Quilter Full Year Results 2019 - Part 1

RNS Number : 6868F

Quilter PLC

11 March 2020

 

NEWS RELEASE

11 March 2020

Quilter plc preliminary results for the year ended 31 December 2019

A year of significant strategic progress, underlying profit performance ahead of market expectations and £375 million capital return with additional c.£30 million Odd-lot Offer announced

Highlights (including Quilter Life Assurance ("QLA"))

· Adjusted profit before tax up 1% to £235 million (2018: £233 million excluding Single Strategy business; 2018: £259 million including Single Strategy business) of which £53 million (2018: £57 million) from QLA.

· Adjusted diluted earnings per share of 11.3 pence (2018: 13.5 pence, of which 1.2 pence is in respect of the Single Strategy business).

Management basis - continuing business (excludes QLA)

· Adjusted profit before tax for the Group up 3% to £182 million (2018: £176 million); for further details see overleaf.

· Adjusted diluted earnings per share from continuing operations of 8.6 pence (2018: 8.9 pence) reflecting more normal tax charge.

· Recommended final dividend of 3.5 pence per share (2018: 3.3 pence per share), bringing the total dividend for the year to 5.2 pence per share (2018: 3.3 pence per share, excluding the special dividend of 12.0 pence per share).

· Assets under Management/Administration ("AuMA") up 13% from 31 December 2018 to £110.4 billion (2018: £97.7 billion).

· Operating margin stable at 26% (2018: 26%), despite investment in distribution, supported by optimisation initiatives.

· Net Client Cash Flow ("NCCF") of £0.3 billion (2018: £4.7 billion).

· Integrated net flows of £2.6 billion (2018: £4.7 billion).

 Statutory results

· IFRS loss before tax attributable to equity holders from continuing operations of £53 million (2018: profit of £41 million) reflecting a higher policyholder tax charge due to the increase in market levels during 2019.

· Diluted earnings per share of 7.8 pence (2018: 26.5 pence).

· Solvency II ratio of 221% after payment of the recommended final dividend (2018: 190% (including QLA)).

Strategic progress

·     The sale of the QLA business to ReAssure Group for £425 million (plus interest of £21 million) completed on 31 December 2019. The net surplus proceeds of £375 million are planned to be returned to shareholders. A share buyback on both the London and Johannesburg Stock Exchanges will commence imminently.

· Odd-Lot Offer to reduce number of shareholders by up to c.50% at a cost of up to c.£30 million announced alongside full year results.

·     UK Platform Transformation Programme - initial migration of 38,500 accounts from 25,000 clients representing AuA of £4.3 billion successfully transitioned over the weekend of 22/23 February 2020, in line with plan.

· Business optimisation and cost saving initiatives ahead of plan with £14 million of savings realised during the year with an end-2019 run rate benefit of £24 million.

· Integration of Charles Derby completed and Lighthouse Group plc progressing in line with plan. Charles Derby rebranded to Quilter Financial Advisers early in 2020.

· Quilter Investors disengagement from Transition Service Agreement with Merian completed six months ahead of schedule and on budget.

Paul Feeney, Chief Executive Officer, said:

"2019 was a pivotal year for Quilter. Not only were we pleased with a 3% increase in adjusted profit to £182 million, excluding QLA, after business investment via acquisitions and new premises expenditure of around £10 million, 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. Quilter Investors is 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 3.5 pence per share to provide a full year dividend of 5.2 pence per share. We intend to undertake a capital return of £375 million 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.

2020 began well but the sharp Coronavirus induced market correction beginning in late February has created a level of uncertainty as to the outlook for the remainder of 2020. It is currently too early to ascertain what impact market volatility will have on investor sentiment, NCCF 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 our new UK platform in early February was a major milestone for the Group. 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."

Quilter highlights from continuing operations1	2019	2018
Assets and flows
AuMA (£bn)2	110.4	97.7
Gross sales (£bn)2	12.3	14.2
NCCF (£bn)2	0.3	4.7
NCCF/opening AuMA2	-	5%
Integrated flows (£bn)2	2.6	4.7
Productivity (£m)2,3	1.0	1.7
Asset retention2	88%	91%
Profit & loss
IFRS (loss)/profit before tax attributable to equity holders from continuing operations (£m)	(53)	41
IFRS (loss)/profit after tax from continuing operations (£m)	(21)	66
Adjusted profit before tax before reallocation of QLA costs (£m)2,4	182	176
Adjusted profit before tax (£m)2,4	156	148
Operating margin2	26%	26%
Revenue margin (bps)2	55	55
Return on equity2	8.3%	9.8%
Non-financial
Restricted Financial Planners ("RFPs")6	1,799	1,621
Investment Managers ("IMs")6	167	155
Quilter highlights from continuing operations and Quilter Life Assurance	2019	2018
Profit & loss
Adjusted profit before tax (£m)2	235	233
Operating margin2	29%	30%
Revenue margin (bps)2	57	57
Adjusted diluted earnings per share (pence)2,5	11.3	12.3
1 Continuing operations represent Quilter plc excluding results of QLA (for both 2018 and 2019) and the Single Strategy business (up to the date of sale which completed on 29 June 2018).
2 Alternative Performance Measures ("APMs") are detailed on pages 5 to 7.
3 Average integrated NCCF per Restricted Financial Planner.
4 Adjusted profit from continuing operations includes £26 million of costs (2018: £28 million) previously reported as part of the QLA business to be reallocated from discontinued to continuing operations, as these costs do not transfer to ReAssure on disposal at 31 December 2019. Of the £26 million of costs reallocated, £14 million will recur in 2020 to provide services to ReAssure under the Transitional Services Arrangement, with corresponding income to cover these costs. Management actions are being taken to manage the remaining costs, which are expected to continually decline over the next two years. Refer to page 16 for a full reconciliation.
5 Adjusted diluted earnings per share in 2018 of 13.5 pence, of which 1.2 pence in respect of the Single Strategy business. 6 Closing headcount as at the year end date. Adjusted profit presented in this announcement Adjusted profit is presented in this announcement in a number of ways, to provide readers with a view of adjusted profit for the total Group, excluding QLA, and on a continuing and discontinued basis. A full reconciliation of these views is provided on page 16 and a definition of adjusted profit is explained on page 5. For adjusted profit before tax on a continuing basis, IFRS accounting standards require £26 million of costs (2018: £28 million), previously reported as part of the QLA business, to be reallocated from discontinued to continuing operations, as these costs do not transfer to ReAssure on disposal at 31 December 2019. Of the £26 million of costs re-allocated, £14 million will be incurred in 2020 to provide services to ReAssure under the Transitional Services Arrangement, with corresponding income to cover these costs. Management actions are being taken to manage the remaining costs, which are expected to continually decline over the next two years. Alternative Performance Measures ("APMs") We assess our financial performance using a variety of measures including APMs, as explained further on pages 5 to 7. In the headings and tables presented from page 8 onwards, these measures are indicated with an asterix: *.

Quilter plc results for the year ended 31 December 2019

Enquiries

Investor Relations
John-Paul Crutchley	UK	[phone]
Media
Jane Goodland	UK	[phone]
Tim Skelton-Smith	UK	[phone]
Camarco
Geoffrey Pelham-Lane	UK	[phone]
Aprio (South Africa)
Julian Gwillim	SA	[phone]

Paul Feeney, CEO, and Mark Satchel, CFO, will host a presentation for investors and analysts at 08:30am (GMT) today, 11 March 2020, at Quilter plc, Millennium Bridge House, 2 Lambeth Hill, London, EC4V 4AJ.

Alternatively, if you are unable to attend but would like to watch a live webcast of the presentation, please click on the link below to join via our website.

Live and on-demand: https://www.quilter.com/investor-relations  

To join by telephone:

United Kingdom/ Other	[phone]
South Africa	[phone]
United States	[phone]
Access Code	91213038#

Playback facility:

United Kingdom/ Other	[phone]
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Access Code	301307701#

Note: Neither the content of the Company's website nor the content of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement .

Disclaimer

This announcement may contain certain forward-looking statements with respect to certain Quilter plc's plans and its current goals and expectations relating to its future financial condition, performance and results. 

By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Quilter plc's control including amongst other things, international and global economic and business conditions, the implications and economic impact of several scenarios of the UK leaving the EU in relation to financial services, market related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing and impact of other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation and other regulations in the jurisdictions in which Quilter plc and its affiliates operate. As a result, Quilter plc's actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in Quilter plc's forward looking statements.

Quilter plc undertakes no obligation to update the forward-looking statements contained in this announcement or any other forward-looking statements it may make. Nothing in this announcement should be construed as a profit forecast.

 

Business unit descriptor:

Previous Business Unit Name	New Business Unit Name
Advice & Wealth Management
Multi-Asset	Quilter Investors
Quilter Cheviot	No change
Intrinsic	Quilter Financial Planning
Old Mutual Wealth Private Client Advisers	Quilter Private Client Advisers
Wealth Platforms
UK Platform	Quilter Wealth Solutions
International	Quilter International
Heritage	Quilter Life Assurance

Alternative Performance Measures ("APMs")

We assess our financial performance using a variety of measures. APMs are not defined by the relevant financial reporting framework which for the Group is IFRS, but we use them to provide greater insight into the financial performance, financial position and cash flows of the Group and the way it is managed.

APMs should be read together with the Group's consolidated financial statements, which include the Group's income statement, statement of financial position and statement of cash flows, which are presented on pages 32 to 37.

A number of our metrics exclude Quilter Life Assurance, which was historically excluded due to the closure of the institutional life book of business announced in 2017, and the run-off of the closed legacy book of business. At 31 December 2019, this business was sold to ReAssure, as explained in note 3(b) to the financial statements, and has been classified as a discontinued operation accordingly.

Further details of APMs used by the Group in its financial review are provided below. The Group's APMs have not changed due to the adoption of new accounting standards in the year, which includes the impact of IFRS 16, as disclosed in note 1 to the consolidated financial statements.

APM	Definition
Adjusted profit before tax	Represents the adjusted profit before tax of the Group. Adjusted profit before tax represents the Group's IFRS profit, adjusted for key items and excludes non-core operations, as detailed on page 34 in the consolidated financial statements. Due to the nature of the Group's businesses, management believe that adjusted profit before tax is an appropriate basis by which to assess the Group's underlying operating results as it enhances comparability and understanding of the financial performance of the Group. In 2019, total adjusted profit before tax is presented for the total Group, as well as adjusted profit before tax for the Group excluding QLA, and adjusted profit before tax for QLA. A continuing and discontinued view of adjusted profit before tax has also been presented, as IFRS accounting standards require £26 million of costs (2018: £28 million) previously reported as part of the QLA business to be reallocated from discontinued to continuing operations, as these costs do not transfer to ReAssure on disposal at 31 December 2019. A detailed reconciliation of the adjusted profit before tax metrics presented, and how these reconcile to IFRS, is provided on page 16. Adjusted profit is referred to throughout the Chief Executive Officer's statement and Financial review, with comparison to the prior period explained on page 13.
Revenue margin (bps)	Represents net management fees, divided by average AuMA.Management uses this APM as it represents the Group's ability to earn revenue from AuMA. Revenue margin by segment and for the Group is explained on page 14 of the Financial review.
Operating margin	Represents adjusted profit before tax divided by total net fee revenue including policyholder tax contributions and adviser fees. Operating margin excludes financing costs on external debt (as disclosed in note 5(a) to the consolidated financial statements as 'Interest payable on borrowed funds'). Operating margin is presented for the total group, including QLA, and the group excluding QLA (before the reallocation of the QLA costs as described in the adjusted profit before tax section above). Management use this APM as this is an efficiency measure that reflects the percentage of total net fee revenues that become adjusted profit before tax. Operating margin is referred to in the Chief Executive Officer's statement and Financial review, with comparison to the prior year explained in the adjusted profit section on page 14.
Gross sales	Gross sales are the gross client cash inflows received from customers during the period and represent our ability to increase AuMA and revenue. Gross sales are disclosed by business on page 12 of the Financial review and by business and segment in the Supplementary information on pages 24 and 26.
Gross outflows	Gross outflows are the gross client cash outflows returned to customers during the period and results in a decrease to AuMA and revenue. Gross outflows are disclosed by business on page 12 of the Financial review and by business and segment in the Supplementary information on pages 24 and 26.
Net client cash flows ("NCCF")	The difference between money received from and returned to customers during the relevant period for the Group or for the business indicated. This measure is considered to be a lead indicator of total net fee revenue. NCCF is referred to throughout this document, with a separate section in the Financial review on pages 12 to 13, and is presented by business and segment in the Supplementary information on pages 24 to 26.

 

Integrated net flows	Total NCCF (excluding QLA), before intra-Group eliminations that have flowed through two or more segments within the Group. It is considered to be a lead indicator of revenue generation driven by our integrated business model. Integrated net flows are explained in the NCCF section of the Financial review on page 13.
Assets under Management and Administration ("AuMA")	Represents the total market value of all financial assets managed and administered on behalf of customers. For reporting, the Advice and Wealth Mangement segment presents Assets under Management and Wealth Platforms segment presents Assets under Administration. AuMA is referred to throughout this document, with a separate section in the Financial review on page 13, and is presented by business and segment in the Supplementary information on page 25.
Average AuMA	Represents the average total market value of all financial assets managed and administrated on behalf of customers. Average AuMA is calculated using a 7-point average (half year) and 13-point average (full year) of monthly closing AuMA.
Total net fee revenue1	Total net fee revenue represents revenue earned from net management fees and other revenue listed below, and is a key input into the Group's operating margin. Further information on total net fee revenue is provided on page 14 of the Financial review and note 5(c) in the consolidated financial statements.
Net management fees	Consists of revenue generated from AuMA, fixed fee revenues including charges for policyholder tax contributions, less trail commissions payable. Net management fees are presented net of trail commission payable as trail commission is a variable cost directly linked to revenue, which is treatment and presentation commonly used across our industry. Net management fees is a part of total net fee revenue, which is a key input into the Group's operating margin. Further information on net management fees is provided on page 14 and note 5(c) in the consolidated financial statements.
Other revenue	Represents revenue not directly linked to AuMA (e.g. encashment charges, closed book unit-linked policies, non-linked Protect policies, adviser initial fees and adviser fees linked to AuMA in Quilter Financial Planning (recurring fees)).  Other revenue is part of total net fee revenue, which is a key input into the Group's operating margin. Further information on other revenue is provided on page 14 and note 5(c) in the consolidated financial statements.
Expenses1	Expenses represent the underlying costs for the Group, excluding the impact of one-off items that need to be incurred to earn total net fee revenue. Expenses are included in the calculation of adjusted profit before tax, and impact the Group's operating margin. A reconciliation of expenses to the applicable IFRS line items is included in note 5(c) to the consolidated financial statements, and the adjusting items excluded from expenses are explained in note 5(a). Expenses are explained on page 15 of the Financial review.
Cash generation	This presents a shareholder view of underlying cash earnings. The IFRS consolidated statement of cash flows includes policyholder cash flows and non-operating items. Cash generated from operations is calculated by removing non-cash items from adjusted profit after tax. For 2019, the cash generation has been calculated using the total adjusted profit for the Group (including QLA), as well as for adjusted profit (excluding QLA) before the reallocation of QLA costs (as explained on page 2). The capital requirements of the business are assessed on each company's solo regulatory solvency basis. Cash generation is explained on page 17 of the Financial review.
Asset retention	The asset retention rate measures our ability to retain assets from delivering good customer outcomes and investment performance. Asset retention reflects the annualised outflows of the assets under management during the period as a percentage of opening assets under management. Asset retention is calculated as: 1 - (annualised gross outflow divided by opening assets under management). Asset retention is provided for the Group on page 2, and by segment on pages 28 to 29.
Productivity	Productivity is a measure of the value created by Integrated net flows from our advice business, and is an indicator of the success of our integrated business model. Productivity is calculated as average integrated net flow per Restricted Financial Planner. Productivity is provided on pages 2 and 28.
NCCF/opening AuMA (excluding QLA)	This measure is calculated as total NCCF annualised (as described above) divided by opening AuMA presented as a percentage. Quilter Life Assurance is excluded from this metric principally due to the closure of the institutional life book of business announced in 2017 and run-off of the legacy book as it is a closed-book business. The completion of the sale of this business took place on 31 December 2019. This metric is provided on page 2.
Return on Equity ("RoE") (excl. discontinued operations)	This calculates how many pounds of profit the Group generates with each pound of shareholder equity. This measure is calculated as adjusted profit after tax divided by average equity. For the 2018 comparative, equity was adjusted for the acquisition of Skandia UK from Old Mutual plc as part of Managed Separation and equity allocated to the discontinued operations arising from the sale of the Single Strategy business and, for both 2018 and 2019, sale of the Quilter Life Assurance business.
IFRS profit before tax (excluding amortisation, policyholder tax adjustments and other one-off items)1	This profit metric is calculated using the Group's IFRS profit before tax, from continuing and discontinued operations, and is adjusted to exclude amortisation of intangible assets, policyholder tax adjustments, and other one-off items as disclosed in the reconciliation in note 5(b) to the consolidated financial statements. This APM has been relabeled in 2019, to provide a more meaningful title (was previously called IFRS profit before tax (excluding policyholder tax and life tax contributions)). The 2018 comparative has also been restated for comparability with the current year, which is also explained in note 5(b) to the consolidated financial statements. This metric is used as the basis for remuneration, which is explained in the Remuneration Report in the Group's Annual Report.
Adjusted diluted earnings per share	Represents the adjusted profit earnings per share. Calculated as adjusted profit after tax divided by the weighted average number of shares. Refer to page 15 and note 7 in the consolidated financial statements. In 2019 adjusted diluted earnings per share is presented for the total Group, as well as adjusted profit before tax for the Group excluding QLA. A continuing and discontinued view of diluted earnings per share has also been presented, as IFRS accounting standards require £26 million of costs (2018: £28 million) previously reported as part of the QLA business to be re-allocated from discontinued to continuing operations, as these costs do not transfer to ReAssure on disposal at 31 December 2019. The calculation of all EPS metrics is included in note 7 to the consolidated financial statements Adjusted diluted earnings per share is referred to throughout this document, with additional details in the EPS section in the Financial review on page 15.
Headline earnings per share1	The Group is required to calculate headline earnings per share in accordance with the Johannesburg Stock Exchange Limited Listing Requirements, determined by reference to the South African Institute of Chartered Accountants' circular 02/2015. This is calculated on a basic and diluted basis. For details of the calculation, refer to note 7 to the consolidated financial statements.
1New APM definition in 2019.

Chief Executive Officer's Statement

Execution

Last year I noted that Quilter had come to market not as the finished article but as a work in progress. In 2019 we made significant strides towards achieving our goals. We have a clear vision about what we want Quilter to be: a modern advice-led, wealth management company built on the principles of fairness, transparency and choice with each of these supported by great service. Our core UK customer propositions are free of exit charges or surrender penalties. Delivering good customer outcomes through the provision of trusted advice is central to everything we do. The combination of our own restricted financial planners together with the c.4,000 independent adviser firms who use Quilter's UK Platform on a regular basis provides us with two strong channels to drive business growth.

Our ambitions are considerable and the growth opportunity across our markets remains compelling, so during 2019 we have been moving at pace to transform Quilter by:

· a relentless focus on optimisation and the development of our new UK platform;

· reshaping our business through both acquisitions and disposals;

· investing in our revenue generation capability through growth in restricted financial planners and adding investment managers to replace the departures we saw in 2018; and

· maintaining the capital discipline we demonstrated with 2018's special dividend through a commitment to return the £375 million net surplus sale proceeds from the disposal of Quilter Life Assurance through on-market share repurchases.

Remaining key milestones include the migration of customers from our existing platform onto our new UK platform, the first stage of which was completed in early 2020. We also need to complete the first phase of our optimisation plans by the end of 2021. As we look ahead, we believe that the secular growth characteristics of our markets remain strong, and each of our businesses are well positioned strategically in each of the markets in which they operate. Our objective is to deliver on our potential by making Quilter more than the sum of its parts and delivering excellent outcomes for all our stakeholders.

Financial performance

We have delivered a solid profit performance in 2019 in a market that has had to contend with extreme political and economic uncertainty due to Brexit in the UK, and trade and geopolitical concerns more broadly across the globe. Business conditions in 2019 were the opposite of those experienced in the previous year. In 2018, Quilter benefited from good new business flows but a challenging environment which was exacerbated by the market sell off late in that year. By contrast, in 2019 the net flow environment has been more challenging due to the aforementioned geopolitical uncertainty coupled with certain Quilter-specific issues, discussed below. However, the market rebound early in 2019 was stronger than we expected at the end of 2018, which, coupled with the high level of retention of our assets under management and administration, meant we closed the year with record AuMA of £110.4 billion.

Against this backdrop, I am pleased with our adjusted profit before tax for the year of £182 million (2018: £176 million) (excluding Quilter Life Assurance), up 3% on last year, or £235 million (2018: £233 million), up 1%, including Quilter Life Assurance. This reflected stable revenue margins coupled with a 4% increase in average AuMA and was supported by strong cost discipline and our optimisation activities. Expenses increased modestly as a result of investment in the business through our distribution acquisitions and the normalisation of the charge for the FSCS levy. Excluding the impact from acquisitions, underlying costs (including Quilter Life Assurance) were broadly unchanged on 2018, in line with the guidance provided at the beginning of the year. On an IFRS basis, our continuing business made a loss after tax of £21 million (2018: profit after tax of £66 million). The difference between our IFRS and adjusted profit is predominantly due to the amortisation of (non-cash) intangibles related to acquisitions, the costs of our platform transformation programme (which will fall away in 2021) and the restructuring costs associated with our optimisation plans, which will continue to be incurred in 2020 and 2021.

Transformation

A key initiative in 2019 was broadening the reach of our advice business. We acquired Charles Derby Group in February 2019 which, in one-step, gave us UK-wide scale in our recently formed national advice business. The subsequent addition of 390 financial advisers through the acquisition of Lighthouse Group plc in June 2019 added critical mass to the national advice business as well as broadening our network business. We will enhance the Lighthouse restricted proposition through access to Quilter Investors solutions which have been specifically designed to meet the needs of customers of advice businesses. In line with the trend in previous acquisitions, over time, we expect a number of the 250 Lighthouse independent financial advisers to convert to a restricted proposition based upon the ability of our propositions to meet their customers' needs.

The integration of both the above acquisitions are progressing in line with expectations and should contribute to flows during 2020. While these acquisitions were strategically important, we also experienced good levels of organic growth in RFPs across our wider business. We added a net 41 RFPs across the firm representing organic growth of 3% and have a strong pipeline of new joiners expected for 2020 which is partly due to the scaling up of our investment in our Financial Adviser School. Given the focus on broadening of our business, we were delighted that Quilter was named as the top-ranked financial adviser firm in 2019 by FTAdviser which provides external validation of our commitment to providing high-quality advice.

The sale of Quilter Life Assurance was in line with our strategic objectives. Once the FCA thematic review into fair treatment of long-standing customers closed with a favourable outcome in late 2018, we decided to undertake a strategic review of the business which concluded that a sale was in the best interests of customers, shareholders and employees. The sale of Quilter Life Assurance to ReAssure helps simplify and focus our business and removes a drag from our growth trajectory. We were delighted with the sale price achieved of £425 million (and interest income of £21 million) representing 120% of proforma own funds which set a new benchmark for pricing of closed life book transactions in the UK. Our Board is highly focussed on capital discipline and we intend to return the full net surplus sale proceeds (after disposal costs) of £375 million to shareholders. We will commence a share buyback on the London and Johannesburg exchanges shortly and it will be subject to staged regulatory approval and the Board will keep the programme under review to make sure it continues to be the most efficient and effective means of returning capital to shareholders.

In terms of our operational transformation through optimisation, we continue to make excellent progress. In late 2018 and 2019 our focus was on initiatives with near-term benefits such as supplier contract renegotiation and reduction, driving savings in property and facility costs, and reducing dependence on higher cost contracting staff. We are now focussed on delivering the longer-term sustainable cost savings which will allow us to deliver the planned operating margin improvements in 2020 and 2021. This will be achieved through technology enabled transformation, such as implementing a single payroll system, a firm-wide general ledger and enhancing the straight through processing capabilities within our advice business. We have started the consolidation of the support functions which is designed to create centres of excellence across the business by removing duplication and ensuring tasks are only performed once. This has already contributed to our lower costs in activities such as finance and marketing.

Our optimisation plans have contributed to keeping our operating margin stable year-on-year, despite the impact of our Advice acquisitions which have a lower operating margin than the rest of the Group. We remain committed to delivering the targeted improvement in our operating margin in 2020 and in 2021. As a result of the sale of Quilter Life Assurance, this will be off a lower base than we originally expected when we announced our targets in March 2019. We target an operating margin of 27% for 2020 and 29% for 2021.

Turning to our UK Platform Transformation Programme, this has been a priority over the course of 2019. We spent the year with the system in soft launch phase which was used to verify core system functionality, processes and controls in a live environment. This provided valuable insight as we worked through to the core code delivery in the summer and the delivery of the master version of the code in early November 2019. Alongside our rigorous testing approach, we undertook two dry runs and three dress rehearsals as part of our migration readiness plans before our initial migration in February 2020.

This initial migration of c.8% of the total platform assets under administration represented the funds associated with around 60 adviser firms and 25,000 customers. In the period immediately after migration, operational activity has been in line with expectations and initial feedback from advisers using the new system has been positive. We will incorporate lessons learnt from this process into our plans and ensure the new platform is operating well and at scale, ahead of undertaking our final migration by the end of summer, with scheduling of this timed to reduce potential disruption to our customers and advisers.

Ensuring that assets are transferred from our existing platform onto the new platform on a high quality, low risk basis is mission-critical. The total costs of the project are expected to be around £185 million, in line with the revised estimates we set out in August 2019. Of this sum, £136 million had been spent by end-December 2019.

Separately, we executed well on the programme to build out Quilter Investors' capability as a standalone business independent of the transitional support provided by Merian Global Investors (formerly Old Mutual Global Investors). This project was completed more than six months ahead of schedule and within budget.

Operational performance

Delivering good customer outcomes through a trusted advice relationship is core to the Quilter business model. Both our restricted and third party independent advisers drive client flows to our platform - the centre of our business which provides the investment 'wrappers', where needed, to meet clients needs. Our investment solutions provide the intellectual capital to deliver the financial outcomes that our clients seek. Excellent service delivery underpins the customer and adviser experience. Confidence in our proposition is demonstrated through both the continued attraction of our solutions to independent financial advisers and the resilience of our integrated net flows.

Gross client cash flows (excluding Quilter Life Assurance) into the business were lower at £12.3 billion (2018: £14.2 billion) and as already noted, 2019 was challenging in terms of NCCF. 2019 NCCF (excluding Quilter Life Assurance) of £0.3 billion was down from £4.7 billion in 2018. As well as general market uncertainty caused by Brexit and broader geopolitical and macro-economic concerns, the 2019 result includes two Quilter-specific issues:

First, despite higher gross sales in 2019 from Quilter Cheviot, the departures of a group of Investment Managers who resigned in mid-2018 had an impact on outflows in the business once their non-compete restrictions expired in the second quarter 2019. We recorded outflow requests totalling £1.3 billion from clients looking to follow these Investment Managers and, as previously announced, we also experienced the transfer of a quasi-institutional £0.2 billion mandate from Quilter Cheviot late in the second quarter.

Secondly, partly due to market uncertainty, we have experienced a lower level of new gross flows onto our UK platform from both our and third party financial advisers ahead of our planned platform migration this year. This has led to lower levels of flow into Quilter Investors, with the combination of these factors leading to lower net flows.

Quilter International's NCCF was up 67% on the prior year, albeit off a low base. The current business flows are consistent with repositioning the business to have deeper roots in fewer markets, and to ensure the product range and client offering across our international markets is consistent with Quilter's risk appetite in all markets where we operate.

We are pleased that overall levels of client retention across the business were broadly unchanged, outside of the isolated impact from the Quilter Cheviot departures.

AuMA, excluding Quilter Life Assurance, increased 13% to £110.4 billion from £97.7 billion at 31 December 2018. The market recovery began late in the first quarter and overall market levels oscillated around the higher levels for most of the year, with the FTSE-100 up 12% during the year. This led to average AuMA, excluding Quilter Life Assurance, of £105.7 billion, the principal driver of management fee revenue, modestly higher than the 2018 average level of £101.9 billion.

Investment performance

Our solutions have continued to deliver good investment performance for our clients. Performance at Quilter Cheviot, our discretionary fund management business, continued to outperform relevant ARC benchmarks, with strong returns from our stock selection. We recorded first or second quartile performance over 1, 3 and 5 years, and top quartile over 10 years across all categories.

The medium and longer-term performance of Quilter Investors' multi-asset funds has also remained strong, although the shorter-term performance on the biggest range, Cirilium Active, has been more mixed reflecting some tactical positioning over the prior year end and the start of 2019 that did not perform in the short-term to our medium and long-term expectations. This underperformance partially recovered in a strong finish to the year. Our Cirilium passive range has continued to perform strongly. The second largest range, our Managed Portfolio Service, continued to deliver good performance.

We have both simplified and broadened the Quilter Investors product range through fund consolidation and new product launches during 2019. These new products, including our new multi-asset income suite and the Cirilium blend proposition, have been launched in response to the specific needs of our customers based upon direct research we conducted through our advice business. These products have lower revenue margins than our current stock of business and equally, have a lower cost to manufacture. We are pleased with the early response from clients and advisers to these new products and look forward to them contributing to the Group's net flows in the years to come.

Brand

Ensuring Quilter brand consistency and strengthening the ties that bind our people to deliver our purpose is a core focus for the management team. Feedback from the gradual transition to a single Quilter brand across our business from both staff and advisers has been overwhelmingly positive. The move to the Quilter brand allows our network of advisers to enhance their relationship with their clients by demonstrating the backing of a strong FTSE-250 listed business and for staff it reinforces their importance to the broader Quilter business.

Culture and values

Creating a responsible business which builds positive stakeholder relationships is very important to me. In particular I want Quilter to be a place where our people can fulfil their potential and thrive. During 2019 we continued our colleague wellbeing initiative, Thrive, which supports our people's emotional, mental, physical, financial and social wellbeing. Colleagues are engaged in the community via the Quilter Foundation which is our registered charity. It supports young people by enhancing financial capability, improving employment prospects and supporting good mental health.  As we complete our transition to a unified brand I am delighted that our employee engagement scores remain strong and we will continue to strengthen our cutlure and the ties that bind us across the organisation.

Our vision for Quilter is to be a modern, advice led, Wealth Manager delivering good customer outcomes. Our foundations are built on three simple principles; delivering customer choice, being transparent and ensuring fairness in all our dealings with customers, with all of this underpinned by high quality service levels.

Choice is about delivering quality assured choice rather than unlimited choice to customers and being agnostic as to active versus passive solutions and in terms of how customers wish to approach us - whether it is via their own independent adviser or through one of our own restricted financial planners.

Transparency means no hidden charges and no lock-ins so that customers only pay Quilter for what they use and are free to go elsewhere if they choose.

Fairness is about always doing the right thing for our customers. In this regard, we are aware of current market commentary surrounding British Steel pension transfer advice. Prior to our acquisition in June last year, Lighthouse advised around 300 British Steel pension scheme members to undertake a defined benefit transfer. Of this sum, approximately 80 were undertaken prior to June 2017 after which the transfer values of the pension scheme were fundamentally enhanced. Since the year-end we have been notified of around 30 complaints relating to advice provided by Lighthouse, all of which related to the pre-June 2017 period. We are in the process of reviewing those complaints and have written directly to the customers involved. Whilst Lighthouse has professional indemnity insurance cover in place, we have taken a provision of £12 million on a gross basis to cover potential costs and this has been reflected as an adjustment to the acquisition balance sheet of Lighthouse. We have initiated a review of all cases advised by Lighthouse, prior to its acquisition by Quilter in June 2019, to assess the standard of advice given to British Steel pension scheme members and have actively engaged with the regulator. While this situation is obviously disappointing, our priority is to do the right thing for our customers.

Outlook

Quilter's performance during the early part of 2020 was broadly in line with our expectations. Markets were initially resilient, we were seeing a more confident tone from clients and their advisers and the overall NCCF flow trends for the UK business were consistent with the trends seen in late 2019. Net flows onto the UK platform continued at a similar level and the outflows at Quilter Cheviot continued to decline leading to a modest NCCF inflow in that business. NCCF for Quilter International was at a similar run-rate to the first quarter of 2019.

The sharp Coronavirus induced market correction beginning in late February has created a level of uncertainty as to the outlook for the remainder of 2020. As we all try to understand the potential impact of this on people, economies and markets, my focus is two-fold; firstly, making sure our people are safe and secondly, a customer focus. We have contingency plans in place for home-working across the organisation and we are following Public Health England guidelines, as they develop. In times of turbulence like this, we want our advisers and investment managers to be right there to support and guide our clients, so they are not left to deal with this level of uncertainty alone. At this stage, it is too early to ascertain the impact of this situation on investor sentiment, NCCF and revenues.

Our optimisation programme will deliver the cost savings that are embedded in our operating margin targets for 2020/2021. However, as we have previously indicated, those targets were based on an expectation of broadly stable markets from the base level at time they were set, coupled with a modest aggregate NCCF contribution over the period. If markets were to remain at recent post correction levels for an extended period, or to decline further, then delivering our operating margin target for 2020 will be a challenge. We remain committed to our targets but recognise that attainability will be subject to market levels, investor activity and management actions over the remainder of the year.

Irrespective of short term market sentiment, we remain optimistic on the long-term secular opportunity across our markets and we are strategically well positioned to benefit from this. Completing the first migration onto our new UK platform in early February was a major milestone for the Group. We are now focussed on delivering the second and final migration to a high quality outcome in the summer. The new platform will strengthen the cohesion between our different business capabilities and be a catalyst for faster growth.

Paul Feeney

Chief Executive Officer 

Financial review

Review of financial performance

Overview

In this financial review, unless indicated otherwise, all results are presented including QLA in both the current year and prior year comparative. Unless indicated otherwise, the prior year comparative will exclude the results of the Single Strategy business that was disposed on 29 June 2018.

The Group delivered solid results for 2019, in a challenging environment for flows. Platform industry statistics indicate that 2019 was the lowest year for net flows since 2013, due to broader UK political and economic uncertainty. NCCF for the Group was £0.3 billion, excluding the Quilter Life Assurance business, which was sold to ReAssure in December 2019. AuMA, excluding the Quilter Life Assurance business, increased by 13% to close at £110.4 billion, benefitting from the rebound in equity markets during the year, with the FTSE-100 index up 12% for the year. Adjusted profit before tax (including QLA) increased by 1% to £235 million, with stable revenue, supported by continued cost discipline across the business. The Group's IFRS loss after tax from continuing operations (excluding QLA) was £21 million, compared to a profit after tax of £66 million in 2018, primarily due to the change in policyholder tax, which can vary significantly year on year as a result of market volatility.

Alternative Performance Measures ("APMs")

We assess our financial performance using a variety of measures including APMs, as explained further on pages 5 to 7. In the headings and tables presented, these measures are indicated with an asterix: *.

Key financial highlights

Year ended 31 December 2019 Continuing operations (excluding QLA)	Advice & Wealth Management	Wealth Platforms	Eliminations	Total Group
Gross sales (£bn)*	7.5	8.0	(3.2)	12.3
Gross outflows (£bn)*	(7.8)	(6.6)	2.4	(12.0)
NCCF (£bn)*	(0.3)	1.4	(0.8)	0.3
Integrated net flows (£bn)*	1.6	1.0	-	2.6
AuMA (£bn)*	45.8	77.7	(13.1)	110.4
NCCF/opening AuMA (%)*	(1%)	2%	n/a	-
Asset retention (%)*	81%	90%	n/a	88%
Year ended 31 December 2018 Continuing operations (excluding QLA)	Advice & Wealth Management	Wealth Platforms	Eliminations	Total Group
Gross sales (£bn)*	8.0	9.5	(3.3)	14.2
Gross outflows (£bn)*	(4.5)	(6.1)	1.1	(9.5)
NCCF (£bn)*	3.5	3.4	(2.2)	4.7
Integrated net flows (£bn)*	3.6	1.1	-	4.7
AuMA (£bn)*	40.7	67.7	(10.7)	97.7
NCCF/opening AuMA (%)*	8%	5%	n/a	5%
Asset retention (%)*	89%	91%	n/a	91%

Net client cash flow ("NCCF")* 

NCCF, excluding Quilter Life Assurance, was a net inflow of £0.3 billion (2018: £4.7 billion). After a good first quarter, the Group experienced net outflows in the second and third quarters of the year, which modestly reversed in the final quarter. Gross sales were lower due to challenging market conditions, with Brexit and broader geopolitical and macro-economic concerns weighing on investor sentiment. The Group also experienced higher gross outflows during the year, primarily as a result of the Investment Manager ("IM") departures from Quilter Cheviot, who resigned during 2018. Detailed analysis on NCCF by business is shown in the supplementary information section of this announcement.

Net inflows into Quilter Investors were £0.5 billion, down 82% from 2018 (£2.8 billion) reflecting lower new business volumes from Quilter Financial Planning, Quilter's own platform (Quilter Wealth Solutions) and third party platforms. As reported during the year, new business flows from Quilter Financial Planning and independent financial advisers were particularly impacted by investor uncertainty over Brexit in the UK and the macro environment more generally. This had a knock-on impact for Quilter Investors, where net flows from the restricted channel were £1.2 billion (2018: £2.4 billion), of which £0.3 billion (2018: £1.1 billion) were from third party platforms and £0.9 billion (2018: £1.3 billion) from our own platform, Quilter Wealth Solutions. Flows from the Wealth Platform segment to Quilter Investors were net outflows of £0.1 billion in 2019 (2018: net inflow £0.8 billion). Third party net outflows in Quilter Investors were £0.6 billion in 2019 (2018: outflow £0.4 billion).

Quilter Cheviot experienced NCCF outflows of £0.8 billion (2018: inflow of £0.7 billion), which included £1.3 billion of outflows linked to the departures of the IMs who resigned in mid-2018 and the loss of a £0.2 billion quasi-institutional mandate.

Quilter Wealth Solutions recorded net inflows of £0.9 billion, down 71% on prior year (2018: £3.1 billion). Gross sales of £6.0 billion (2018: £7.7 billion) decreased by £1.7 billion, primarily as a result of lower levels of defined benefit scheme ("DB") to defined contribution scheme ("DC") pension transfers, which were down 50% to £0.8 billion (2018: £1.6 billion) and lower levels of market activity more generally, particularly from independent financial advisers. NCCF from Quilter Wealth Solutions was further impacted by the impending migration of client assets to our new technology platform.

Quilter International's NCCF increased by 67% to £0.5 billion (2018: £0.3 billion), supported by a small number of investments from Hong Kong and Latin America in the fourth quarter, which totalled £0.3 billion.

 

Flows from continuing operations	2019	2018	% Change
Total integrated net flows*	2.6	4.7	(45%)
Direct net flows	(1.5)	2.2	-
Eliminations	(0.8)	(2.2)	64%
Total Quilter plc NCCF from continuing operations	0.3	4.7	(94%)

Integrated net flows (excluding Quilter Life Assurance) were £2.6 billion, down 45% from 2018 (£4.7 billion), as cautious investment sentiment led to a decrease in gross sales from Quilter Financial Planning. Similarly, Quilter Wealth Solutions experienced a decline in net flows primarily due to weaker flows across the industry due to a combination of Brexit, defined benefit transfer head winds and lower pension limits having an impact. The restricted channel of Quilter Financial Planning accounted for £1.2 billion (2018: £2.4 billion) of Quilter Investors' net flows and £1.0 billion (2018: £1.1 billion) of Quilter Wealth Solutions net flows.

Total Restricted Financial Planner ("RFP") headcount of 1,799 at 31 December 2019 included an additional 137 RFPs following the acquisition of Lighthouse Group plc. Excluding RFPs added through the Lighthouse Group plc acquisition, net RFP growth of 41 represents an annualised growth rate of 3%. We continue to generate good levels of new RFP appointments within existing businesses and through the recruitment of newly appointed representative firms, driven in part by the appointment of new recruitment leadership to drive our organic recruitment capability. The Quilter Financial Adviser School continues to be popular with firms and is on schedule to add around 100 graduates into Quilter Financial Planning firms in 2020. New RFP appointments have been partially offset by the natural attrition of advisers, with turnover levels within our appointed representative firms remaining stable throughout the year. Productivity* for Quilter Financial Planning was £1.0 million per RFP for the year (2018: £1.7 million), reflecting the challenging market conditions in 2019. Our strategic focus of building scale within the National model will help drive overall productivity levels in 2020 and beyond, boosted by the integration of Lighthouse Group plc and the acquisition of Prescient in December 2019. 

Asset retention* (excluding Quilter Life Assurance) has declined marginally to 88% (2018: 91%), as a result of the outflows in Quilter Cheviot from the departing IMs. Adjusting for these outflows, asset retention is 90%, in line with prior year and previous medium-term experience.

Assets under management/administration ("AuMA")*

AuMA was £110.4 billion at 31 December 2019, up 13% from 31 December 2018 (£97.7 billion, excluding Quilter Life Assurance), driven by positive market performance of £12.4 billion and net inflows of £0.3 billion.

Quilter Investors' AuM was £20.8 billion, up 18% since the start of the year (2018: £17.7 billion). The Cirilium fund range AuM increased by 23% to £11.1 billion at 31 December 2019 (2018: £9.0 billion), with £0.8 billion of net inflows and £1.3 billion of market movement. The WealthSelect fund range increased by 22% to £6.7 billion of AuM at the end of December 2019 (2018: £5.5 billion). Quilter Cheviot AuM of £24.2 billion increased by 9% in the year, primarily as a result of positive market movements. Quilter Wealth Solutions' AuA increased by 16% to £57.2 billion, which is primarily comprised of £27.8 billion within pension propositions (of which £4.4 billion has been generated from the restricted channel and £23.4 billion from third party advisers) and £16.5 billion of ISA products. Quilter International AuA was £20.5 billion, up 12% (2018: £18.3 billion) predominantly due to favourable markets over the year and modest client inflows.

Adjusted profit before tax*

Adjusted profit before tax reflects the Board's view of the underlying performance of the Group and is used for management decision making and internal performance management. Adjusted profit before tax is a non-GAAP measure which adjusts IFRS profit for specific items, as detailed in note 5 in the consolidated financial statements on page 49 of this announcement, and is the profit measure presented in the Group's segmental reporting.

Adjusted profit before tax for 2019 (including QLA) was £235 million, 1% higher than the prior year (2018: £233 million excluding the Single Strategy business; 2018: £259 million including Single Strategy business). Adjusted proft for the Advice and Wealth Management segment grew by 1% (excluding the Single Strategy business) and the Wealth Platforms segment grew by 2% during the year. Excluding Quilter Life Assurance, adjusted profit for the Wealth Platforms segment grew by 7%.

Total net fee revenue of £808 million increased by 3% (2018: £788 million) over the year. Net management fees of £649 million were broadly stable on those of the prior year (2018: £647 million) as the growth in revenues from higher average AuMA in Quilter Investors and Quilter Wealth Solutions was offset by a decreasing revenue contribution from Quilter Life Assurance given the run-off nature of that business. Other revenue of £159 million grew by 13% (2018: £141 million), where the growth in Quilter Financial Planning contributed to the increase.

Expenses for the Group increased from £555 million to £573 million, mainly due to the impact of the Quilter Financial Planning acquisitions made in the year. Excluding acquisitions, expenses remained stable year on year.

The Group's overall operating margin has remained broadly stable at 29% (2018: 30%). Realised optimisation benefits have offset the impact of the Quilter Financial Planning acquisitions, which initially provide a drag on operating margin.

Financial performance from continuing operations and Quilter Life Assurance 2019 (£m)	Advice & Wealth Management	Wealth Platforms	Head Office	Total Group
Net management fee*	296	353	-	649
Other revenue*	111	45	3	159
Total net fee revenue*	407	398	3	808
Expenses*	(304)	(233)	(36)	(573)
Adjusted profit before tax*	103	165	(33)	235
Tax				(25)
Adjusted profit after tax				210
Operating margin (%)*	25%	41%		29%
Revenue margin (bps)*	67	42		57
Financial performance from continuing operations and Quilter Life Assurance 2018 (£m)	Advice & Wealth Management1	Wealth Platforms	Head Office	Total Group1
Net management fee*	276	371	-	647
Other revenue*	97	43	1	141
Total net fee revenue*	373	414	1	788
Expenses*	(271)	(252)	(32)	(555)
Adjusted profit before tax*	102	162	(31)	233
Tax				(6)
Adjusted profit after tax				227
Operating margin (%)*	27%	39%		30%
Revenue margin (bps)*	65	45		57

¹Total adjusted profit before tax including the Single Strategy business for 2018 is £259 million. Refer to reconciliation on page 16.

Total net fee revenue*

The Group's total net fee revenue increased by 3% to £808 million (2018: £788 million) due to higher average AuMA across all businesses, primarily as a result of the rebound in equity markets in 2019 and increased advice fees as a result of the Quilter Financial Planning acquisitions in both 2018 and 2019.

Total net fee revenue for the Advice and Wealth Management segment grew by 9% during the year, to £407 million (2018: £373 million). Quilter Investors average AuM increased by 10% to £19.6 billion, with £17 million of additional net management fee revenue compared to the prior year. This included non-recurring net revenue for Quilter Investors from the release of revenue provisions that were no longer required and which relate to the separation of the business from the Single Strategy business that was sold in 2018 (c. £8 million). Quilter Cheviot average AuM was flat year-on-year, as market growth offset the impact of the assets lost as a consequence of the IM departures. Total net fee revenue within Quilter Cheviot was 2% higher in 2019 at £178 million (2018: £175 million). Other revenue increased by £14 million to £111 million, principally due to the increase in advice fees in Quilter Financial Planning as a result of the acquisitions in 2019, as well as the full year revenue contribution from acquisitions made in 2018.

Total net fee revenue for the Wealth Platforms segment (including QLA) was £398 million, which was down 4% (2018: £414 million) primarily due to a reduction in Quilter Life Assurance and Quilter International's revenue. Quilter Wealth Solutions' net fee revenue increased by £7 million (4%) to £177 million due to higher average AuA of 6% over the course of the year. Quilter International's net fee revenue was £10 million lower than the prior year due to the continued movement of the book towards products that attract lower revenue. As expected, revenues from Quilter Life Assurance continued to decrease given the run-off nature of the book, and totalled £96 million (2018: £109 million).

The Group's revenue margin* from continuing business of 55 bps remained consistent with the prior year (2018: 55 bps).

The revenue margin for Advice and Wealth Management of 67 bps was 2 bps higher compared to the prior year. This increase was due to a 4 bps increase in the revenue margin for Quilter Investors to 63 bps, primarily due to the revenue provision releases (c. 2 bps) and income received from the Compass fund range previously managed by Merian. Quilter Cheviot's revenue margin remained in line with prior year at 72 bps.

The revenue margin for Wealth Platforms (excluding QLA) decreased by 2 bps to 38 bps, as new business written for Quilter Wealth Solutions and Quilter International is generally in products or in revenue tiering structures that have a slightly lower margin than the average for the current book of business.

Expenses* 

Expenses increased by £18 million to £573 million (2018: £555 million) in the year. The acquisitions made by Quilter Financial Planning in 2019, and a full year run-rate for those made in 2018, increased expenses by £24 million, and the continued build out of the Quilter Investors business increased costs by a further £4 million year-on-year. The Quilter Investors business is now fully independent following the separation from the Single Strategy business, with a stable cost base. Expenses also increased as a result of the London office move, which added an additional £3 million as previously guided. The impact of these cost increases and those arising from inflation were more than mitigated by the continued cost disciplines across the business and savings achieved through optimisation. Overall expenses were broadly flat on 2018, excluding the impact of the acquisitions.

Expense split (£m)1
	2019	2018
Front office and operations	339	319
IT and development	130	123
Support functions	83	96
Other	21	17
Expenses*	573	555
1For the 2018 comparatives, some costs have been reallocated between categories to align with current year presentation.

Front office and operations expenses increased by 6% to £339 million (2018: £319 million), primarily due to the impact of the Quilter Financial Planning acquisitions made during the year.

IT and development expenses increased by 6% to £130 million (2018: £123 million), mainly due to increased IT run costs to facilitate the growth in the business and general inflation, partly offset by a reduction in development costs due to less regulatory change requirements in 2019 compared to 2018.

Support function expenses relate to back office expenses, which have decreased by 14% to £83 million (2018: £96 million). Savings have been made across various functions as part of optimisation and are expanded on further below.

Other costs include Professional Indemnity Insurance, and charges for regulation and licencing fees. FSCS levies increased by £3 million this year due to an increase in levies for asset managers across the industry and a normalised full year charge for Quilter Financial Planning, following the nine month charge in 2018 as the FCA changed the timing of making charges to regulated entities within the industry.

Taxation

The effective tax rate ("ETR") on adjusted profit was 10.7% (2018: 4.5%). The Group's ETR is lower than the UK corporation tax rate of 19% principally due to profits from Quilter International being taxed at lower rates than the UK and the utilisation of brought forward capital losses. The Group's ETR is dependent upon a number of factors including the level of Quilter International profits, the utilisation of capital losses, which can be volatile, as well as the UK corporation tax rate.  A further reduction in the corporation tax rate to 17% from 1 April 2020 was enacted in 2016.

The Group's IFRS income tax expense on continuing business was £66 million for the year ended 31 December 2019, compared to a credit of £86 million for the prior year. This income tax expense or credit can vary significantly year-on-year as a result of market volatility and the impact market movements have on policyholder tax. The recognition of the income received from policyholders (which is included within the Group's IFRS revenue) to fund the policyholder tax liability can vary in timing to the recognition of the corresponding policyholder tax expense, creating volatility to the Group's IFRS profit or loss before tax attributable to equity holders. An adjustment is made to adjusted profit to remove these distortions, as explained further on page 17 and in note 5(a) of the consolidated financial statements.

Earnings Per Share ("EPS") 

Basic EPS was 8.0 pence, compared to 26.6 pence in 2018. Basic EPS is based on the Group's IFRS profit (including both continuing and discontinued operations), with the decrease within discontinued operations due principally to the profit on sale of the Single Strategy business in 2018. During the year, the number of shares in issue remained at 1,902 million. The average number of shares in issue used for basic EPS was 1,835 million (2018: 1,832 million), after the deduction of shares held in Employee Benefit Trusts ("EBTs") of 67 million (2018: 70 million) which are held in respect of staff share schemes.

Adjusted diluted EPS* (based on the Group's adjusted profit after tax) was 11.3 pence (2018: 13.5 pence), of which 8.6 pence relates to the continuing business before the reallocation of QLA costs. Refer to note 7 of the consolidated financial statements. The average number of shares in issue used for adjusted diluted EPS was 1,863 million (2018: 1,839 million), following inclusion of the dilutive effect of shares and options awarded to employees under share-based payment arrangements of 28 million (2018: 7 million). The dilutive effect of share awards has increased year-on-year due to more share options being awarded to employees during 2019. Further details are included in note 7 of the consolidated financial statements.

Optimisation

As announced in March 2019, we have commenced our phased, multi-year optimisation programme, targeting a 4 percentage point uplift in the Group's operating margin on an on-going business by 2021. Phase 1 is aiming to unify and simplify the Group through a number of efficiency initiatives that will deliver improvements in operational performance.

Throughout 2019 delivery and benefits were ahead of plan, with £14 million of savings realised during the period when compared to 2018.  Together with the initiatives delivered in 2018, this amounts to a run-rate annualised benefit to the Group of approximately £24 million. Implementation costs remain in line with previous guidance.

A number of quick win tactical efficiencies have been delivered, which included targeted staff restructuring, third party contract renegotiation and termination, and property and facilities savings. Some more complex initiatives, such as the insourcing of technology capabilities as well as the simplification of group support functions, have also been delivered. All the planned programmes that will transform our business through technology enablement, such as the consolidation and modernisation of our general ledgers and other associated finance, HR and procurement modules, have been initiated. The use of robotics to automate manual operational processes in our International business, as well as streamlining and automating some of the processes used in our advice business, are also underway.

Reconciliation of adjusted profit before tax* to IFRS profit

Adjusted profit before tax for the group, including QLA, was £235 million (2018: £233 million), which includes £182 million for the group excluding QLA (2018: £176 million), and £53 million (2018: £57 million) for QLA.

For adjusted profit before tax on a continuing basis, IFRS accounting standards require £26 million of costs (2018: £28 million), previously reported as part of the QLA business, to be reallocated from discontinued to continuing operations, as these costs do not transfer to ReAssure on disposal at 31 December 2019. Of the £26 million of costs reallocated, £14 million will be incurred in 2020 to provide services to ReAssure under the Transitional Services Arrangement, with corresponding income to cover these costs. Management actions are being taken to manage the remaining costs, which are expected to continually decline over the next two years. Due to the sale of the QLA business, we expect to incur additional one-off business transformation costs of up to £10 million over the next two years, as we restructure certain parts of our business and decommission IT infrastructure previously associated with QLA.

The Group's IFRS loss after tax from continuing operations was £21 million, compared to a profit after tax of £66 million in 2018, primarily due to the change in policyholder tax, which can vary significantly year on year as a result of market volatility. The table reconciles the Group's adjusted profit to the IFRS results in 2019 and 2018.

Reconciliation of adjusted profit before tax to profit after tax	For the year ended 31 December 2019			For the year ended 31 December 2018
		Discontinued operations			Discontinued operations		Discontinued operations
	Continuing Operations	Quilter Life Assurance	Total	Continuing Operations	Quilter Life Assurance	Sub-total of Continuing Operations and Quilter Life Assurance	Single Strategy business	Total
£m
Advice and Wealth Management	103	-	103	102	-	102	26	128
Wealth Platforms	112	53	165	105	57	162	-	162
Head Office	(33)	-	(33)	(31)	-	(31)	-	(31)
Adjusted profit before tax before reallocation*	182	53	235	176	57	233	26	259
Reallocation of QLA costs1	(26)	26	-	(28)	28	-	-	-
Adjusted profit before tax*	156	79	235	148	85	233	26	259
Adjusting for the following:
Goodwill impairment and impact of acquisition accounting	(54)	-	(54)	(50)	-	(50)	-	(50)
Profit on business disposals	-	103	103	-	-	-	290	290
Business transformation costs	(77)	-	(77)	(84)	-	(84)	-	(84)
Managed Separation costs	(6)	-	(6)	(24)	-	(24)	-	(24)
Finance costs	(10)	-	(10)	(13)	-	(13)	-	(13)
Policyholder tax adjustments	(62)	(12)	(74)	64	37	101	-	101
Voluntary customer remediation provision	-	10	10	-	-	-	-	-
Total adjusting items before tax	(209)	101	(108)	(107)	37	(70)	290	220
(Loss)/profit before tax attributable to equity holders	(53)	180	127	41	122	163	316	479
Tax attributable to policyholder returns	98	76	174	(61)	(97)	(158)	-	(158)
Income tax (expense)/credit	(66)	(89)	(155)	86	83	169	(2)	167
(Loss)/profit after tax	(21)	167	146	66	108	174	314	488
1Adjusted profit from continuing operations includes £26 million of costs (2018: £28 million) previously reported as part of the QLA business to be reallocated from discontinued to continuing operations, as these costs do not transfer to ReAssure on disposal at 31 December 2019. Of the £26 million of costs reallocated, £14 million will recur in 2020 to provide services to ReAssure under the Transitional Services Arrangement, with corresponding income to cover these costs. Management actions are being taken to manage the remaining costs, which are expected to continually decline over the next two years.

Adjusted profit before tax reflects the profit from the Group's core operations, and is calculated by making certain adjustments to IFRS profit to reflect the Directors' view of the Group's underlying performance. Details of these adjustments are provided in note 5 of the consolidated financial statements.

Business transformation costs of £77 million in 2019 (2018: £84 million) include £57 million (2018: £58 million) incurred on the UK Platform Transformation Programme and £18 million of costs (2018: £7 million) in relation to the optimisation programme. In 2019, a credit of £1 million (2018 cost: £19 million) has been recognised in relation to the separation of Quilter Investors as a result of the sale of the Single Strategy business and restructuring costs of £3 million (2018: nil) as a result of the sale of QLA.

Managed Separation costs were £6 million (2018: £24 million), reflecting costs associated with our successful separation from Old Mutual plc and Listing in June 2018. In 2019, this cost was primarily incurred on the rebranding activities within the business, with a further £4 million expected to be incurred in 2020 for the final rebranding activity.

Finance costs were £10 million (2018: £13 million). The prior year includes the cost of interest and finance charges on the Group's borrowings from Old Mutual plc. As previously reported, these were converted into equity or repaid in February 2018.

Policyholder tax adjustments of £74 million expense for 2019 (2018: credit of £101 million) relate to the removal of distortions arising from market volatility that can, in turn, lead to volatility in the policyholder tax charge between periods. The recognition of the income received from policyholders (which is included within the Group's IFRS revenue) to fund the policyholder tax liability can vary in timing to the recognition of the corresponding tax expense, creating volatility to the Group's IFRS (loss)/profit before tax attributable to equity holders.

Cash generation*

Cash generation measures the proportion of adjusted profit that is recognised in the form of cash generated from operations.

Cash generated from operations is calculated by removing non-cash generative items from adjusted profit, such as deferrals required under IFRS to spread fee income and acquisition costs over the lives of the underlying contracts with customers. It is stated after deducting an allowance for net cash required to support the capital requirements generated by new business offset by a release of capital from the in-force book.

The Group, including Quilter Life Assurance, achieved a cash generation rate of 94% of adjusted profit over 2019 (2018: 88%). The cash generation rate for the Group excluding Quilter Life Assurance and before the reallocation of Quilter Life Assurance costs is 85% (2018: 81%).

Review of financial position

Capital and liquidity

Solvency II

The Group's pro forma Solvency II surplus is £769 million at 31 December 2019 (31 December 2018: £1,059 million), representing a Solvency II ratio of 180% (31 December 2018: 190%). The Solvency II information for the year to 31 December 2019 contained in this results disclosure has not been audited.

The pro forma Solvency II position is stated after allowing for the impact of the recommended final dividend payment of £65 million (2018: £61 million), the proposed distribution to shareholders of the net surplus proceeds from the QLA sale of £375 million and the Odd-lot Offer to shareholders of c.£30 million.

The Solvency II position for regulatory purposes is also presented below. Under Solvency II rules, the impact of future distribution of share buybacks and Odd-lot Offer to shareholders is not taken into account as at 31 December 2019, thereby increasing the Group's Solvency II surplus to £1,168 million and the Solvency II ratio to 221%.

	Pro forma at	At	At
	31 December	31 December	31 December
Group regulatory capital (£m)	20191	20191,2	20183
Own funds	1,727	2,132	2,237
Solvency capital requirement ("SCR")	958	964	1,178
Solvency II surplus	769	1,168	1,059
Solvency II coverage ratio	180%	221%	190%
1Based on preliminary estimates.
2Formal filing to the PRA by 19 May 2020.
3As represented within the Quilter plc Group Solvency and Financial Condition report for the year ended 31 December 2018.

The 10 percentage point decrease in the Group Solvency II ratio on a pro forma basis from the 2018 position is primarily due to corporate activity in the year, with the main contributors being the acquisitions of Charles Derby Group, Lighthouse Group plc and Prescient during 2019. The goodwill and intangible assets arising in respect of these acquisitions are not recognised within Solvency II own funds, thereby reducing the Solvency II ratio.

The Board believes that the Group Solvency II surplus includes sufficient free cash and capital to complete all committed strategic investments (including the UK Platform Transformation Programme). The impact of this prudent policy is that Quilter expects to continue to maintain a solvency position in excess of its internal target in the near term.

Composition of qualifying Solvency II capital

The Group own funds include the Quilter plc issued subordinated debt security which qualifies as capital under Solvency II. The composition of own funds by tier is presented in the table below.

	Pro forma at	At	At
	31 December	31 December	31 December
Group own funds (£m)	2019	2019	2018
Tier 11	1,520	1,925	2,036
Tier 22	207	207	201
Total Group Solvency II own funds	1,727	2,132	2,237
1All Tier 1 capital is unrestricted for tiering purposes.
2Comprises a Solvency II compliant subordinated debt security in the form of a Tier 2 bond, which was issued at £200 million in February 2018.

On a pro forma basis:

· the Group SCR is covered by Tier 1 capital, which represents 159% of the Group SCR of £958 million;

· Tier 1 capital represents 88% of Group Solvency II own funds; and

· Tier 2 capital represents 12% of Group Solvency II own funds and 27% of the Group surplus.

Dividend

The Board has recommended a final dividend of 3.5 pence per share at a total cost of £65 million. Subject to shareholder approval, the recommended final dividend will be paid on 18 May 2020 to shareholders on the UK and South African share registers on 3 April 2020. For shareholders on our South African share register a dividend of 72.78519 South African cents per share will be paid on 18 May 2020, using an exchange rate of 20.79577. This will bring the dividend for the full year to 5.2 pence per share (2018: 3.3 pence per share).

 Holding company cash

The holding company cash statement includes cash flows generated by the three holding companies within the business: Quilter plc, Old Mutual Wealth Holdings Limited and Old Mutual Wealth UK Holding Limited. The cash flows associated with these companies will differ markedly from those disclosed in the statutory statement of cash flows, which comprises flows from the entire Quilter plc Group including policyholder movements.

The holding company cash statement illustrates cash received from the key trading entities within the business together with other cash receipts, and cash paid out in respect of corporate costs and capital servicing (including interest and dividends). Other capital movements, including those in respect of acquisitions and disposals together with funding for ongoing business requirements, are also included. It is an unaudited non-GAAP analysis and aims to give a more illustrative view of business cash flows as they relate to the Group's holding companies compared to the IFRS consolidated statement of cash flows which is prepared in accordance with IAS 7 (statement of cash flows) and includes commingling of policyholder related flows.

£m			2019	2018
Opening cash at holding companies at 1 January			416	36
Short term loan and Tier 2 bond proceeds			-	500
Loans repaid to Old Mutual plc			-	(200)
Quilter Life Assurance business sale - cash proceeds			446	-
Single Strategy business sale - cash proceeds			-	576
Short-term loan repayment			-	(300)
Costs of disposal and external financing fees			(7)	(19)
Dividends to market			(92)	(221)
Net capital movements			347	336
Managed Separation and head office costs			(49)	(54)
Interest costs			(9)	(6)
Net operational movements			(58)	(60)
Cash remittances from subsidiaries			307	167
Net capital contributions and investments			(200)	(65)
Other			3	2
Internal capital and strategic investments			110	104
Closing cash at holding companies at end of period			815	416

Net capital movements

Net capital movements in the period include the cash proceeds of £446 million resulting from the sale of the Quilter Life Assurance business to ReAssure on 31 December 2019.  There was also a further £7 million of outflows in connection with disposal costs as a consequence of the sale.  Also included are the two dividend payments made to shareholders of £61 million on 20 May 2019 and £31 million on 17 September 2019.

Net operational movements

Net operational movements were £58 million for the year, which comprises corporate and transformation costs, including the Managed Separation and optimisation programmes, totalling £49 million.  Interest paid of £9 million relates to coupon payments on the Tier 2 bond and non-utilisation fees for the revolving credit facility.

Internal capital and strategic investments

The net inflow in the year of £110 million is principally due to £307 million of cash remittances from the trading businesses, partially offset by £200 million of capital contributions, made to support business unit operational activities, the Platform Transformation Programme and funding for the strategic acquisitions of Charles Derby Group, Lighthouse Group plc and acquisitions by Private Client Advisers within Quilter Financial Planning.

Balance sheet
Summary balance sheet (£m)	At 31 December 2019	At 31 December 2018
	Total	Continuing Operations	Quilter Life Assurance	Total
Assets
Financial investments	59,345	49,533	9,686	59,219
Reinsurers' share of policyholder liabilities	-	-	2,162	2,162
Contract costs/deferred acquisition costs	455	498	64	562
Cash and cash equivalents	2,473	1,881	514	2,395
Goodwill and intangible assets	592	520	30	550
Trade, other receivables and other assets	424	500	30	530
Other assets	449	349	23	372
Total assets	63,738	53,281	12,509	65,790
Equity	2,071	1,593	412	2,005
Liabilities
Investment contract liabilities	52,455	45,211	11,239	56,450
Third-party interests in consolidated funds	7,675	5,116	-	5,116
Contract liabilities/deferred revenue	191	195	31	226
Borrowings - sub-ordinated debt	198	197	-	197
Lease liabilities	137	-	-	-
Trade, other payables and other liabilities	836	841	158	999
Other liabilities	175	128	669	797
Total liabilities	61,667	51,688	12,097	63,785
Total equity and liabilities	63,738	53,281	12,509	65,790

The Group balance sheet at 31 December 2019 has total equity of £2,071 million (2018: £2,005 million).

Financial investments have increased from £49,533 million for continuing operations at 31 December 2018 to £59,345 million at 31 December 2019, predominantly due to positive market performance. The corresponding increase is reflected in Investment contract liabilities (an increase from £45,211 million for continuing operations at 31 December 2018 to £52,455 million at 31 December 2019), and Third-party interests in consolidated funds (an increase from £5,116 million at 31 December 2018 to £7,675 million at 31 December 2019).

Cash and cash equivalents of £2,473 million have increased by £592 million from £1,881 million at 31 December 2018 for continuing operations. This increase includes £446 million of the cash proceeds received on the sale of Quilter Life Assurance, of which £375 million is planned to be returned to shareholders. Included within this balance are cash investments due to policyholders, and cash to support the capital and funding requirements of the business.

Goodwill and intangible assets have increased by £72 million to £592 million at 31 December 2019. The balance increased by £117 million during the year due to the acquisitions made by Quilter Financial Planning, which was offset by the amortisation of the intangible assets of £45 million charged during the year.

Trade, other receivables and other assets have decreased by £76 million to £424 million mainly due to a reduction in unsettled trades across the business and lower management fees as Quilter Investors no longer acts as authorised corporate director ("ACD") for certain Merian funds.

Other assets of £449 million, which principally reflects property, plant and equipment and loans and advances, increased by £100 million during the year. The implementation of IFRS 16 resulted in an increase in other assets, where a right of use asset has been created in respect of property leases, which have totaled £124 million. Included within this balance are Practice Buy Out ("PBO") loans of £19 million, a £6 million increase during the year.

The lease liability of £137 million has arisen due to the implementation of IFRS 16, which represents the Group's obligation to pay lease rentals on certain property, plant and equipment.

Trade, other payables and other liabilities have reduced by £5 million to £836 million as at 31 December 2019, primarily due to a reduction in outstanding trade payables as Quilter Investors no longer acts as ACD for Merian funds.

Other liabilities have increased from £128 million to £175 million primarily due to an increase in deferred tax liabilities.

Contingent liability/post balance sheet event

Prior to the Group's acquisition of Lighthouse in June 2019, Lighthouse provided pension transfer advice to around 300 British Steel pension scheme members between 2016 and 2018. The Group was advised after the reporting date of a number of complaints on the advice given by Lighthouse. The Group has initiated a review of all cases advised by Lighthouse, prior to its acquisition by Quilter in June 2019, to assess the standard of advice given to British Steel pension scheme members.

For the cases where a complaint has been received on the advice given by Lighthouse, the likelihood of redress is probable, and an estimate of the amount of redress payable has been made of £9 million. For the remaining cases, it is possible that further costs of redress may be incurred following the outcome of the reviews. Of the pension transfers Lighthouse advised on between 2016 and 2018, approximately 80 cases were undertaken prior to mid-2017 after which the British Steel pension scheme was restructured and transfer values were enhanced considerably.

An additional provision for £3 million has been established in respect of the cost of legal and professional fees related to the complaints and redress process, which includes the anticipated costs to review advice provided of a similar nature in relation to cases that management believe may have similar characteristics. 

As the advice was provided before the Group's acquisition of Lighthouse, any further redress costs will be recognised as a pre-acquisition liability within the fair value of the net assets acquired, with a corresponding increase in goodwill. Any adjustments to the acquisition balance sheet must be finalised within 12 months after the acquisition, in June 2020.

Principal risks and uncertainties

The Group continues to operate in a challenging political and economic environment.  While the Brexit deal struck in October 2019 and the subsequent General Election of 12 December 2019 has provided greater stability on possible outcomes, the detail of the UK's future trading relationships is still to be determined.  Although Quilter's UK-focused business model has limited the cross-border challenges faced by Quilter in comparison with others in the sector, the firm is strongly exposed to any detriment to future UK economic performance and consequential impacts such as loss of investor confidence.  The Group is continuing to closely monitor developments and has developed a range of actions to mitigate any implications to our business and customers. 

The Group's business has become simpler during 2019. The successful sale of the Quilter Life Assurance business significantly reduces the financial and regulatory complexities associated with delivering life assurance business, and good progress has been made to move towards transitioning the UK Platform business onto FNZ's market-leading technology platform.

The principal risks and uncertainties faced by the group are:

· Strategic risks: The risk that Quilter's strategy to be the leading UK advice-led wealth manager does not yield the anticipated benefits for the business as result of misalignment with customer needs or failure to establish appropriate arrangements to deliver the strategy.

· Business risks: The risk Quilter's strategy is undermined by a failure to successfully deliver key strategic priorities, for example delivery of suitable advice, strong investment performance, and strong Group financial performance.

· Market risks: The risk of an adverse change in the level or volatility of market prices of assets, since Quilter's key revenue streams are asset value related.

· Operational risks: The risk of losses arising from inadequate or failed internal processes, or from personnel and systems, or from external events.  Given Quilter's technology-enabled client service model, particular exposures arise in relation to information technology, information security and third party risks. 

· Legal and regulatory: Quilter is subject to regulation and laws of the jurisdictions in which it operates and failure to achieve compliance could expose Quilter to penalties or restrictions on its permissions to provide financial services. 

At this time, there remain the much publicised concerns about the risk of Coronavirus becoming a global pandemic and further impact to global supply chains, global growth and employee availability. The Group could be adversely impacted by falls in equity market levels, adverse investor sentiment affecting NCCF and increased operational risks should employment availability be badly affected. The length and severity of the impact remains unclear but the Group would not expect these to adversely change the underlying medium to long-term prospects of the business.

Shareholder information

The Quilter Board has agreed to recommend to shareholders the payment of a final dividend of 3.5 pence per share. This will be considered at the Quilter plc Annual General Meeting, which will be held on Thursday 14 May 2020. The final dividend will be paid on Monday 18 May 2020 to shareholders on the UK and South African share registers on Friday 3 April 2020. 

Dividend Timetable

Dividend announcement in pounds sterling with South Africa ZAR Equivalent	Wednesday 11 March 2020
Last day to trade cum dividend in South Africa	Tuesday 31 March 2020
Shares trade ex-dividend in South Africa	Wednesday 1 April 2020
Shares trade ex-dividend in the UK	Thursday 2 April 2020
Record Date in UK and South Africa	Friday 3 April 2020
Annual General Meeting	Thursday 14 May 2020
Final dividend payment date	Monday 18 May 2020

From the opening of trading on Wednesday 11 March 2020 until the close of business on Friday 3 April 2020, no transfers between the London and Johannesburg registers will be permitted. Share certificates for shareholders on the South African register may not be dematerialised or rematerialised between Wednesday 1 April and Friday 3 April 2020, both dates inclusive.

Additional information

For Shareholders on our South African share register a dividend of 72.78519 cents per share will be paid on Monday 18 May 2020 to shareholders, based on an exchange rate of 20.79577. Dividend Tax will be withheld at the rate of 20% from the amount of the gross dividend of 72.78519 South African cents per share paid to South African shareholders unless a shareholder qualifies for exemption. After the Dividend Tax has been withheld, the net dividend will be 58.22815 South African cents per share. The Company had a total of 1,902,251,098 shares in issue at today's date.

If you are uncertain as to the tax treatment of any dividends you should consult your own tax advisor.

Odd-lot Offer

As part of our drive for greater efficiency and in line with our desire to act in the best interests of all our shareholders, the Board will today announce the launch of an Odd-lot Offer, for shareholders registered on the London and Johannesburg Stock Exchanges. The Odd-lot Offer entails Quilter making an offer to eligible shareholders (holders of less than 100 shares) to repurchase their shares at a 5% premium to the market price.  Full details will be provided in this morning's announcement.

The proposed Odd-lot Offer will reduce the complexity and cost to Quilter of managing our shareholder base and will allow investors holding small numbers of shares to dispose of their holdings in a timely and cost effective manner. Eligible shareholders can, of course, elect to retain their shareholding in Quilter, if they so choose.

Odd-lot Holders will receive the final dividend on their Odd-lot Offer shares providing they still hold their shares on the dividend record date, Friday 3 April 2020.

Further information will be released to the market this morning and documentation for completion will be provided to eligible shareholders shortly.

Capital return

Following the completion of the sale of Quilter Life Assurance to Reassure Group plc for £425 million (and interest income of £21 million), the Quilter Board intends to return the full net surplus sale proceeds (after disposal costs) of £375 million to shareholders. Quilter will commence a share buyback on the London and Johannesburg exchanges imminently and it will be subject to staged Board and regulatory approvals. The Board will keep the programme under review to make sure it continues to be the most efficient and effective means of returning capital to shareholders.

Supplementary information

Alternative Performance Measures ("APMs")

We assess our financial performance using a variety of measures including APMs, as explained further on pages 5 to 7. These measures are indicated with an asterix: *.

For the year ended 31 December 2019

1.  Key financial data

	2019					Change (FY 2019 vs FY 2018)		2018
Gross sales* (£bn)	Q1	Q2	Q3	Q4	FY	%		Q1	Q2	Q3	Q4	FY
Quilter Investors	1.0	1.0	0.9	2.0	4.9	(11%)		1.6	1.5	1.3	1.1	5.5
Quilter Cheviot	0.7	0.5	0.7	0.7	2.6	4%		0.8	0.6	0.5	0.6	2.5
Advice & Wealth Management	1.7	1.5	1.6	2.7	7.5	(6%)		2.4	2.1	1.8	1.7	8.0
Quilter Wealth Solutions	1.6	1.4	1.4	1.6	6.0	(22%)		2.3	2.0	1.8	1.6	7.7
Quilter International	0.4	0.4	0.4	0.8	2.0	11%		0.5	0.4	0.4	0.5	1.8
Wealth Platforms	2.0	1.8	1.8	2.4	8.0	(16%)		2.8	2.4	2.2	2.1	9.5
Elimination of intra-Group items	(0.6)	(0.4)	(0.6)	(1.6)	(3.2)	(3%)		(1.0)	(0.9)	(0.6)	(0.8)	(3.3)
Quilter plc excl. Quilter Life Assurance	3.1	2.9	2.8	3.5	12.3	(13%)		4.2	3.6	3.4	3.0	14.2
Quilter Life Assurance	0.1	0.1	0.2	-	0.4	(33%)		0.2	0.1	0.1	0.2	0.6

			2019											% of opening AuMA					2018
NCCF* (£bn)			Q1		Q2			Q3		Q4		FY							Q1			Q2	Q3				Q4		FY
Quilter Investors			0.2		0.2			-		0.1		0.5		3%					1.0			0.8	0.5				0.5		2.8
Quilter Cheviot			0.1		(0.5)			(0.4)		-		(0.8)		(4%)					0.3			0.2	0.1				0.1		0.7
Advice & Wealth Management			0.3		(0.3)			(0.4)		0.1		(0.3)		(1%)					1.3			1.0	0.6				0.6		3.5
Quilter Wealth Solutions			0.4		0.1			0.1		0.3		0.9		2%					1.3			0.8	0.6				0.4		3.1
Quilter International			0.1		-			0.1		0.3		0.5		3%					0.1			-	-				0.2		0.3
Wealth Platforms			0.5		0.1			0.2		0.6		1.4		2%					1.4			0.8	0.6				0.6		3.4
Elimination of intra-Group items			(0.3)		-			(0.3)		(0.2)		(0.8)							(0.7)			(0.8)	(0.1)				(0.6)		(2.2)
Quilter plc excl. Quilter Life Assurance			0.5		(0.2)			(0.5)		0.5		0.3		0%					2.0			1.0	1.1				0.6		4.7
Quilter Life Assurance			(0.8)		(0.4)			(1.1)		(1.2)		(3.5)		(31%)					(0.5)			(0.5)	(0.5)				(0.8)		(2.3)
Integrated net flows (excl. Quilter Life Assurance)*			0.6		0.8			0.4		0.8		2.6							1.5			1.3	0.9				1.0		4.7
	2019												Change (FY 2019 vs FY 2018)				2018
AuMA* (£bn)	Q1			H1		Q3			FY				%				Q1				H1			Q3				FY
Quilter Investors	19.0			19.9		20.2			20.8				18%				17.0				18.3			18.6				17.7
Quilter Cheviot	23.6			24.0		23.8			24.2				9%				22.7				24.0			24.2				22.2
Quilter Financial Planning	0.8			0.8		0.8			0.8				-				1.0				1.0			1.0				0.8
Advice & Wealth Management	43.4			44.7		44.8			45.8				13%				40.7				43.3			43.8				40.7
Quilter Wealth Solutions	52.6			54.8		55.7			57.2				16%				49.1				51.8			52.9				49.4
Quilter International	19.2			20.0		20.2			20.5				12%				18.5				19.1			19.5				18.3
Wealth Platforms	71.8			74.8		75.9			77.7				15%				67.6				70.9			72.4				67.7
Elimination of intra-Group assets	(11.6)			(12.2)		(12.5)			(13.1)				22%				(10.1)				(10.9)			(11.0)				(10.7)
Quilter plc excl. Quilter Life Assurance	103.6			107.3		108.2			110.4				13%				98.2				103.3			105.2				97.7
Quilter Life Assurance	11.2			11.1		10.3			-				(100%)				13.4				13.4			12.9				11.2
YTD Gross flows, net flows and AuMA (£bn)
		AuMA as at 31 December 2018*					Gross  sales*				Gross outflows*				NCCF*						Market and other movements					AuMA as at 31 December 2019*
Quilter Investors		17.7					4.9				(4.4)				0.5						2.6					20.8
Quilter Cheviot		22.2					2.6				(3.4)				(0.8)						2.8					24.2
Quilter Financial Planning		0.8					-				-				-						-					0.8
Advice & Wealth Management		40.7					7.5				(7.8)				(0.3)						5.4					45.8
Quilter Wealth Solutions		49.4					6.0				(5.1)				0.9						6.9					57.2
Quilter International		18.3					2.0				(1.5)				0.5						1.7					20.5
Wealth Platforms		67.7					8.0				(6.6)				1.4						8.6					77.7
Elimination of intra-group assets		(10.7)					(3.2)				2.4				(0.8)						(1.6)					(13.1)
Quilter plc excl. Quilter Life Assurance		97.7					12.3				(12.0)				0.3						12.4					110.4
Quilter Life Assurance		11.2					0.4				(3.9)				(3.5)						(7.7)					-
		AuMA as at 31 December 2017*					Gross Sales*				Gross Outflows*				NCCF*						Market and other movements					AuMA as at 31 December 2018*
Quilter Investors		16.7					5.5				(2.7)				2.8						(1.8)					17.7
Quilter Cheviot		23.5					2.5				(1.8)				0.7						(2.0)					22.2
Quilter Financial Planning		1.1					-				-				-						(0.3)					0.8
Advice & Wealth Management		41.3					8.0				(4.5)				3.5						(4.1)					40.7
Quilter Wealth Solutions		49.6					7.7				(4.6)				3.1						(3.3)					49.4
Quilter International		19.2					1.8				(1.5)				0.3						(1.2)					18.3
Wealth Platforms		68.8					9.5				(6.1)				3.4						(4.5)					67.7
Elimination of intra-group assets		(9.8)					(3.3)				1.1				(2.2)						1.3					(10.7)
Quilter plc excl. Quilter Life Assurance		100.3					14.2				(9.5)				4.7						(7.3)					97.7
Quilter Life Assurance		14.6					0.6				(2.9)				(2.3)						(1.1)					11.2
Estimated asset allocation (%)																				2019					2018
Fund profile by Investment type																				Total client AuMA					Total client AuMA
Quilter
Fixed interest																				26%					26%
Equities																				64%					64%
Cash																				4%					4%
Property and alternatives																				6%					6%
Total																				100%					100%
Retail																				99%					99%
Institutional																				1%					1%
Total																				100%					100%

Total net fee revenue* 2019 (£m)	Quilter Investors	Quilter Cheviot	Quilter Financial Planning	Advice & Wealth Management	Quilter Wealth Solutions	Quilter International	Quilter Life Assurance	Wealth Platforms	Head Office	Group
Net management fee*	123	171	2	296	173	110	70	353	-	649
Other revenue*	1	7	103	111	4	15	26	45	3	159
Total net fee revenue*	124	178	105	407	177	125	96	398	3	808
Total net fee revenue* 2018 (£m)	Quilter Investors	Quilter Cheviot	Quilter Financial Planning	Advice & Wealth Management	Quilter Wealth Solutions	Quilter International	Quilter Life Assurance	Wealth Platforms	Head Office	Group
Net management fee*	106	168	2	276	168	112	91	371	-	647
Other revenue*	3	7	87	97	2	23	18	43	1	141
Total net fee revenue*	109	175	89	373	170	135	109	414	1	788

2. Advice and Wealth Management

The following table presents certain key financial metrics utilised by management with respect to the business units of the Advice & Wealth Management segment, for the periods indicated.

Key financial highlights	2019	2018	% change
Quilter Financial Planning
Net management fee*	2	2	-
Other revenue*	103	87	18%
Total net fee revenue*	105	89	18%
RFPs + PCA (#)	1,799	1,621	11%
Productivity (£m)*	1.0	1.7	(41%)
Quilter Investors
Net management fee*	123	106	16%
Other revenue*	1	3	(67%)
Total net fee revenue*	124	109	14%
NCCF (£bn)*	0.5	2.8	(82%)
Closing AuM (£bn)*	20.8	17.7	18%
Average AuM (£bn)*	19.6	17.8	10%
Revenue margin (bps)*	63	59	4 bps
Asset retention (%)*	75%	84%	(9) pp
Quilter Cheviot
Net management fee*	171	168	2%
Other revenue*	7	7	-
Total net fee revenue*	178	175	2%
NCCF (£bn)*	(0.8)	0.7	-
Closing AuM (£bn)*	24.2	22.2	9%
Average AuM (£bn)*	23.6	23.5	0%
Revenue margin (bps)*	72	72	-
Asset retention (%)*	85%	92%	(7) pp
Investment managers (#)	167	155	8%

3. Wealth Platforms

The following table presents certain key financial metrics utilised by management with respect to the business units of the Wealth Platforms segment, for the periods indicated.

Key financial highlights	2019	2018	% change
Quilter Wealth Solutions
Net management fee*	173	168	3%
Other revenue*	4	2	100%
Total net fee revenue*	177	170	4%
NCCF (£bn)*	0.9	3.1	(71%)
Closing AuA (£bn)*	57.2	49.4	16%
Average AuA (£bn)*	54.1	51.0	6%
Revenue margin (bps)*	31	32	(1) bp
Asset retention (%)*	90%	91%	(1) pp
Quilter International
Net management fee*	110	112	(2%)
Other revenue*	15	23	(35%)
Total net fee revenue*	125	135	(7%)
NCCF (£bn)*	0.5	0.3	67%
Closing AuA (£bn)*	20.5	18.3	12%
Average AuA (£bn)*	19.6	19.0	3%
Revenue margin (bps)*	56	59	(3) bp
Asset retention (%)*	92%	92%	-
Quilter Life Assurance
Net management fee*	70	91	(23%)
Other revenue*	26	18	44%
Total net fee revenue*	96	109	(12%)
Expenses*	(43)	(52)	(17%)
Adjusted profit before tax*	53	57	(7%)
Tax	3	(7)	-
Adjusted profit after tax	50	64	(22%)
Operating margin %*	55%	52%	3 pp
NCCF (£bn)*	(3.5)	(2.3)	(52%)
Closing AuA (£bn)*	-	11.2	(100%)
Average AuA (£bn)*	-	13.2	(100%)
Revenue margin (bps)*	66	69	-
Asset retention (%)*	-	80%	-

 

END

 

 

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