applicable .
Return on equity is provided on page
6.
----------------------------------------------
Adjusted diluted earnings per share Adjusted diluted earnings per share
represents the adjusted profit earnings
per share, calculated as adjusted
profit after tax divided by the weighted
average number of shares. Refer to
note 8 in the condensed consolidated
financial statements.
A continuing and discontinued view
of diluted earnings per share has
also been presented, 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
Limited Listing Requirements, determined
by reference to the South African
Institute of Chartered Accountants'
circular 1/2021 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.
----------------------------------------------
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