Sanne : 2021 Interim Results RNS

14 September 2021

Sanne Group plc

(the Group, Sanne or the Company)

Interim Results for the six months ended 30 June 2021

Continued growth momentum and strategic progress

Sanne, a leading global provider of alternative asset and corporate services, announces its results for the six months ended 30 June 2021.

				Constant
	6 months to 30	6 months to 30	Change	currency
	June 2021	June 2020		change3
Underlying1
Net revenue2	£90.7m	£83.9m	8.1%	12.5%
Operating profit	£24.0m	£23.0m	4.3%	12.4%
Profit before tax	£22.2m	£22.3m	(0.5%)	6.4%
Diluted earnings per share	11.5p	12.3p	(6.5%)	2.4%
Free cash flow attributable to equity	£14.7m	£14.0m	5.0%	n.a.
holders4
Operating profit margin	26.4%	27.4%	(100bps)	(3bps)
Statutory
Turnover2	£96.2m	£86.5m	11.2%	15.6%
Operating profit	£12.6m	£12.3m	2.4%	14.7%
Profit before tax	£9.4m	£11.6m	(19.2%)	(8.0%)
Diluted earnings per share	4.1p	6.1p	(32.8%)	(21.3%)
Interim dividend per share	-	4.8p	n.a.	n.a.

See below for notes

Highlights:

1. Robust financial performance:

1. Return to double digit net revenue growth on a constant currency basis with growth of 12.5%3 year-

on-year and organic growth of 4.0%3

1. Returning growth momentum following impact of COVID-19 pandemic on the industry: organic net

revenue growth of 4.1% on H2 2020 vs, only 1.4% H2 2020 on H1 2020

1. Underlying operating profit growth of 12.4%3

1. Underlying operating profit margin flat at 27.3%3, excluding a 1.0 percentage point dilution effect

due to FX

1. Continued strong cash generation with underlying operating cash conversion in excess of 100% o Significant growth in new business wins up 41.4% year-on-year with annualised revenue of

approximately £15.7 million secured in the first half

1. Continued strategic progress:

1. Completed acquisitions of PEA6 and Strait7 to add new presence in important Scandinavian markets of Sweden and Denmark as well as expand the Group's North American footprint

1. Successful completion of a £79.5m equity placing and refinancing of the Group's revolving credit facility

1. Positive progress on roll-out of new Group technology strategy

1. Acquisitions completed during 2020 performing well and integrations well underway

1. Agreed the acquisition of PraxisIFM Group plc's fund business to augment the Group's presence in the European listed funds market

1. Sale of investment in Colmore realising net proceeds of $25.2m (£18.1m), a return of 2.3 times

our original investment after two years, with continued commitment to the strategic partnership with Sanne under its new owner, Prequin

1. Takeover process

1. On 25 August 2021 the Company announced that the Board had reached an agreement with
2. • 
     Apex Group Ltd ("Apex") on the terms of a recommended all cash offer of 920p per share to be made by Apex (the "Acquisition")
   • Sanne's Directors intend to recommend unanimously that Sanne Shareholders vote in favour of the Scheme at the Court Meeting and the resolution to be proposed at a Sanne General Meeting
   • It is anticipated that the Acquisition will complete in the first half of calendar year 2022

1. As a result of the terms of the Acquisition, the Board concluded it is not recommending the payment of an interim dividend for 2021

Outlook:

1. Continued high demand for private asset alternatives driving ongoing market recovery

1. Good momentum seen in the first half of 2021 expected to continue into the second half, making the Group well positioned to deliver continued improvement to our organic growth rate.

Martin Schnaier, Chief Executive Officer of Sanne Group plc, said:

"I am delighted by the continued strategic progress that the Company has achieved so far this year, despite the macro-economic uncertainty that prevails. The business has continued to demonstrate its resilience and in the first half we have delivered material new business wins that will further drive future revenue momentum. The efforts of all of our people are thoroughly appreciated and I would like to thank them for their continued excellent service during the first half of the year."

Enquiries:
Sanne Group plc	[phone]

Martin Schnaier, Chief Executive Officer
James Ireland, Chief Financial Officer
Tulchan Communications LLP	[phone]
Tom Murray
Harry Cameron

The Company will be hosting a virtual investor and analyst presentation at 9.30am (GMT) this morning. A webcast will be provided and is available by registering at the following link:

A dial-in facility is also available, and the details are as follows:

Dial-in numbers:

UK: 0800 640 6441

International Access Numbers: [phone]

Participant PIN:

884963

A PDF copy of the 2021 Interim Results presentation will be available to download on Sanne's Investor Relations results and presentation page after the live webcast has ended.

Notes:

1. Underlying results for the year have been presented after the exclusion of non‐underlying items, third-party fund management fees and discontinued activities. Further details of non-underlying items can be found in note 5 of the consolidated financial statements. Further detail of alternative performance measures is provided in the Alternative Performance Measures section
2. Net revenue comprises turnover less third-party fund management fees. More detail is provided in the Financial Review
3. Constant currency represents the comparative performance using the same FX rates for the 2020 and 2021 performance to eliminate movements due to FX
4. Free cash flow attributable to equity holders is the total cash generated in the year before acquisitions, capital expenditure, financing activities and cash non-underlying costs
5. The results shown in the table above and comments below refer to continuing operations only unless otherwise stated
6. Private Equity Administrators Group
7. Strait Capital Company Ltd

Sanne is a leading global provider of alternative asset and corporate services. Established for over 30 years and listed on the Main Market of the London Stock Exchange and a member of the FTSE 250 index, Sanne employs more than 2,000 people worldwide and administers structures and funds that have in excess of £500 billion of assets.

Key clients include alternative asset managers, financial institutions, family offices, ultra-highnet-worth individuals and corporates.

Sanne operates from a global network of offices located in leading financial jurisdictions, which are spread across the Americas, Europe, Africa and Asia-Pacific.

www.sannegroup.com

THE ANNOUNCEMENT MAY CONTAIN "FORWARD-LOOKING STATEMENTS". FORWARD-LOOKING STATEMENTS SOMETIMES USE WORDS SUCH AS "AIM", "ANTICIPATE", "TARGET", "EXPECT", "ESTIMATE", "INTEND", "PLAN", "GOAL", "BELIEVE", "SEEK", "MAY", "COULD", "OUTLOOK" OR OTHER WORDS OF SIMILAR MEANING. BY THEIR NATURE, ALL FORWARD-LOOKING STATEMENTS INVOLVE RISK AND UNCERTAINTY BECAUSE THEY RELATE TO FUTURE EVENTS AND CIRCUMSTANCES WHICH ARE BEYOND THE CONTROL OF THE COMPANY. AS A RESULT, THE ACTUAL FUTURE FINANCIAL CONDITION, PERFORMANCE AND RESULTS OF THE COMPANY MAY DIFFER MATERIALLY FROM THE PLANS, GOALS AND EXPECTATIONS SET FORTH IN ANY FORWARD-LOOKING STATEMENTS. ANY FORWARD-LOOKING STATEMENTS MADE HEREIN SPEAK ONLY AS OF THE DATE THEY ARE MADE AND THE COMPANY DOES NOT ASSUME OR UNDERTAKE ANY OBLIGATION OR RESPONSIBILITY TO UPDATE ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS ANNOUNCEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE, EXCEPT TO THE EXTENT LEGALLY REQUIRED.

Strategic Review

Chief Executive Officer's Statement

The first half of 2021 has been a period of growing momentum for the Group as we begin to see client activity across our end markets recover, with our strong platform and client proposition making us well- placed to benefit. Despite the COVID-19 pandemic continuing to impact the global macroeconomic environment, we have seen a good recovery in investment activity, which in turn has been driving an increase in fund raising activity across our target client base.

This market recovery and our continued investment for growth throughout the pandemic have resulted in a very strong half year for new business wins. The annualised value of new business wins for the first six months of the year was £15.7m, which represents a 41.4% increase compared with the same period in 2020. New business win momentum has been seen across all regions and product strategies and has continued into the second half of the year.

From this strong momentum, the Group has seen a continued improvement in the constant currency organic growth rate, and the Group is well positioned to deliver continued improvement through the second half of 2021. The scale of this new business win activity has resulted in some short-term gross profit margin pressure as we scale up teams to manage the take-on and delivery of new business. However, despite this, the structural changes made over the last two years to manage the Group's well- invested operating platform mean that underlying operating profit margins have remained broadly flat, before the impact of foreign exchange movements, compared with the first half of 2020.

In addition to the robust first half performance and increase in new business wins, Sanne has successfully completed two acquisitions in the first six months of the year and is expected to complete a third in Q4 2021.

Financial performance

				Constant
	H1 2021	H1 2020		currency %
Underlying Group Income Statement	(£'000)	(£'000) % Change	change
Net revenue	90,729	83,949	8.1%	12.5%
Gross profit	51,795	49,649	4.3%	9.3%
- Gross profit margin	57.1%	59.1%	(200bps)	(170bps)
Overhead costs	(27,821)	(26,668)
Underlying operating profit from
continuing operations	23,974	22,981	4.3%	12.4%
- Underlying operating profit margin	26.4%	27.4%	(100bps)	(3bps)

Note: the above table includes Alternative Performance Measures. See the Alternative Performance Measures section for their calculation methodology.

The Group delivered double digit net revenue growth of 12.5%, on a constant currency basis in the first half. As 2021 has seen a significant strengthening of sterling against the Group's other predominant currencies, this has resulted in reported net revenue growth of 8.1%.

The return to double digit net revenue growth on a constant currency basis has been driven by a combination of organic growth as well as the contribution from the five acquisitions that the Group has completed since the start of 2020. Constant currency organic net revenue growth compared with the same period last year was 4.0%. However, a more comprehensive picture of the increasing organic growth performance since the height of the COVID-19 pandemic can be seen by looking at H1 2021's performance compared with H2 2020. The impact of the pandemic on our end markets caused a

significant slow-down in new business and transactional activity during 2020, whilst having minimal impact on end-of-life attrition. As a result, we saw net revenue in the second half of 2020 grow by 1.4% on the first half of the same year. By contrast, our first half performance represents constant currency organic net revenue growth of 4.0% on the second half of 2020. The strong new business wins and increase in transactional activity being seen across the business should provide strong momentum in the second half of the year.

We have made improvements in the approach to business development across the Group and benefited from a number of strategic hires into our Product Development team, which have been instrumental in positioning the Group to benefit from the recovery in client fund raising. This has driven the 41.4% increase in the annualised value of new business wins in the first half of 2021 compared with the first half of 2020. We have also seen a reduction in the delays between winning business and generating revenue which were such a feature of 2020.

Despite positive revenue momentum, the mix effect from PEA and Strait, which both join the Group on lower margins, and the strong pick-up in new business wins, which have required a short-term scaling up of the teams ahead of revenue being generated, have resulted in a short-term reduction in the Group's gross profit margin. This has meant that the gross profit margin in the first half was 57.1%, a 170 basis points reduction on a constant currency basis compared with the prior year. The first half constant currency gross profit growth has been 9.3%.

Overheads remain well-managed, and we continue to benefit from operational gearing in our platform. This control over costs has allowed us to reduce overheads as a proportion of revenue whilst simultaneously increasing our spend on technology as we continue the roll out of our new strategy.

Underlying operating profit has increased 12.4% with a broadly flat margin of 27.3%, both at constant currency, despite the short-term dilution in gross profit margin. However, a greater proportion of overhead costs are incurred in sterling which means the strengthening of the currency that has seen a headwind in revenue does not get reflected to the same degree across the Group's cost base.

The Group's cash performance has once again been strong with underlying operating cash conversion for H1 at 100.4%. Underlying free cash flow attributable to equity holders was also up 5.0% on the first half of 2020 to £14.7 million. This has been driven by our continued working capital discipline as well as the resilient nature of our business model.

Continued strategic delivery

We have continued our focus on innovation and driving our use of technology to enhance client service and operational efficiency throughout the first half. The implementation of our new technology strategy has progressed well, and we have continued to develop innovative client facing initiatives such as Sanne.Live, Sanne Rio and Spotlight which are demonstrable differentiators for Sanne in client pitches. The technology strategy has also involved a significant increase in investment in strategic projects to drive improvements in our efficiency, as well as further enhance the quality of client service. These include projects to rebuild the Group's data architecture and data management framework, as well as redesigning key workflows across core administration technologies. We expect these initiatives to free up significant resources within our teams, enabling them to focus on the high-touch service upon which Sanne has built its reputation.

The first half of the year has also seen continued focus on expanding our full range of products and services across our global footprint. Whilst the on-going travel restrictions in place as a result of the