Jtc Plc

Hello and welcome to the JTC PLC interim 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, everyone. Welcome to the presentation of JTC PLC's interim results for the period ended 30 June 2023. I'm Nigel O'Kane, the Group CEO, and presenting with me as usual is Martin Fotheringham, our Group CFO. If we can turn to slide one and the agenda. In the next 30 minutes or so, I will present my CEO highlights for the period and Martin will run through the financial review. We'll follow up with a more detailed business review covering the macro environment, industry trends, the group and the two divisions. We will then take an in-depth look and provide an insight into our plans for the Cosmos era, commencing from the beginning of 2024. And finally, we will summarise our key takeaways for the first half of 2023 and provide an indication of how we expect to close out the year and the Galaxy era. We will then open the forum up for questions. At JTC, the first half of 2023 will be remembered for the increased momentum delivered following an excellent 2022. In macro conditions that remain challenging, we've been able to make significant progress both organically and inorganically. In particular, our net organic growth at 21% has been spectacular, up 11.5 percentage points period on period, with gross growth of 26.7% and improved client attrition of 5.7%. We also had record new business wins of £14.6 million, up 15.9% period on period. Group revenue was up 30.6%, EBITDA was up 30.8%, delivered at an EBITDA margin of 33.1% within our guidance range. This reflects both great impetus and strong stewardship in both divisions, as well as a significant contribution to the success of each from our Group Commercial Office, which helps to drive our growth by the development and delivery of new services, and surfacing of cross-selling opportunities as well as enhancing the client experience and measuring client satisfaction across the group. On the inorganic side of the picture, we were delighted to have our seven-year-long relationship and courtship of South Dakota Trust Company come to a successful conclusion, resulting in our becoming the largest independent provider of private trust company services in the United States when combined with our existing and established business. SDTC is a strategically important platform purchase for the Group's future in private client services in the world's largest market. and leaves us well positioned to serve both the US domestic and international private client markets, and in time, to provide a wider range of corporate and family office services to both. Given that it was a strategic objective for the group to develop a meaningful presence in the United States in the Galaxy era, we are delighted with our success in this regard and the progress we have made to grow a significant platform for both divisions, and one from which we can build further scale in Cosmos. It's worth noting that the combined JTC US presence now has run rate revenues of over $85 million, more than 300 employees across eight states and representation in the key hubs for both marketing and delivery of our services. Looking to the future, we expect 50% or more of group revenues to be generated by our US business by the end of the Cosmos era. In combination, these latest examples of the successful execution of our growth strategies will ensure that we achieve our Galaxy goal this year and enter the Cosmos era confident we can double again in a three to four year period. In the Institutional Client Services division, the key acquisitions made in recent years, in particular the RBC SEAS business, now JTC Employer Solutions, and Sally Fund Services, both of which completed in 2021, have made significant contributions to our growth. The delivery of outstanding organic growth of 22.4% is a record for the division, together with record new business wins of £10.9 million, which are particularly satisfying results for the team. And in private client services division, The recurring organic revenues from strategic transformation projects such as Amaro, Campari and Ottawa have now all come on stream and are positively contributing to performance. And in spite of the attention demanded in the US towards the integration of NYPTC in Delaware and acquisition of SDTC in South Dakota, the division has delivered excellent organic growth of 18.6% period on period, significantly ahead of the industry norms. Altogether, the combination of great performance in the divisions, with the ability of the Group Commercial Office to act as a catalyst for growth, has led to unprecedented organic growth, which is over twice our medium-term guidance range. These revenues are embedded and recurring and have been delivered from increased revenues from banking services, tax and regulatory compliance reporting, a number of strategic transformation mandates commencing, good conversion of Project Apple mandates from the Sally book in the United States, as well as more new client wins, primarily mature structures from competitors. These together have created a purple patch of organic growth success, which is unprecedented, adding significant embedded and recurring core revenues. There has been a flywheel effect of delivery from a number of contributory factors simultaneously, with a large degree of the heavy lifting being contributed in the background earlier in the Galaxy era, resulting in the business rising to a whole new level of success. Finally, I would like to conclude my CEO highlights once again with a huge thank you to our excellent high quality JTC team of owners for their ability to deliver on our ongoing success. As we rapidly approach the end of 2023, I'm confident that our ambitious Cosmos plans to double again are well within our capability to deliver, and I look forward to leading the business in the next phase of its development. So let's turn now to slide four and the financial highlights. Our revenues period on period grew to £121.5 million and underlying EBITDA was £40.2 million, delivered at an underlying group EBITDA margin of 33.1%, at the low end of our range as we would anticipate in a high growth environment. As previously highlighted, our net organic growth was 21% period on period, significantly above guidance and up from 9.5% in H1-22. As also noted earlier, our new business wins were a record £14.6 million, up 15.9% period on period, as the Group continues to benefit from excellent win rates across both divisions. Our LTM win rate at the period end stood at 51.4%, well above the top end of our current target range of 35% to 40%, and implying that we continue to win at least half the business we pitched for, a great performance in a very competitive market. The new business pipeline remains strong. It stood at £47.1 million at period end and as of the 1st of September was at £54.1 million. The period on period lifetime value of work one was a record £195.1 million based upon our 14 year lifetime estimate of our client book. An increase of 16% on the H1-22 figure of £168.2 million. this gives us visibility of a total of circa 1.6 billion of forward revenues from our existing client book without the addition of any new mandates reflecting the long-term enhanced and compounding value of the entire book of business and finally onto the interim dividend which we've declared at 3.5 pence per share up from 3.1 pence in h122 so now over to martin for a deeper look at the financials

Thank you, Nigel. We're both pleased to report another strong set of interim results, which show continued trading momentum and exceptional revenue growth. Our financial highlights are set out on slide seven, with the underlying performance showing revenue growth of 30.6% and record organic growth of 21%, which is significantly above our medium term guidance range, with more to follow on this shortly. Underlying EBITDA increased by 30.8%, with the margin improving to 33.1%. Earnings per share increased by 11.9%, the third consecutive year of double-digit EPS growth. Cash conversion was very strong at 113%, where we continue to meet our expectation that the first half of the year delivers more than 100% cash conversion. Net debt saw a temporary but significant drop of £64.2 million, driven in large part by the June equity raise in advance of the SDTC acquisition. Our interim dividend was 3.5 pence per share and is a 12.9% increase on the prior year. On slide 8 we can see our trading in more detail, and starting with revenue and what's happened to the component parts of that in the last 12 months. Gross new organic revenue in the last 12 months was £44.1 million, a significant increase from £20 million at the same time last year. 76% of the growth came from existing clients, compared to 56% this time last year. Attrition was £9.3 million in the last 12 months, with £7.1 million of that being end of life, and therefore 98.6% of non-end of life revenue was retained. Revenue recognised so far on LTM New Business Wins was 53%. Our pipeline at the period end was a healthy £47.1 million, a 2.8% increase from the position at the end of 2022 and had increased further to £54.1 million as of last week. Let's move on to slide 9 and look at our net organic growth with a focus upon the divisions. PCS recorded 18.6% of organic growth and benefited from the successful onboarding of Amaro in Q422. This was a complex mandate but is now our largest client and currently generates $4 million of annualised revenues. ICS recorded organic growth of 22.4%, with the division now delivering record organic growth figures for three successive period ends. The current period saw particularly strong growth in the US, Channel Islands in the UK and Luxembourg. Our three-year organic growth for the group is now 12.7% and is above our medium-term guidance range. I'd like to explore this further and there are two principal drivers to organic growth, pricing and volume. As you may recall from last year, we said that empirically we've recovered at least two-thirds of inflationary increases through pricing growth. We've seen pricing growth of 5.5% in the last 12 months, which represents more than 75% of the inflationary staff cost that the business has incurred in the same period. On the revenue bridge slide, I referred to growth coming from existing clients of 76%, which is a significant increase on the prior year figure. This was driven by volume growth of 15.5%, which is 10.1 percentage points higher than this time last year. The reason for the increase is many fold and includes higher win rates than we've seen previously, the impact of the launch of our treasury services, these revenues now being embedded in our suite of services, resulting in an exceptional increase to the organic growth result for this year, the successful development of our tax compliance service offering, a service which is a significant component of the Amaro contract. Our expectation is that for the remainder of 2023, we will remain above guidance levels, but that it's unlikely to be at the current elevated level. In the medium term, we expect organic growth to revert to our 8% to 10% guidance range. To conclude on the top line, let's move on to the geographic profile of our revenues on slide 10. We saw all regions report positive net organic growth and the US continues to be our highest growth performer and is becoming an increasingly large part of the business. The US will now be further supplemented by the SDTC acquisition, which completed on the 2nd of August. we anticipate US revenues exceeding 30% of the overall group total in 2024. Let's now move on to the EBITDA margin on slide 11. The underlying margin in the period increased by 0.1 of a percentage point to 33.1%. This sits within our medium term guidance range and is consistent with our previous messaging on how we perform during periods of uncertain macroeconomic conditions. In addition to this, during periods of heightened revenue growth, the required upfront investment in human capital can inherently slow margin progression. It's therefore pleasing to see margins improve at a time of record growth and an increased inflationary environment. We're committed to continued investment in the business to support growth, margins and to ensure the continued longevity of our client relationships. The PCS margin was 36%, which is 0.3 of a percentage point drop from H1-22. However, excluding NYPTC, which was acquired in Q4-22 and is integrating well, the division would have delivered a 0.2 percentage point increase in margin, effectively 36.5%. The STTC acquisition is expected to be accretive to the EBITDA margin. both for the PCS division and the overall group. The ICS margin improved again, coming in at 31.6% against 31.5% in H1-22, and we're pleased to see the division continue improving on this key metric. We maintain our medium-term guidance range of 33-38%. We shall now look at cash, net debt and leverage. Slide 12 focuses on our cash conversion and how successful we are in managing our working capital cycle. As you can see, cash conversion was strong at 113%, which is the highest it's ever been in H1. This is due in part to continued discipline about cash collection, but it's also the result of the changing mix of our business, whereby there's a greater proportion of ICS revenues. At the end of the period, our pro forma net investment days has fallen in the last 12 months by 13 days to 83 days. As you'll note from our past results, we also always have stronger collections in H1 due to our billing pattern and the full year result consistently falls back into line with our guidance range of 85 to 90%. Moving on to net debt on slide 13. At the end of 2022 a reported net debt was £104.8 million and by the period end this stood at £28 million, a significant decrease of £76.8 million in the first six months of the year. This was the result of strong cash conversion and the gross proceeds of £62 million from the June equity raise which advance-funded the SDTC acquisition. In addition to this, we increased our existing bank facility by £50 million to an available £275 million, and £169.3 million of this was undrawn at 30 June. We withdrew £118 million from this on 1 August to fund the SDTC acquisition. The facility expires in October 25 and we have an option to extend it by one year, which we intend to exercise. In addition, we intend to obtain additional deck capacity by the end of H2, which will help support our future M&A activity in the Cosmos era. Slide 14 shows that our reported leverage now stands at 0.37 times EBITDA and this is a 1.22 times reduction from the 31st of December and sits below our guidance range of 1.5 to 2 times. This was an expected, albeit temporary, reduction in leverage as we completed the SDTC equity fundraise before the end of the period. Our guidance for leverage continues to be up to two times underlying pro forma EBITDA. Finally, turning to slide 15, I'd like to reiterate our perspective on capital allocation. As you know, we have a resilient long-term business model characterised by contracts that last at least 10 years and where 98.6% of revenues recur on a year-on-year basis. We take a long-term view on return on invested capital, and ideally when making an acquisition, we seek to cover our cost of capital within three years of that acquisition. In the last two years, we've made two platform acquisitions in the US, Sally and SDTC, where the short-term return on capital has diluted the overall group return on capital. The slide demonstrates that whilst in the short term there is dilution, that Sally is improving returns and will continue to improve these and we expect the same of SDTC. We believe the capital allocation decisions we've taken are for the good of the long term business for the following reasons. Both businesses have long-term annuity-like revenue streams which underpin multi-year growth and returns. Sally with a client duration in excess of 40 years and SDTC with 98.6% recurring revenue. Both acquisitions are important platforms for growth in the US. Sally has brought significant cross-selling revenues, currently over $4 million annual revenue value, and has also allowed us to acquire another business at a highly accretive multiple. SDTC gives us the opportunity to cross-sell existing JTC services into clients of the preeminent and largest independent private trust business in the US. We are one month into ownership of that business, but already we see opportunities to leverage off this platform business. These are businesses that both significantly enhance the overall JTC business, and despite the short-term dilution on return on capital, JTC still comfortably exceeds its cost of capital, and we expect that in the absence of any other large deals, that our return on capital will improve further as time progresses. Thank you for listening. I'll hand back now to Nigel.

Thank you, Martin. Later, I will highlight the notable achievement of our doubling the business twice since listing in 2018 and how based upon our group capabilities, robust investment case and prevailing market drivers, we believe a goal of doubling again is appropriate in the Cosmos era, which we anticipate being delivered in a three to four year timeframe. But before that, we will look at current industry trends and take a deeper dive into the performance of the business from a group and divisional perspective. Starting at group level and the wider market trends, the macro themes have not changed significantly since we last reported. But as is evident, we have continued to post a phenomenal performance in an ongoing and sustained economic downturn. When presenting our full year results in April, I commented on the slowdown in M&A activity in 2022 and the hiatus in deal flow in our primarily private equity dominated industry due to the rising cost of capital. As a result, the deal flow had temporarily slowed up and there was uncertainty in price expectations between buyers and sellers, with selling parties holding out for pre-downturn pricing and acquirers having a less bullish view of the new normal. As mentioned at the time, we believed that the pause would be a temporary one due to the attractive and compounding nature of the industry, the weight of uninvested capital and the need for deal flow to allow for desired exits. Whilst this largely remains the case, there have been signs of late of activity for highly prized assets which have transacted at multiples towards the top end of industry norms. More generally, however, the tendency remains, where possible, to hold on to see whether pricing gets as full as it was in 2021. Time will tell, but one thing we can be sure of is that consolidation will continue apace when some of the market uncertainty falls away. From our perspective, we continue to see several potential deals, some off-market such as the SDTC transaction, and we are comfortable with biding our time, keeping our discipline and finding the right deals at the right prices. In other themes, at JTC we have always concentrated on being the best business in our space rather than the biggest. Of late, some of the challenges created by the Race to Scale, which have consumed many industry participants, continue to emerge, including regulatory issues, over-leveraging, business failures, and more recently, movement of mature clients and talent between service providers, which has not been as common in the past. In particular, we observe that business models that are more heavily reliant on offshoring and technology solutions rather than a more traditional professional services approach has led to both clients and experienced and capable practitioners choosing to move between firms. From a JTC perspective, we have been the net beneficiaries of this trend and as a result of taking the opportunity to enhance our team capabilities through individual hiring and team lift outs and the onboarding of new client groups of a good quality and scale from competitors. There is of course the potential for a reasonable time lag between the cost being incurred and the full revenue and EBITDA benefits of the clients being added to our book. To date, pleasingly, we've been able to absorb these short-term growing pains while still remaining within our underlying EBITDA margin guidance range, which can be difficult in high-growth scenarios. This outcome is a testament to the ongoing work we deliver in the core business day-to-day to improve processes and deliver efficiencies. Moving on to the divisions, it has become clear as the industry has consolidated that the ICS division has grown and improved its profile and capability to become a recognised top-tier market participant. This is particularly satisfying and is the culmination of proactive management and a number of specific initiatives in recent years. These have included improving the talent, capabilities and range of services together with an upgraded go-to-market strategy. As a result of this and the other positive factors in play, the division has delivered very strong results in H1, building on an excellent 2022. Period on period revenue increased by 27% to £80.7 million and EBITDA by 27.4% to £25.5 million at an improved margin of 31.6% achieved without the benefit of any recent acquisitions. Particularly pleasing is the outstanding net organic growth alluded to earlier, which at 22.4% is a record high for the division, significantly above the three-year rolling average of 14.1%, as well as the new business wins at 10.9 million, up 28% period on period. In addition, and as alluded to earlier, further incremental improvements have been made to the ICS operating model, having established a strong, distinct, divisionally focused operations team more recently. The PCS division continues as a standout market leader in the global Trust Company industry and has accumulated 18 awards for Trust Company business, private client services and family office services in the past 12 months as evidence of this. The division also had a strong H1 with revenue increasing 38.3% to £40.8 million and underlying EBITDA by 37.1% to £14.7 million, with those early contributions from the Amaro, Campari and Ottawa mandates all assisting. Net organic growth is at an unprecedented 18.6%, with a rolling three-year average of 10.8%, and the underlying EBITDA margin remains strong at 36%. With the addition of NYPTC and SDTC, the platform we now have in the US places us as the largest and most diversified independent in the private trust sector. This is particularly exciting as the market has room to develop and grow in the future. We now have dedicated teams focused on both domestic and international clients, and we are the only independent in both of the two leading trust and corporate market delivery locations of Delaware and South Dakota, with these hubs supported by dedicated sales offices in New York and Miami. The division has also seen large, mature structures move from competitors over the past 12 months for the reasons I alluded to earlier. After 35 years of uninterrupted growth and profitability, and having doubled the size of JTC twice since listing, first during the Odyssey era, 2018 to 2020, and then the Galaxy era, 2021 to 2023, we recently held our latest global planning offsite with the group's top 50 executives with the purpose of establishing and setting our goals for the upcoming Cosmos era, commencing in January. It was pleasing to assemble our key talent together in person, in one location for the first time since the pandemic, with the important takeaway being that the shared ambition and impetus that has fuelled the previous 35 years of growth was as evident as it's ever been, and the plan for the Cosmos era became one of doubling again in an estimated three to four year timeframe. In setting this challenging but achievable target, we took account of a number of factors, including the key market drivers and demand for our services, the JTC formula for success and our highly refined industry knowledge. starting with the demand for our services, which remains strong in both divisions. For private client services, we have an accelerating number of ultra-high net worth individuals around the world, increasing the market size, combined with a trend for increasing global wealth mobility, creating a demand for a growing range of sophisticated services that are delivered seamlessly, are highly compliant, and increasingly multi-jurisdictional solutions. In the institutional client services space, we have seen the volume of capital dedicated to alternative assets increase significantly over time, coupled with a greater propensity to outsource the administration, accounting, tax regulatory and investor reporting of these structures to specialists like JTC to assist with the regulatory compliance and to provide multi-jurisdictional coverage. We believe these drivers will remain relevant, current and have the potential to accelerate in the foreseeable future. Although difficult to define precisely, the market for our services is estimated to generate $12 billion in fees annually and the sector remains highly fragmented with no one participant having more than a 5% share and with thousands of businesses offering hundreds of interrelated service lines. This we believe will fuel the drive for further consolidation and an environment for more acquisition activity in the future. Our historically robust and proven investment case and business formula fundamentally remains the same, including our ability to develop and adapt to market opportunities and changes, which has been and remains a key ingredient of our success. These features include our unique culture of shared ownership that sits at the heart of the group and makes all of our people responsible business owners. We have a very experienced and entrepreneurial management team which has brought 35 years of uninterrupted success. A strategy designed for growth, currently one third organic and two thirds by acquisition, which is well diversified with highly visible recurring revenues generated by long term client relationships. This is further complemented by a well-invested platform including, but not limited to, ongoing technology enhancements. Finally, our ability at JTC to develop and adapt to market changes is actively managed, should not be underestimated and is demonstrated by the addition of new service lines, jurisdictions and capabilities to the team, attracting new clients and driving an innate ability to generate additional revenues from existing relationships. As we've said before, our approach is not one of following the market, but having the confidence to shape our own future. Looking forward to Cosmos specifically, we once again concluded that our ability to meet the target of doubling the size of the business would most likely be achieved by one-third organic and two-third inorganic growth. From an organic perspective, the growth needs to be achieved in a controlled fashion and the achievement of our medium-term financial KPIs remain in the realms of responsible management. The expectation of 8% to 10% net organic growth, margins in the 33% to 38% range, cash conversion of 90%, and debt equity ratio at up to two times. From an inorganic perspective, as has been the case from Odyssey and through Galaxy, the M&A targets will inevitably be larger or be more strategic to provide the opportunity for opening up new markets, as well as some opportunistic, ideally off-market bolt-ons over time for which we have a proven flair. There will be more transformational opportunities arising too, each of which we will take on their merits. Geographically, we see significant opportunity for US expansion in Cosmos, with other key jurisdictions of interest being the UK and Europe, coupled with a wider appetite for incremental deals that strengthen our platform in our existing business or significantly advance our service offering. Finally, we considered the experience of the Odyssey and Galaxy eras that drove success and the lessons learned, and how we can apply these to the Cosmos era. Ultimately, we concluded that our Cosmos goal was achievable by evolution, not revolution, in a similar timeframe to Odyssey and Galaxy, in spite of doubling the size of the task before us. And finally, on to our key takeaways. An excellent first half of 2023, with the impetus from 2022 accelerating into this year, allowing us to deliver exceptional organic growth in difficult markets. With the Galaxy-era goal of doubling the business achieved by the end of this year, I was delighted to see a similar ambition from the team as we enter the Cosmos era from 2024. We continue to break previous bests with our growth and new business wins and have been able to deliver unprecedented performance well ahead of our medium term guidance. We were pleased to complete the transformational SDTC deal in August We are now the independent private trust company market leader in the United States, with a significant wider US platform from which to grow both divisions in the Cosmos era. And we continue to see opportunities for further M&A, but will remain disciplined in our approach. Looking forward, we are enjoying a strong 2023 with very good momentum across the group and we look well set for another successful year ahead of commencing Cosmos. So thank you for listening and for your ongoing support. We'll now be happy to take your questions.

Thank you to Nigel and Martin. So we're ready to take questions now. So we'll call out people's names. If you want to ask a question, please just use the raise hand feature. So I can see a couple of hands up already. Can we start with David Brockton from Numis, please?

Good morning all. Hopefully you can hear me. Yeah, all good. Great. Thank you. Two questions, please. First, I think in the presentation you indicated that you've recovered 75% of the staff cost increases through pricing. Can you just elaborate on whether there's sort of more pricing gains to come through to sort of fully recover the inflationary costs the business has seen. And then the second question, I guess, relates to sort of the clear purple patch the business is in. There's a lot of cross-sell coming through now, be it banking, tax, Sally. Is there more to come through on, Sally? Can you give an update on that? And also for SDTC, can you maybe just set out what the cross-sell opportunity could be there and how big that could be? Thank you.

Thank you, David. Maybe I'll pass to Martin quickly on the pricing gains and then I'll talk about Sally and SDTC.

Morning, David. So the quick answer is yes, there should be more pricing to come. The 75% that we've recovered, that effectively, that 5.5% of pricing gain, that is over the last 12 months. So it's six months of this year, six months of last year. By the time we get to the year end, will have had the full impact of the 23 pricing increases. So I expect it to be higher, again, about 75% of the total, but rather than being 5.5%, somewhere more like 7, 7.5% is what I would expect. Nigel, do you want to pick up on the Sally and SDTC cross-selling opportunities then?

Maybe I'll start with Sally, probably the more mature one. As you know, when we bought the business, they're really a US manco. So when we bought the business, there was the opportunity to, something we call Project Apple, was the opportunity to convert fund administration from existing funds. And if you like, insert JTC as the fund administrator rather than the incumbents. That's gone really, really well in terms of revenue, about $4 million worth has come across from that. And of course, everything that they've landed since has really almost naturally fallen into being a JTC administration opportunity. So huge opportunity for us there. Just to put it in perspective, that includes some really top names from the private equity community. So really, really pleased with how that has gone. It continues to obviously to add assets year on year as well. So really pleased with Sally, very steady business, bringing us more and more opportunities and beginning to help with looking at other opportunities, both in the tax and strategic transformation spaces. And then SDTC, obviously, like Sally, another platform acquisition. So those two together have really created our U.S. platform, makes us the U.S. independent trust company business as largest. There are opportunities, however, as you allude to, David, to to break the mold in the USA to some degree. And what I mean by that is there are peripheral services that aren't naturally the domain of trust companies, as we've seen it. There tend to be trustee services without the add-on of administration, tax services, regulatory and other regulatory compliance type services. So plenty to go for there. I think there is I would put that more into the sort of short to medium term as opposed to a short term scenario. Having said that, and I mentioned that we're in Delaware and South Dakota, which are obviously the two key locations there, over the weekend alone in two different buckets we've been made aware of opportunity of about um three hundred thousand dollars of revenue which has turned up because we've got delaware and south dakota some of it's come from the south dakota team others come from pre-existing relationships and the fact that you know banks are beginning to to to decide whether they want to be in the space or otherwise so it just gives you this i mean that's you know literally in the first few weeks of being together and getting to understand each other. So really, really pleased with that too. And it seems to initially be proof of the theory that we'd come up with for the acquisition. So I wouldn't underestimate when you bring those two things together, because I know there's been a bit of noise about cost of return on capital and the like. Those are both fantastic businesses with huge platforms from which we can build. Thank you very much.

Super, thank you. Can we go to Callum from Berenberg next, please?

Morning, guys. Thank you for the presentation today. Just a couple of follow-up questions around some of those cross-selling points, if that's all right. So firstly, in terms of what you've said around the group commercial office, there were some numbers in the slide on this, but I wasn't quite sure if I could understand the scale. And is it possible to say approximately what level of the gross organic growth is now coming from these initiatives? And then if you think that's something that can continue to boost revenues at this level, as you roll out these services across the client base, I guess, related to that, I'm not quite sure if this is something you've now rolled out with a quarter of the clients, two thirds of the clients, or kind of any kind of commentary to that end would be too helpful. If we start there, I'll come back for the second question.

Hi, Colin. Our take on it is that of the 21% organic growth, about 12 to 13% of that is what you would call not the core business because it's all core, but organic growth as we knew it from non-commercial office contribution. So, you know, then the commercial office has been going for a little while now, but Clearly, it's contributing quite a big chunk of that 21%. It's probably more like 7%, 8% of it this time round. Sorry, and the penetration of the book, I think we've probably got, I mean, it varies depending on the service. I think from the... The banking and treasury side is probably 30 to 40%. We've addressed the low-hanging fruit. I think there's opportunities on the tax side that we haven't accessed yet, frankly. We've talked about it before. There's an opportunity in the US through Sally to do a bunch of tax work that... Frankly, we just haven't got to yet because we've been so busy with everything else, but it's there. And that's a couple of million dollars that we just need to get the infrastructure in place to deliver on that. So there's plenty of penetration still to come, plenty of opportunities still to come, but it will be a bit harder and it might just take a little bit longer to get that coming through.

I think just to add to that, in particular on the banking side, We get a little bit of revenue from the US in that regard, but we do think there is an opportunity for more to come from that. We're actively looking at opportunities to sort of widen out our capabilities to have a proper platform in the US as well.

Got it. Super clear. Thank you. And then I think to ask David's question in a slightly different way on SDTC. At the time of the deal, you're talking about kind of explaining this as there's a big difference in the revenue per client between SDTC and let's say your core Jersey business. I just wondered, obviously it's early days, but you have a view on one, roughly what that difference is, if you're able to say it publicly, and then two, how much of let's say the difference in service offering you think you'll be able to eventually unlock, i.e. kind of bring those revenues and services in-house and cross out in time?

I would say the markets are constructed differently and that the trust companies mandate in the US is to do as little as possible and take as little risk as possible in return for a fee. Whereas where we've come from in Europe, it's more of a wider service range and do more and more for them over time. So there's a little bit of work to be done about sort of changing the mentality. I think one of the reasons the SDTC team transacted was because they could see that that was going to become a necessity in the US over time. And of course, we've got the experience of doing that in multi jurisdictions in different places. So I think they could see change was coming. They start out with a very cautious approach in a litigious country. But I do think it's an education over time that will allow us to do those things. And probably those two examples over the weekend amounting to $300,000 is a really good example of that, where you know, they're thinking wider than the envelope in which they would otherwise have operated. And those would have fallen by the wayside. I think there's opportunities otherwise. So it's difficult to put a figure on it, but I do think the opportunities there and just by having Delaware, South Dakota, and, you know, really good relationships with law firms on the one hand from an SDTC perspective, And banks, on the other hand, from a JTC perspective, also having a really good foothold in the South American market as well. There's plenty for us to get into. And of course, there are other jurisdictions I think that we could easily start to think about. Wyoming, Nevada being two examples of those. So we're not finished with that yet, but we're definitely beginning to be seen as the independent of choice.

really helpful thanks Nigel thank you I've got a hand up from Dan Cowan at HSBC if anyone else on the call would like to ask a question please just raise your hand so that we know and we can unmute you but over to you Dan

Good morning, guys. Thanks for the presentation. My question is on competition. You've been a beneficiary of some of the difficulties that some of your competitors have been experienced. I was wondering if you could just elaborate on what you see at those competitors and how long you might expect that to continue that. I appreciate some players are suffering from significant indigestion following a period of consolidation. And then also, as an appendix to that, perhaps you can, if you can, quantify the sort of, let's say, the exceptional wins of business from competitors that you've seen in the period. That would be really helpful, please.

Yeah, happy to do that, Dan. I describe it as the race to scale. It's a simple way of describing it. I think what we're seeing or we have seen historically is a lot of M&A activity and very little concentration on integration or perhaps M&A activity happening so quickly that the idea of integration can't even be contemplated. That's part of the issue. We've got unsympathetic regulators in play at the moment who are very jurisdictionally focused, not globally focused to where the industry is. We've got over-leveraging because of their PE backed and expectations on valuation were becoming quite full. And probably more specifically, as I said in the presentation, This over reliance on technology and offshoring relative to professional services. So, you know, top quality individuals with great technology to back up what they do is probably the two ends of the scale. And we're firmly in the professional services end whilst improving our technology all the time, rather than the offshoring and technology approach to the business. We've also obviously seen these business failures, some of which you'll be aware of in our space over time. So, yeah, so I think that's the sort of background I'm alluding to. I think those wins, you know, over 50%, given that, you know, our KPI is sort of 35 to 40 in a very competitive market, tells you something about that. And along the way, as I mentioned, we're picking up great talent, actually, from... from one or two service providers over time and clients along the way. In terms of putting a number on it, off the top of my head, I would suggest it could be, although some of these are, you know, the clients are out there looking for alternatives. We've got a lot of the same, you know, we've now got some of the teams that they would have been familiar with working with. So I think if I take a 12-month view on that, because as I mentioned, these things don't happen, have a habit of happening over a six, 12-month period. I would say there's at least two to three million across both divisions, actually, that I'm aware of, just to answer the question. But it's probably more than that. It's these two extremes of where businesses are going. You're getting some of the top talent voting to be in one or the other. So, you know, this is, it could be a bit of a seismic shift. Super, thank you.

Thank you. We've got one more hand up. I don't have a name though, so could you give us your name and where you're calling from, please? It's a mobile ending 816.

Ah, thanks. It's Michael Donnelly from Investec.

Hi, Michael.

Sorry about that bad line. So apologies if these two quick questions have already been posed and answered. Could you comment, please, about developments in the competitive landscape? I'm thinking specifically about Apex, that one might expect to be suffering a bit of indigestion after its many recent deals. And then secondly, are there any important global jurisdictions where you currently don't have any presence that you would regard as a sort of missing block in your strategy?

Thank you. Michael, I did do a bit of a job. I'll probably try and keep off any specific competitor in answering the question. But I was just saying to Dan in answering his question that there is this sort of gap appearing between those who are more technology and offshoring based as the future and others who are more... who believe in professional service approach to what we do here and obviously surrounded by the right and appropriate technology to achieve that. And we're firmly at one end of that. I think those at the other end, without mentioning names, are suffering and it is to some degree even if you're the best at integrating new businesses, if you buy at the scale and speed that some others have been buying, then inevitably you're going to have issues. I think the clients are the last ones that they get disgruntled. I think what we're seeing for the first time is clients mature clients choosing to contemplate moving mature funds rather than you know wait for the next fund that they launch and choose a different administrator that's that's quite a change from uh the environment we've been working in so there's nowhere in particular i i honestly believe that you know a major market where we're not covered at the moment certainly for the for the foreseeable future. Hopefully it'll be an opportunity perhaps to complete our potential purchase of the Kensington business where we're the largest shareholder, individual shareholder there to be debated in the Far East. I think probably increasing our infrastructure from a US perspective. And ICS are probably places that I would be looking. And then opportunistically in the Bahamas, which is sort of related to the Amaro mandate and how partly because that's where the core part of their business was based. And there are obvious opportunities arising out of what's what's falling out, if you like, from from the beginning to white label and outsource certain products. certain parts of their business so good steady decisions on our part i think in terms of just taking the opportunities they present themselves but the the real answer is no no place we've got a tearing desire to be that we aren't already michael thank you very much super okay we're um up against time and we don't have any more hands raised so thank you very much to everyone who's dialed in and uh yes if you have any further questions please feel free to get in touch thank you