sanne group plc full year results...2019/12/31 · £'m gross debt balance 129.6 85.4 gross...

>> Sanne Group plc

19 March 2020

Full Year ResultsYear ended 31 December 2019

title style> Caution Statement

THIS PRESENTATION HAS BEEN PREPARED SOLELY FOR THE STATED PURPOSE AND THE INFORMATION CONTAINED IN IT, IS STRICTLY CONFIDENTIAL

THE CONTENT OF THIS PRESENTATION HAS NOT BEEN APPROVED BY AN AUTHORISED PERSON AND NO RELIANCE SHOULD BE PLACED ON THE PRESENTATION BY ANY PERSON ENGAGING IN ANY INVESTMENT ACTIVITY. IT DOES NOT CONSTITUTE OR FORM PART OF, AND SHOULD NOT BE CONSTRUED AS, AN OFFER OR INVITATION TO SELL OR OTHER PROMOTION OF ANY SECURITIES AND THE COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO PUBLISH ANY UPDATES OR REVISIONS TO IT. NO STATEMENT IN THIS PRESENTATION IS INTENDED TO BE A PROFIT FORECAST.

THE PRESENTATION MAY CONTAIN OTHER STATEMENTS CONTAINING "FORWARD-LOOKING STATEMENTS" WITH RESPECT TO CERTAIN OF THE COMPANY'S PLANS AND ITS CURRENT GOALS AND EXPECTATIONS RELATING TO ITS FUTURE FINANCIAL CONDITION, PERFORMANCE, STRATEGIC INITIATIVES, OBJECTIVES AND RESULTS. FORWARD-LOOKING STATEMENTS SOMETIMES USE WORDS SUCH AS "AIM", "ANTICIPATE", "TARGET", "EXPECT", "ESTIMATE", "INTEND", "PLAN", "GOAL", "BELIEVE", "SEEK", "MAY", "COULD", "OUTLOOK" OR OTHER WORDS OF SIMILAR MEANING. BY THEIR NATURE, ALL FORWARD-LOOKING STATEMENTS INVOLVE RISK AND UNCERTAINTY BECAUSE THEY RELATE TO FUTURE EVENTS AND CIRCUMSTANCES WHICH ARE BEYOND THE CONTROL OF THE COMPANY. AS A RESULT, THE ACTUAL FUTURE FINANCIAL CONDITION, PERFORMANCE AND RESULTS OF THE COMPANY MAY DIFFER MATERIALLY FROM THE PLANS, GOALS AND EXPECTATIONS SET FORTH IN ANY FORWARD-LOOKING STATEMENTS. ANY FORWARD-LOOKING STATEMENTS MADE HEREIN SPEAK ONLY AS OF THE DATE THEY ARE MADE.

FOR THE PURPOSE OF THIS NOTICE, “PRESENTATION” MEANS THIS DOCUMENT, ANY ORAL PRESENTATION, ANY QUESTION AND ANSWER SESSION AND ANY OTHER WRITTEN OR ORAL MATERIAL DISCUSSED OR DISTRIBUTED DURING THE PRESENTATION MEETING.

Forward looking statements

19 March 2020/ Sanne Group plc - 2019 Full Year Results /

title style> Agenda

1. 2019 Highlights

2. Strategy Overview

3. Financial review

4. Operational review and Outlook

5. Q&A

Appendix

2019 Full Year Results


James IrelandChief Financial Officer

Martin SchnaierChief Executive Officer

title style> 2019 Highlights

Strong double digit revenue growth

H2 margin improvement saw full year margin in line with revised guidance

Record-equalling new business wins

Underlying cash flow generation in excess of guidance

Strategic partnership with Colmore and acquisition of Inbhear

Successful conclusion to strategic review of Jersey Private Client business


Investment in and enhancements to our platform

New offices added to our jurisdictional footprint

title style>

Strategy overviewMartin Schnaier


title style> Our marketplaceAttractive structural growth drivers

GLOBALISATION

Asset managers have an increasing international focus for investors and investments

Fund structures increasingly multi-jurisdictional

Scaled presence and expertise across jurisdictions and products required

CONSOLIDATION

Highly fragmented industry

Opportunity to accelerate growth

Disciplined approach drives quality

CURRENT MARKET DYNAMICS

1 DEMAND FOR ALTERNATIVESIncreasing number of funds to services

2 INCREASING REGULATIONMore services are needed per fund

AIFMD

FATCA

CRS

DODD-FRANK

MIFID II

BEPS

GDPR

AMLD

OUTSOURCING TREND3Increased demand for outsourced expertise


title style> Our position in the market

▪ Commoditised service providers▪ High-volume, low touch service▪ Limited ability to provide bespoke services

▪ High-touch, tailored service offering▪ Specialist product focus▪ Professional services model

▪ Wide ranging services provided ▪ Functional approach for scale ▪ Limited ability to provide tailored service


Corporate and Trust

service providers

Large custodian

banks

Hedge specialists

Closed-ended fund administration and outsourced business services specialists

Local excellence on a global platform

title style> Resilient business model

LONG -TERM RECURRING REVENUES

7-12 year contracts

Negligible mid-life attrition in structures

Inflation linked contracts

1

PROFESSIONAL SERVICES PROFIT MARG INS

2

3 HIGHLY CASH G ENERATIVE

c. 30% EBITDA margin

Strong operational cash generation > 90% conversion

Capital light business


title style> SANNE’s strategy for growth

D I F F E R E N T I AT E D, B E S T - I N - C L A S S S E R V I C E S

S U C C E S S F U L B U S I N E S S D E V E LO P M E N T

Quality people and professional training

Accredited business processes

New capabilities and technology offering

Roll out full service offering at scale to each office

Ensure one-stop-shop solution for clients

E X PA N D F O OT P R I N T

I N V E S T I N P L AT F O R M

Resilient and scalable platform

Enhancing technology capabilities

Add new locations to support client demand

Access new clients in new markets

I N O R G A N I C G R O W T H

Disciplined and thoughtful approach to M&A

1 4

5

6

E X PA N DS E R V I C E S A C R O S SJ U R I S D I C T I O N S

Cross-selling to existing clients

New clients wins

2

3


title style>

2019 Financial ReviewJames Ireland


title style> Key financial highlights

TOTAL G ROUP REVENUE

FY 2019

£165.4mFY 2018: £143.8m

UNDERLYING FREE CASH FLOW AT T. TO EQUITY HOLDERS

FY 2019

£35.1mFY 2018: £23.0m

TOTAL G ROUP UNDERLYING OPERATING PROFIT

FY 2019

£46.7mFY 2018: £44.4m

TOTAL G ROUP UNDERLYING DILUTED EPS

FY 2019

23.6pFY 2018: 24.1p

NEW BUSINESS WINS

FY 2019

£24.5mFY 2018: £24.5m

DIVIDEND PER SHARE

FY 2019

14.1pFY 2018: 13.8p

Note: KPI’s for “Total Group” includes results from both continuing and discontinued operations


title style> Total Group Income StatementFor the year ending 31 December 2019

KEY HIGHLIGHTS

Total Group*: growth 14.7%; organic growth 12.1%

Continuing Group*: growth 16.2%; organic growth 13.5%

Significant H2 margin improvement

Non-underlying items increased by:

- Earn out payments charged to Income Statement

- SA intangible impairment

Interest cost reflects IFRS 16 costs

Underlying effective tax rate better at 19%

Full year dividend of 14.1p per share

2019 2018£'m £'m % change

Revenue 165.4 143.0 15.7%Gross profit 96.5 88.3 9.3%Gross profit margin 58.4% 61.8% -343bps

Underlying overhead expenses (49.8) (43.9)Underlying operating profit 46.7 44.4 5.0%Underlying operating profit margin 28.2% 31.1% -286bps

Non-underlying items:Amortisation, acquisition and integration costs (17.1) (16.5)Acquisition related earn-outs and share based payments (8.1) (2.4)Intangibles impairment (2.4) 0.0Regulatory settlement and other (1.0) 0.0

Operating profit 18.0 25.6

Underlying interest cost and other gains and losses (4.3) (1.9)Non-underlying interest cost and other gains and losses (0.5) 0.0

Profit before tax 13.3 23.7

Underlying tax (8.0) (7.7)Non-underlying tax 3.6 2.2

Profit for the year 8.9 18.2

Underlying diluted earning per share 23.6 24.2

Dividend per share 14.1 13.8

Note: Income statement presented is for “Total Group” and includes results from both continuing and discontinued operations


*At constant currency

title style> 2019 Revenue bridgeStrong organic revenue growth

£130m

£135m

£140m

£145m

£150m

£155m

£160m

£165m

£170m

2018 EMEA (organic)

APM NA CI (continuing)

EMEA (inorganic)

CI (discontinued)

2019

£143.0m

£165.4m

+£8.8m

+£3.8m

+£5.2m

+£1.9m

+£3.7m -£1.0m

Organic growth from continuing operations 13.5%*

* At constant currency


title style> Margin bridgeSecond half margin recovery

20%

22%

24%

26%

28%

30%

32%

2018

31.1% -1.7%

-2.2%

-1.5%

0.6% 26.4%

+2.2% -0.4%

Overhead spend

increase

EMEA / CI efficiency

decline

Increase growth

initiatives

Other items

H1 2019

Overhead improvements

Other items

2019

28.2%

KEY HIGHLIGHTS

Second half recovery driven by overheads improvement

Realignment of revenues across EMEA and CI during H2 to drive gross profit improvement going forward


title style> Cash flow statement and uses of cashFor the year ending 31 December 2019

OPERATING PROFIT TO FREE CASH FLOW 2019 USES OF CASH FLOW

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cash sources Cash uses

£39m

£23m

£4m

£20m

£38m

2019 2018

£'m £'m % change

Underlying total group operating profit 46.7 44.4

Depreciation (equipment and IFRS 16) 8.2 1.9

Other items 0.4 4.3

Change in working capital 3.2 (14.4)

IFRS 16 lease cost cash charge (6.4) 0.0

Non-underlying items in accruals (2.9) 0.0

Underlying total group operating cash flows 49.3 36.2 35.9%

Underlying cash conversion 105% 82%

Capital expenditure (Equipment and software) (4.2) (4.2)

Tax charge (7.6) (7.3)

Net finance cost (2.3) (1.7)

Underlying free cash flow attributable to equity holders 35.1 23.0 52.9%

Net movement in debt

Free cash flow before capital expenditure

Acquisition related

DividendsCapex


title style> Working capital and indebtednessFor the year ending 31 December 2019

WORKING CAPITAL POSIT ION NET INDEBTEDNESS

2019 2018

£'m £'m % change

Contract assets - Continuing operations 6.5 6.6

Trade receivables - Continuing operations 42.6 40.3

Contract liabilities - Continuing operations (17.6) (16.1)

Net working capital - Continuing operations 31.4 30.8 2.0%

- as a % of last 12 months continuing revenues 19.7% 22.6%

Net working capital - Discontinued operations 2.4 2.2 7.4%- as a % of last 12 months Discontinued

revenues 41.9% 33.1%


2019 2018

£'m £'m

Gross debt balance 129.6 85.4

Gross cash balances (51.5) (32.4)

Net indebtedness 78.1 53.0

Restricted cash balances 31 December 2019 10.1 8.9

Total group underlying operating profit 46.7 44.4

Non-IFRS 16 depreciation 2.9 1.9

IFRS 16 adjustment 5.3 -

Recognise leases per IAS17 (6.5) -

Total Group pre-IFRS 16 EBITDA 48.4 46.4

Net debt to pre-IFRS 16 EBITDA 1.6x 1.1x

Restricted cash adjusted net debt to pre-IFRS 16 EBITDA 1.8x 1.3x

title style> COVID-19 UpdateResilient business model despite market uncertainty

▪ APAC offices successfully under BCP since January 2020. Minimal disruption to date

▪ Most offices now operating under full or rotating remote working. No issues to date, but early days

▪ Platform and systems operating well - continue to provide service as usual so far

▪ No significant impact to client activities across our APAC offices

▪ Core activities for structures continue as usual

▪ No impact yet seen on client activity across the rest of the Group, but it remains very early in client enacting their own remote working processes.

▪ SANNE remains well capitalised with healthy liquid resources

▪ Low levels of leverage

▪ Long-term contracts should underpin a resilient performance

▪ Risk of a near-term slow in new business and debtor collections

▪ Broader implications of a global recession on Alternatives industry

ONGOING OPERATIONS

AND SERVICES

CLIENT ACTIVITY

BUSINESS RESILIENCE

FUTURE ASSESSMENT


title style> Guidance for continuing businessNear-term guidance for 2020

Revenue Growth

Underlying operating profit margin excl. Private Client

Underlying effective tax rate

Underlying operating cash conversion

Capital Expenditure

Double digit

28-30%

19-21%

> 90%

c. 3% of Group revenues


title style>

Operational review and OutlookMartin Schnaier


title style> Segmental performance

£30.4m

2018 2019

£

REV

ENU

E

Strong revenue growth in region of 27.6% with organic growth of 20.0%

Continued strong demand for our services and new fund creation in closed-ended alternatives markets, plus good progress made in broadening open-ended services into Dublin

AgenSynd and LIS acquisitions performing well

EUROPE, MIDDLE EAST and AFRICA

2018 2019

£ G

RO

SS P

RO

FIT

£29.6m

£48.1m

£60.5m

£33.7m

£42.7m

£

REV

ENU

E

£43.6m

Good organic growth across the closed-ended alternatives products

Private Client business declining by 15.2% in the year

Successful completion of strategic review and subsequent disposal of private client business

2018 2019

CHANNEL ISLANDS

2018 2019

£ G

RO

SS P

RO

FIT

£26.1m£25.7m

Regional breakdown at a glance


Discontinued Private Client Gross profit

Discontinued Private Client Revenue

£6.7m£5.7m

£4.0m£3.7m

title style> Segmental performanceRegional breakdown at a glance

£30.4m

2018 2019

£

REV

ENU

E

£34.2m

Another year of strong performance from Asia-Pacific locations

New offices opened in Tokyo and Mumbai

Good level of new business wins in Mauritius in a year of anticipated elevated end-of-life attrition

ASIA -PACIFIC and MAURITIUS

2018 2019

£ G

RO

SS P

RO

FIT

MA

RG

IN

£23.1m£22.1m

2018 2019

£

REV

ENU

E

Strong growth for the North America region at 18.7%

Good pipeline opportunities being seen from first-time outsourcers

Establishment of new San Diego office

NORTH AMERICA

2018 2019

£ G

RO

SS P

RO

FIT

MA

RG

IN

£13.4m

£21.7m£26.9m

£10.8m


title style> Acquisitions and strategic partnerships

D E A L S I G N E D D E A L C O M P L E T I O N E X P E C T E D

Q4 2019 Q2 2020

D E A L B E N E F I T S TO S A N N E

Enhances global footprint with presence in Cayman Islands and additional team in Dublin

S T R AT EG I C PA R T N E RS H I P E S TA B L I S H E D

September 2019N U M B E R O F P EO P L E

80 expertsacross UK, US and Switzerland

P R O G R E S S M A D E TO DAT E

Strategic relationship enables SANNE to access Colmore’s powerful Limited Partner technology, Helios4GP being developed exclusively for SANNE’s client base

Deploying Colmore’s technology within SANNE’s alternative assets business will give its clients access to market-leading analytics and reporting tools


P R O G E S S M A D E TO DAT E

Since signing we have received approval from the Cayman Islands regulator and expected approval from the Irish regulator in Q2 2020

title style> US acquisition in 2016How FLSV Fund Administration Services LLC added value to the Group

£18.5m£19.1m

£21.7m

£26.9m

2016 2017 2018 2019

£

REV

ENU

E

DEAL HEADLINES

Acquired in November 2016

Price paid £57.8m (c.12 x run-rate EBITDA)

75 staff in New York and 40 staff in Belgrade

RATIONALE

Establish presence in North America, the world’s largest alternative asset market

Alignment of cultures and approach to client service quality

Enhancing Group’s platform through technology

EFFECTS OF THE TRANSACTION

Double digit ROIC and consistently ahead of acquisition case

Successful capture of new American clients in Europe from cross-sell

Significant reverse synergies delivered for the Group by leveraging Belgrade office as global IT hub

F INANCIAL PERFORMANCE


title style> 2019 Strategic developments

D I F F E R E N T I AT E D, B E S T - I N - C L A S S S E R V I C E S

Invested in Product Development team

Upgraded legacy policies and procedures

Ongoing development of Helios4GP

Real Asset services rolled out in North America and Spain

Credit fund services launched in Singapore

Closed-ended funds offering in South Africa

E X PA N D F O O T P R I N T

I N V E S T I N P L AT F O R M

I N O R G A N I C G R O W T H

1

2

3

4

5

6

D E V E LO P E DS E R V I C E S A C R O S SF O OT P R I N T

Invested in Business Development team

Successful cross-sell through existing client base

New offices established in Tokyo, Mumbai and San Diego

Relocation from Rotterdam to Amsterdam

Expanded into Cayman through Inbhear

Enhanced existing policies and procedures

First ever Chief Technology Officer

Investment in offices and people

Investment in Colmore

Acquisition of Inbhear

Healthy pipeline of potential opportunities


S U C C E S S F U L B U S I N E S S D E V E LO P M E N T

title style> Outlook

Good momentum in Alternatives and Corporate businesses positions SANNE well for future growth in 2020

Robust alternatives market backdrop with anticipated growth in addressable markets

Healthy pipeline of acquisition opportunities

Business performing well under business continuity measures and impact of ongoing COVID-19 outbreak assessed daily

Board expects to deliver a resilient performance in 2020 and remains confident in the medium and long-term prospects for the Group

Continue to improve operational efficiency & technology in the Group


Expected healthy level of cash generation as per guidance

title style>

Q&A


>> Appendix

title style> New business growth overviewConsistent strong new business wins seen in H2 2019

£13.8m

£20.9m

£5.2m

£13.0m

£24.5m

£7.8m

£7.1m

£6.7m

£10.9m

£10.0m£11.5m

H1 Annualised Sales H2 Annualised sales

2015 2016 2017 2018 2019

£13.0m

£16.0m

£24.5m

£8.5m

New business wins in FY 2019 of £24.5m (FY 2018: £24.5m) which demonstrates consistently strong new business wins year-on-year

Some large mandates from 2019 will be realised in Jan 2020


title style> Underlying Continuing Group Income StatementFor the year ending 31 December 2019

KEY NOTES

Presented for underlying continuing Group

Excludes some cost allocation that will be removed ex-Private Client

Presents an alternative base position models moving forward

Margin slightly lower in near term without Private Client


2019 2018

£'m £'m % change

Revenue 159.7 136.2 17.2%

Gross profit 92.5 84.0 10.2%

Gross profit margin 57.9% 61.6% -371bps

Underlying overhead expenses (48.2) (42.5)

Underlying operating profit 44.3 41.4 7.0%

Underlying operating profit margin 27.8% 30.4% -265bps

Non-underlying items (28.7) (18.9)

Operating profit 15.6 22.5

Underlying interest cost and other gains and losses (4.0) (1.6)

Underlying profit before tax 40.4 39.8

Non-underlying interest cost and other gains and losses (0.5) 0.0

Profit before tax 11.2 20.9

Underlying tax (7.8) (7.5)

Profit for the year 32.6 32.3

Underlying diluted earning per share 22.3 22.4

title style> Impact of Private Client business disposal

2019 2018£'m £'m % change

Revenue - Discontinued operations 5.7 6.8 -15.2%

Gross profit - Discontinued operations 3.7 4.0

Operating profit - Discontinued operations 3.7 4.0 -8.6%

Representative allocation of direct costs (0.3) (0.3)Representative allocation of overheads (1.0) (0.7)Underlying operating profit - discontinued operations 2.4 3.0 -21.9%

Tax charge - Discontinued operations (0.4) (0.4)Profit after tax - Discontinued operations 3.3 3.6 -8.6%

Underlying interest charge adjustment (0.3) (0.2)Adjustment to tax charge (at Jersey 10% rate) 0.2 0.1Underlying profit after tax - Discontinued operations 2.2 2.9 -23.4%

Underlying DEPS - Discontinued Operations 1.3p 1.7pAs a % of total group underlying DEPS 5.4% 7.2%

KEY HIG HLIGHTS

Agreement signed in March 2020

Completion expected during 2020

Up to £12m cash consideration

Discontinued results adjusted from IFRS 5 presentation to give more realistic impact of removing business


title style> What we do for clients globally

EXAMPLE OF SERVICES

Fund and corporate administration

Fiduciary services

Accounting and reporting services

Asset servicing

Loan agency and servicing

AIFMD Depositary

AIFMD Management Company services


C L O S E D - E N D E D A L T E R N A T I V E

A S S E T S E R V I C E S

Carried interest administration

Company secretary / governance support

Compliance monitoring

Transaction management

Regulatory reporting services

Cash and FX management services

Data analytics and ESG reporting

Note: Representative of continuing operations only

title style>

Information on SANNE and details of its regulators can be accessed via sannegroup.com

MAKING THE DIFFERENCE


sanne group plc full year results...2019/12/31 · £'m gross debt balance 129.6 85.4 gross...

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