Half year 2023 results summary
Benefiting from a stronger business model
- Results in H1 2023 evidence the benefit of our diversification strategy with a full six months of ii (H1 2022: one month) making a positive contribution, offset by the impact of continued challenging market conditions and net outflows from the 'risk-off' environment.
- Net operating revenue was 4% higher at £721m, with growth in Adviser and Personal offsetting lower revenue in Investments.
- Adjusted operating profit was up 10% to £127m.
- Cost/income ratio improved marginally to 82% (H1 2022: 83%) with adjusted operating expenses up by 2% to £594m due mainly to the inclusion of ii.
- IFRS loss before tax of £169m (H1 2022: loss £326m1), largely driven by the fall in market value of our listed stakes.
- AUMA was £496bn (FY 2022: £500bn), down 1% reflecting the impact of net outflows.
- Net outflows excluding liquidity of £4.4bn with positive flows of £1.9bn in ii offset by outflows in Investments and Adviser.
- Interim dividend of 7.3p, covered 1.04 times by adjusted capital generation of £142m.
Market conditions impact Investments as costs continue to fall
- Net operating revenue in Investments is 15% lower at £466m due to lower average AUM and net outflows, particularly in equities as client asset allocation moved to debt products and cash in the rising interest rate environment.
- Adjusted operating profit is down 66% to £26m (H1 2022: £76m) reflecting challenging conditions impacting the sector and the decline in revenue.
- Adjusted operating expenses down 6% and on track to deliver the £75m net cost reduction target with £30m realised in H1.
Strong earnings in Adviser despite challenging market conditions
- Net operating revenue 12% higher to £103m (H1 2022: £92m) driven by higher average cash margin of c215bps reflecting higher interest rates. The indicative average cash margin for 2023 is now c225bps.
- Adjusted operating profit was up 29% at £49m (H1 2022: £38m) due to higher revenue and flat costs.
- Net outflows of £0.6bn (H1 2022: £1.4bn inflows) reflect slow down seen across the market, and customer response to increased cost of living.
Personal benefiting from ii's robust operating model delivering growth
- Personal includes benefit of full six months of ii revenue, with total net operating revenue up 162% to £152m (H1 2022: £58m). Assuming ii had been owned for an equivalent period in H1 2022, net operating revenue would be up 27%.
- Treasury income of £66m (H1 2022: £5m) benefited from rising interest rates with an average cash margin of 229bps. The indicative average cash margin for 2023 is now expected to be 180-200bps.
- Customer growth, excluding the run-off from acquired books, was subdued as expected at 1%.
- SIPP customers grew to 57.2k (FY 2022: 51.5k) with penetration increasing to 14% of customer base.
Redeployment and distribution of capital
- Strong capital position with surplus regulatory capital of £1,017m and a further unrecognised £554m in the value of the Phoenix stake.
- Final holdings in Indian stakes sold raising £535m net cash proceeds.
- Initial £150m share buyback close to completion and we are announcing the extension of this by a further £150m to a total of £300m.
- We will continue to be disciplined in our allocation of capital, investing in the business in order to drive growth and to support continued returns to shareholders.
And later;
Dividends
The Board has declared an interim dividend for 2023 of 7.3p (H1 2022: 7.3p) per share which will be paid on 26 September 2023. The dividend payment is expected to be £137m.
As a result of the higher adjusted profit in the period, dividend cover on an adjusted capital generation basis was 1.04 times.
https://www.investegate.co.uk/announcem ... -3/7681716
Part 2; https://www.investegate.co.uk/announcem ... -3/7681768
And 3; https://www.investegate.co.uk/announcem ... -3/7681772
Also posted on Company News here;
viewtopic.php?p=607708#p607708
Ian (No holding).