Allfunds : Press Release on Interim Results

Interim results

For the six months ended 30 June 2022

Allfunds publishes its 1H 2022 financial results and announces the

acquisition of a majority stake in MainStreet Partners

London/Madrid/Amsterdam - Allfunds Group plc ("Allfunds") (AMS: ALLFG) one of the leading B2B WealthTech platforms for the fund industry, offering fully integrated solutions for both fund houses and distributors, today releases interim results for the six-month period ended 30 June 2022 and announces it has entered into an agreement to acquire a majority stake in the share capital of Mainstreet Partners Limited ('MainStreet Partners'), a unique platform that offers a full suite of ESG products including ESG Investment Portfolios and Scoring&Reporting.

Key highlights

Solid financial results despite significant market volatility

• Net revenues of €259m, representing a 5% increase year-on-year:
• • Platform revenue margin at 3.5bps, at the high end of our FY2022 guidance
  • Subscription revenues increased by 58% to €14.6m
• Adjusted EBITDA of €188m, a 4% increase year-on-year and implying an Adjusted EBITDA margin of 73%
• Assets under administration ("AuA") were down (3.5)% year-on-year, from €1,348 billion to €1,301 billion. This compares to a (7.4)% decline for the industry (1) in the same period
• • Platform service negative market performance of €132.4 billion or (12.5)% since December 2021(2)
  • Platform service net organic flows of €(7.4) billion or (0.7)% since December 2021(2) (-1.4% annualised) compensated by new client migrations
• Allfunds' business model has proven resilient in periods of heightened volatility:
• • Our AuA growth continues to outperform markets and the fund industry, as a result of diversification (regional, asset classes, distributors) and secular growth levers (e.g., outsourcing, open architecture wealth management, share gains from other platforms/legacy infrastructure, and demographic wealth / savings growth)
  • We benefit from long-standing, deeply embedded client relationships resulting in very high retention rates (99.9% and 98.0% for distributors and fund houses, respectively, in 1H 2022)

Strong business activity and momentum

• Our flywheel effect remains strong: 74 new fund houses and 34 new distributors onboarded in 1H 2022
• Continued market share gain to 13%(3). Significant runway remaining underpinned by open architecture penetration, outsourcing trend, and potential to win share from other / legacy infrastructure providers
• Growing pipeline: high confidence in migrations of >€40bn for 2H 2022, and accelerating subscription-based revenues thanks to cross-selling initiatives related to completed M&A
• 1. Based on Total Net Assets for European market, Net asset figures refer to UCITS and include closed-ended funds at June 2022. Source: Morningstar.
  2. Calculated as the sum of flows from existing clients and from new clients over Allfunds Platform service AuA only as of beginning of period

amounting to €1,055bn as of 31 December 2021

1. Refers to Allfunds total AuA over European Industry AuA. Based on Total Net Assets for European market, Net asset figures refer to UCITS and include closed-ended funds at 30 June 2021. Source: Morningstar

• Our business and revenue model is well-positioned to capitalise on a market recovery: historically observed strongly positive net flows when markets recover and risk sentiment normalizes

Good progress on strategic initiatives

• Our digital ecosystem is evolving fast, thanks to the integration of recent acquisitions, with subscription-based revenues representing already 6% of total net revenues (c. 10% pro forma for completed M&A), growing 58% year- on-year
• Digital services is a large and growing market benefiting from secular tailwinds, and Allfunds is well-positioned to capture market share on the back of long-standing relationships with distributors and fund houses
• Ongoing investments in long-term growth initiatives such as blockchain and private capital markets

Juan Alcaraz, Chief Executive Officer and Founder, said:

"The first half of 2022 has demonstrated Allfunds' resilience to market volatility. Despite negative market performance driven by the global economic impact of the ongoing war in Ukraine and rising inflation, we have delivered growth in net revenues and continued to gain market share compared to 1H 2021.

Our outlook for FY2022, assuming flat market performance for the remainder of the year, is for low-single digit growth in net revenues. Once markets recover, we anticipate strong net flows to accelerate AuA growth.

I remain excited about the exceptional opportunities for Allfunds ahead, especially in the enhanced digital ecosystem we are creating for our customers. Our strategic focus remains entirely aligned with our client needs and with adding value to our partners; the best proof is the continued enhancement of our platform, witnessed by the organic or inorganic investments as we have done in the first six months of 2022."

Acquisition of a majority stake in MainStreet Partners

Headquartered in London, MainStreet Partners is the trusted ESG partner of top tier financial groups, providing a one stop shop for their sustainability requirements. Founded in 2008, MainStreet Partners has developed a unique platform delivering proprietary ESG scorings, ESG investment strategies via model portfolios and empowered reporting.

MainStreet Partners´ solutions strongly align with Allfunds' strategy of providing value-added services to its clients, covering an increasing gap of specialized ESG-related services:

• For distributors: providing a comprehensive set of ESG tools to help them build an ESG-focused offering, properly assess the ESG profile of funds and portfolios, and report extra-financial results in a transparent and user-friendly manner;
• For fund houses: helping them to analyse the alignment of their funds to the relevant ESG regulations, assess the sustainability profile of the holdings and produce advanced impact reporting.

These unique, industry leading, proprietary solutions will complement Allfunds' own. Allfunds will reinforce its existing offering and strong product suite with the increased capabilities and cross selling opportunities that MainStreet Partners provides. This falls in line with the company's commitment to continuously invest and develop Allfunds' digital ecosystem for fund houses and distributors and keep building the most robust set of solutions available for the entire fund industry.

The transaction, which is subject to customary closing conditions, including regulatory approvals, is expected to close in the coming months. Further terms of the transaction were not disclosed.

Non-financial highlights

Figures in EUR bn, unless otherwise stated		1H 2022		2Q 2022	1Q 2022		1H 2021		Change
				y-o-y (%)
AuA EoP		1,300.9		1,300.9	1,404.8		1,348.4		(3.5)%
Platform service(1)		915.2		915.2	996.6		949.9		(3.6)%
Dealing & Execution(2)		385.6		385.6	408.2		398.5		(3.2)%
Platform Service Market performance		(132.4)		(76.3)	(56.1)		49.3		n.m.
Platform Service Net flows		(7.4)		(5.0)	(2.4)		85.5		n.m.
Flows from existing clients		(24.4)		(11.6)	(12.8)		51.3		n.m.
Flows from new clients (migrations)		17.0		6.6	10.4		34.2		(50.3)%
Net flows as a % of BoP AuA(3)		(0.7)%		(0.5)%	(0.2)%		11.5%
Net flows as a % annualised of BoP AuA		(1.4)%		(1.9)%	(0.9)%		22.9%
Dealing and Execution variation(4)		(53.8)		(22.7)	(31.1)

Note: AuA refer to Assets under administration at End of Period ("EoP") 30 of June or 31 of March

1. Platform service AuA includes Allfunds standalone, acquisitions of Nordic Fund Market and CS Investlab as well as BNPP Local Paying Agent business
2. Only AuA for which we provide Dealing & Execution services
3. Calculated as the sum of flows from existing clients and from new clients over Allfunds Platform service AuA only as of beginning of period. For 2022, beginning of period is considered December 2021 (amounting to €1,055bn) and for 2021, BoP is considered December 2020 (amounting to €746bn)
4. Variation coming from Dealing and Execution portfolio refer to both market performance and flows from existing clients

Financial highlights

Figures in € million, unless otherwise stated		Six months ended			Six months ended		Change
	30 June 2022			30 June 2021
					y-o-y (%)
		Unaudited			Unaudited
Net revenues		259.0			247.2		5%
Net platform revenues		244.4			238.0		3%
Net platform revenue (% of total)		94.4%			96.3%
Net platform revenue margin (bps)		3.5			3.8
Net subscription revenues		14.6			9.2		58%
Net subscription revenue (% of total)		5.6%		3.7%
Adjusted EBITDA		188.4			181.1		4%
Adjusted EBITDA margin		72.7%			73.3%
Adjusted Profit before tax		166.8			161.3
Adjusted Profit after tax (5)		123.5			94.4		31%
Normalised free cash flow		120.8			95.7
Capital expenditure		15.2			10.4
Separately disclosed items		40.1		77.0

(5) 1H 2021 Restated compared to the figures presented in the Interim Report 1H2021. See reconciliation tables in following pages for further information

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

			30 Jun 22	30 Jun 21
			EUR ('000s)	EUR ('000s)
			Unaudited	Unaudited
	Fee, commission and service revenue	1,401,105	1,238,773
	Fee, commission and service expense	(1,142,089)	(991,536)
	Net Revenue (*)		259,016	247,237
	Employee compensation and benefits	(48,790)	(56,992)
	Other expenses	(62,225)	(87,933)
	Other operating income		330	1,804
	Amortisation and depreciation relating to other intangible assets and property, plant		(13,814)	(10,893)
	and equipment
	Amortisation of intangible assets acquired as a result of business combinations			(69,291)
		(68,941)
	Profit before net interest expense, impairment loss and tax expense		65,576	23,932
	Interest income		2,125	1,406
	Interest expense		(7,283)	(5,820)
	Net interest expense		(5,158)	(4,414)
	Impairment losses		(2,589)	(4,520)
	Gain or loss on disposal of non-financial asset		-	(675)
	Profit before tax		57,829	14,323
	Tax credit/(expense)		(19,721)	57,239
	Profit after tax		38,108	71,562
	Basic and diluted earnings per share (EUR)		0.0605	0.1137
Items that may be reclassified subsequently to profit or loss
	Other comprehensive income/(loss) for the period		11,060	(62)
	Total comprehensive income for the period		49,168	71,500

1. Net revenue is comprised of fee, commission and service revenue recognised under IFRS 15 less fee, commission, and service expense. Net revenue is a gross profit measure. The Company labels this gross profit subtotal as Net revenue because the Directors believe it reflects the integral interrelationship between revenue generated and the expenses concurrently incurred, whilst also being comparable to measures used by peers

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	30 Jun 22	31 Dec 21
Assets	EUR ('000s)	EUR ('000s)
Non-current assets	Unaudited	Audited
Goodwill	1,155,992	1,008,159
Intangible assets	1,151,843	1,194,977
Property, plant, and equipment	29,170	28,046
Financial assets held at amortised cost	672	957
Deferred tax assets	119,258	125,416
Total non-current assets	2,456,935	2,357,555
Current assets
Financial assets at fair value through profit or loss	1,954	1,041
Financial assets held at amortised cost	306,815	245,250
Contract assets	677,944	713,562
Tax assets	12,551	23,228
Other assets	9,910	12,784
Cash and cash equivalents	1,879,579	2,192,630
Total current assets	2,888,753	3,188,495
Total Assets	5,345,688	5,546,050
Equity and Liabilities
Non-current liabilities
Deferred tax liabilities	209,638	223,219
Non-current lease liabilities	13,801	12,728
Provisions	1,755	1,890
Total non-current liabilities	225,194	237,837
Current liabilities
Financial liabilities at fair value through profit or loss	2,800	396
Financial liabilities held at amortised cost	2,119,788	2,257,390
Contract liabilities	572,958	601,710
Current lease liabilities	6,632	7,116
Tax liabilities	27,189	52,104
Other liabilities	45,318	65,162
Total current liabilities	2,774,685	2,983,878
Total liabilities	2,999,879	3,221,715
Equity
Share capital	1,574	1,574
Share premium	2,060,156	2,060,156
Retained earnings	258,524	248,110
Other reserves	25,555	14,495
Total equity	2,345,809	2,324,335
Total equity and liabilities	5,345,688	5,546,050