Quilter remains upbeat after 'pivotal' year

Quilter reported a year of “significant” strategic progress in its full-year results on Tuesday, with its underlying profit performance ahead of market expectations as it returned £375m of capital.

The FTSE 250 company said its adjusted profit before tax was up 1% to £235m for the year ended 31 December, of which £53m was from Quilter Life Assurance (QLA).

It said its adjusted diluted earnings per share slipped to 11.3p from 13.5p for the year, however.

Quilter said its looking at its continuing operations, which exclude QLA, it saw adjusted profit before tax rise 3% to £182m, while adjusted diluted earnings per share from continuing operations were down slightly to 8.6p from 8.9p, which the board said reflected a “more normal” tax charge.

It recommended a final dividend of 3.5p per share, up from 3.3p at the end of 2018, which would bring the total dividend for the year to 5.2p per share, rising from 3.3p year-on-year excluding the special dividend of 12p in 2018.

Assets under management and administration were 13% higher year-on-year at £110.4bn, while the company’s operating margin remained stable at 26%, despite its investment in distribution, which was supported by optimisation initiatives.

Net client cash flow slid to £0.3bn from £4.7bn, and the company reported integrated net flows of £2.6bn, down from £4.7bn in the prior year.

On a statutory basis, Quilter siad its IFRS loss before tax attributable to equity holders from continuing operations totalled £53m, swinging from a profit of £41m in 2018, which reflected a higher policyholder tax charge due to the increase in market levels during 2019.

Diluted earnings per share were 7.8p, down from 26.5 pence, and the company said its Solvency II ratio stood at 221% after the payment of the recommended final dividend, compared to 190% in 2018, including QLA.

On the strategic front, Quilter noted that the sale of the QLA business to ReAssure Group for £425m plus interest of £21m completed on 31 December.

The net surplus proceeds of £375m are planned to be returned to shareholders, and a share buyback on both the London and Johannesburg Stock Exchanges was set to begin “imminently”.

An odd-lot offer to reduce the number of shareholders by up to 50% at a cost of up to £30m was also announced.

Looking at its UK platform transformation programme, Quilter said the initial migration of 38,500 accounts from 25,000 clients representing assets under administration of £4.3bn was successfully transitioned over the weekend of 22 and 23 February, in line with its plan.

Business optimisation and cost saving initiatives were said to be ahead of plan, with £14m of savings realised during the year with an end-2019 run rate benefit of £24m.

The integration of Charles Derby was completed, with Lighthouse Group said to be progressing in line with plan.

Charles Derby was rebranded to Quilter Financial Advisers early in 2020.

The Quilter Investors disengagement from the transition service agreement with Merian was also completed six months ahead of schedule, and on budget, the board reported.

“2019 was a pivotal year for Quilter,” said chief executive officer Paul Feeney.

“Not only were we pleased with a 3% increase in adjusted profit to £182m, excluding QLA, after business investment via acquisitions and new premises expenditure of around £10m, it was also a great year for delivering on our transformation agenda.

“Our optimisation plans remain on track and our advice acquisitions will contribute to flows in the coming years.”

Feeney said Quilter Investors was now a “highly scalable business” with a broader range of solutions to meet client needs.

“Quilter International delivered strong performance in 2019 supported by a focus on cost containment to offset revenue pressures.

“The board has proposed a final dividend of 3.5p per share to provide a full year dividend of 5.2p per share.

“We intend to undertake a capital return of £375m to shareholders from the net surplus proceeds from the Quilter Life Assurance sale, and a share buyback will commence imminently.

“We have also announced an odd-lot offer to provide small shareholders with a cost effective means of selling their shares.”

Paul Feeney added that 2020 had begun “well”, but said the sharp coronavirus-induced market correction beginning in late February had created a level of uncertainty as to the outlook for the remainder of the year.

“It is currently too early to ascertain what impact market volatility will have on investor sentiment, net client cash flow and the consequential impact this may have on revenues and profitability.

“Notwithstanding short term market sentiment, we remain optimistic on the long-term secular opportunity across our markets and Quilter is strategically well positioned to benefit from this.”

Completing the first migration onto the new UK platform in early February was described as a “major milestone” by Feeney.

“We are now focussed on delivering the second and final migration to a high quality outcome in the summer.

“Our new platform will strengthen the cohesion between our different business capabilities and be a catalyst for faster growth.”

At 0823 GMT, shares in Quilter were up 4.59% at 138.9p.