Ifg Regulatory News (IFP)

19th November 2014

Interim Management Statement

IFG Group plc, the financial services firm and parent of leading UK platform provider James Hay Partnership and financial advisor Saunderson House, issues the following update covering its business from January to October 2014.

Highlights:

· Paul McNamara, joined as Group CEO at the end of July

· Previously announced disposals have simplified the Group, bringing a sharper focus to our two core businesses, James Hay and Saunderson House

· James Hay has delivered continued growth in SIPPs, adding 5,247 in the 10 months to October 31st

· Assets under administration in James Hay increased to £16bn, with net inflows of £0.9bn to October 31st, boosted by the first tranche of customers from the Capita transaction

· Pressure on margins and interest income in James Hay, as highlighted in H1, has continued. This, together with our investment in technology and staff, has reduced James Hay's forecasted profitability for 2014

· Saunderson House continues to deliver over 20% growth in revenues with margins being maintained. New client wins year to date are 222, 77% ahead of the same period in 2013.

· Sale of Irish Pension and Advisory businesses expected to complete in 2014, subject to regulatory approval

· In overall terms the adjusted Group operating profit pre-tax will be marginally below 2013 on a re-presented basis, though after-tax earnings will be impacted by a materially higher effective tax rate, linked to the disposals of businesses

Group Chief Executive, Paul McNamara, commented:

"2014 marks a fundamental transformation of the IFG Group. We will benefit as we exit non-core businesses and reinvest to deliver continued growth in James Hay and Saunderson House. We are strongly positioned as we go into 2015, with two profitable businesses in attractive markets, and a strong and liquid balance sheet to support growth and investment. We expect 2015 to deliver meaningful growth in Group profitability."

Strategic Update:

In line with the strategic direction previously communicated, the Group has undergone significant change in 2014, with the disposal of non-core businesses and the increased focus on driving growth in our two core businesses, James Hay and Saunderson House. In addition the management team has been strengthened further, most recently with the arrival of Paul McNamara as Group CEO.

Since our interim results announcement we have completed the sale of IFG FS and Siddalls France for a combined consideration of up to £8.9m. The sale of our Irish Pension and Advisory business for €13.5m (£10.8m), which was announced on 28th August, is subject to Irish Central Bank approval but is expected to complete before the end of the year. We remain in discussions to sell ARB, our Irish general insurance business, though a transaction is not imminent. 

The Group is now focused on its two main UK businesses and, following the completion of the sale transactions, will have a strong and liquid balance sheet to support our growth ambitions. Whilst our focus remains on the continued organic growth in James Hay and Saunderson House, we will selectively consider acquisitions, including strategic arrangements such as the Capita deal, to further accelerate growth.

Group results for 2014 will reflect the sale of five legacy businesses (including Ireland which is treated as discontinued). This will require a restatement of comparative information. For 2014, and going forward, the Group will report its results in three segments, namely James Hay, Saunderson House, and Group/Other. This will provide more transparent reporting of the underlying profitability and performance of our individual businesses.

Our businesses are well-positioned in attractive parts of the UK wealth management market. We believe there is significant growth potential in these markets.

Whilst we will continue to review our corporate structure to drive performance and maximise returns to shareholders, we do not expect in the short term to move our group head-quarters from Ireland or to change our current market listing arrangements.

James Hay Partnership:

James Hay provides a full platform for retirement wealth planning, underpinned by a specialist capability in pension administration. James Hay administers self-directed pension schemes for more than 49,000 clients, in addition to offering ISAs and general investment accounts in the Modular iPlan launched earlier this year. It now has more than £16bn in assets under administration (December 2013 - £15.3bn), with net inflows of £0.9bn in the period to October 2014.

James Hay has maintained its new business momentum and improved client retention, with new SIPPs to end October totalling 5,200 (Full Year 2013 - 5,071), of which 550 relate to the arrangement with Capita. The majority of new business is in our recently launched MiPlan product, which has attracted new business due to its transparent pricing and flexibility. Current year attrition remains at historically low levels, at less than 6% annualised.

· Income per SIPP on new MiPlan business has continued at the lower levels seen in the first half of the year, reflecting the modular pricing of discrete components of the MiPlan, and a lower take-up of property modules.

· In H2 there are lower levels of interest income across the book (projected £1m lower compared to H1 2014) reflecting changes in rates paid by banks following recent regulatory rule changes. We have assumed a continuation of the current low base interest rate environment for the foreseeable future. However, arising from changes we are implementing in our banking arrangements we expect an improvement in interest margin in 2015.

· Sales of newly launched ancillary products such as ISAs, both in our back book and in new MiPlans remain low but we expect to see further growth in these products in 2015, particularly in light of the recent increases in ISA limits and the new flexibility to transfer between cash and share-based ISA investments. We see ISAs increasingly being used alongside pensions for integrated retirement planning by customers and their advisors.

· Our investment programme in James Hay has continued in 2014, including additional investment in technology and operational capability to support the Capita transaction and facilitate future transactions of a similar nature. In particular we have invested in our on-boarding capability and digital processes, which will drive further operational efficiency. Over 40% of new applications are now accepted online with electronic signatures and we expect this to drive further unit cost reduction as well as delivering better service to our customers and their advisors.

· Our investment spend has impacted short-term profitability in 2014, but has now reached peak levels and will facilitate continued growth in new customers in 2015 whilst reducing future unit servicing costs.

· We expect that announced reforms in UK pensions, including annuity reforms, will benefit James Hay through increased retention of assets in drawdown and flexible retirement plans.

Our focus will remain on the primary distribution channel of financial advisers, though we are seeking some growth in our direct offering, as clients take advantage of our digital capability to open new accounts.

Whilst 2014 has been a challenging year in terms of financial performance, we believe the investments we have made strengthen the capability of the business, particularly in light of announced reforms to pension legislation, and will return James Hay to meaningful profit growth in 2015.

Saunderson House

Saunderson House offers financial planning and investment advice with assets under advice now in excess of £3.6bn (December 2013 - £3.2bn). It provides holistic financial and investment planning to high net-worth individuals and an investment proposition based on macroeconomic research, rigorous due diligence of fund managers and active asset allocation, with an emphasis on transparency of process. This investment approach continues to deliver excellent performance to clients despite challenging market conditions.

Our strategy is to continue to accelerate growth in the business by increasing clients and assets under advice by broadening our market offering, developing our advisors and generating margin improvement through efficiency gains and the greater use of technology.

Saunderson House has continued to accelerate new client take-on, whilst attrition remains at de-minimus levels. In the period from January to October 2014 we have added 222 new clients (154 for all of 2013), and now have 1,600 clients.

· Income per client remains at consistent levels in excess of £15,000 per annum

· Revenue is growing at more than 20% per annum, and the operating margin in the business is being maintained at in excess of 20%.

· Our increased marketing effort and development of client winning capability will support continued growth both in our core and adjacent markets

· Our primary focus will be on organic growth, but we continue to monitor the competitive landscape for acquisition opportunities which fit with the culture and operating characteristics of Saunderson House.

Group Financial Performance & Outlook

The significant changes to the Group this year, the material increase in the resultant effective tax rate and the continued investment in James Hay, will reduce the expected post-tax earnings for the Group in 2014. On a pre-tax basis adjusted operating profit is expected to be marginally below 2013 on a re-presented basis. The overall impact of the disposals to pre-tax operating profits for the year is not material, but will result in the write-off of deferred tax assets. However the disposals will materially translate goodwill into increased cash balances.

We are strongly positioned as we go into 2015, with two profitable businesses in attractive markets, and a strong liquid balance sheet to support growth and investment. We expect 2015 to deliver meaningful growth in Group profitability, driven by increased revenues in James Hay and Saunderson House, together with a focus on improved cost efficiency.

The completion of the sale transactions will increase cash in the business, with overall net cash post completion of the Irish sale expected to be approximately £25m by year-end. This balance sheet strength will be utilised to drive further growth in our business.

The interim dividend of 1.65c per share will be paid on December 18th. Given the significant changes to the business and the improved liquidity of the balance sheet, the Board will review the dividend policy in early 2015.

Investor and analyst enquiries should be directed to:

Paul McNamara John Cotter Niamh Hore

Group Chief Executive Group Finance Director Investors Relations & Corporate Development

Tel: 00 353 1 275 2800 Tel: 00 353 1 275 2800 Tel: 00 353 1 275 2866

Media enquiries to:

Billy Murphy

Drury Communications

Tel: 00 353 1 260 5000