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Full year results 2019

11 March 2020

Momentum driven by focus on clients and customers, solid progress on costs, strong capital position supports investment in business and returns to shareholders.

Keith Skeoch, Chief Executive, commented:

"We have seen growing momentum in the second half of the year across the business with improved investment performance and flows. We remain on track to deliver targeted synergies and have identified more we can deliver as we continue to reshape the business and sustain resilience.

Our strong financial position, capital generation potential and focus on operational efficiency enables us to invest in the business to drive profitable revenue growth and shareholder return.

The outlook for the markets and our industry in 2020 is turbulent with the additional complexity of COVID-19. Importantly we are focused on what we can control, namely delivering for our clients, customers, colleagues and shareholders; diversifying our revenues; investing for the future and maintaining financial discipline."

Key points:

Financial

  • Fee based revenue of £1,634m, down 13% reflecting impact of net outflows in 2018 and 2019
  • Adjusted operating expenses of £1,333m, down 4% due to synergies and other efficiencies
    • Now expect to deliver £400m of annualised synergies – £350m by end of 2020 and an additional £50m during 2021, at a total cost of £555m
    • Cost of separation now expected to be £310m due to increased complexity
  • Adjusted profit before tax of £584m, down 10% largely reflecting lower revenue
  • Adjusted diluted EPS of 19.3p, up 8% benefitting from share count reduction
  • IFRS profit before tax of £243m, up £1bn due to lower total adjusting items charge of £333m (2018: £1,397m charge)
    • £1.5bn gain on sales of Indian investments and £140m LBG compensation offsetting £1.6bn non-cash impairment charge in relation to acquired intangible assets
  • Strong surplus capital position of £1.7bn continues to support investment in the business and shareholder returns
    • Over £1bn returned to shareholders in dividends and share buybacks in 2019
  • Final dividend of 14.3p, giving full year dividend of 21.6p, in line with guidance

Operational

  • Improvement in investment performance with 74%, 60% and 67% of AUM above benchmark over 1, 3 and 5 years, respectively
  • Gross inflows up 15% at £86.2bn
  • Net outflows reduced to £17.4bn (excluding LBG tranche withdrawals), a significant improvement on £40.9bn net outflows in 2018
  • AUMA of £544.6bn, up 6% (excluding LBG tranche withdrawals)
  • Cost/income ratio of 71%, weaker than 68% in 2018

Outlook

  • Strong financial position, capital generation potential and focus on operational efficiency enables investment in business to drive profitable revenue growth and shareholder return
  • Outlook for markets and our industry in 2020 is turbulent with additional complexity of COVID-19
  • We are focused on what we can control and will build a business that is fit for the future and well positioned to manage through the uncertainties ahead
    • 2019 2018
    Financial metrics
    Fee based revenue £1,634m £1,868m
    IFRS profit/(loss) before tax £243m (£787m)
    Adjusted operating profit £301m £473m
    Cost/income ratio 71% 68%
    Adjusted profit before tax £584m £650m
    Adjusted diluted EPS2 19.3p 17.8p
    Full year DPS 21.6p 21.6p
    Operational metrics
    Gross inflows £86.2bn £75.2bn
    Net flows
    Excluding LBG (£17.4bn) (£40.9bn)
    Total (£58.4bn) (£40.9bn)
    AUMA £544.6bn £551.5bn
    Investment performance (AUM) – 3 years 60% 50%

    Annual report and accounts 2019

    The Annual report and accounts 2019 (Annual report 2019) has been published today and is available in full here. This press release contains certain information that has been extracted from the Annual report 2019.

    Read the full press release

    Notes

    1 Unless otherwise stated, all figures in this press release are on a continuing operations basis excluding the UK and European insurance business sold to Phoenix on 31 August 2018.

    2 In accordance with IAS 33, earnings per share has not been restated following the share consolidation as there was an overall corresponding change in resources. As a result of the share consolidation and share buyback earnings per share from continuing operations for the period ended 31 December 2019 is not directly comparable with the prior year. Refer to Note 12 of the Annual report and accounts 2019 for information relating to the calculation of diluted earnings per share.