IntegraFin : Full Year Results Presentation 2020

Results Presentation

Year ended 30 September 2020

Presentation team

Alex Scott

Chief Executive Officer

• Joined IntegraFin in 2009
• 1997 - Twelve years in insurance licence provision
• 25 years of insurance experience in the UK and internationally

Jonathan Gunby

Executive Director - IFAL CEO

• Joined IntegraFin in 2011
• 1999 - Twelve years as Director of NMG Holdings
• 30 years of financial services experience in the UK and internationally

Results Presentation

2

Key messages

Total revenue £107.3m, up 8% compared to FY19

Profit before tax £55.3m for the period, up 11% compared to FY19 Operating profit £55.3m, up 11% compared to operating profit in FY19 Operating margin increased to 52%, from operating margin of 50% in FY19 Cash flow and group balance sheet remain strong, with no debt

Second interim dividend of 5.6p declared, total dividend of 8.3p FUD at £41.09bn, up 9% since FY19

Net inflows of £3.59bn, up 3% from FY19 Gross inflows of £5.75bn

Client numbers at 192k, up 7% from FY19

Results Presentation

3

Growth in Funds under Direction

Impressive FUD growth

Growth in Funds Under Direction (£bn) compared to the MSCI World Index
250.000								2007													45	•	Transact has enjoyed FUD
				2003 Transact														41.1		growth every year since
				moves into			First dividend paid											40		2000.
				operational			yearly thereafter										37.8
									2020
				profit during
200.000											COVID-19 Pandemic
2000		2003													35
												2018					33.1		•	FUD growth maintained
	First
	assets												IHP lists on the					30		through periods of high
	onto												London Stock		27.9
	platform												Exchange							stock market volatility.
150.000
	in 2000																			25
																	22.7					8%
																							2%	By asset class
																					20
																18.0					10%
100.000
														16.0									Equity
																				15
														13.6										Bonds
													11.5
												9.8
											8.8									10				Cash
50.000																						55%
									7.1														Property
									5.6
								4.9
																			5
																				25%			Other
							3.1
					0.9	1.7
		0.1	0.2	0.5
0
0.000																					0
00	01	02	03	04	05	06	07	08	09	10	11	12	13	14	15	16	17	18	19	20
							FUD		WORLD Standard (Large+Mid Cap)

Results Presentation

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FY20 Net inflows were up 3%

£1.8bn

£1.6bn

£1.4bn

£1.2bn

£1.0bn

£0.8bn

£0.6bn

£0.4bn

£0.2bn

£0.0bn

		£1.70bn
		£1.54bn
	£1.44bn	£1.48bn
£1.39bn
£1.39bn
		£1.29bn
		£1.23bn
		£1.10bn
	£0.93bn	£0.96bn
£0.88bn	£0.89bn
	£0.80bn	£0.80bn

£0.73bn

Q1 FY19	Q2 FY19	Q3 FY19	Q4 FY19	Q1 FY20	Q2 FY20	Q3 FY20	Q4 FY20
				Gross		Net

£m	FY20
Opening FUD	37,799
Inflows	5,750
Outflows	(2,160)
Net inflows	3,590
Market	(224)
movements
Other	(72)
movements
Closing FUD	41,093

Results Presentation

6

FUD by wrapper split

45

40

	35			£10.08bn
		£9.27bn
	30
	£8.05bn
				£9.38bn
FUD(£bn)	25
£6.89 bn	£8.79bn
	20	£8.00bn		£1.64bn
		£1.54bn	£1.16bn
		£7.08 bn	£1.07bn
		£1.41bn
	15	£0.96bn
		£1.25 bn
		£0.84 bn

10
£17.13bn	£18.84bn
	£14.69bn
5	£11.87 bn

0

FY17

FY18

FY19

FY20

• Strong growth in all

		wrapper types over the
	ISAs	period.
	• Pensions and ISA CAGRs
	GIA
	in excess of 16%.
	Offshore	• GIAs and Bond ISAs
	Bond
	Onshore	CAGR in excess of 10%.
	Bond
	Pension
	Wrappers

7

Pension transfers split by DB vs. DC

£700m

£600m

£500m

£400m

£300m

£200m

£100m

£0m

							•	Pension transfer business
								has remained strong.
							• 3Q20 reduction in DC
								transfers as COVID-19
£512m	£480m	£456m
			£446m			DC	impacts took effect.
							DB
			£302m				•	Recovery in DC transfers
								in 4Q20 but still not back
								to 4Q19 levels.
£129m	£133m	£162m	£126m	£133m			•	DB transfers remained
								stable over the year.
Q4 FY19	Q1 FY20	Q2 FY20	Q3 FY20	Q4 FY20

Quarter	Q4 FY19	Q1 FY20	Q2 FY20	Q3 FY20	Q4 FY20
DB as a %	20.1%	21.7%	26.2%	29.4%	23.0%

Results Presentation

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Financial Performance

Fee Income - Responsible Pricing

We share the benefits of scale economies with our clients and reduce our charges when confident it will not negatively impact our award-winning service.

Annual Commission

• No change to Annual Commission charges in 2019.
• Annual Commission charges reduced from 0.29% to 0.28% and from 0.19% to 0.18% (for the respective charging bands) on 1 April 2020.

Wrapper Fees

• Flat fees - no increases.

Buy Commission

• Buy commission rebate threshold reduced from £1m to £500k from 1 March 2019.
• Buy commission rebate threshold further reduced to 400k from 1 March 2020.

10

Total fee income up 8%

97% of total fee income is recurring

FY20	FY19 Change
£m	£m

Annual Fee

Income

Wrapper Fee

Income

Buy

Commissions

Total Fee

Income

Annual basis point charge levied on assets and cash held on the platform

Annual fixed fee levied on all Transact wrappers

Commission levied on the value of buy transactions executed on the platform

94.5	86.7	+9%
(88%)	(87%)
9.7	9.0	+8%
(9%)	(9%)
3.1	3.5	-11%
(3%)	(4%)
107.3	99.2	+8%

Results Presentation

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Well controlled expenses

£m	FY20	FY19	Change
		Restated
Staff costs	36.9	36.3	+2%
Occupancy(1)	2.0	3.6	-44%
Regulatory and professional fees	7.0	5.5	+27%
Other income - tax relief to	(1.1)	(1.0)	+10%
shareholders
Other costs	3.8	3.7	+3%
Total expenses	48.6	48.1	+1%
Depreciation and amortisation(1)	2.6	0.7	+271%
Total operating expenses	51.2	48.8	+5%

1. Impact of IFRS 16 reduces occupancy costs by £1.6m and increases depreciation and amortisation by £1.9m. This is due to the recognition of office leases as right of use assets, and subsequent depreciation.

Results Presentation

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Staff numbers

	30 Sep 20	30 Sep 19	Change
IT & technology	121	115	+5%
Operational & support	327	332	-2%
Sales & marketing	39	39	0%
Total staff	487	486	0%

• Small increase in IT staff to increase development capabilities.
• Small reduction in Operational and support staff numbers as a result of efficiency gained through platform development.
• The small rise in staff costs in the period was attributable to the net effects of general inflationary increases.

Results Presentation

13

P&L and cash flows

Profit & loss

Restatement

£m	FY19	FY19
	Restated	Published
FUD (£bn)	37.8	37.8
Total fee income	99.2	99.2
Cost of sales	(0.8)	(0.8)
Net revenue	98.4	98.4
Staff costs	(36.3)	(36.3)
Other costs	(12.5)	(13.5)
Total expenses	(48.8)	(49.8)
Operating profit	49.6	48.6
Operating margin	50%	49%

• FY19 Profit after tax has been restated to £41.1 million from £40.1 million.
• FY19 opening retained earnings has been restated with an increase of £5.4m.
• The restatement is due to an error caused by corporate expenses being deducted in the policyholder tax calculation resulting in an overprovision of tax reserves due back to policyholders.
• There has been a release of the policyholder tax provision to the retained earnings as at 1 October 2018 and to the statement of profit or loss and other comprehensive income in 2019.

Results Presentation

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P&L and cash flows

Profit & loss

Cash flows

£m	FY20	FY19
		Restated
FUD (£bn)	41.1	37.8
Total fee income	107.3	99.2
Cost of sales	(0.8)	(0.8)
Net revenue	106.5	98.4
Staff costs	(36.9)	(36.3)
Other costs	(14.3)	(12.5)
Total expenses	(51.2)	(48.8)
Operating profit	55.3	49.6
FUD Y-o-Y growth	9%	14%
Operating margin	52%	50%

£m	FY20	FY19
		Restated
Operating profit	55.3	49.6
Depreciation & amortisation	2.6	0.7
Working capital requirements	5.0	4.2
Capex	(0.9)	(1.2)
Tax paid(1)	(13.8)	(8.7)
Free cash flows	48.2	44.6
Net operating cash conversion(2)	120%	115%

1. Tax paid excludes policyholder tax paid
2. Conversion from profit after tax into net cash from operating activities

Results Presentation

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We continue to achieve strong profit growth while also reducing fees

CAGR: 11%

• Transact has an impressive record of consistently

Total fee income

£63.6m £68.4m

£80.2m

£91.2m £99.2m £107.3m

growing both revenue and operating profit.

• Given its scale and operating leverage, Transact has

been able to implement a number of pro-active

pricing changes.

FY15 FY16 FY17 FY18 FY19 FY20

Adjusted operating profit(1,2)

£23.0m

	CAGR: 19%			£55.3m
				£49.6m
£37.7m	£43.3m

£28.7m

• We have implemented our 13th price reduction in

11 years.

Revenue yield & adjusted operating profit margin

FY15	FY16	FY17	FY18	FY19	FY20
	42.0%	47.0%	47.5%	50.0%	51.5%
37.4bps	33.6bps
	31.7bps	29.6bps	28.6bps
		27.7bps
36.2%
FY15	FY16	FY17	FY18	FY19	FY20

1. Adjusted operating profit excludes one-off IPO related costs relating to FY17 & FY18
2. FY16 operating profit includes an adjustment of £0.7m for the annualised pro forma impact of the acquisition of IAD

Results Presentation

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Group balance sheet remains strong

• Transact operates with a conservative balance sheet position:
• • No debt
  • Policyholder assets and liabilities fully matched
  • Second interim dividend of 5.6p declared
  • Total dividend: £27.5m (2020) vs £25.8m (2019)
  • Cash balance of £154.1m as at September '20 (2019: £132.3m), before £18.6m dividend, supporting regulatory capital, risk appetite and tax requirements of £97.0m

Results Presentation

	30 September '20
	£m
Non-current assets
Loans	2.6
Intangible assets	13.0
Property, plant and equipment	2.3
Rights of use assets	3.9
Deferred tax assets	0.5
Deferred acquisition costs	53.5
	75.8
Current assets
Financial assets at fair value through profit or loss	5.1
Other prepayments and accrued income	14.4
Trade and other receivables	3.5
Investments held for the benefit of
policyholders	16,727.2
Policyholder cash and cash equivalents	1,385.7
Shareholder cash and cash equivalents	154.1
Current Tax Asset	0.1
	18,290.1
Current liabilities
Trade and other payables	18.4
Finance lease liabilities	2.4
Liabilities for linked investment contracts	18,112.9
Current tax liabilities	-
	18,133.7
Non-current liabilities
Provisions	25.2
Finance lease liabilities	3.7
Deferred income liability	53.5
Deferred tax liabilities	9.0
	91.4
Net assets	140.9	17

Business Update

Strong client base and addressable market

Increasing client and adviser numbers

200,000	7,000
180,000	6,000
160,000
140,000	5,000
120,000	4,000
100,000
80,000	3,000
60,000	2,000
40,000	1,000
20,000
0	0
	FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

Count of investors		Count of advisers

• Client numbers up 7% from FY19
• Adviser numbers up 6% from FY19
• Client retention remained at 96% per annum

Large market with growth opportunities

UK House Hold

Wealth £6.7trn

UK Advised Platform

Market £460.52bn

Transact FY20 FUD

£41.09bn

Source: Fundscape

The Platform Report

Q320

• UK advised platform market FUD grew 6% in the previous year in difficult market conditions, our FUD grew 9% in the same period.
• 36,401 IFA's in the UK as at 2019, 15,000 which we

consider to be contestable.	19

Continued technological advances to meet client needs

Platform investment up 9% to £9.8m for the year, making further enhancements that benefit the client and adviser online experience.

We expect that adviser users will continue to move their clients onto Transact, as they experience the benefits that our service brings, and those clients already using us will put more money into their portfolios.

We have launched 'Guided Applications' which enable online applications for a new portfolio and multiple

wrappers to be completed online.

We now accept e- signatures, accepting them on most applications via digital signature provider DocuSign.

We have moved all sales conferences and adviser appointments online.

20

Transact is consistently rated top for service

UK Investment Trends Adviser Technology & Business Report 2020

• Transact was rated the top platform in the UK Investment Trends Adviser Technology & Business Report 2020.
• In this year's study, Transact is rated first for overall satisfaction, for overall adviser support services and for overall investment capabilities.
• Transact also once again obtained the highest advocacy rating from its adviser relationships, with the top net promoter score.
• This is the 11th year running that Transact has been rated top.
• The study is one of the most comprehensive undertaken and is based on the views of 1,466 UK advisory professionals. The fieldwork for this independent research was undertaken in March 2020.

CoreData Investment Platform Study 2020

• CoreData research is a multinational company specialising in financial services. CoreData surveyed 991 UK professionals in the most recent wave.

•	Transact was rated Best Overall Platform (2020) - based on 46 service metrics.
•	Transact were also rated Best Large Platform (2020) for the 11th consecutive year.	21
	Results Presentation

New Charging structure

New Transact annual commission charging structure effective from 01/04/2021

Single or consolidated portfolios of less than £100,000

	Cash & investments
£0 - £60,000	0.50%
>£60,000 and <£100,000	0.27%

Single or consolidated portfolios of £100,000 and above

	Cash & investments
£0 - £600,000	0.27%
>£600,000 - £1,200,000	0.17%
>£1,200,000 - £5,000,000	0.07%
On the remainder	0.05%

New Transact buy commission charging structure effective from 01/03/2021

Monthly average portfolio	Refund	Effective rate
value
<£300k	0%	0.05%
£300k+	100%	0.00%

22

Regulation

• COVID-19
  We expect that throughout 2021 the FCA will continue to devote considerable effort to supervising authorised firms in relation to the impact of COVID-19.
• Operational resilience

A joint Bank of England, PRA and FCA policy statement is expected in 2021 addressing requirements for strengthening operational resilience across financial services.

• Platform market study
  New rules to simplify transfers between platforms are being introduced in February 2021. The FCA has announced a halt to its consultation work on restricting platform exit fees, due to platforms moving away from such fee charging, but that it will continue to monitor the situation. We have never charged exit fees.
• Duty of care
  The FCA has indicated that it will begin a consultation in 2021 on investment firms duty of care to consumers.
• Vulnerable customers
  In late 2020, early 2021 the FCA is expected to finalise and bring into immediate effect guidance on the fair treatment of vulnerable customers.
• Prudential regulation
  The FCA is to begin a consultation on a new UK prudential regulation for investment firms with a view to new rules being implemented from sometime around mid 2021.

Results Presentation

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Summary: Transact enjoys a strong growth profile

penetrationMarketIndustry drivers

Growth in UK wealth market

Growth in assets managed by financial advisers

Growth in wealth managed by current advisers

Increasing penetration of current advisers

New advisers joining Transact

Strong growth profile for Transact

Results Presentation

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Strategy

Drive organic growth:

• Grow FUD by attracting and retaining advisers and their clients.
• Deliver a superior service and value for money.

Consider acquisition opportunities

• Innovative development opportunities to broaden our proposition.
• Scale opportunities to increase shareholder value and accelerate responsible pricing.

Reinvest in the business:

• Continue to enhance our existing proposition by adding new financial planning components for advisers.

Grow earnings:

• Maintain level of growth and potentially increase it in the coming year recognising the economic outlook is challenging.

Maintain cash generation:

• We will continue to manage expenses and it is expected the Group's strong liquidity profile will be maintained.

Results Presentation	25

Disclaimer

The information contained in this presentation has not been independently verified and no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. None of IntegraFin Holdings plc (the "Company"), any other members of its group (together with the Company, the "Group") or its or their directors, advisers or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation. Unless otherwise stated, all financial information contained herein is stated in accordance with generally accepted accounting principles in the UK at the date hereof.

Certain statements made in this presentation are forward-looking statements. Such statements are based on current expectations and assumptions and are subject to a number of known and unknown risks and uncertainties that may cause actual events or results to differ materially from any expected future events or results expressed or implied in these forward-looking statements.

Persons receiving this presentation should not place undue reliance on forward-looking statements. Unless otherwise required by applicable law, regulation or accounting standard, the Group does not undertake to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

This presentation is being made only to, and is directed only at: (a) those persons who are (i) investment professionals within the meaning of paragraph (5) of Article 19 or high net worth companies or unincorporated associations within the meaning of paragraph (2) of Article 49, of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (S1 2005/1529) (the "Order"); and (ii) qualified investors as defined in Article 2(e) of the Prospectus Regulation (EU) 2017/1129 (and therefore within the meaning of section 86 (2)(a) of FSMA, as amended by the The Financial Services and Markets Act 2000 (Prospectus) Regulations 2019), or to other persons to whom it may lawfully be communicated in accordance with the Order; or (b) any person to whom it may otherwise lawfully be made (such persons together being "relevant persons"). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Any investment or investment activity to which this presentation relates is available only to relevant persons and will be engaged in only with relevant persons.

This presentation does not constitute or form part of, and should not be construed as: (i) an offer, solicitation or invitation to dispose of or acquire any securities or financial instruments, nor shall it, or the fact of its communication, form the basis of, or be relied upon in connection with, or act as any inducement to enter into any contract or commitment whatsoever with respect to such securities or financial instruments; or (ii) any form of financial opinion, recommendation or investment advice with respect to any securities or financial instruments.

No statement in this presentation is intended as a profit forecast or profit estimate.

Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.

IntegraFin Holdings plc, 29 Clement's Lane, London, EC4N 7AE Tel: [phone] Fax: [phone]

(Registered office: as above; Registered in England and Wales under number: 8860879)26 The holding company of the Integrated Financial Arrangements Ltd group of companies.

Appendix 1 - Pre-Look through position

Type	Value (£bn)	Percentage of total
		FUD
Mutual funds	34.45	83.84%
Cash (pooled)	3.12	7.59%
Investment trusts	1.41	3.43%
ETFs	0.88	2.14%
Shares	0.79	1.93%
Structured products	0.28	0.70%
FI & Gilts	0.11	0.26%
Others	0.05	0.11%
Total	41.09

Look through by
asset class	8%
2%	Equity
10%		Bonds
		Cash

Property

	55%	Other
25%

Direct investment breakdown

	Shares	FI & Gilts	Others
	0%	0%
ETFs	2%
2%			Structured products
Investment			1%
trusts
3%
Cash
8%

Mutual Funds	27
84%
Results Presentation

Appendix 2 - Cohort analysis

	Cohort Analysis by Adviser for Inflows Split by FY Year of First
Inflows breakdown	£m	Relationship
£7,000								FY 20
-Inflows from current investors putting more onto
£6,000								FY 19
the Platform: 31%								FY 18
									FY 17
-Inflows from advisers with established relationship	£5,000								FY 16
							FY 15
putting new investors onto the Platform: 62%
								FY 14
-Inflows from new advisers onto the Platform: 7%	£4,000								FY 13
							FY 12
	£3,000								FY 11
								FY 10
									FY 09
	£2,000								FY 08
								FY 07
									FY 06
	£1,000								FY 05
								FY 04
									FY 03
	£0								FY 02
	FY 17	FY 18	FY 19	FY 20
Results Presentation			28