IntegraFin Holdings PLC

Good morning and welcome to Integrity and Holdings interim results presentation for the six months ended 31st of March 2024. I'm Alex Scott, Group Chief Executive, and this morning I'll be presenting with Ewan Marshall, our new Chief Financial Officer who joined us in early January. I'll kick off proceedings with an overview of the group's highlights over the previous six months, and I'll then hand over to Ewan to run you through the group's financial performance in the period, before I give you an update on the Transat platform, wrap up, and then open up to questions and answers, where Ewan and I will be joined by Jonathan Gumby to take any of your questions. Transat finished the half year with record high funds under direction, with performance over the period being resilient in the context of uncertain economic conditions. We delivered continued organic growth in revenue, funds under direction and both advisor and client numbers. We consider we're well positioned in the growing market. The Transat platform remains strongly aligned to the consumer duty regulations. Our high-quality service proposition provides value for money and we pass on all client interest earned on client cash. Our proven business model and focus on positive consumer outcomes continues to be recognised, with the Transat platform winning Best Platform for Advisors at the recent Professional Advisors Awards. Our combination of high-quality client service with evolving proprietary technology continues to attract inflows and grow client and advisor numbers, while our digitalisation plan is delivering further enhanced efficiencies and operational leverage for the platform. During the first half of the financial year, our business model has continued to deliver healthy growth against a challenging sector backdrop. The number of advisors registered on Transact has increased by 4% from half year 23, and we've added over 3,000 new clients in the same period. The platform delivered resilient net flows of £1.1 billion during the half year, in the face of heightened withdrawals seen across the sector. Average daily funds under direction for the first half of the financial year increased by 8% year-on-year, growing group revenue by 6% to £70.4 million, even after the full-year effect of the small fee reductions that we put through in FY23. This resulted in underlying profit before tax of 33.5 million, a steady increase from the previous half year comparative, driven by the higher average FUD levels and interest earned on group corporate cash. Cash generation continues to be robust and the balance sheet remains strong with no debt. This has allowed us to declare an interim dividend of 3.2 pence per share, maintained at the same level as the previous year. I'll pass over to Ewan now for the financials.

Thanks, Alex. It's a pleasure to be presenting the group's results to you today for the first time. Moving to the financials for the period. The top left graph shows Average Funds Under Direction, or FUD, the main revenue driver of the group. Average FUD for HY24 has increased 80% year-on-year to £57 billion. When you look across to the top right graph, this is translated into a £4 million or 6% increase in group revenue to £70.4 million. Looking down to the bottom left graph, group underlying profit before tax has increased 14% year-on-year to £33.5 million. This was mainly driven by the increased revenue that I have just mentioned, as well as a £3 million increase in net interest income. The group has worked to optimise yields earned on corporate cash and investments in the higher interest rate environment. This increase in net interest income has offset a similar increase in costs as we continue to invest in the business. IFRS reported profit before tax rose by 16% to £32.4 million. Non-underlying costs, which relate to the deferred acquisition costs of T4A, were £1.1 million for the six-month period. On the bottom right graph, you can see the group's consistent track record of delivering on our dividend policy. Note that EPS has increased year on year, but at a lower rate than profits before tax due to the increase in corporation tax, which took effect in April 2023. Moving on to the next slide, we look at revenue in more depth. Let's look first at platform revenue. The 8% increase in average daily FUD on the platform helped annual commission income increase to £61 million for the half year. Wrapper administration fee income increased 4% year on year. This is due to an increase in the number of open tax wrappers and reflects the continued underlying platform growth. These two recurring revenue streams together contributed 99% of the total platform revenue. On time for advice, our advisor back office software, the current Q03 software continues to attract new chargeable users up 20% year on year. Although T4A revenue has remained flat year on year, there has been an increase in the licence fee income of 10%. The licence fee income is a recurring revenue stream for T4A and it is pleasing to see this become a larger part of the total revenue. Moving on to the next slide and operating expenses. We continue to manage costs carefully and in line with our guidance. In the six months to March 2024, total underlying operating expenses increased £4 million or 11% when compared with the six months to March 2023. This was in line with our guidance given at the FY23 year end. The majority of this increase was staff costs, which have increased by £2.4 million to £28.9 million. The uplift is due to pay rises awarded to employees and a 6% increase in group headcount over the period, from approximately 630 in March 2023 to 670 in March 2024. Average headcount was up around 9%. Other costs have increased by £0.7 million compared to HY23. The main driver of this was VAT, which increased by around £0.4 million. I'll explain the increase in occupancy and the decrease in depreciation in the financial guidance later. On the next slide, we look at platform revenue yield. As you can see, we have an ongoing commitment to share the benefit of scale with our end clients through reducing platform fees. During HY24, there was a moderate decrease in platform revenue yield to 23.9 basis points due to the effects of targeted price reductions that have been implemented. Moving on to the group's liquidity position, As shown in the table on the left, the group continues to maintain a healthy liquidity position with available liquidity of over £40 million at the end of March. Given the group's operating model, ongoing cash generation is strong due to profit and cash profiles being very similar. I'm pleased to announce that a first interim dividend of 3.2 pence per share has been declared, maintaining at the same level as the prior year. Finally, I'll take you through the group's financial guidance. We continue to manage our costs carefully and cost guidance for FY24 remains unchanged. Two items should be noted, however. Firstly, due to accounting treatment solely in H1, occupancy will appear higher than guided. but there is an offset in depreciation charges. The total full year increase or decrease in your forecasts for these items will remain similar to those figures shown on the earlier cost slide. Secondly, a presentational change will impact total operating costs, but importantly, has no impact on PBT. In previous years, we have included a tax impact of gains resulting from policyholder returns within the group's other costs. This item has now been moved elsewhere in the income statement, so its removal from operating costs will result optically in an increase in operating costs of between £1 and £2 million this year and going forward. you can see the change in presentation of the income statement in the appendix. Finally, we have added net interest income guidance to help this be more accurate forecast going forward. For every 25 basis point change in the Bank of England base rate, net interest income will be impacted by around £500,000 on an annualised basis. Looking beyond FY24, we expect the platform digitalisation programme to continue developing operational efficiencies. This will allow us to serve a growing client base with similar numbers of operational staff and also provide a better platform experience for our advisors. Our platform pricing will be kept under review, as always. I'll now hand over back to Alex.

Thanks, Ian. I'll now provide a more in-depth look at how the Transat platform has performed in the first half of the financial year. Average daily funds under direction for the half year reach record high levels, more than £4 billion higher than HY23. As disclosed in our Q2 trading update, we have increased both the number of advisors and clients on the platform year on year. These metrics are strong indicators of a healthy pipeline for future growth of the business. This growth in advisor and client numbers was despite our periodic account closure exercises for clients who only have small residual balances, which helps us meet both our consumer duty requirements and to help drive economic efficiencies on running the platform. The graph on the left highlights our impressive growth and track record of adding advisors to the platform over time. The pie chart on the right of this slide shows where the sources of our growth inflows come from. 59% of growth inflows come from new clients seeking advice from advisors who have been established on the Transact platform for over a year. This is testament to our digitalization plan coming to fruition and the quality of service as advisors already using the Transact platform continue to bring their new clients and their assets to the platform. The ongoing digitalisation plan is delivering emergent efficiencies and enhancing our service capability. Our enhancements are streamlining our portfolio opening process with real-time data validation and the need for less client signatures. This not only has been creating efficiencies for our operations teams, but is also helping advisors, back offices deliver efficiencies as well, reducing the need for double-keying of client data. we can continue to see strong adoption by advisors in these new online processes. And it is by providing and elevating our high-quality client service that the Transact platform continues to win awards, picking up Best Platform for Advisors at the Professional Advisor Awards 2024 and also being rated a five-star advisor platform by DeFacto. This high-quality service, coupled with our proprietary technology, is a key differentiator in the platform market, and we strongly believe helps Transact remain as one of the largest platforms in the market, ranked third in the Funds Under Direction League table, while steadily growing our market share of FUD. We also remain one of the only top 10 platforms to use our own technology. We believe this helps us to continue to perform strongly on a net flows basis compared to larger platforms. Third-party data provided by Fundscape helps illustrate the projected growth in the UK platform advisor market, which continues to be strong. As one of the leading platforms in the market, we are well positioned to take advantage of this potential growth. In summary, our investment case remains compelling. The UK platform market in which we operate continues to grow and our proprietary technology and high-quality client service leads us well-placed to capitalise. The uptake in our products is further testament to their quality and the BlackRock MPS now has over £150 million in funds under direction, having only launched 18 months ago. Platform client numbers continue to grow and our superior service ensures we attract high-quality financial advisors to the platform. We have delivered robust results and continued growth in volatile markets amidst an uncertain macroeconomic environment. Our award-winning proposition, the Transact platform, continues to attract strong gross flows and our net flows remain resilient. We've steadily grown our revenues and underlying profits in the first half of the year whilst closely managing our costs and this sets us in good stead for the rest of the financial year. As ever, we remain strongly aligned to consumer duty regulation and platform efficiencies are starting to emerge from our digitalisation programme and we're excited by the direction these efficiencies can take the group in. Thank you for your time and we'll now open up to questions.