Sanne : 2020 Full year results presentation

Sanne Group plc

2020 Full Year Results Presentation

For year ended

31 December 2020

19 March 2021 sannegroup.com

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Forward looking statement

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Agenda

• 1 2020 Full Year Results Highlights

• 2 Operational Review

• 3 Financial Review

• 4 Strategic Overview

• 5 Summary and Outlook

• 6 Q&A

Highlights for 2020

A year of resilient delivery and continued investment despite COVID-19

• ▪ Net revenue growth of 7.7% (5.8% c.c. organic)

• ▪ Annualised, recurring new business wins of £22.5m

• ▪ Underlying operating profit margin up 100bps to 28.3%

• ▪ Cash conversion of 99.5%

• ▪ Underlying EPS growth of 19.2% (12.2% c.c.)

• ▪ Final dividend of 9.9p (total dividend 14.7p)

• ▪ Continued investment in organic growth initiatives including global rebrand and launch of new products and services

• ▪ Implementation of new technology strategy and continued client service innovation

• ▪ Signing of five M&A deals in 2020 enhancing global footprint and deepening product expertise

• ▪ Disposal of legacy Jersey Private Client business

Alternative assets market trends

Strong growth fundamentals despite COVID-19 delays

Delays in new funds and drop-in activity…

…but the structural growth drivers remain strong

Value of New Private Equity & Venture Capital

Funds Closed, 2012 - 2020

AuM $bn

1000 800 600 400 200

• ▪ COVID-19 uncertainty caused Q2 delays

  60%

  Investors' Plans for their allocation to alternatives by 2025 55%

• ▪ Concerns on timing of capital deployment weighed on Q3 & Q4

  2012

  2013

  2014

  2015

  2016

  2017

  2018

  2019

  2020

  Year of Final Close

  New AuM raise ($bn)

  Source: Preqin Special Report: Future of Alternatives 2025

• ▪ Led to a 30% drop in PE/VC AuM raised - similar picture across all asset classes

  ProportionofRespondents

  50%

  • ▪ Investor demand higher than ever for Private Asset Alternatives

    40%

    30%

    20%

    10%

  • ▪ 81% of investors will increase or significantly increase their allocations over the next five years

    0%

    Will Increase SignificantlyWill IncreaseStay the SameWill DecreaseWill Decrease Significantly

    Source: Preqin Special Report: Future of Alternatives 2025

    Number of deals and values by Quarter, 2018-2020

• ▪ Significant drop in M&A volumes in Q2

  2500

  180

  160

  2000

  140

  Numberofdeals

  120

  1500

  100

  80

  1000

  60

  500

  40

  20

  )nb$SU( eulaV laeD etagerggA

• ▪ Drop in capital deployment due to deal volumes; also delayed closing of funds raised in late 2019 and early 2020

Alternative Assets under Management and Forecast, 2016 - 2025*

• ▪ Market forecasts indicate a +12% growth in AuM in 2021 and +12.6% CAGR over the next five years

  AssetsunderManagement($tn)

  14

  12

  10

• ▪ Started to see improving trends from Q4 20 and into Q1 2021

8

6

4

2

0

0

Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20

0

Number of dealsAggregate Deal Value (USD bn)

2016

2017

2018

2019

2020

2021

2025

Source: Preqin

Source: Preqin Special Report: Future of Alternatives 2025

Attractive structural growth drivers

Sanne is well placed to capture medium and long term growth globally

Resilient business model

2020 has proven the stability and resilience of the Group

1

2

3

Long-term recurring revenues

Professional services profit margins

Highly cash generative

• ▪ 7-12 year contracts

  • ▪ c. 33% EBITDA margin

• ▪ Negligible mid-life attrition in structures

  • ▪ Strong operational cash generation > 90% conversion

  • ▪ Capital light business

• ▪ Inflation linked contracts

100

90

80

70

Revenue £m

60

%

50

£m

%

40

30

20

10

0

2014

2015

2016

2017

2018

2019

2020

Time

2014

2015

2016

2017

2018

2019

2020

New from NewNew from existingExisting structures

EBITDAOverheadsDirect costs

Underlying operating cash flowOperating cash conversion

Our strategy for growth

Clear and consistent strategy that has positioned Sanne to be a sector winner

Differentiated best-in-class services

Expand Footprint

• ▪ Quality people and professional training

  • ▪ Add new locations to support client demand

• ▪ Accredited business processes

  • ▪ Access new clients in new markets

• ▪ New capabilities and advanced technology offering

Invest in platform

Successful business development

• ▪ Resilient and scalable platform

  • ▪ Cross-selling to existing clients

• ▪ Enhancing technology and data capabilities

• ▪ New clients wins

Inorganic growth

Expand services across jurisdictions

• ▪ Disciplined and well considered approach to M&A

  • ▪ Rollout full service offering at scale to each office

  • ▪ Ensure complete solution for clients

• ▪ Scaled resources to ensure agile completion and integration

Segmental performance

Regional breakdown at a glance

Europe, Middle East & Africa

Revenue

Gross Profit

£m

70

60

50

40

30

20

10

0

45

40

35

30

25

£m

20

15

10

5

0

FY 19

FY 20

FY 19

FY 20

• ▪ Robust Constant Currency revenue growth of 7.6% despite headwinds in the South African Hedge business

• ▪ Good growth in Private Equity across UK and Luxembourg and Loan Agency and Real Assets in the year

• ▪ Full year margin improved on H1 2020 and further progress expected in 2021

• ▪ Integration of the Inbhear business in Ireland and good performance post acquisition

Channel Islands

Revenue

40

35

30

£m

25

20

15

10

5

0

Gross Profit

25

20

£m

15

10

5

0

FY 19

FY 20

FY 19

FY 20

• ▪ Constant Currency organic growth of 6.9%, despite COVID-19 and Brexit concerns

• ▪ Good performance across the business with strong new wins in Private Debt

• ▪ Continued to invest into the local management team and business development resources

• ▪ The acquisition of PEA (completed 1 March 2021) will add additional scale and growth prospects to the existing Guernsey business

Segmental performance
Regional breakdown at a glance
Asia-Pacific & Mauritius	North America
Revenue
Revenue	Gross profit

40

Gross profit

35

30

25

20

15

10

5

0

35

30 25 20 15 10 5 0

30

25

20

15

10

5

18

16

14

12

10

8

6

4

2

0

0

FY 19

FY 20

FY 19

FY 20

FY 19

FY 20

FY 19

FY 20

• ▪ Constant Currency revenue growth of 5.2%, despite full year of COVID-19 conditions in APAC region

• ▪ Strong double-digit growth in Singapore and Japan with good visibility for new business

• ▪ China saw good progress whilst Hong Kong continued to be impacted by civil unrest in 2019 closely followed by COVID-19 in 2020

• ▪ Mauritius saw low growth as its key market in India was badly impacted by the pandemic

• ▪ The Japan office was further enhanced with the Deutsche Bank's Trust Company deal that completed in H2 2020

• ▪ Strong Constant Currency revenue growth of 9.7% with good margin improvement

• ▪ Good performance despite COVID-19 impact and political tensions

• ▪ Expansion of products and services including Loan Agency and Real Assets

• ▪ Remains one of the largest and fastest growing market opportunities

New business wins

For the year ended 31 December 2020

Year-on-year performance

30

2015

25

20

£m

15

10

5

0

Key highlights

• ▪ Annualised, recurring new business wins of £22.5m

• ▪ Positive pick-up in new wins during Q4 across all major asset classes

• ▪ New wins split 58% "new-existing" and 42% "new-new"

• ▪ Good momentum continuing into 2021

2016

2017

2018

2019

2020

H1H2

Total Group Income Statement

For the year ended 31 December 2020

FY 2020 £'mFY 2019 £'m

Turnover Third-party fees Net Revenue Gross Profit

174.9 159.7 (5.2) (2.2) 169.7 157.5 100.6 94.0

Gross Profit margin 59.3% 59.7%

Operating Profit

48.0 43.0

Operating profit margin 28.3% 27.3%Net finance cost Profit before tax Tax

Profit after tax Diluted EPS Dividend per share

(3.2) (4.3) 44.9 38.7 (7.9) (7.8) 37.0 31.0 25.4 21.3 14.7p 14.1p

Non-underlying items 16.6 29.2

Amortisation, acquisition and integration costs 19.2 17.1

Acquisition related earn-out and share based payments 2.4 8.1

Lease and intangibles impairment 1.2 2.4

Regulatory settlement and other 1.6 1.5

Gain on disposal (7.7)

Discontinued operations Revenue

Profit before tax Profit after tax

2.0 5.7 1.0 3.7 0.9 3.3

% changecc change

9.5% 9.0% 7.7% 7.3%

11.7% 8.4%

15.9% 9.4%

19.2% 12.2%

• ▪ Resilient c.c. net revenue growth of 7.3% (5.8% organic) impacted by delays to new funds and closing of won funds

• ▪ 100 bps underlying operating profit margin improvement

• ▪ H1 FX gain reduces net finance cost

• ▪ Underlying tax rate of 17.4% in the year

• ▪ Double digit EPS growth despite market headwinds

• ▪ Decrease of 16.1% in non-underlying items (excl. gain on disposal) despite increased acquisition costs

FY 2020 Net Revenue Bridge

Organic growth seen across all segments

175.0

£'m

170.0

165.0

160.0

155.0

150.0

2019

• ▪ Continued growth across all geographies

• ▪ Net organic revenue increase of £9.7m substantially below average new business win rates highlighting delays in revenues from won business

• ▪ Catch up of delayed revenues expected in 2021

EMEA

APM

NA

CI

Acquisitions

2020

Margin bridge

Year-on-year margin improvement of 100bps

29.0%

28.5%

28.0%

27.5%

27.0%

26.5%

26.0%

25.5%

25.0%

24.5%

24.0%

2019

• ▪ 100bps margin improvement

• ▪ EMEA margin reflects headwinds from SA Hedge business and elevated H1 costs in Luxembourg

• ▪ APM margin improvement offset by dilutive impact of new Japan office

• ▪ Good margin improvement across NA and CI as jurisdictional model beds in

  EMEA

  APM

  NA

  CI

  Overheads

  2020

• ▪ Overheads improvement driven from prior year management actions

Cash flow statement and uses of cash

Another period of strong cash generation

Operating Profit to free cash flow

Uses of Cash flow

FY 2020	FY 2019	100%
£'m	£'m
90%
Underlying total group operating profit	49.1	46.7
80%
Depreciation (equipment and IFRS 16)	4.5	8.2
Other items	(2.2)	0.4	70%
Change in working capital	(3.5)	3.2
60%
Operating cashflows	54.5	58.5
50%
IFRS 16 lease cost cash charge	(6.5)	(6.4)
Non-underlying items in accruals	0.8	(2.9)	40%
Underlying total group operating cash flows	48.8	49.3
30%
Underlying cash conversion	99.5%	105.5
20%
Capital expenditure	(4.3)	(4.2)	10%
Tax charge	(7.6)	(7.6)	0%
Loan to minority interest	(0.8)	0.0
Net finance cost	(2.6)	(2.3)
Underlying free cash flow attributable to equity holders	33.6	35.1

Cash sources	Cash uses
FCF before capex	Acquisition related	Capex
Disposal proceeds	Dividends	Net reduction in debt

Working capital and indebtedness

Robust balance sheet position

Working capital position

FY 2020	FY 2019	FY 2020	FY 2019
£'m	£'m	£'m	£'m
Contract assets	8.2	6.5	Gross debt balance	133.5	129.6
Trade receivables	46.4	42.6	Gross cash balance	(57.1)	(51.5)
Contract liabilities	(18.5)	(17.6)	Restricted cash balance	13.4	10.1
Net working capital	36.1	31.4	Group net debt	89.8	88.2
- As a % of last months continuing reviews	21.3%	19.9%
Underlying operating profit from continuing operations	48.0	43.0
Add back: Depreciation (excl IFRS 16 lease depreciation)	2.9	2.9
EBITDA less lease depreciation	50.9	45.9
Net Debt to EBITDA less lease depreciation	1.8x	1.9x

• ▪ Successful refinancing to increase facilities by 40%

• ▪ New £210 committed RCF with £100m accordion

• ▪ New facility on similar terms

Net indebtedness

Growth in industry

Strong structural growth drivers remain

1

Demand for Alternatives

2

Increasing regulation

3

Outsourcing trends

AuM across core strategies

US$bn

14,000 12,000 10,000 8,000 6,000 4,000 2,000

0

Private Equity

Private DebtReal EstateInfra

Source: Preqin Special Report: Future of Alternatives 2025

• ▪ Investor demand remains as high as ever

• ▪ Confidence in timing of capital deployment should drive recovery in fund raising activity

• ▪ New legislation from authorities to encourage the flow of alternative investment

  • - Irish ILP

  • - Singapore VCC

  • - Hong Kong LPF

  • - HM Treasury consultation underway

• ▪ Increased regulatory oversight

• ▪ COVID has highlighted the challenge of managing remote in-house teams and need for well invested, robust infrastructure

• ▪ Maturing outsourcing model in APAC and a shift to outsource in North America

Market leading capability & platform

Sanne is a global leader and perfectly placed to support clients

• ▪ Highly professional teams offering Local Excellence on a Global Platform

• ▪ Our accredited business processes and structure enables us to expand seamlessly

• ▪ Product specialists in Alternative Asset classes

• ▪ Clients see us as a trusted, long term partner

• ▪ Our experts provide professional, secure and resilient services

• ▪ Accredited training provider for professional qualifications

• ▪ Ability to service clients from 22 locations around the globe

• ▪ c.£500bn AuA

• ▪ c.2,000 clients globally

• ▪ c.9,500 funds & structures administered

• ▪ We have a strong heritage of developing the very best talent

• ▪ We are known for our strong brand, excellent people and client service culture

• ▪ Diverse and inclusive corporate culture

• ▪ Proven M&A strategy since IPO

• ▪ Strong integration track record

• ▪ Positive post-deal financial and operating contributions throughout

• ▪ Continuous investment into technology infrastructure

• ▪ We differentiate our service offering to clients through innovation

• ▪ Sanne.Live, Sanne Spotlight, Sanne Rio ESG Reporting

Our M&A strategy

To accelerate growth of our market leading proposition

• ▪ We are agile and have an efficient and centralised M&A decision making process

  Proven track record of M&A since IPO

• ▪ Our listed status is attractive to many founders and their management teams

  DB Trust Co Japan

  FAS

  • ▪ Our culture is focused on providing high-quality client service and inclusive working environment

    Sorato Trust

  • ▪ We have long-term strategic plans

  CCS

• ▪ We have a disciplined approach to pricing and structuring of transactions in order to generate the best long term returns for our shareholders

Capital deployed

2015 £2m

2016 £180m

2017 £87m

2018 £13m

2019 £9m

2020 £44m

Momentum in M&A strategy

Insight into deals signed during 2020

DB Trust Co Japan

Rationale:

• ▪ Added fund administration capability to Ireland operation

• ▪ Provided Sanne with first footprint into the Cayman Islands - strategically important fund jurisdiction

Rationale:

• ▪ Enhanced Japan operation which boosted ability to win new business in 2020

• ▪ Adds a high-quality existing client book

Rationale:

• ▪ Augmented existing Cayman Islands operation

• ▪ Provides further management bandwidth and new product capabilities

Rationale:

• ▪ Adds strategically important Scandinavian footprint

• ▪ Adds scale and further expertise to Guernsey operation

Rationale:

• ▪ Minority investment into start-up technology business focused on accounting, reporting and delivery for Private Asset administration

Locations

• ▪ Ireland

• ▪ Cayman Islands

Location

• ▪ Japan

Location

• ▪ Cayman Islands

Locations

• ▪ Denmark

• ▪ Sweden

• ▪ Guernsey

Location

• ▪ New York

SECTION 6

Q&A

Legal notices

Sanne Group (Cayman) Limited is regulated by Cayman Islands Monetary Authority. Sanne Financial Management Consulting (Shanghai) Co Limited is licenced by the Shanghai Administration of Industry and Commerce. Sanne Group (Guernsey) Limited is regulated by the Guernsey Financial Services Commission. Sanne Group Asia Limited is licenced by the Hong Kong Registry for Trust and Company Service Providers. Sanne Group Administration Services (Ireland) Ltd and Inbhear Fund Services Limited are regulated by Central Bank of Ireland. Sanne Fiduciary Services Limited and its affiliated group are regulated by the Jersey Financial Services Commission. Sanne Group (Luxembourg) S.A. and Luxembourg Investment Solutions S.A. are regulated by the Commission de Surveillance du Secteur Financier. Sanne Fund Services Malta Ltd is regulated by Malta Financial Services Authority. SANNE Trustees (Mauritius), SANNE Mauritius and SANNE Securities (Mauritius) Ltd are regulated by the Financial Services Commission- Mauritius. Sanne Group (Netherlands) B.V. is regulated by the Dutch Central Bank (De Nederlandsche Bank). Sanne (Singapore) Pte. Ltd is regulated by The Accounting and Corporate Regulatory Authority. Sanne Fund Services SA (Pty) Ltd and Sanne Management Company (RF) (Pty) Ltd are regulated by the Financial Sector Conduct Authority. Sanne Fiduciary Services (UK) Limited and Sanne Group Administration Services (UK) Limited are authorised and regulated by the Financial Conduct Authority. Private Equity Administrators ApS is registered in Denmark. PEA Depositary Services ApS is licensed by the Danish FSA. Private Equity Administrators Sweden AB is registered in Sweden. PEA Depositary Services AB is licensed by the Swedish FSA. Private Equity Administrators Limited is licensed by the Guernsey Financial Services Commission under The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended and The Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 2000

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