Jtc PLC

Hello and welcome to the JTC PLC results presentation. My name is David and I'll be your host for today's event. Please note that this conference is being recorded and for the duration of the presentation your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the presentation. This can be done using the raise hand feature in the control panel on your screen. We will address as many questions as possible. When we come to answering your question, we will invite you to unmute and speak live to address our panellists. I will now hand you over to your presenters for today.

Good morning. Welcome to the presentation of JTC PLC's full year results for the year ended 31st December 2024. I'm Nigel O'Kane, the Group CEO, and presenting with me today is Martin Fotheringham, our Group CFO, together with Ian Johns and Kate Beecham, who head up private client and institutional client services divisions, respectively. If we can turn to slide one and the agenda. In the next 30 minutes or so, I'll present my CEO highlights for the year, and Martin will run through the financial review. I will then give an update on the trends in the M&A market as it relates to the Group and the opportunity provided by the City Trust acquisition, which is on track to close at the end of this quarter. Then Ian and Kate will review 2024 for their respective divisions and give some insight into the focus areas for this year. Then finally, I will summarise our key takeaways and my expectations for the Group in 2025. 2024 was the first year of our Cosmos era and JTC's 37th consecutive year of revenue and profit growth since inception. We have made an accelerated start to the era with a particularly busy year of M&A activity supported by good organic growth momentum. Our group revenue was up 18.6% and EBITDA was up 18.4%, delivered at an underlying EBITDA margin of 33.3% and within our established guidance range. We achieved another annual record for new business wins of £35.7 million, up 15.9% year on year. Our net organic growth was ahead of our new guidance at 11.3%, although lower than our purple patch of 2023. It is, however, our third best performance in percentage terms since IPO in 2018. reflecting good growth in what was a more difficult market, with gross growth of 16% and client attrition of just 4.7%, an improvement on last year's 5.1%. These results reflect continued strong growth and provide us with good impetus going into 2025, which as always, we balance with appropriate investment in group infrastructure as we scale. As you will hear from Ian and Kate later, both divisions made meaningful contributions, but it's fair to say the market was more difficult for the ICS practice, with a slower than anticipated reduction in the cost of capital during the year, which negatively impacted market sentiment, leading to fewer IPOs, a muted M&A market, and a reduction in fund launches as a consequence. To have produced 9.9% organic growth in this environment is of great credit to the ICS team. Conversely, PCS enjoyed another excellent year with very positive growth of 14% and record new business wins of £15.2 million. The accelerated start towards our Cosmos goals from an M&A perspective was another notable achievement in the year, with the announcement or completion of six acquisitions across both divisions and had an excellent blended acquisition multiple of 6.5 times EBITDA. Five of these deals, FRTC in Delaware, the Cayman-headquartered FFP, and the three primarily UK-based businesses, Blackheath, Hanway and Buck, have all completed and are integrated. The most notable acquisition, however, was the purchase from Citigroup of Cititrust, their global trust company business, making JTC the global leading independent trust company and building upon our position as the largest private trust company business in the US market. This transaction remains subject to closing formalities and we anticipate completion by the end of Q2 2025. I'll return to the significance of this transaction to the group later. As I've highlighted previously, we've been very successful in establishing our US platform, and it's one that presents an enormous opportunity, which has been underlined by the excellent performance in 2024 by both Sally Fund Services in ICS, who have doubled their AUM organically to $32 billion since the business was acquired in October 2021, and SDTC in PCS, with the US region contributing 32% of our revenues. With the addition of the U.S. element of City Trust this year, our run rate revenues for the U.S. should rise to £148 million post-completion, contributing 35% of group revenues and making it JTC's largest single market. This has been achieved by steady organic growth in the early years and more recently by acquisition at a blended multiple of circa 12 times EBITDA in a market that regularly has had deals transacting at 20 to 25 times. This provides us with a significant base in a relatively mature market. We are establishing a group presence in the U.S. in 2025 to manage our operational growth and assist in cementing our all-important group culture. The achievement of becoming a recognized institution in this market in a relatively short space of time and the prospect it creates cannot be overemphasized. As has become a tradition, I cannot complete my highlight comments without mentioning the top quality team we have at JTC. We're delighted to award the first tranche of £50 million of warehouse shares from our Employee Benefit Trust to our global workforce for their individual and collective achievements in the Galaxy era. This brings us to a total value of £450 million generated for employee owners since 1998. Our 2024 annual employee survey had an 89% response rate with over 80% of the team stating they feel valued as an employee owner. They understand our future growth plans and confirming that JTC is a positive workplace culture. When coupled with our group regretted attrition of only 4%, these are outstanding results and I'm excited as ever to lead our global team into the second year of our Cosmos era. Our unwavering commitment to employee ownership is now attracting global acclaim. This has been reflected of late in our being the recipient of awards specific to our approach. Having 2,300 owners rather than employees makes an enormous difference to the working environment and the organization's culture, ensuring the team are happy, valued, empowered, and highly motivated to improve our business every day. But now let's turn to slide four in the financial highlights. Our revenues have grown to £305.4 million, breaking £300 million for the first time, and underlying EBITDA was £101.7 million, our first year north of £100 million, delivered an underlying group EBITDA margin of 33.3%. As previously highlighted, our net organic growth was 11.3%. New business wins were a record 35.7 million, up 15.9%, as the group continues to benefit from excellent win rates of greater than 50% across both divisions for the third year in a row, implying that we win at least half the business we pitched for, an ongoing and outstanding performance in a very competitive market. The new business pipeline remained strong and stood at £49.8 million at year end and had increased to £55 million at the end of March. The lifetime value of work one was just under half a billion at a record £492 million, based on a 14.1 year average lifespan of our client book. a 16.8% increase on the 2023 figure of £421.1 million. This gives us visibility of over £2.3 billion of forward revenues from our existing client book, i.e. what the business would generate without the addition of any new mandates from this point forward. These figures, we believe, help demonstrate the long-term compounding value of the group. And finally, onto the total dividend, which for 2024 has been proposed at 12.54 pence per share, up from 11.17 pence in 2023. Now over to Martin for a deeper look at the financials.

Thank you, Nigel. I'm delighted to speak to another consistent set of results where we've seen our growth momentum carry into the Cosmos era. Our results for the year were in line with expectations when taking into account the weakening of the US dollar and a later than first anticipated completion date for the FFP acquisition. Our financial highlights are set out on slide 6, where we've delivered significant revenue growth of 18.6% whilst maintaining our profitability. We delivered on all of our key metrics, with a particular highlight being net organic growth of 11.3%, which was ahead of our revised guidance range of plus 10% per annum. This is also the third best annual result for organic growth since our IPO in 2018. Our underlying EBITDA margin dropped by 0.1 of a percentage point from 2023 and now reports at 33.3%. We reported a loss before tax of £7.4 million. The loss was due to the inclusion of the £36.4 million cost of the Galaxy EBT distribution. Underlying earnings per share increased by 12.1%. Cash conversion was ahead of guidance at an excellent 98%. Net debt increased by 59 million pounds and was driven by our drawdowns to finance the FRTC and FFP acquisitions. It was also a busy year for M&A with us completing five acquisitions with another confirmed but pending regulatory approval. At the year end, our underlying leverage of 1.79 times was comfortably within our medium term guidance range of 1.5 to 2 times underlying EBITDA. Our final dividend increased by 12.3% to 12.54 pence. And finally, our return on invested capital for the year was 12.6%, and there's more on this later. Moving on a slide, I'll be looking at our results in more detail, and we'll start with our revenue bridge. On a constant currency basis, our revenue growth was 20.2%. This was above our reported revenue growth of 18.6%, where we were impacted by the weaker US dollar during 2024. Gross new revenue was 38.7 million pounds, a decrease from 49.6 million pounds in 2023. Banking and treasury revenues provided a one-time organic growth increase in 2023. And we also had the full year impact of the Amaro contract. As we explained last year, these new organic revenues resulted in an exceptional increase to volume growth and the services are now embedded. Gross attrition was £11.4 million, which is 4.7% of annual revenues and is down from the 5.1% reported in the prior year. £7.6 million of this attrition was end of life and therefore 98.4% of non-end of life revenue was retained. Revenue recognised on new business wins in the year was 61%, an increase from 59% in 2023. Our new business pipeline at the period end was a healthy £49.8 million, with a strong Q4 for new business wins in 2024. Let's now move on to slide 8 and look at the first of our key metrics, net organic growth. At this point last year, we updated our medium term guidance range for the Cosmos era to be at least 10% net organic growth per year. And we're delighted to have delivered growth of 11.3% in 2024, with the three year average now at a record 14.4%. PCS recorded 14% net organic growth, down from an exceptional result in 2023. ICS recorded net organic growth of 9.9%, which was very pleasing when considering the macroeconomic environment and the delay in fund launches. You'll see that in 2024, our pricing growth was strong at 6.6%. This was because in 2024, we determined that our chargeout rates had fallen behind market and we responded accordingly. To conclude on revenue, let's look at the geographical profile on slide nine. All regions reported revenue growth in 2024. The US continues to deliver impressive levels of organic growth and has established itself as a leading growth region for us. It's now been our highest growth region for five successive years. As you can see from the chart, we've increased our US revenue base significantly over recent years, a product of strong organic growth, but also focused in strategic M&A activity. To recap on our journey, in 2018, when we IPO'd, our US region represented 4% of our revenue, and this now stands at 32%. Post regulatory approval for Citi, our US revenues will represent approximately 35% of revenues. We now move on to the EBITDA margin on slide 10. The underlying margin was 33.3%, which, whilst consistent with 2023, was a 10 basis point decrease. This remains within our medium term guidance range, and maintaining a consistent margin while delivering strong revenue growth will always be a focus for us. As we've said previously, there are many moving parts in the overall margin story. Margin improvements came from the positive impact of recent acquisitions, particularly in relation to SDTC and FRTC in PCS, as well as operational efficiencies from scale, process improvements and technology. Risk and compliance costs increased in the year, with a 30 basis point impact on margin, the impact being felt more heavily in ICS. This does not account for the chargeable time lost from the increased regulatory burden. We also continued to invest in growing our banking and treasury team, and this accounted for a further 30 basis points of margin in 2024. We remain committed to continued investment in the business, confident that this will bring improved long-term returns. Now focusing on cash conversion on slide 11. As you can see, cash conversion was 98%. a decrease from the exceptional 106% recorded last year, but still an excellent result. This continues to be driven by increased US exposure, where we see shorter working capital cycles, the uptake of our treasury services in 2023, where we see predictable and timely cash receipts, and as a result, net investment days were 71 days at the period end, consistent with the 72 days from the prior year. We continue to note that our business fundamentals remain unchanged, and for now we maintain our medium term guidance range for annual cash conversion of 85 to 90%. Next to look at is net debt and leverage on slide 12. At the end of 2023, our reported net debt was 123.3 million pounds. And by the end of 2024, it stood at 182.3 million pounds. an increase of 59 million pounds. This was driven in the main by net outflows for acquisitions of 80.1 million pounds where material outflows included. The payout in full for the Sally earn out for a value of 21.1 million pounds from our existing cash on the 10th of January, 2024. 42.7 million pounds for FFP, which was funded in large part by a $46.3 million drawdown in October. and £15.5 million for FRTC, which was part-funded by a £13.5 million drawdown in July. Excluding these acquisition-related cash flows, net debt decreased by £21.1 million, continuing to evidence our capability to deleverage through strong cash conversion and effective working capital management. Our reported leverage at 31st December 2024 was 1.79x underlying EBITDA and is in line with our medium term guidance range. Our leverage guidance of up to 2x underlying pro forma EBITDA remains. But as with prior deals, we will go up to 2.5x where we can see rapid subsequent deleveraging. as at 31 December 2024, the group had undrawn funds available of £125.9 million. We do have capital commitments in 2025 to finance, and with the city outflows around the corner, we're looking to increase our debt facilities, and we expect to complete on a private placement loan facility in the first half of 2025. Moving on to our return on invested capital slide, where we delivered a return on investment of 12.6% in 2024. This has improved by 30 basis points from 2023 and is well above our cost of capital. This return was particularly pleasing during a period of heightened acquisition activity. In 2023 we completed our largest acquisition to date with SDTC and we completed a further five acquisitions in 2024 with Citi expected to complete in mid 2025. We operate in an industry which is characterised by widespread private equity ownership and a significant level of past and continuing consolidation often at premium valuations. Such outlays can result in the short-term dilution of our returns but we consider both the immediate return on capital and also the long-term potential and strategic fit of our acquisitions. The lifetime value of clients, which represents the revenue that our client relationships will generate in the absence of new business, increased by 17.3% in 2023 to £2.3 billion. Since IPO, we've reported over a 700% increase from £0.3 billion in 2018 to £2.3 billion at the end of this year. The average client life cycle has decreased slightly to 14.1 years, which reflects the slightly shorter life cycles of the businesses acquired in 2024. To finish off, I'm going to cover our performance across the eras since our IPO. We've built a reputation for delivering in line with medium term guidance range, and we delivered 11.3% of net organic growth in 2024. This is the third best year since IPO. Delivering on high growth requires investment in infrastructure and personnel, and that is reflected within our underlying EBITDA margin. We reported a 33.3% margin in 2024, which was better than the Galaxy Era average of 33.1%. 2024 saw a 12.1% increase in our underlying EPS. ahead of our Odyssey era, but down on the exceptional growth seen in the Galaxy era. We remain confident in delivering against EPS targets, with our track record of consistency and resilience to macroeconomic factors. We've also delivered improved cash conversion across the eras, with 2024 reporting at 98%. We've made a solid start to Cosmos in 2024. And on that note, I'll hand back to Nigel.