Quilter plc 2023 Half Year Results - Part 1

Quilter PLC

08 August 2023

 

News Release

8 August 2023

Quilter plc interim results for the period ended 30 June 2023

Quilter delivers 25% increase in adjusted profit and improved operating margin. Further growth and efficiency initiatives underway

Steven Levin, Chief Executive Officer, said:

"We have delivered a strong improvement in first half profitability, pleasing flow outcomes in the Quilter channel and improved our market share of new advised platform flows. Our business model is fully aligned with the principles of the Consumer Duty regime and my focus is on doing more for our customers to improve business momentum in the near-term, and deliver faster growth and higher returns to shareholders in the longer-term. We are targeting an additional £50 million of Simplification savings by 2025 and we expect consensus profit estimates for this year to increase materially."

Highlights

·      Assets under Management and Administration ("AuMA") of £101.7 billion at the end of June 2023, increased by 2% on 31 December 2022 (£99.6 billion) principally due to positive market movements of £1.9 billion and:

o  Core business gross inflows of £5.5 billion in the first half which were broadly evenly spread between each quarter. Core net inflows in the first half were £0.7 billion (Q1: £409 million, Q2: £247 million). This reflected a good performance from the Quilter channel in both High Net Worth and Affluent with a more muted performance from our IFA/Direct channels across both segments. Market share of gross platform flows increased in both quarters. Notably, Q2 flows were up 5% year-on-year despite a 9% decline in the overall market over the same period.

o  Non-core net outflows of £0.5 billion (H1 2022: £0.2 billion) which relate to assets we still manage on behalf of businesses we have sold.

·      Adjusted profit before tax increased by 25% to £76 million (H1 2022: £61 million). Revenue increased by 3% to £312 million (H1 2022: £303 million) supported by revenue generated on corporate cash balances. This was coupled with strong expense discipline which delivered a third consecutive decline in first half costs, despite inflationary pressures, and supported an increase in the operating margin to 24% (H1 2022: 20%).

·      We expect to deliver our target £45 million Simplification cost savings by end 2023, a year earlier than planned. An additional £50 million of Simplification (Phase 2) savings are targeted for delivery by the end of 2025, with initiatives in train to improve each of our businesses.

·      Stabilisation in Quilter restricted adviser headcount which increased by nine financial planners on December 2022 levels.

·      Adjusted diluted earnings per share increased 34% to 4.3 pence (H1 2022: 3.2 pence) supported by the share count reduction from our capital return programme in 2022.

·      IFRS profit after tax attributable to shareholders of £5 million (H1 2022: £151 million) with the period-on-period variance largely due to market valuation changes in the policyholder tax charge. Basic earnings per share of 0.4 pence (H1 2022: 9.8 pence).

·      Interim Dividend of 1.5 pence per share versus 1.2 pence per share for 2022, representing an increase of 25%. 

·      Solvency II ratio of 240% after payment of the Interim Dividend (31 December 2022: 230%).

Key financial highlights

We assess our financial performance using a variety of measures including alternative performance measures ("APMs"), as explained further on pages 19 to 21. In the headings and tables presented, these measures are indicated with an asterisk: *.

Quilter highlights from continuing operations1		H1 2023	H1 2022
Assets and flows - core business
AuMA* (£bn)		98.3	95.2
Gross flows* (£bn)		5.5	5.8
Net inflows* (£bn)		0.7	1.6
Net inflows/opening AuMA* (annualised)		1%	3%
Assets and flows - reported
AuMA* (£bn)		101.7	98.7
Gross flows* (£bn)		5.5	5.9
Net inflows* (£bn)		0.2	1.4
Net inflows/opening AuMA* (annualised)		0%	3%
Profit and loss
IFRS profit before tax attributable to equity holders (£m)		7	182
IFRS profit after tax (£m)		5	151
Adjusted profit before tax* (£m)		76	61
Operating margin*		24%	20%
Revenue margin* (bps)		48	47
Adjusted diluted EPS from continuing operations* (pence)2		4.3	3.2
Interim dividend per share from continuing operations (pence)		1.5	1.2
Basic earnings per share from continuing operations (pence)2		0.4	9.9
1Continuing operations represent Quilter plc, excluding the results of discontinued operations relating to the sale of the Single Strategy business in 2018. 2The Financial Reporting Council published a thematic review on earnings per share in September 2022. The EPS figures for H1 2022 have been restated following the publication of this guidance as disclosed in note 8 to the interim financial statements.

Quilter plc results for the period ended 30 June 2023

Investor Relations
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Media
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Camarco
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Steven Levin, CEO, and Mark Satchel, CFO, will give a presentation via webcast at 08:30am (BST) today, 8 August 2023. The presentation will be followed by a Q&A session.

The presentation will be available to view live via webcast or can be listened to via a conference call facility. Details to join online or via conference call can be found on our website: 2023 results and presentations | Quilter plc

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 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 the conflict in Ukraine, 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.

Chief Executive Officer's statement

At our full year results, I said my focus was on building our distribution, enhancing our propositions, and driving efficiency to deliver better returns and faster growth. We have made good initial progress in this regard as demonstrated by our considerably higher first half profitability and improved operating margin. There is still more to be done which I discuss below under Business Improvement and Strategic Transformation.

Business performance

In the first six months of 2023, we have:

1.     delivered a strong improvement in profit performance;

2.     delivered robust flows in each quarter in the Quilter channel and continued to increase our market share of new Platform flows across both the Quilter and IFA channels, despite lower market activity levels; and

3.     been focused on improving our business by accelerating efficiency initiatives, while positioning ourselves to deliver faster growth and higher returns in the longer term.

UK inflation and interest rates are higher than the market was anticipating earlier this year. While this continues to place pressure on the ability of consumers to save, the investment return we generate on shareholder funds has exceeded our prior expectations. This, together with strong cost management, supported an increase in first half adjusted profit of 25% to £76 million (H1 2022: £61 million). We expect UK interest rates to peak later this year, remain stable for an extended period before starting to decline. As a consequence, investment revenue is likely to remain elevated into 2024 before potentially starting to reduce. We view this eventual decline as a positive given that lower interest rates should support improved market performance and consumer confidence. This, in turn, supports higher customer saving, increased flows and provides a stronger long-term foundation to build client prosperity.

Despite inflationary headwinds, I am pleased to report a third successive first half period of lower absolute costs. Having reduced first half 2022 costs by £6 million on the 2021 level, we made similar progress this year, taking the first half cost base to £236 million. As a result, we achieved an improvement in operating margin to 24% (H1 2022: 20%).

Our High Net Worth segment delivered a steady income performance with a modest increase in revenue margin, supported by the contribution from interest margin. Operating expenses were held flat at £85 million as cost savings broadly offset planned business investment. The overall segment contribution to adjusted profit before tax was unchanged at £23 million.

Modestly higher revenues in our Affluent segment of £195 million (H1 2022: £193 million) reflected broadly stable average AuMA, the planned reduction in revenue margin on managed assets following the Cirilium reprice and a contribution from interest income on shareholder capital that supports the regulatory requirements of the business. Strong cost management combined with a lower FSCS levy led to a 15% increase in adjusted profit to £54 million for the half year (H1 2022: £47 million).    

In Head Office, the cost of managing the Group declined by £1 million to £10 million. Higher interest rates contributed to an increase of £10 million in investment revenue generated on the cash and capital resources which support our regulatory capital and liquidity requirements. 

Adjusted profit before tax of £76 million represents the Group's IFRS profit, adjusted for specific items that management consider to be outside of normal operations or one-off in nature. The Group's IFRS profit after tax from continuing operations was £5 million compared to £151 million in H1 2022. Principal differences between adjusted profit and IFRS profit are due to non-cash amortisation of intangible assets, business transformation expenses and the impact of policyholder tax positions on the Group's results. This latter item was significantly positive in the first half of 2022 reflecting the decline in markets during that period and was negative in the first half of 2023 due to the gain in markets this year. The year-on-year variance in IFRS profit after tax is principally due to the change in policyholder tax as a result of market movements. We expect business transformation expenses to remain elevated until 2025, reflecting spend on anticipated change programmes, but is expected to reduce substantially thereafter.

Total Group adjusted diluted earnings per share were 4.3 pence, an increase of 34% (H1 2022: 3.2 pence) with the greater increase relative to the increase in adjusted profit reflecting the benefit from a lower share count following last year's capital return exercise. On an IFRS basis, we delivered basic EPS from continuing operations of 0.4 pence per share versus 9.9 pence per share for H1 2022 on a comparable basis.

The strong profit performance we delivered for the first half of this year, combined with a constructive outlook for the remainder of the year, supports the increase in the interim dividend of 25% to 1.5 pence per share. While market uncertainty in recent years contributed to the total dividend payment being overly weighted to the second half, the Board's current expectation is that the traditional one third/two thirds split should be anticipated for 2023.

Flows and investment performance

At an aggregate level, net flows in our core business were c.1% of opening balances, with the total Group position (after non-core outflows) broadly flat. While the overall position reflected muted activity across the industry, we experienced varied trends across the business. Notably, both our Quilter channel and our Platform performed well relative to market peers:

·      Quilter channel: Our High Net Worth segment delivered a 37% increase in gross flows to £266 million (H1 2022: £194 million) and our Affluent segment delivered a 6% increase to £1.8 billion (H1 2022: £1.7 billion). Notably, the Quilter channel delivered a stronger second quarter for new business than the first in High Net Worth and a similar outcome in each quarter in the Affluent segment, despite lower market volumes in the second quarter. Overall, this translated into broadly stable net flows for the half as a result of a modest decline in persistency as some clients withdrew monies to repay debt or maintain living standards. Net flows as a percentage of opening balances were 17% and 11% for the High Net Worth and Affluent segments respectively.

·      IFA channel: New business volumes in both segments were lower than the prior period reflecting lower market activity. This contributed to a net outflow for the half year in our High Net Worth business - with a small number of larger accounts restructuring their finances heavily influencing this outcome - and a broadly flat contribution from IFA flows to our Platform within the Affluent business. We need to deliver a better performance at the net level and I have made some changes to ensure we deliver on our potential. Both distribution channels within the Affluent segment have now been brought together under common leadership. Delivering stronger net IFA flows will be an important contributor to bridging the gap between our current performance and where we want to be.

·      Within Affluent, we were pleased with the overall level of new business onto our Platform, given the challenging market. We were the only advised platform to write more than £2 billion of new business in the first quarter and broadly maintained that level of gross flows in the second quarter. Second quarter new business flows onto our Platform increased by 5% period-on-period, despite market volumes being around 9% lower (Source: Fundscape) and our leading peers underperforming this benchmark. I am delighted we remain the number one market platform for new advised flows and we continued to increase our market share of new business in each quarter.

·      Finally, our non-core portfolios, which largely relate to residual assets we manage on behalf of businesses we sold in previous periods together with some legacy run-off funds, remain in outflow, as expected. An outflow of £457 million in the first half was higher than in the prior period (H1 2022: £164 million). The second quarter outflow was elevated by c.£200 million of sub-scale fund closures. Excluding this, the book is running off at a mid-teens rate and we expect this trend to continue given that these assets are managed on behalf of individuals who are no longer active clients of the Group.

In terms of investment performance, within High Net Worth, our Growth oriented Discretionary Portfolio Service continued to modestly outperform its benchmark over 1, 3 and 5 years while our Balanced Discretionary Portfolio Service was broadly in line with benchmark over 1 year but underperformed its 3 and 5 year benchmark by around a percentage point.

Within Affluent, we continued to deliver an excellent performance from our WealthSelect managed portfolio range. Cirilium Passive and Blend also performed well during the first half of the year. Since the change in manager at Cirilium Active late last year, performance has improved significantly with second quartile performance in the period since that change was implemented. While the weak period of performance over the last two to three years will take time to work through, we are confident that the fund is positioned much better for the longer-term.

Business Improvement and Strategic Transformation

Business Improvement

We are building distribution and enhancing our propositions. We have driven our efficiency agenda by accelerating our Simplification cost reduction programme. We now expect to realise the target savings of £45 million from that initial programme by the end of this year, a year ahead of schedule.

Distribution

In High Net Worth, we are building our advice capability internationally in our Dublin and Jersey offices. We aim to grow our Investment Manager and Financial Planner headcount to around 300 client facing individuals over time. This will be achieved by developing existing staff and external recruitment. Where appropriate, we will look to take advantage of recent market dislocation by making modest bolt-on acquisitions to bolster our advice business or add teams of Investment Managers to accelerate our growth plans.

Within Affluent, our Quilter channel is building distribution on three fronts. We have:

·      increased the number of RFPs, where the position has stabilised following recent declines;

·      increased productivity, with annualised gross flow per adviser of £2.7 million in the first half (H1 2022: £2.4 million); and

·      increased the assets our advisers manage within our propositions through back-book transfers, which totalled £326 million in the first half.

In IFA distribution, we have seen incremental flows in line with expectations from our targeted firms and delivering stronger levels of net IFA flows is an absolute priority for my distribution team.

Proposition

Our Platform and investment solutions are both market leading propositions. My focus is on ensuring both remain competitively positioned and continue to offer value to customers. For example, our Cirilium reprice coupled with improved performance in the Active range has repositioned the product and we continue to see strong appetite for our Blend and Passive offerings.

Similarly, the Platform reprice went live for new customers at the end of the second quarter and is being rolled out to existing customers during the third quarter. This reduced our Platform administration fee to clients meaningfully, with this partially offset through sharing of the interest margin earned on Platform cash between clients and Quilter. This allows us to offer clients a competitive rate of interest across the market, while partially offsetting some of the impact of the lower platform charge. The overall cost to us over an interest rate cycle is expected to be in line with the single basis point of Platform margin attrition that I guided to in March. However, while interest rates remain elevated, the net outcome will be better for clients and broadly neutral for Quilter.  

A recent upgrade to our Platform introduced automated tiered adviser charging. This meets a need that advisers have sought for some time and allows them to implement sliding scale advice fees linked to the value of their customers' assets. Most importantly, it supports advisers as they adapt their own businesses to be fully aligned with Consumer Duty principles.

The advent of higher global interest rates means that cash is now seen as an attractive investment alternative for retail clients. To this end, we intend to enhance our support of cash as an asset class and will be introducing a cash hub on our Platform later in 2023. This will allow clients to hold cash and fixed term deposits alongside their other Platform assets and obtain market leading rates.  

Quilter's business model is fully aligned with the principles of the Consumer Duty regime. We have always believed that Quilter's unbundled pricing approach to serving clients puts client choice at the heart of our business - they choose the services they wish to take from us and only pay us for what we provide. Moreover, our unique breadth of distribution means that all our products and services are available across the market, to both our financial advisers and to independent financial advisers. That means whether through investment performance or in terms of price/value/service trade-offs, our products and solutions are competitive with third-party alternatives. We have no lock-ins, or hidden fees so the need to both demonstrate and deliver value is axiomatic to our approach.

I am pleased the introduction of Consumer Duty has provided an opportunity to reflect on the clear tangible benefit our propositions deliver for our clients and the way we communicate the value we provide to them. We are delighted with the positive response we have had from advisers and their clients on these initiatives.

Strategic Transformation

Longer term, we are focused on repositioning each of our businesses to deliver faster growth, enhanced client outcomes, improved efficiency, and higher returns. We have change programmes underway in each of our principal distribution franchises; the High Net Worth segment, and, in Affluent, our IFA and Quilter channels. This activity is underpinned at a Group level by the next stage of our Simplification programme. Taking each in turn:

1.     High Net Worth Evolution

Over the last few years, we have built a Quilter branded advice business in our High Net Worth segment. This distribution channel has delivered significant incremental flows to our business. However, for historical reasons our advice and investment management businesses operate within different legal entities which complicates integrated client servicing. We plan to bring both teams together in a single legal and regulated structure, where our High Net Worth advice business will become directly authorised by the FCA for advice. That will allow us to manage relationships with clients who want an integrated investment management and advice proposition in a more seamless manner, as well supporting our productivity and efficiency goals. We will implement this change as soon as the necessary regulatory approvals are in place.

2.     Affluent: IFA Channel

From an advice perspective, one of Quilter's defining strengths is the breadth of proposition and distribution we support. This breadth of distribution ensures that our Platform and solutions benefit from flows generated across the market and we remain strategically well positioned however the advice market evolves in future.

We manage around £57 billion of assets on our Platform on behalf of IFA firms. Of this, around £10 billion is on behalf of firms who solely use our Platform to access third party funds for their client portfolios. However, the majority of assets on our Platform are with firms who use third party options alongside our investment solutions. We see the highest usage of our solutions on the c.£30 billion of assets we administer for our strategic partner IFA firms. These assets are principally managed through our £11 billion WealthSelect portfolios. Given the strong operational gearing of both our Platform and Investment Solutions businesses, my objective is to first grow the assets on our Platform and then encourage use of our solutions, where it is appropriate to do so. To this end, we continue to implement our plans to grow the number of active firms using our Platform and seek to position ourselves as primary platform with all firms using our Platform. As I noted earlier, we continue to rebuild our IFA market share and, positively, flows from the "target growth firms" that we discussed at our Capital Markets Day continue to build and are higher in the first half of 2023 than they were in the corresponding period of 2022 and 2021, despite lower market volumes.

3.     Affluent: Quilter Channel Transformation

We will grow our advice business and make it more efficient. We will drive growth through increasing our numbers of restricted advisers and continuing to ensure greater alignment between them and Quilter. This ensures we capture more of the flow they generate onto our Platform and into our solutions.

In terms of proposition, we have traditionally offered two alternatives to advisers:

·      a National business, for advisers who do not want to be burdened with business administration and wish to use our Platform and solutions and focus their time on advising clients; and

·      our Network, which services owner-operated advice businesses, who benefit from our support and use our Platform and solutions via a restricted matrix. Generally, c.80% of new flows advised upon by these firms are managed by Quilter.

Recent market consolidation activity reflects a heightened recognition by advisers of the value that can be created through proposition alignment. This creates an opportunity for a new franchise model that complements our existing propositions. We are piloting a new proposition, Quilter Partners, which will combine full alignment with our investment and Platform propositions with the entrepreneurial drive and focus of owner-operated businesses. This work is at an early stage, and we will update further as we refine our work on developing this proposition.

We are also transforming how we work to deliver a more efficient operating model and better client experience. Our advice business was built through acquisition and a historic lack of integration has led to operational complexity and a higher cost of running the business than we would like. To improve overall adviser productivity, reduce support costs, and improve risk management and our control framework, we intend to roll out common systems to all Quilter channel adviser firms over the next few years.

4.     Simplification Phase II

Following the sale of Quilter Life Assurance and Quilter International, the first stage of Simplification focused on reducing complexity in our business and rationalising legacy IT systems. Targeted cost saves of approximately £45 million from this programme will be achieved by the end of this year on a run-rate basis.

We are now targeting a further £50 million of cost saves by end 2025 on a run-rate basis with a cost to achieve of approximately £65 million, inclusive of spend on our Advice and High Net Worth initiatives. These savings arise from the simplification of our governance and internal administration processes, including full delivery of our two-segment model, together with IT and Operations efficiencies from our investment in Advice technology. These additional cost savings will support the delivery of our 30% longer-term operating margin target.

Outlook

We have a lot going on, but this is deliberate. It reflects my focus on delivering near-term improvements to business performance as well as fundamentally changing the way we work. My objective is simple - to retain our customer focus while making Quilter more efficient and responsive to the external environment and to drive the faster growth and higher returns our shareholders expect.

While inflation and interest rates are elevated, new business levels are likely to remain subdued. As a result, normalisation of flows may take longer to achieve than we anticipated earlier in the year. Notwithstanding this, we remain confident in the prospects for our business and the potential it offers.

The second half of the year will see the full impact of the repricing of our Platform which was announced at the end of June and the repricing of our Cirilium Active range at the end of the first quarter. We also anticipate a slightly higher second half cost out-turn due to planned spend on change initiatives. While this means second half profit is not expected to match that of the first half, our strong cost discipline and self-help plans means the adjusted profit out-turn for this year is expected to be meaningfully ahead of current market expectations, assuming broadly stable markets.

Longer-term, the fundamental growth characteristic that supports our business - the need to take personal responsibility to save for retirement - remains intact and we are very well positioned to support clients in this. Our plans to build distribution, enhance propositions and drive efficiency will deliver strong outcomes for all our stakeholders in the years ahead.

Finally, I am pleased that in the first half we were able to draw a line under the Lighthouse regulatory review relating to advice that was given by certain Lighthouse advisers prior to our acquisition of the business. While these problems were not caused by us, once they came to light, we dealt with them as swiftly as possible, doing the right thing by customers. We were pleased that the FCA publicly acknowledged these efforts and, in response, chose not to levy a fine on the business because of the actions we took.

We look forward to the future with confidence both in our ability to deliver on our potential and in our ability to continue to deliver good outcomes for all our clients.

Steven Levin

Chief Executive Officer

Financial review

Review of financial performance

Overview

During the first half of 2023, the Group achieved a strong improvement in profit performance. Global market indices experienced a modest recovery in the period, underpinning growth in Assets under Management and Administration ("AuMA"). The European Central Bank and the Bank of England continued to raise interest rates, supporting investment revenue, and management continued to demonstrate strong cost control.

The Group's reported AuMA was £101.7 billion at the end of the period, representing a 2% increase on the opening position, with positive market movements of £1.9 billion and net inflows of £0.2 billion. The average AuMA for the period was £101.8 billion, compared to £105.3 billion in the same period last year, a decrease of 3%. Adjusted profit before tax of £76 million increased 25% on the comparable period (H1 2022: £61 million). This growth reflects effective cost management in an inflationary environment as well as higher investment revenue resulting from interest income earned on cash and capital resources. This offset a decline in net management fee revenue of 2% due to average AuMA being 3% lower during the period.

Alternative Performance Measures ("APMs")

We assess our financial performance using a variety of measures including APMs, as explained further on pages 19 to 21. In the headings and tables presented, these measures are indicated with an asterisk: *.

Key financial highlights

We have changed our reporting where we share a margin on client cash. This margin is now included in net management fee revenue rather than other income. Comparative figures have been restated. This change brings us into line with peers across the industry. For the first half the benefit of interest margin on client balances was £6 million in High Net Worth and £1 million in Affluent (H1 2022: £2 million in High Net Worth and £nil million in Affluent).

Reporting of assets and flows have been restated to show non-core AuMA outside of core business AuMA reporting. Non-core AuMA and associated gross and net flows represents assets managed on behalf of businesses we have previously sold together with some legacy funds which are in run-off and remain in outflow, with the run-rate of decline included in prior periods. The core business AuMA and movements therein better represents the performance of the Group.

Quilter highlights from continuing operations1		H1 2023	H1 2022
Assets and flows - core business
AuMA* (£bn)		98.3	95.2
Gross flows* (£bn)		5.5	5.8
Net inflows* (£bn)		0.7	1.6
Net inflows/opening AuMA* (annualised)		1%	3%
Gross flows per adviser* (£m)2		2.7	2.4
Asset retention* (annualised)		90%	92%
Assets and flows - reported
AuMA* (£bn)		101.7	98.7
Gross flows* (£bn)		5.5	5.9
Net inflows* (£bn)		0.2	1.4
Net inflows/opening AuMA* (annualised)		0%	3%
Profit and loss
IFRS profit before tax from continuing operations attributable to equity holders (£m)		7	182
IFRS profit after tax from continuing operations (£m)		5	151
Adjusted profit before tax* (£m)		76	61
Operating margin*		24%	20%
Revenue margin* (bps)		48	47
Return on equity* (annualised)		7.5%	5.9%
Adjusted diluted EPS from continuing operations* (pence)4		4.3	3.2
Interim dividend per share from continuing operations (pence)		1.5	1.2
Basic earnings per share from continuing operations (pence)4		0.4	9.9
Non-financial
Total Restricted Financial Planners ("RFPs") in both segments3		1,511	1,567
Discretionary Investment Managers in High Net Worth segment3		178	176
1Continuing operations represent Quilter plc, excluding the results of discontinued operations from the sale of the Single Strategy business in 2018.
2Gross flows per adviser is a measure of the value created by our Quilter distribution channel.
3Closing headcount as at 30 June. 4The Financial Reporting Council published a thematic review on earnings per share in September 2022. The EPS figures for H1 2022 have been restated following the publication of this guidance as disclosed in note 8 to the interim financial statements.

Detailed analysis on net flows by business segment is shown in the Supplementary Information section of this announcement.

Net inflows for the core business of £0.7 billion for the first half of 2023 were 56% lower than the prior period (H1 2022: £1.6 billion). Gross flows of £5.5 billion declined by 5% on the prior period (H1 2022: £5.8 billion) while outflows of £4.8 billion were 14% higher than the prior period reflecting  increased withdrawals from clients that are already in drawdown to offset the impact of higher living costs, and for some clients who chose to repay debt obligations given the higher interest rate environment.

In the Affluent segment core business, the Quilter channel delivered steady net flows of £0.9 billion (11% of opening balances) compared to £0.9 billion (10% of opening balances) in the prior period. We have changed our reporting of Quilter channel flows, so this figure represents the net flows onto our Platform from Quilter Financial Planning less the outflow from assets managed by our advisers on other platforms. These balances largely represent back book transfers which totalled £326 million in the first half of 2023. The revised disclosure provides a better representation of performance of the activity within this channel. Gross inflows of £1.8 billion were up 6% on the comparative period (H1 2022: £1.7 billion), despite lower volumes across the total retail advised market demonstrating the continued strength of our integrated channel. Productivity, representing Quilter channel gross flow per adviser, also increased in line with our business objectives. Outflows increased to £0.9 billion (H1 2022: £0.8 billion) due to higher customer drawdown as previously referenced. This was partially offset by a reduction in regretted outflows reflecting lower levels of consolidator activity in this channel during the period.

Despite the subdued level of flows across the industry, IFA channel gross inflows of £2.6 billion (H1 2022: £2.9 billion) held up against the prior period as we continued to improve our market share of new business. Lower net inflows of £17 million (H1 2022: £654 million) reflected increased customer withdrawals and ongoing consolidator activity. This latter item was more than offset by net positive flows to the Quilter Platform from competitor platforms. At a net level, inflows as a percentage of opening AuMA (annualised) for the IFA channel was 0% (H1 2022: 2%).

Fund flows via third-party platforms gave rise to net outflows of £0.2 billion (H1 2022: net outflows of £0.3 billion) predominantly due to planned fund closures and a slowdown in the Compass fund range run-off.

The Quilter Investment Platform continues to maintain the leading market share of gross sales, against our Retail Advised Platform peers, based on the latest available Fundscape data (Q2 2023).

Persistency for the Affluent segment was below the prior period at 89% (H1 2022: 91%) as inflationary and interest rate pressures increased withdrawal activity as already mentioned.

2023 YTD	AuMA* as at 31 December 2022 (£bn)	Gross   flows* (£m)	Net Flows* (£m)	AuMA* as at 30 June 2023 (£bn)
AFFLUENT SEGMENT
Quilter channel	15.4	1,775	863	15.9
IFA channel on Quilter Investment Platform	54.1	2,557	17	55.8
Funds via third-party platform	2.0	144	(190)	1.6
Total Affluent segment core business	71.5	4,476	690	73.3
2022 YTD	AuMA* as at 31 December 2021 (£bn)	Gross   flows* (£m)	Net Flows* (£m)	AuMA* as at 30 June 2022 (£bn)
AFFLUENT SEGMENT
Quilter channel	16.6	1,713	866	14.8
IFA channel on Quilter Investment Platform	60.0	2,874	654	53.7
Funds via third-party platform	2.5	141	(326)	2.2
Affluent segment core business	79.1	4,728	1,194	70.7

The High Net Worth segment recorded gross inflows of £1.2 billion, 8% lower than the first half of 2022 (£1.3 billion) reflecting lower market activity. Net inflows of £0.1 billion were lower than the prior period (H1 2022: £0.5 billion), with robust gross flows from the Quilter channel offsetting a slowdown in IFA flows and a small number of unrelated larger account losses, notably in the charity and corporate account sector. Lower persistency of 91% (H1 2022: 95%) reflected some clients opting to use existing investments to repay debt obligations given the higher interest rate environment.

The Group's core business AuMA ended the period at £98.3 billion, up 2% from the opening position (FY 2022: £96.2 billion), due to positive market movements of £1.4 billion and net inflows of £0.7 billion. The Affluent segment AuMA increased by 3% to £73.3 billion (FY 2022: £71.5 billion) of which £23.4 billion is managed by Quilter, versus the opening position of £22.7 billion. High Net Worth's AuM was £25.9 billion, up 2% from the opening position of £25.5 billion, with all assets managed by Quilter.

In total, £49.0 billion or 50% of AuMA is managed by Quilter across the Group (FY 2022: £48.0 billion, 50%).

The Group's revenue margin of 48 bps was 1 bp higher than the prior period (H1 2022: 47 bps). The revenue margin on administered assets within the Affluent segment was 1 bp higher than the prior period at 27 bps. The revenue margin on managed assets in the Affluent segment decreased by 4 bps to 43 bps as a result of planned reprice of the Cirilium Active range which occurred early in the second quarter. Within the High Net Worth segment the revenue margin increased by 2 bps to 73 bps, supported by revenues from interest margin generated on client balances.

Adjusted profit before tax increased by 25% to £76 million (H1 2022: £61 million). The decline in net management fees to £242 million of 2% (H1 2022: £247 million) broadly matched the decline in average AuMA period-on-period of 3% (H1 2023: £101.8 billion compared to H1 2022: £105.3 billion). Net management fees include the investment return on client funds of which £7 million was generated in the first half of 2023 (H1 2022: £2 million). Other revenue decreased by 21% to £42 million (H1 2022: £53 million) reflecting lower new business activity in our mortgage and protection business, and lower equity market levels.

Investment revenue increased from £3 million in the first half of 2022 to £28 million in H1 2023, due to the increase in interest income earned on shareholder cash and capital resources. Operating expenses in the first half of 2023 were £236 million, 2% lower than the prior period (H1 2022: £242 million) primarily due to continued cost discipline, lower FSCS levies and Simplification cost initiatives during the period offset by higher inflation. The Group's operating margin improved by 4 percentage points to 24% (H1 2022: 20%).

The Group's IFRS profit after tax from continuing operations was £5 million compared to £151 million for the first half of 2022. The year-on-year decrease in IFRS profit is largely attributable to a variance in policyholder tax outcomes which moved from an expense of £21 million in the period to June 2023 (due to net market gains) to a credit of £145 million (due to market losses) in the period to June 2022.

Adjusted diluted earnings per share for continuing operations increased 34% to 4.3 pence (H1 2022: 3.2 pence). This increased more than adjusted profit due to the share consolidation in May 2022.

Total net revenue*

Total net revenue from continuing operations H1 2023 (£m)			Affluent	High Net Worth	Head Office	Continuing operations
Net management fee*1			147	95	-	242
Other revenue*			34	11	(3)	42
Investment revenue*			14	2	12	28
Total net revenue*			195	108	9	312

Total net revenue from continuing operations H1 2022 (£m)			Affluent	High Net Worth	Head Office	Continuing operations
Net management fee*1			151	96	-	247
Other revenue*			41	12	-	53
Investment revenue*			1	-	2	3
Total net revenue*			193	108	2	303
1Net management fee includes the interest earned on client holdings in Quilter Cheviot and Quilter Investment Platform.

Total net revenue for the Affluent segment was £195 million, up 1% on the prior period (H1 2022: £193 million). Net management fees of £147 million were 3% lower than the prior period (H1 2022: £151 million) due to the impact of lower average AuMA which declined by 3% to £76.6 billion in the first half of 2023 (H1 2022: £78.9 billion). Within net management fees, £1 million of interest revenue was generated on client cash holdings following the introduction of a revised platform pricing policy which also reduced the basis points charge paid by customers in respect of platform administration. This became effective mid-May 2023 for new clients (H1 2022: £nil million).

Other revenue predominantly reflects revenue generated from the provision of advice within Quilter Financial Planning. Recurring charges and fixed fees were lower than the prior period due to lower average levels of assets under advice as a consequence of lower equity and bond markets, and the reduced volumes of mortgage new business undertaken.

This decrease was offset by increased investment revenue due to interest income earned on cash balances that support the capital and liquidity requirements of the business.

Total net revenue in the High Net Worth segment was £108 million, in line with that of the prior period. Net management fees, which includes revenues retained by Quilter Cheviot on the interest margin earned on client balances, was at a similar level to that of the prior year period with higher interest income of £6 million (H1 2022: £2 million) offsetting slightly lower fees on AuM aligned to the decrease in the average AuM. Other revenue predominantly reflects the revenue generated from Quilter Private Client Advisers which was at similar levels to those of the first half of 2022.

Operating expenses*

Operating expenses decreased by £6 million to £236 million (H1 2022: £242 million). Our focus on embedding sustainable cost savings through business simplification activities has enabled us to achieve a lower cost base whilst absorbing significant inflationary headwinds.

	H1 2023				H1 2022
Operating expense split (£m)			Operating Expenses	As a percentage of revenues	Operating Expenses	As a percentage of revenues
Support staff costs			54		58
Operations			8		9
Technology			12		14
Property			15		16
Other base costs1			16		15
Sub-total base costs			105	34%	112	37%
Revenue-generating staff base costs			51	16%	49	16%
Variable staff compensation			38	12%	39	13%
Other variable costs2			28	9%	26	9%
Sub-total variable costs			117	38%	114	38%
Regulatory/professional indemnity costs			14	4%	16	5%
Operating expenses*			236	76%	242	80%
1Other base costs includes depreciation and amortisation, audit fees, shareholder costs, listed Group costs and governance.
2Other variable costs includes FNZ costs, development spend and corporate functions variable costs.

Support staff costs decreased by 7% to £54 million (H1 2022: £58 million) primarily driven by Simplification activities delivering sustainable benefits offset by higher wage inflation.

Operations costs are broadly stable at £8 million (H1 2022: £9 million) reflecting efficiencies resulting from a more streamlined operating environment following business divestments made in prior years.

Technology costs decreased by 14% to £12 million (H1 2022: £14 million) driven by continued rationalisation of our infrastructure following the sale of Quilter International with further reductions related to ongoing Business Simplification activity.

Property costs remained stable at £15 million (H1 2022: £16 million) with operating cost increases due to continued higher occupancy and higher utility costs being offset by cost reductions associated with further property portfolio consolidation.

Other base costs increased by 7% to £16 million (H1 2022: £15 million) due to the establishment of our Responsible Wealth proposition and investment in Environmental, Social and Governance frameworks.

Aggregate base costs of 34% of revenues were three percentage points lower than the prior year and are the principal contributor to the year-on-year increase of four percentage points in our operating margin.

Revenue-generating staff base costs have increased by 4% to £51 million and remain at a similar proportion of revenues (H1 2022: £49 million) as we continue to invest in our people and commercial proposition across our business segments to drive growth.

Variable staff compensation remains stable as £38 million (H1 2022: £39 million) and is broadly in line with the prior period as a percentage of revenues.

Other variable costs increased by 8% to £28 million (H1 2022: £26 million) but remained steady as a percentage of revenues. This principally reflected increased development expenditure including costs associated with implementing the FCA's Consumer Duty requirements and investment spend supporting proposition enhancement, offset by lower operating expenses associated with the Platform given a lower average AuA period on period.

Regulatory and professional indemnity costs decreased by 13% to £14 million (H1 2022: £16 million) reflecting Quilter's share of overall lower industry costs in the period.

Taxation

The UK corporation tax rate changed from 19% to 25% from 1 April 2023, resulting in a UK blended corporate tax rate of 23.5% for the financial year 2023. The effective tax rate ("ETR") on adjusted profit before tax was 24% (2022: 18%). The Group's ETR is higher than the UK blended corporation tax rate of 23.5% for the period, principally due to non-deductible movements in share-based remuneration. The Group's ETR is dependent on a number of factors, including future changes in the UK corporation tax rate.

The Group's IFRS income tax expense was a charge of £23 million for the period ended 30 June 2023, compared to a credit of £114 million for the prior year period. The income tax expense or credit can vary significantly period-on-period as a result of market volatility and the impact market movements have on policyholder tax. The recognition of the income received from policyholders to fund the policyholder tax liability (which is included within the Group's IFRS revenue) 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 before tax to remove these distortions, as explained further on page 11 and in note 5(b) to the condensed consolidated interim financial statements.

Business Simplification

Quilter's Simplification programme continues to track towards the anticipated £45 million target of annualised run-rate cost savings, announced at the Capital Markets Day in November 2021. This target is expected to be largely achieved by the end of 2023, and £50 million of additional costs saves have been identified to be achieved by the end of 2025. The cost to achieve the new £50 million savings target is estimated to be £65 million, bringing the total costs to deliver £95 million of cost savings to £120 million.

The Simplification programme delivered an incremental £10 million of annualised run-rate cost savings in the first half of 2023 through ongoing rationalisation of our property and technology estates, together with continued cost reduction as we simplify our structures and organisation to support the two segments, Affluent and High Net Worth. To date the programme has delivered £33 million of annualised run-rate cost savings with implementation costs since inception of the programme of £31 million.

Lighthouse Defined Benefit to Defined Contribution ("DB to DC") pension transfer advice provision

As reported previously, a provision was recognised in relation to DB to DC pension transfer advice provided by Lighthouse advisers prior to Lighthouse transitioning to our systems and controls following our acquisition of Lighthouse.

In 2020 the FCA commenced an enforcement investigation and the FCA required Lighthouse to commission a skilled person review in relation to certain DB to DC pension transfer advice by Lighthouse. The FCA has concluded its enforcement investigation into Lighthouse and, in May 2023, the FCA issued a public Final Notice to Lighthouse setting out its findings.  The FCA found that Lighthouse had provided unsuitable DB to DC pension transfer advice but imposed no financial penalty. The skilled person's review concluded in December 2022.

As at 30 June 2023, a provision of £6 million (31 December 2022: £5 million) remains for the potential redress of British Steel Pension Scheme cases, and other DB to DC pension transfer cases under review as part of the Group-managed past business review.

Reconciliation of adjusted profit before tax* to IFRS profit

Adjusted profit before tax represents the Group's IFRS profit, adjusted for specific items that management considers to be outside of the Group's normal operations or one-off in nature, as detailed on page 33 in the condensed consolidated interim financial statements. The exclusion of certain adjusting items may result in adjusted profit before tax being materially higher or lower than the IFRS profit after tax.

Adjusted profit before tax does not provide a complete picture of the Group's financial performance, which is disclosed in the IFRS income statement, but is instead intended to provide additional comparability and understanding of the financial results.

Reconciliation of adjusted profit before tax to IFRS profit after tax (£m)				For the six months ended 30 June 2022
			Six months ended 30 June 2023	Continuing Operations	Discontinued Operations1	Total
Affluent			54	47	-	47
High Net Worth			23	23	-	23
Head Office			(1)	(9)	-	(9)
Adjusted profit before tax*			76	61	-	61
Adjusting items:
Impact of acquisition and disposal-related accounting			(21)	(22)	-	(22)
Business transformation costs			(16)	(17)	-	(17)
Finance costs			(10)	(5)	-	(5)
Customer remediation			(3)	15	-	15
Loss on business disposals			-	-	(1)	(1)
Exchange rate movement (ZAR/GBP)			(2)	4	-	4
Policyholder tax adjustments			(18)	146	-	146
Other adjusting items			1	-	-	-
Total adjusting items before tax			(69)	121	(1)	120
Profit/(loss) before tax attributable to equity holders*			7	182	(1)	181
Tax attributable to policyholder returns			21	(145)	-	(145)
Income tax (expense)/credit			(23)	114	-	114
Profit after tax2			5	151	(1)	150

¹Discontinued operations relate to changes in the warranty provision on the sale of the Single Strategy business.

²IFRS profit after tax.

The impact of acquisition and disposal-related accounting costs of £21 million (H1 2022: £22 million) include amortisation of acquired intangible assets. These costs remained stable on those of the prior period.

Business transformation costs of £16 million were incurred in H1 2023 (H1 2022: £17 million), including Simplification costs of £14 million (H1 2022: £12 million). The Simplification programme continues to track towards the £45 million target of annualised run-rate cost savings, announced in November 2021. This target will be largely achieved by the end of 2023, and £50 million of additional cost savings are targeted to be achieved by the end of 2025. The aggregate cost to achieve the combined £95 million savings target is estimated to be £120 million. To date, the programme has delivered £33 million of annualised run-rate cost savings with an implementation cost of £31 million.

The customer remediation expense of £3 million in H1 2023 (H1 2022: income of £15 million) reflects £2 million provision increase for the non-British Steel Pension Scheme redress payments as a result from the Group-managed past business review of DB to DC pension transfer advice suitability by an independent expert, which is almost complete. There is an additional £1 million of legal, consulting costs and other costs in H1 2023.

Policyholder tax adjustments were a credit of £18 million for H1 2023 (H1 2022: charge of £146 million) in relation to the removal of timing differences 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 profit before tax attributable to equity holders.

Exchange rate movements for H1 2023 were £2 million (H1 2022: £4 million) which relate to foreign exchange loss on cash held in South African Rand in preparation for payments to shareholders.

Cash generation*

Cash generation measures the proportion of adjusted profit after tax that is recognised in the form of cash generated from operations. The Group achieved a cash generation rate of 82% of adjusted profit after tax over H1 2023 (FY 2022: 75%).

Review of financial position

Capital and liquidity

Solvency II

The Group's Solvency II surplus is £852 million at 30 June 2023 (31 December 2022: £820 million), representing a Solvency II ratio of 240% (31 December 2022: 230%). The Solvency II information for the six months to 30 June 2023 contained in this results disclosure has been prepared on a pro forma basis and has not been audited.

The Group's Solvency II capital position is stated after allowing for the impact of the foreseeable dividend payment of £20 million (31 December 2022: £45 million).

		At 30 June	At 31 December
Group Solvency II capital (£m)		20231	20222
Own funds		1,460	1,451
Solvency capital requirement ("SCR")		608	631
Solvency II surplus		852	820
Solvency II coverage ratio		240%	230%
1Based on preliminary estimates and including the impact of year-to-date profits.
2As disclosed in the Group Solvency and Financial Condition Report for 2022.

The 10 percentage point increase in the Group Solvency II ratio from the 31 December 2022 position is primarily due to the favourable impact of higher interest rates and improved equity markets on the solvency capital requirement.

Composition of qualifying Solvency II capital

The Group's 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.

		At 30 June	At 31 December
Group own funds (£m)		2023	2022
Tier 11		1,266	1,249
Tier 22		194	202
Total Group Solvency II own funds		1,460	1,451
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 January 2023.

The Group SCR is covered by Tier 1 capital, which represents 208% of the Group SCR of £608 million. Tier 1 capital represents 87% of Group Solvency II own funds. Tier 2 capital represents 13% of Group Solvency II own funds and 23% of the Group Solvency II surplus.

Dividend

The Board declared an interim dividend for 2022 of 1.5 pence per share at a total cost of £20 million. The interim dividend will be paid on 18 September 2023 to shareholders on the UK and South African share registers on 1 September 2023. For shareholders on our South African share register an interim dividend of 35.69864 South African cents per share will be paid on 18 September 2023, using an exchange rate of 23.79909.

Odd-lot Offer

As part of our continued drive for greater efficiency, the Board sought shareholder approval at the Company's 2023 Annual General Meeting for an Odd-lot Offer for shareholders registered on the London and Johannesburg Stock Exchanges.  Further information on the Odd-lot Offer is set out on page 14.  

Debt issue

In early January 2023, the Company announced plans to issue a new subordinated debt instrument in order to refinance its existing £200 million 4.478 percent Fixed Rate Reset Subordinated Notes, due 2028, on its first call date of 28 February 2023. A new issue of £200 million 8.625 percent Fixed Rate Reset Subordinated Notes, due April 2033, completed on 18 January 2023.

Holding company cash

The holding company cash statement includes cash flows generated by the three main holding companies within the business: Quilter plc, Quilter Holdings Limited and Quilter UK Holding Limited. The 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.

£m			H1 2023	FY 2022
Opening cash at holding companies at 1 January			392	756
Return of capital to shareholders			-	(328)
Share repurchase			- -	(28)
Cost of sale of Quilter International			-	(23)
Single Strategy business sale - price adjustment provision			(4)	-
Debt issuance costs			(2)	-
Dividends paid			(45)	(78)
Net capital movements			(51)	(457)
Head Office costs, Business Simplification and Optimisation programme funding			(26)	(52)
Net interest received			8	4
Interest costs			(9)	(9)
Net operational movements			(27)	(57)
Cash remittances from subsidiaries			122	163
Net capital contributions, loan repayments and investments			(72)	(15)
Other net movements			(3)	2
Internal capital and strategic investments			47	150
Closing cash at holding companies at the end of the period			361	392

Net capital movements

Net capital movements in the period totalled an outflow of £51 million. This includes £45 million of dividend payments made to shareholders, £2 million relating to the issuance of new debt, and £4 million in final settlement on the sale of the Single Strategy business.

Net operational movements

Net operational movements were an outflow of £27 million for the period, which includes £26 million of corporate and transformation costs, interest paid of £9 million relating to coupon payments on the Tier 2 bonds and non-utilisation fees for the revolving credit facility, and £8 million of net interest received on money market funds, group loans and cash holdings.

Internal capital and strategic investments

The net inflow of £47 million is principally due to £122 million of cash remittances from the trading businesses, partially offset by £72 million of net capital contributions to support business operational activities. 

Shareholder information

The Quilter Board has declared an Interim Dividend of 1.5 pence per share. The Interim dividend will be paid on Monday 18 September 2023 to shareholders in the UK and South African share registers on Friday 1 September 2023.

Dividend Timetable

Dividend announcement in pounds sterling with South Africa ZAR equivalent	Tuesday 8 August 2023
Last day to trade cum dividend in South Africa	Tuesday 29 August 2023
Shares trade ex-dividend in South Africa	Wednesday 30 August 2023
Shares trade ex-dividend in the UK	Thursday 31 August 2023
Record Date in UK and South Africa	Friday 1 September 2023
Interim Dividend payment date	Monday 18 September 2023

From the opening of trading on Tuesday 8 August 2023 until the close of business on Friday 1 September 2023, 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 30 August 2023 and Friday 1 September 2023, both dates inclusive.

Additional information

For shareholders on our South African share register an Interim Dividend of 35.69864 South African cents per share will be paid on Monday 18 September 2023, based on an exchange rate of 23.79909. Dividend Tax will be withheld at the rate of 20% from the amount of the gross dividend of 35.69864 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 Interim Dividend will be 28.55891 South African cents per share. The Company had a total of 1,404,105,498 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 adviser.

Odd-lot Offer

Following our Odd-lot Offer in 2020, as part of our continued drive for greater efficiency and in line with our desire to act in the best interests of all our shareholders, we plan to undertake another Odd-lot Offer for shareholders registered on the London and Johannesburg Stock Exchanges. The potential Odd-lot Offer was approved by shareholders at the Company's 2023 Annual General Meeting held in May 2023 and will launch within 18 months of the meeting.

The Odd-lot Offer entails Quilter making an offer to eligible shareholders (holders of less than 200 shares) to repurchase their shares at a 5% premium to the volume weighted average price of Ordinary Shares traded on the London Stock Exchange over the five trading days prior to the date on which the offer price is finalised. The Odd-lot Offer will reduce the complexity and cost to Quilter of managing our unusually large shareholder base and will allow shareholders holding small numbers of shares to dispose of their holdings in a timely and cost-effective manner, without any dealing fees. Eligible shareholders can, of course, elect to retain their shareholding in Quilter plc.

Odd-lot Holders will receive the 2023 Interim Dividend on their Odd-lot Offer shares providing they still hold their shares on the Interim Dividend Record Date, Friday 1 September 2023.

Further information will be provided to eligible shareholders in due course.

Supplementary information

Alternative Performance Measures ("APMs")

We assess our financial performance using a variety of measures including APMs, as explained further on pages 19 to 21. These measures are indicated with an asterisk: *.

For the period ended 30 June 2023

1.     Key financial data

2023 YTD gross flows, net flows & AuMA (£bn), unaudited	AuMA* as at 31 December 2022	Gross   flows* (£m)	Net Flows* (£m)	AuMA* as at 30 June 2023	Of which managed by Quilter AuM as at 30 June 2023
AFFLUENT SEGMENT
Quilter channel	15.4	1,775	863	15.9	12.2
IFA channel on Quilter Investment Platform	54.1	2,557	17	55.8	9.6
Funds via third-party platform	2.0	144	(190)	1.6	1.6
Total Affluent segment core business	71.5	4,476	690	73.3	23.4
HIGH NET WORTH SEGMENT
Quilter channel	2.4	266	195	2.6	2.6
IFA channel incl. Direct	23.1	884	(141)	23.3	23.3
Total High Net Worth segment	25.5	1,150	54	25.9	25.9
Inter-Segment Dual Assets1	(0.8)	(122)	(88)	(0.9)	(0.3)
Quilter plc core business	96.2	5,504	656	98.3	49.0
Non-core	3.4	41	(457)	3.4	2.2
Quilter plc reported	99.6	5,545	199	101.7	51.2
AuMA breakdown:
Affluent administered only	50.0	2,371	302	51.1
Affluent managed and administered	17.0	1,620	701	18.3
Affluent external platform	7.9	526	(770)	7.3
1Inter-segment dual assets reflect funds sold by Quilter Cheviot and managed by Quilter Investors and the Quilter Cheviot bespoke managed portfolio services solution available to advisers on the Quilter Investment Platform. This is excluded from total AuMA to ensure no double count takes place.

2022 YTD gross flows, net flows & AuMA (£bn), unaudited		AuMA* as at 31 December 2021	Gross   flows* (£m)	Net Flows* (£m)	AuMA* as at 30 June 2022	Of which managed by Quilter AuM as at 30 June 2022
AFFLUENT SEGMENT
Quilter channel		16.6	1,713	866	14.8	11.4
IFA channel on Quilter Investment Platform		60.0	2,874	654	53.7	8.7
Funds via third-party platform		2.5	141	(326)	2.2	2.2
Affluent segment core business		79.1	4,728	1,194	70.7	22.3
HIGH NET WORTH SEGMENT
Quilter channel		2.5	194	160	2.3	2.3
IFA channel incl. Direct		26.2	1,068	352	22.9	22.9
Total High Net Worth segment		28.7	1,262	512	25.2	25.2
Inter-segment dual assets1		(0.2)	(190)	(150)	(0.7)	(0.2)
Quilter plc core business		107.6	5,800	1,556	95.2	47.3
Non-core		4.2	109	(164)	3.5	2.2
Quilter plc reported		111.8	5,909	1,392	98.7	49.5
AuMA breakdown:
Affluent administered only		55.9	2,833	1,023	49.7
Affluent managed and administered		17.3	1,391	562	16.1
Affluent external platform		10.1	613	(555)	8.4

¹Inter-segment dual assets reflect funds sold by Quilter Cheviot and managed by Quilter Investors and the Quilter Cheviot bespoke managed portfolio services solution available to advisers on the Quilter Investment Platform. This is excluded from total AuMA to ensure no double count takes place.

Estimated asset allocation (%)		H1 2023	FY 2022
Fund profile by investment type, unaudited		Total client AuMA	Total client AuMA
Fixed interest		26%	25%
Equities		64%	65%
Cash		7%	7%
Property and alternatives		3%	3%
Total		100%	100%

1. Affluent

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

Key financial highlights	H1 2023	H1 2022	% change
Affluent Administered
Net management fees (£m)*	93	91	2%
Other revenue (£m)*	-	1	-
Investment revenue (£m)*	12	1	-
Total net revenue	105	93	13%
Net inflows (£bn)*	1.0	1.6	(38%)
Closing AuMA (£bn)*	69.5	65.8	6%
Average AuMA (£bn)*	68.9	69.5	(1%)
Revenue margin (bps)*	27	26	1 bp
Asset retention (%)*	91%	93%	(2) ppts
Affluent Managed
Net management fees (£m)*	54	60	(10%)
Other revenue (£m)*	-	-	-
Investment revenue (£m)*	1	-	-
Total net revenue	55	60	(8%)
Net inflows (£bn)*	0.1	0.0	-
Closing AuM (£bn)*	25.6	24.5	4%
Average AuM (£bn)*	25.5	25.9	(2%)
Revenue margin (bps)*	43	47	(4) bps
Asset retention (%)*	82%	85%	(3) ppts
Advice (Quilter Financial Planning)
Net management fees (£m)*	-	-	-
Other revenue (£m)*	34	40	(15%)
Investment revenue (£m)*	1	-	-
Total net revenue*	35	40	(13%)
RFPs (number)	1,447	1,512	(4%)

2. High Net Worth

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

Key financial highlights	H1 2023	H1 2022	% change
Quilter Cheviot
Net management fees (£m)*	95	96	(1%)
Other revenue (£m)*	1	1	-
Investment revenue (£m)*	2	-	-
Total net revenue	98	97	1%
Net inflows (£bn)*	0.1	0.5	(80%)
Closing AuM (£bn)*	25.9	25.2	3%
Average AuM (£bn)*	25.9	27.0	(4%)
Revenue margin (bps)*	73	71	2 bps
Asset retention (%)*	91%	94%	(3) ppts
Investment managers (#)*	178	176	1%
Advice (Quilter Private Client Advisers)
Net management fees (£m)*	-	-	-
Other revenue (£m)*	10	11	(9%)
Investment revenue (£m)*	-	-	-
Total net revenue*	10	11	(9%)
QPCA RFPs (number)	64	55	16%

Financial performance by segment

The following table presents a breakdown of financial performance by segment and continuing operations for the periods indicated.

Financial performance from continuing operations H1 2023 (£m)			Affluent	High Net Worth	Head Office	Continuing operations
Net management fee*1			147	95	-	242
Other revenue*			34	11	(3)	42
Investment revenue*			14	2	12	28
Total net revenue*			195	108	9	312
Operating expenses*			(141)	(85)	(10)	(236)
Adjusted profit before tax*			54	23	(1)	76
Tax						(18)
Adjusted profit after tax*						58
Operating margin (%)*			28%	21%		24%
Revenue margin (bps)*			38	73		48

Financial performance from continuing operations H1 2022 (£m)			Affluent	High Net Worth	Head Office	Continuing operations
Net management fee*1			151	96	-	247
Other revenue*			41	12	-	53
Investment revenue*			1	-	2	3
Total net revenue*			193	108	2	303
Operating expenses*			(146)	(85)	(11)	(242)
Adjusted profit before tax*			47	23	(9)	61
Tax						(11)
Adjusted profit after tax*						50
Operating margin (%)*			24%	21%		20%
Revenue margin (bps)*			38	71		47

¹Net management fee includes the interest earned on client holdings in Quilter Cheviot and Quilter Investment Platform.

Alternative Performance Measures

We assess our financial performance using a variety of alternative performance measures ("APMs"). APMs are not defined under IFRS, but we use them to provide further 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 condensed consolidated interim financial statements, which include the Group's income statement, statement of financial position and statement of cash flows, which are presented on pages 26 to 30.

Further details of APMs used by the Group in its Financial review are provided below.

APM	Definition
Adjusted profit before tax	Adjusted profit before tax represents the Group's IFRS profit, adjusted for specific items that management consider to be outside of the Group's normal operations or one-off in nature, as detailed on page 33 in the condensed consolidated interim financial statements. The exclusion of certain adjusting items may result in adjusted profit before tax being materially higher or lower than the IFRS profit after tax. Adjusted profit before tax does not provide a complete picture of the Group's financial performance, which is disclosed in the IFRS income statement, but is instead intended to provide additional comparability and understanding of the financial results. Adjusted profit before tax is presented for the continuing Group, for discontinued operations (relating to the sale of the Single Strategy business in 2018), and for the total Group for continuing and discontinued operations. A detailed reconciliation of the adjusted profit before tax metrics presented, and how these reconcile to IFRS, is provided on page 11 of the Financial review. Adjusted profit before tax is referred to throughout the Chief Executive Officer's statement and Financial review, with comparison to the prior year explained on page 9. A reconciliation from each line item on the IFRS income statement to adjusted profit before tax is provided in note 5(c) to the condensed consolidated interim financial statements on page 35.
Adjusted profit after tax	Adjusted profit after tax represents the post-tax equivalent of the adjusted profit before tax measure, as defined above.
Revenue margin (bps)	Revenue margin represents net management fees, divided by average AuMA. Management use 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 8 of the Financial review.
Operating margin	Operating margin represents adjusted profit before tax divided by total net fee revenue. Management use this APM as this is an efficiency measure that reflects the percentage of total net revenue that becomes 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 9.
Gross flows	Gross flows are the gross client cash inflows received from customers during the period and represent our ability to increase AuMA and revenue. Gross flows are referred to in the Financial review on page 8 and disclosed by segment in the supplementary information on pages 15 to 16.
Net flows	Net flows are 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 a lead indicator of total net revenue. Net flows is referred to throughout this document, with a separate section in the Financial review on page 8 and is presented by business and segment in the supplementary information on pages 15 to 16.
Assets under Management and Administration ("AuMA")	AuMA represents the total market value of all financial assets managed and administered on behalf of customers. AuMA is referred to throughout this document, with a separate section in the Financial review on page 8 and is presented by business and segment in the supplementary information on pages 15 to 16.
Non-core AuMA	Non-core AuMA and associated gross and net flows represents assets managed on behalf of businesses we have sold together with some legacy funds which are in run-off and remain in outflow.
Average AuMA	Average AuMA represents the average total market value of all financial assets managed and administered 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 revenue	Total net 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 revenue is provided on page 9 of the Financial review and note 5(c) in the condensed consolidated interim financial statements.
Net management fees	Net management fees consist of revenue generated from AuMA, fixed fee revenues including charges for policyholder tax contributions, interest earned on client holdings, 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 a treatment and presentation commonly used across our industry. Net management fees are a part of total net revenue and is a key input into the Group's operating margin. Further information on net management fees is provided on page 9 and note 5(c) in the condensed consolidated interim financial statements.
Other revenue	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 a part of total net revenue, which is included in the calculation of the Group's operating margin. Further information on other revenue is provided on page 9 and note 5(c) in the condensed consolidated interim financial statements.
Investment revenue	Investment revenue includes interest on shareholder cash balances (including cash at bank and money market funds).
Operating expenses	Operating expenses represent the costs for the Group, which are incurred to earn total net revenue and excludes the impact of specific items that management considers to be outside of the Group's normal operations or one-off in nature. Operating expenses are included in the calculation of adjusted profit before tax and impact the Group's operating margin. A reconciliation of operating expenses to the applicable IFRS line items is included in note 5(c) to the condensed consolidated interim financial statements, and the adjusting items excluded from operating expenses are explained in note 5(b). Operating expenses are explained on pages 9 to 10 of the Financial review.
Cash generation	Cash generation is calculated by removing non-cash generative items from adjusted profit before tax, 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. Cash generation is explained on page 12 of the Financial review.
Asset retention (annualised)	The asset retention rate measures our ability to retain assets from delivering good customer outcomes and investment performance. Asset retention reflects the annualised gross outflows of the AuMA during the period as a percentage of opening AuMA. Asset retention is calculated as: 1 - (annualised gross outflow divided by opening AuMA). Asset retention is provided for the Group on page 7, and by segment on page 17.
Net inflows/opening AuMA (annualised)	This measure is calculated as total net flows annualised (as described above) divided by opening AuMA presented as a percentage. This metric is provided on page 7.
Gross flows per adviser	Gross flows per adviser is a measure of the value created by our Quilter distribution channel and is an indicator of the success of our multi-channel business model. Gross flows per adviser is calculated as gross flows generated by the Quilter channel through the Quilter Investment Platform, Quilter Investors or Quilter Cheviot (annualised) per average Restricted Financial Planner in both segments. Gross flows per adviser is provided on page 7.
Return on Equity ("RoE") (annualised)	Return on equity calculates how many pounds of profit the Group generates from continuing operations with each pound of shareholder equity. This measure is calculated as adjusted profit after tax annualised divided by average equity. Equity is adjusted for the impact of discontinued operations, if applicable. Return on equity is provided on page 7.
Adjusted diluted earnings per share	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 note 8 in the condensed consolidated interim financial statements. A continuing and discontinued view of diluted earnings per share has also been presented, and the calculation of all EPS metrics, is shown in note 8 to the condensed consolidated interim financial statements.
Headline earnings per share	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 1/2023 Headline Earnings. This is calculated on a basic and diluted basis. For details of the calculation, refer to note 8 of the condensed consolidated interim financial statements.

 

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