IntegraFin : Interim Results Presentation 2020

Results Presentation

Half Year ended 31 March 2020

Presentation team

Alex Scott

Chief Executive Officer

• Joined IntegraFin in 2009
• 1997 - Twelve years in insurance licence provision
• 25 years of insurance experience in the UK and internationally

Jonathan Gunby

Executive Director - IFAL CEO

• Joined IntegraFin in 2011
• 1999 - Twelve years as Director of NMG Holdings
• 30 years of financial services experience in the UK and internationally

Results Presentation

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Key messages

Total revenue £53.8m, up 13% compared to 1H19

Profit before tax £27.3m for the period, up 22% compared to 1H19 Operating margin increased to 51% from operating margin of 47% in 1H19 Operating profit £27.2m, up 23% compared to operating profit in 1H19 Cash flow and group balance sheet remain strong, with no debt

Interim dividend of 2.7p declared (1H19: 2.6p) FUD is up 2% since 1H19

Gross inflows of £3.2bn highest ever in the first half of the year (1H19: £2.8bn)

Net inflows of £2.1bn in the first half of the year (1H19: £1.8bn) Client numbers at 187k, up 8% from 1H19

Results Presentation

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Impressive long term FUD growth

Growth in Funds Under Direction (£bn) compared to the MSCI World Index

250.000																												37.8	40
2000
		First assets																								35.0
			2003
							2007
		onto platform																			• FUD growth remains
												2018								35
		in 2000			Transact						First dividend										33.1
																					strong despite periods
200.000							moves into					paid yearly						IHP lists on the
							operational					thereafter						London Stock						30	of high stock market
																		Exchange
							profit during														27.9					volatility
							2003
150.000																							22.7				25	By asset class
																											10%
																															2%
																							18.0						20	13%		Equity
																															Bonds
100.000																					16.0
																			13.6								15			Cash
																			11.5								51%
																														Property
																	8.8	9.8									10
																											24%		Other
																7.1
50.000
													5.6
												4.9
																										5
											3.1
									1.7
				0.1	0.2	0.5	0.9
0
0.000																													0
00	01	02	03	04		05	06	07	08	09	10	11	12		13	14	15	16	17	18	19	1H
														FUD														20

WORLD Standard (Large+Mid Cap)

Results Presentation

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1H20 Gross inflows of £3.2bn, highest ever recorded

£1.7bn

£1.5bn

£1.3bn

£1.1bn

£0.9bn

£0.7bn £0.5bn £0.3bn £0.1bn -£0.1bn

£1.70bn

£1.54bn

	£1.44bn	£1.48bn
£1.39bn	£1.39bn

£1.10bn

	£0.93bn	£0.96bn
£0.88bn	£0.89bn
		£0.80bn

Q1 FY19

Q2 FY19

Q3 FY19

Q4 FY19

Q1 FY20

Q2 FY20

Gross Net

£m	1H 2020
Opening FUD	37,799
Inflows	3,234
Outflows	(1,172)
Net inflows	2,062
Market	(4,872)
movements
Other	1
movements(1)
Closing FUD	34,990
(1)Includes dividends,
interest, fees and tax
charges and rebates

Results Presentation

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Regulation

• The Platform market study
• • Process began in July 2017
  • Policy statement issued last 13 December 2019
• Two pages of rules to speed up transfers
• • We have always complied anyway
  • Good news - as we are net importers
• No ban on exit fees (this is still under review)
• • We have never charged exit fees
• No mention of vertical integration

Results Presentation

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Transact is consistently rated top for service

• Transact was rated the top platform in the UK Investment Trends Adviser Technology & Business Report 2020.
• In this year's study, Transact is rated first for overall satisfaction, for overall adviser support services and for overall investment capabilities.
• Transact also once again obtained the highest advocacy rating from its adviser relationships, with the top net promoter score.
• This is the 11thyear running that Transact has been rated top.
• The study is one of the most comprehensive undertaken and is based on the views of 1,466 UK advisory professionals. The fieldwork for this independent research was undertaken in March 2020.

Results Presentation

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Total fee income up 13%

97% of total fee income is recurring

1H 2020	1H 2019	Change
£m	£m

Annual Fee

Income

Wrapper Fee

Income

Buy

Commissions

Total Fee

Income

Annual basis point charge levied on assets and cash held on the platform

Annual fixed fee levied on all Transact wrappers

Commission levied on the value of buy transactions executed on the platform(1)

47.4	41.3	+15%
(88%)	(87%)
4.8	4.4	+9%
(9%)	(9%)
1.6	1.9	-16%
(3%)	(4%)
53.8	47.6	+13%

1. Buy commission rebate threshold reduced to £400k from 1 March 2020

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Well controlled expenses

£m	1H 2020	1H 2019
Staff costs	18.3	18.4
Occupancy(1)	1.0	1.8
Regulatory and professional fees	3.5	2.5
Other costs	2.2	1.9
Total expenses	25.0	24.6
Depreciation and amortisation(1)	1.2	0.3
Total operating expenses	26.2	24.9

1. Impact of IFRS 16 reduces occupancy costs by £0.8m and increases depreciation and amortisation by £0.9m. This is due to the recognition of office leases as right of use assets, and subsequent amortisation.

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Staff numbers

1H 2020	1H 2019	Change

IT & technology	117	110	6%
Operational & support	334	361	-7%
Sales & marketing	41	43	-5%
Total staff	492	514	-4%

Results Presentation

• Staff numbers have decreased from natural attrition and efficiency gains delivered through platform development

10

P&L and cash flows

Profit & loss

£m	1H 2020	1H 2019
FUD (£bn)	35.0	34.4
Total fee income	53.8	47.6
Cost of sales	(0.4)	(0.5)
Net revenue	53.4	47.1
Staff costs	(18.3)	(18.4)
Other costs	(7.9)	(6.5)
Total expenses	(26.2)	(24.9)
Operating profit	27.2	22.2
FUD Y-o-Y growth	1%	15%
Operating margin	51%	47%

Cash flows

£m	1H 2020	1H 2019
Operating profit	27.2	22.2
Depreciation & amortisation	1.3	0.3
Working capital requirements	0.6	(3.0)
Capex	(0.3)	(0.6)
Tax paid	(8.1)	(3.0)
Free cash flows	20.7	16.0
Net operating cash conversion	90%	94%

Results Presentation

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We continue to achieve strong profit growth while also reducing fees

Total fee income

Adjusted operating profit(1,2)

Revenue yield & adjusted operating profit margin

CAGR: 12%

		£91.2m	£99.2m
	£80.2m
£68.4m
		£53.8m

16	17	18	19	1H 20
		CAGR: 21%
			£48.6m
		£43.3m
	£37.7m
£28.7m				£27.2m
16	17	18	19	1H 20
42.0%	47.0%	47.5%	49.0%	51.0%
33.6bps	31.7bps	29.6bps	28.6bps	28.0bps
16	17	18	19	1H 20

• Transact has an impressive record of consistently growing both revenue and operating profit
• Given its scale and operating leverage, Transact has been able to implement a number ofpro-active pricing changes:
• • Annual commission charges reduced from 0.29% to 0.28% and from 0.19% to 0.18% (for the respective charging bands) on 1 April 2020
  • Buy commission change reducing the commission refund threshold from £500,000 to £400,000, on 1 March 2020
  1. Adjusted operating profit excludesone-off IPO related costs relating to FY17 & FY18
  2. FY16 operating profit includes an adjustment of £0.7m for the annualised pro forma impact of the acquisition of IAD

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Group balance sheet remains strong

1H 2020 £m

• Transact operates with a conservative balance sheet position:
• • No debt

Non-current assets Loans Intangible assets

Property, plant and equipment Right of use assets Deferred tax assets Deferred acquisition costs

2.2

13.0

2.3

4.7

8.1

52.9

• • Policyholder assets and liabilities fully matched
  • Second FY19 interim dividend of £17.2m paid in January 20
  • The first FY20 dividend of £8.9m is being declared now, to be paid in June 20
• Cash balance of £131.7m as at 1H20 (1H19: £111.8m), before £8.9m dividend, supporting regulatory capital, risk appetite and tax requirements of c. £95m

Current assets

Financial assets at fair value through profit or loss Other prepayments and accrued income

Trade and other receivables

Investments and cash held for the benefit of policyholders

Cash and cash equivalents

Current liabilities

Trade and other payables Finance lease liabilities

Liabilities for linked investment contracts Current tax liabilities

Non-current liabilities

Provisions

Finance lease liabilities

Deferred income liability

Deferred tax liabilities

Net assets

83.2

5.1

12.9

3.2

15,410.2

131.7

15,563.1

18.4

2.4

.

15,431.1

36.9

4.8

0.5

95.1

Results Presentation

Strategy

• Remain focused:
• • UK only
  • Intermediary only
• Maintain high service standards
• Reinvest in business:
• • Continue to enhance online functionality
  • Continue to enhance proposition by adding new financial planning components for advisers
• Control expenses
• Continue to grow inflows
• Minimise attrition levels

Results Presentation

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Summary: Transact enjoys a strong growth profile

penetrationMarket Industry drivers

Growth in UK wealth market

Growth in assets managed by financial advisers Growth in wealth managed by current advisers Increasing penetration of current advisers New advisers joining Transact

Strong growth profile for Transact

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Disclaimer

The information contained in this presentation has not been independently verified and no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. None of IntegraFin Holdings plc (the "Company"), any other members of its group (together with the Company, the "Group") or its or their directors, advisers or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation. Unless otherwise stated, all financial information contained herein is stated in accordance with generally accepted accounting principles in the UK at the date hereof.

Certain statements made in this presentation are forward-looking statements. Such statements are based on current expectations and assumptions and are subject to a number of known and unknown risks and uncertainties that may cause actual events or results to differ materially from any expected future events or results expressed or implied in these forward-looking statements.

Persons receiving this presentation should not place undue reliance on forward-looking statements. Unless otherwise required by applicable law, regulation or accounting standard, the Group does not undertake to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

This presentation is being made only to, and is directed only at: (a) those persons who are (i) investment professionals within the meaning of paragraph (5) of Article 19 or high net worth companies or unincorporated associations within the meaning of paragraph (2) of Article 49, of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (S1 2005/1529) (the "Order"); and (ii) qualified investors within the meaning of section 86(7) of FSMA, or other persons to whom it may lawfully be communicated in accordance with the Order; or (b) any person to whom it may otherwise lawfully be made (such persons together being "relevant persons"). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Any investment or investment activity to which this presentation relates is available only to relevant persons and will be engaged in only with relevant persons.

This presentation does not constitute or form part of, and should not be construed as: (i) an offer, solicitation or invitation to dispose of or acquire any securities or financial instruments, nor shall it, or the fact of its communication, form the basis of, or be relied upon in connection with, or act as any inducement to enter into any contract or commitment whatsoever with respect to such securities or financial instruments; or (ii) any form of financial opinion, recommendation or investment advice with respect to any securities or financial instruments.

No statement in this presentation is intended as a profit forecast or profit estimate.

Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.

IntegraFin Holdings plc, 29 Clement's Lane, London, EC4N 7AE Tel: [phone] Fax: [phone]
(Registered office: as above; Registered in England and Wales under number: 8860879)	16
The holding company of the Integrated Financial Arrangements Ltd group of companies.

Appendix 1 - Pension transfers in split by DB/DC

£700m

£600m

£500m

£400m

£512m

£456m

£480m

DC

£400m

£469m

£300m

DB

£200m

£100m

£162m

£131m

£129m

£133m

£98m

£0m

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Quarter

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

DB as a %

24.6%

17.2%

20.1%

21.7%

26.2%

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Appendix 2 - Growth in number of clients and advisers

	200,000										7,000
	180,000										6,000
	160,000
Investor count	140,000										5,000
										Adviser count
120,000										4,000
100,000
80,000										3,000
	60,000										2,000
	40,000
	20,000										1,000
	0										0
	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	1H 20

Count of investors

Count of advisers

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Appendix 3 - Operational update

• We have further enhanced our pensions proposition by processing transfers more quickly and by extending the functionality of how we facilitate pensions drawdown.
• We released new enhancements to software for our internal and external systems (Transact Online), demonstrating our commitment to continual improvements rather than "big bang"re-platforming.
• We reduced the Transact buy commission rebate threshold to £400k in March.
• New Transact annual commission charging structure effective from 1 April 2020.
• We continue to play a major role in helping set industry standards and protocols with regard to asset transfer.

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Appendix 4 - New charging structure

New Transact annual commission charging structure effective from 1 April 2020

Single or consolidated portfolios of less than £100,000

	Cash & investments
£0 - £60,000
0.50%
>£60,000 and <£100,000
0.28%

Single or consolidated portfolios of £100,000 and above

	Cash & investments
£0 - £600,000
0.28%
>£600,000 - £1,200,000
0.18%
>£1,200,000 - £5,000,000
0.07%
On the remainder
0.05%

New Transact buy commission charging structure effective from 1 March 2020

Monthly average portfolio	Refund	Effective rate
value
<£400k	0%	0.05%
£400k+	100%	0.00%

20

Appendix 5 - Pre-Look through position

Direct investment breakdown

ETFs	Shares	FI & Gilts	Structured products
0%
2%	2%	1%
Investment trusts			Others
3%			0%
Cash			Cash (term deposits)
		1%
9%

Mutual Funds

82%

Results Presentation

Lookthrough by asset class

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Appendix 6 - FUD by asset class breakdown

Type	Value (£bn)	Percentage of total FUD
Mutual funds	28.75	82.18%
Cash (pooled)	3.21	9.19%
Investment trusts	1.14	3.22%
ETFs	0.72	2.06%
Shares	0.63	1.80%
FI & Gilts	0.11	0.30%
Structured products	0.24	0.69%
Cash (term deposits)	0.15	0.42%
Others	0.04	0.14%
Total	34.99

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Appendix 7 - FUD by wrapper split

40

35

						£9.27bn
	30						£8.48bn
				£8.05bn
	25			£6.89 bn		£8.78bn
FUD(£bn)		£4.53 bn		£7.08 bn		£1.45bn
			£1.05bn
			£5.69bn				£8.15bn
	20				£7.99bn
					£1.54bn
			£6.14 bn		£1.41bn		£0.99bn
	15			£0.94bn
				£1.25 bn
		£5.09 bn	£2.90bn	£0.84 bn
	10
		£0.69bn
		£2.00 bn			£17.13bn
				£14.70bn	£15.92bn
		£0.56 bn
	5			£11.87 bn
		£9.07 bn
		£6.94 bn
	0
	YE 2015	YE 2016	YE 2017	YE 2018	YE 2019	1H 20

ISAs

GIA

Offshore Bond

Onshore Bond

Pension

Wrappers

Year

23

Appendix 8 - Cohort analysis

Inflows breakdown

-Inflows from current investors putting more onto the Platform: 33%

-Inflows from advisers with established relationship putting new investors onto the Platform: 63%

-Inflows from new advisers onto the Platform: 4%

£m

£7,000

£6,000

£5,000

£4,000

£3,000

£2,000

£1,000

£0

Cohort Analysis by Adviser for Inflows Split by FY Year of First

Relationship

FY 20

FY 19

FY 18

FY 17

FY 16

FY 15

FY 14

FY 13

FY 12

FY 11

FY 10

FY 09

FY 08

FY 07

FY 06

FY 05

FY 04

FY 03

FY 02

FY 01 FY 00

FY 2017

FY 2018

FY 2019

1H 20

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