Close Brothers Group plc · LSE:CBG
Close Brothers — FY2008 Earnings Presentation
36 slides from Close Brothers's earnings presentation, Sep 29, 2008
Slide 1: Close Brothers Group Preliminary results 2008
Close Brothers Group Preliminary results 2008 29 September 2008
Slide 2: Disclaimer
Disclaimer Certain information included in this presentation is forward-looking and involves risks and uncertainties that could cause actual results to differ materially from those expressed or implied by forward-looking statements. Forward-looking statements include, without limitation, projections
Slide 3: Agenda
Agenda 1. Introduction – Colin Keogh, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business overview – Colin Keogh, Group Chief Executive 4. Q&A Page 3
Slide 4: 2008 Highlights
2008 Highlights • Resilient performance in a difficult environment • Record profits in the Banking division with good growth in the loan book • Non-lending businesses affected by adverse market conditions • Funding and liquidity position remains solid • Proposed total dividend up 5% to 39.0p per sha
Slide 5: Agenda
Agenda 1. Introduction – Colin Keogh, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business overview – Colin Keogh, Group Chief Executive 4. Q&A Page 5
Slide 6: Financial highlights: Summary income statement
Financial highlights Summary income statement £ million, year to 31 July 2008 2007 % change Adjusted operating income(1) 509.2 585.7 (13%) Adjusted operating expenses(2) (344.2) (391.4) (12%) Impairment losses on loans and advances (27.5) (21.5) 28% Adjusted operating profit(3) 137.5 172.8 (20%) of
Slide 7: Financial highlights: Summary income statement (continued)
Financial highlights Summary income statement (continued) £ million, year to 31 July 2008 2007 % change Adjusted operating profit(1) 137.5 172.8 (20%) Exceptional items and goodwill impairment(2) (10.0) 17.4 of which: Adviser fees (5.0) - Restructuring costs (5.0) - Investment gains and performance
Slide 8: Financial highlights: Summary pro forma balance sheet
Financial highlights Summary pro forma balance sheet £ million, as at 31 July 2008 2007 YoY change Assets Cash and cash equivalents 2,384.8 2,149.4 235.4 +11% Loans and advances to customers 2,232.2 1,962.5 269.7 +14% Settlement accounts, long trading positions and stock lending 656.8 855.9 (199.1)
Slide 9: Funding and liquidity
Funding and liquidity Loan book more than twice covered 6,000 • £2.2 billion loan book funded by equity, bank facilities and deposits £5,170 m 5,000 • Recent developments - 15% deposit growth to £2.6 billion 4,000 2,642 - Extended range of committed facilities £ million 3,000 • Prudent liquidity man
Slide 10: Capital
Capital Basel II – no material impact on capital requirement 31 July 2008 31 July 2007 31 July 2007 Basel II Basel II Basel I £ million Pro forma Pro forma Pro forma Risk Weighted Assets 3,804.0(1) 3,449.5(1) 2,776.6 Tier 1 capital 547.2 618.0 618.0 Total capital 613.6 702.1 702.1 Tier 1 capital rat
Slide 11: Asset Management: Key figures
Asset Management Key figures £ million 2008 2007 % change Adjusted operating income(1) 133.5 177.5 (25%) Adjusted operating expenses(1) (100.9) (120.9) (17%) (1) (2) Adjusted operating profit 32.6 56.6 (42%) Closing FuM 8,195 9,148 (10%) Average FuM 8,672 8,680 - Net new funds / opening FuM (4.0%) 4
Slide 12: Asset Management: Income analysis
Asset Management Income analysis Adjusted operating income(1) by type Key metrics 200 • Adjusted operating income(1) down 25% to £134 £177.5 m million • Management fees broadly stable at £80 million 150 56.1 - Average FuM stable at £8.7 billion £133.5 m - Management fees / average FuM down 1 bp to 1
Slide 13: Asset Management: Funds under Management
Asset Management Funds under Management Movement in FuM Breakdown of FuM by asset class £ million Private Funds Total Structured Clients Products 8% 1 August 2007 3,588 5,560 9,148 Hedge Funds 8% Equities New funds raised 436 742 1,178 37% Redemptions, realisations and Private Equity withdrawals (48
Slide 14: Banking: Key figures
Banking Key figures £ million 2008 2007 % change Adjusted operating income(1) 207.1 197.8 5% Adjusted operating expenses(2) (105.1) (104.6) - Impairment losses on loans and advances (27.5) (21.5) 28% (1) Adjusted operating profit 74.5 71.7 4% Customer loan book 2,232.2 1,962.5 14% Bad debt ratio(3)
Slide 15: Banking: Income analysis
Banking Income analysis Adjusted operating income by type Key metrics 250 • Adjusted operating income up 5% to £207 million £207.1 m £197.8 m 200 • Net interest and fees on loan book increased 6% 26.8 27.7 to £180 million 150 • Net loan book increased 14% to £2.2 billion as of £ million 31 July 2008
Slide 16: Banking: Loan book analysis
Banking Loan book analysis Loan book composition Bad debt analysis 2,500 £2,232 m • Bad debt provisions 1.3% of net loan book, up from £1,963 m 117 1.1% in 2007 2,000 210 - Property bad debt ratio 2.2% of net loan book 145 166 174 - No material increase in other asset classes, and 165 no other asset
Slide 17: Corporate Finance: Key figures
Corporate Finance Key figures £ million 2008 2007 % change Adjusted operating income(1) 56.5 77.2 (27%) Adjusted operating expenses(1) (46.5) (54.7) (15%) (1) Adjusted operating profit 10.0 22.5 (56%) Operating margin(2) 17% 28% Expense / income ratio(2) 83% 72% Compensation ratio(2) 60% 57% Notes:
Slide 18: Corporate Finance: Income analysis
Corporate Finance Income analysis Adjusted operating income by type Key metrics 100 • Adjusted operating income down 27% to £57 million - Number of transactions 23% lower at 89 £77.2 m - Lower income/transaction as return to normal pricing environment 20.6 £56.5 m • Performance impacted by weak mark
Slide 19: Securities: Key figures
Securities Key figures £ million 2008 2007 % change Adjusted operating income(1) 110.0 128.0 (14%) Adjusted operating expenses(1) (71.3) (83.9) (15%) Adjusted operating profit(1) 38.7 44.1 (12%) of which: Winterflood 23.5 40.1 (41%) (2) Seydler 8.0 4.0 100% (3) Mako 7.2 - Operating margin(4) 31% 34%
Slide 20: Securities: Income analysis
Securities Income analysis Adjusted operating income by business Key metrics 150 • Adjusted operating income down 14% to £110 £128.0 m million - Performance impacted by volatile trading 25.4 £110.0 m conditions 7.2 100 21.8 • Winterflood income declined 21% to £81 million £ million - Number of barga
Slide 21: Summary of performance
Summary of performance • A resilient overall performance in a challenging year • Each of our divisions traded robustly in difficult conditions • Retained a strong capital position and remain well funded • Achieved strong growth in customer loan book and deposits Page 21
Slide 22: Agenda
Agenda 1. Introduction – Colin Keogh, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business overview – Colin Keogh, Group Chief Executive 4. Q&A Page 22
Slide 23: Close Brothers Group: Business overview
Close Brothers Group Business overview Divisional contribution to adjusted operating profit(1) Group – Strong management team with extensive experience in growing the business organically and Asset via acquisitions Management Securities 21% Asset Management – Strong asset management 25% business wit
Slide 24: Business overview: A year of change and a year of action
Business overview A year of change and a year of action • Short term growth focus in Banking – loan book up 14% • Balance sheet strength to capitalise on opportunities • Management changes • Reorganised and refocused Asset Management and reduced costs • Corporate Finance – European focus and some co
Slide 25: Asset Management: Business overview
Asset Management Business overview • Focus on core UK business - Mix of clients: private, intermediary, and institutional - Direct and intermediary distribution - Emphasis on multi-asset, multi-manager and alternatives • Opportunities for selective international distribution • Seek to expand complem
Slide 26: Banking division: Business overview
Banking division Business overview • Current conditions favour our Banking division - Credit crunch - Market reassessment of risk and reward - Margins and volumes are resilient BUT bad debts may increase in an economic downturn - Opportunities for further value-enhancing acquisitions and organic gro
Slide 27: Corporate Finance: Business overview
Corporate Finance Business overview • Continue to consolidate our UK and European mid market franchise - Acquired remaining management held minority in French business in April 2008 - Acquired remaining 55% share of Spanish Associate (Atlas Capital) in September 2008 (post year-end) • Ongoing focus
Slide 28: Securities: Business overview
Securities Business overview • Winterflood - Retain position as leading retail service provider in the UK - Capitalise on retail platform and liquidity to enter higher growth areas › Direct market access for institutions › Algorithmic trading › Executing corporate share schemes on a market making ba
Slide 29: Outlook
Outlook • Difficult market conditions continue to affect the group’s performance in 2009 • Asset Management affected by volatile market conditions and weak market sentiment, with some offsetting benefit from cost reductions • Good opportunities for loan book growth in Banking division, although bad
Slide 30: Agenda
Agenda 1. Introduction – Colin Keogh, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business overview – Colin Keogh, Group Chief Executive 4. Q&A Page 30
Slide 31: Close Brothers Group Preliminary results 2008
Close Brothers Group Preliminary results 2008 29 September 2008
Slide 32: Appendix
Appendix • Segmental analysis • Banking division supplementary information Page 32
Slide 33: Segmental analysis: Income statement
Segmental analysis Income statement Asset Corporate £ million Management Banking Finance Securities Group Total Year ended 31 July 2008 Adjusted operating income 133.5 207.1 56.5 110.0 2.1 509.2 Adjusted operating expenses (100.9) (132.6) (46.5) (71.3) (20.4) (371.7) Adjusted operating profit 32.6 7
Slide 34: Segmental analysis: Pro forma balance sheet July 2008
Segmental analysis Pro forma balance sheet as at 31 July 2008 Asset Corporate £ million Management Banking Finance Securities Group Total Cash and cash equivalents 544.9 1,799.4 16.3 23.6 0.6 2,384.8 Settlement accounts - - - 450.0 - 450.0 Loans and advances to customers 12.2 2,220.0 - - - 2,232.2 D
Slide 35: Segmental analysis: Pro forma balance sheet July 2007
Segmental analysis Pro forma balance sheet as at 31 July 2007 Asset Corporate £ million Management Banking Finance Securities Group Total Cash and cash equivalents 584.5 1,532.4 10.1 22.3 0.1 2,149.4 Settlement accounts - - - 624.9 - 624.9 Loans and advances to customers 9.3 1,953.2 - - - 1,962.5 De
Slide 36: Banking division: Loan book supplementary information
Banking division Loan book supplementary information Typical lending statistics by asset class Asset Typical LTV % Average loan size(1) Typical loan maturity Transport, engineering and plant 80% £30 k 2-3 yrs Property 60-65% £1,300 k 12-18 mths Property – bridge loans 70% £330 k 6-12 mths Insurance