SNN.L Regulatory News (SNN)

9 September 2020

Sanne Group plc

(the Group, SANNE or the Company)

Interim Results for the six months ended 30 June 2020

SANNE, a leading global provider of alternative asset and corporate services, announces its results for the six months ended 30 June 2020.

1. Underlying results for the year have been presented after the exclusion of non‐underlying items, third-party fund management fees and discontinued activities. Further details of non-underlying items can be found in note 3 of the consolidated financial statements

2. Net revenue comprises turnover less third-party fund management fees. More detail is provided in the Financial Review

3. Constant currency represents the 2020 performance based on applicable 2019 FX rates to eliminate movements due to FX

4. Free cash flow attributable to equity holders is the total cash generated in the year before acquisitions, capital expenditure, financing activities and cash non-underlying costs

Highlights:

o Robust financial performance:

o Net revenue growth of 9.5%3 with organic growth of 8.9%3 reflecting the resilience of client book but Q2 COVID-19 related slowdown in new fund activity

o Underlying operating profit growth of 14.0%3

o Underlying operating profit margin improvement of 210bps to 27.4% in the first half resulting from actions in H2 2019

o Strong cash generation with underlying operating cash conversion in excess of 100%

o New business wins with annualised revenue of approximately £11.1 million secured in the first half with an encouraging pick up since June

o Fast adaptation to COVID-19 implications with no interruption to client service:

o Well invested platform allowed smooth and immediate shift in working patterns under COVID-19 with no interruption to client service

o Prioritised health, safety and wellbeing of our people across all locations throughout the period

o Actively supported COVID-19 related charitable causes across the globe with colleague volunteering and financial contributions

o Progress on strategic goals:

o Continued innovation of technology solutions for improved servicing of customers

o Organic initiatives to sharpen focus and fuel further growth

o Acquisition of Inbhear to increase Dublin capability and open new Cayman office

o Bolt on acquisitions agreed in Cayman and Tokyo to augment presence and drive growth (expected to complete in the second half)

o Completed the disposal of the Jersey Private Client business on 1 July 2020

o Interim dividend of 4.8p (2019: 4.7p), reflecting the Board's confidence in the prospects for the Group

Outlook:

o The business has shown good resilience during H1 2020 during unprecedented conditions, with the operational platform continuing to deliver quality client service and remaining in a good position to overcome any potential future lockdowns

o Whilst economic uncertainty remains around the medium and longer term impact of COVID-19 and the Brexit process, the business model is robust in that revenues are long term, margins are healthy and the resulting cash flow generation is strong

o Signs of market progress have been seen during Q3 and pipeline of new business continues to grow

o These observations give the Board confidence in delivering a full year performance in line with its expectations, and we continue to see the long-term strategic opportunity for the Group

Martin Schnaier, Chief Executive Officer of Sanne Group plc, said:

"The changes that we have made to the business over the past fifteen months have enabled the Group to deliver a resilient financial performance during the first half despite the backdrop of the COVID-19 pandemic. Our ambition remains to provide high quality, professional services to our clients and this year we have particularly focused on technology across the Group which I see as a really exciting development. Operationally we have prioritised the health, safety and wellbeing of all our people and I would like to thank everyone for their continued efforts in delivering uninterrupted quality service to our clients. We remain excited about the long-term opportunities for the business and committed to our stated strategy."

Enquiries:

The Company will be hosting a virtual investor and analyst presentation at 9.30am (GMT) this morning. A webcast will be provided and is available by registering at the following link: https://www.sannegroup.com/investors/results-presentations/

A dial-in facility is also available, and the details are as follows:

A PDF copy of the 2020 Interim Results presentation will be available to download on SANNE's Investor Relations results and presentation page after the live webcast has ended.

Notes:

SANNE is a leading global provider of alternative asset and corporate services. Established for over 30 years and listed on the Main Market of the London Stock Exchange and a member of the FTSE 250 index, SANNE employs more than 1,800 people worldwide and administers structures and funds that have in excess of £250 billion of assets.

Key clients include alternative asset managers, financial institutions, family offices and corporates.

SANNE operates from a global network of offices located in leading financial jurisdictions, which are spread across the Americas, Europe, Africa and Asia-Pacific.

www.sannegroup.com

THE ANNOUNCEMENT MAY CONTAIN "FORWARD-LOOKING STATEMENTS". FORWARD-LOOKING STATEMENTS SOMETIMES USE WORDS SUCH AS "AIM", "ANTICIPATE", "TARGET", "EXPECT", "ESTIMATE", "INTEND", "PLAN", "GOAL", "BELIEVE", "SEEK", "MAY", "COULD", "OUTLOOK" OR OTHER WORDS OF SIMILAR MEANING. BY THEIR NATURE, ALL FORWARD-LOOKING STATEMENTS INVOLVE RISK AND UNCERTAINTY BECAUSE THEY RELATE TO FUTURE EVENTS AND CIRCUMSTANCES WHICH ARE BEYOND THE CONTROL OF THE COMPANY. AS A RESULT, THE ACTUAL FUTURE FINANCIAL CONDITION, PERFORMANCE AND RESULTS OF THE COMPANY MAY DIFFER MATERIALLY FROM THE PLANS, GOALS AND EXPECTATIONS SET FORTH IN ANY FORWARD-LOOKING STATEMENTS. ANY FORWARD-LOOKING STATEMENTS MADE HEREIN SPEAK ONLY AS OF THE DATE THEY ARE MADE AND THE COMPANY DOES NOT ASSUME OR UNDERTAKE ANY OBLIGATION OR RESPONSIBILITY TO UPDATE ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS ANNOUNCEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE, EXCEPT TO THE EXTENT LEGALLY REQUIRED.

Strategic Review

Chief Executive Officer's Statement

The Group has delivered a strong performance during the first half despite the unprecedented COVID-19 conditions during the period. This performance underlines the resilience of our business during a period of considerable uncertainty within global markets that has impacted on new alternative asset fund launches. In our core closed-ended alternatives book, we continued to see healthy revenue growth despite some delays to fundraisings and a lower level of transactional activity during Q2. Overall, the Group increased profitability and continued to benefit from the structural changes that were made last year which continued to yield material improvements in overhead cost control.

The business has continued to track the key strategic ambition of providing best-in-class client service as we smoothly transitioned from office working to remote working across all our locations. Our focus throughout the period has been to prioritise the health, safety and wellbeing of our people and I am incredibly proud of how well they have performed, globally, under such challenging conditions.

In addition to a robust organic performance, SANNE has successfully negotiated two new acquisitions in 2020. In Cayman, the Group signed an agreement to acquire Avalon Trust & Corporate Services Limited and in Japan, we have signed an agreement to lift-out Deutsche Bank's trust company operations. Both transactions are expected to complete during the second half and should help accelerate our growth ambitions in these attractive jurisdictions. The Group also completed the disposal of the Jersey Private Client business on 1 July.

As SANNE continues to build upon its reputation as a leader in our industry, providing our clients with local service excellence on a global, scalable platform, we have refreshed our branding to reflect the tangible evolution of the business during the past year. The new branding communicates a differentiated, technological evolution of our service proposition, enhanced service quality and further ambitions for the exciting opportunities that lie ahead for all our stakeholders. Initial client feedback has been positive, with many noting this better reflects SANNE's evolution to a scaled, industry leading platform focused on high quality client service.

Financial performance

The Group delivered revenue growth of 9.5% on a constant currency basis which was nearer 11% on an actual basis. This is a robust revenue performance for the Group given the backdrop of the global COVID-19 pandemic and demonstrates the resilience of our business and the non-discretionary nature of the majority of the services we provide to clients.

While we are confident that the substantial, long term market opportunity remains for alternative assets, we did see a temporary impact from COVID-19 on our business in two main areas. Firstly, across our core closed-ended business, we saw a shift in client focus away from new fundraising activity and towards portfolio management. While this shift in focus is expected to be temporary, it has caused some delays to actual conversion of our pipeline for new business and slowed transactional activity, particularly in real estate, and therefore contributed to a softer revenue growth rate overall. Secondly, our Hedge business saw a delay in AuM ramp-up from large, new engagements that would have offset the effect of previously reported client attrition in South Africa during 2019. While we still expect these new funds to ramp up, COVID-19 conditions have delayed this, resulting in a soft performance from our principal AuM-based product line for H1 and potentially most of 2020.

Despite this slowdown in new fundraising activity, new business wins with expected annual revenue of over £11m demonstrate a positive result for the Group given the market conditions in the first half.

The Group gross profit has grown in line with revenues at a consistent gross margin compared to the prior year. This result reflects a small underlying gross margin improvement within three of the four reporting segments whilst the EMEA segment margin has been held back as a result of the reduced revenue in the Hedge business and increased costs in Luxembourg following the revenue realignment exercise that we discussed at the full year results. We have also continued to invest in the Group's Product, Business Development and Marketing teams, including work to refresh the Group's branding during the period.

The first half underlying operating profit has materially improved by 20.0% on an actual basis. This improvement reflects the successful actions taken in the second half of 2019 to manage and control overheads after a period of significant investment in our people, processes and systems. It is especially pleasing to see this performance despite our renewed focus and investment in technology.

This performance has meant that the business has delivered a good improvement in underlying operating profit margin from 25.3% in 2019 to 27.4% for the first half. Whilst this has been helped by some one-off cost savings driven by COVID-19, principally travel, most of this improvement is as expected.

The Group has also delivered another period of strong cash generation despite H1 traditionally being the slower period as a result of the timing of invoicing in our Mauritian business. The underlying operating cash conversion for H1 was 101% with free cash flow attributable to equity holders up 16.3% on the first half of 2019 to £15.0 million. This has been driven by our continued working capital discipline as well as the resilient nature of our business model.

Continued strategic delivery

Notwithstanding the global conditions during the first half and the priority to ensure the health and safety of our people in the face of COVID-19, we have continued to make progress against our core strategic goals.

As we reported previously, we have focused on innovation and our use of technology to enhance client service and operational efficiency across the global business. As such, following the restructure of the management team in 2019, we created a new role of Chief Technology Officer. Marie Measures was appointed on 1 January and has already had a significant impact on capability, approach and delivery for the business. An example has been how well the expedited roll out of remote access technology for the entire business during Q1 was managed. This resulted in a smooth transition to remote working when lockdown conditions required and thereby allowed SANNE to continue delivering best-in-class services to our clients. In addition, a thorough review of our legacy systems, team capabilities and user experience has enabled us to identify opportunities to become more efficient in how we work and improve the use of technology internally and in a technology-led client service proposition. In addition to this internal focus, the Technology Team continue to work closely with the Group's Product Development Team to generate significant revenue opportunities through a data and technology led client offering.

Our Product Development Team continued to evolve following its launch last year and we have seen real benefits of having credible, market-leading figures interacting with our key clients, prospective clients and market intermediaries. The Team has also been built out to include enhanced, client-facing regulatory and technology expertise. Together with the Technology Team, the Product Development Team has been leading the development of the Helios4GP data analytics product that was brought into the Group following the investment in Colmore last summer. Our clients have been eager to take up this new product and we believe that this shows what an important service enhancement this will be, especially as it is a unique offering at this time. This product will be available on SANNE's new integrated client portal called Sanne.Live, through which clients will be able to access direct data, analytics and other services. This development launched this year and again shows the progression we are making in delivering a technology-led client proposition.

Despite remote working conditions in the first half, we have continued to be active in delivering on our inorganic strategic goal. We completed the Inbhear Fund Services deal in H1 which provided the Group its first jurisdictional footprint in Cayman and enhanced our existing Irish service offering in Dublin. We have seen continued good performance from this business since acquisition and a healthy amount of cross selling from other parts of the business. Just after the period end, we agreed to enter into two new acquisitions. In Cayman, the Group further expanded by signing an agreement to acquire Avalon Trust & Corporate Services Limited. In Japan, we have signed an agreement to lift-out Deutsche Bank's trust company operations. Since opening our Tokyo office in January 2019, we have seen good progress to date and some encouraging new business wins. Both transactions are expected to complete during the second half and should help accelerate our growth ambitions in these jurisdictions by utilising the trust licences that they have. Both these jurisdictions represent large market opportunities for SANNE where the Group has historically either not been present or been significantly under represented.

The Group completed the disposal of the Jersey based Private Client business on 1 July, and now has a tighter strategic focus on our core markets. I would like to take the opportunity to thank our former colleagues and clients, as well as wishing them all the best for the future.

We continue to see many potential acquisition opportunities across our markets. SANNE has a track record of targeting and integrating high quality strategic acquisition opportunities to build out the client service offering and proposition as well as expanding our physical footprint. We will continue to be disciplined in our approach and assessment of acquisitions.

People, Diversity and ESG

Our people remain our core asset and we have worked hard to ensure that they feel highly valued. The performance of our people during unprecedented COVID-19 conditions in the first half is testament to their quality and resilience and I would like to extend my thanks to everybody for their efforts during the period. We have always prioritised the health and safety of our people during COVID-19 and we will continue to do so.

We have brought our people closer together during the first half and our organisation feels more collaborative than ever. This feeling is reflected by the number of CSR activities run by our people across the globe, voluntarily, that have helped to improve the lives of other people who are less fortunate than ourselves. We have shared many initiatives over social media and these are also shown on our website, but they have included a £40,000 donation to the Mind Charity in Jersey, a €20,000 donation to the Irish Red Cross, Focus and Basis Point Charities in Ireland, as well as donating thousands of family food packs and care kits to NGO partners in Mauritius through the SANNE Solidarity Fund.

During the period we launched an important new initiative and established our first Diversity & Inclusion Committee. This initiative was introduced to provide a channel for our business to deliver enhanced capability through our people's diversity. The Committee was formed by volunteers drawn from around our global business and will be reporting directly to the Group's Executive Committee. Together with the 2019 initiative to form a Workforce Advisory Panel made up of a selection of colleagues from around the Group and attended by several non-executive directors, we believe that our people have valuable, open avenues to help drive ideas for change across the business as well as the employee proposition at SANNE.

As reported during the 2019 full year results, we continue to make great progress in our ESG programme, both for the Group as well as for our clients. As such, we have appointed our first Global Head of ESG who will take responsibility for articulating and delivering our approach internally and in relation to helping our clients. Following the end of the period, SANNE has become a proud signatory of the United Nations supported Principles for Responsible Investment (PRI) Initiative, an international network working together to put the six Principles for Responsible Investment into practice.

Outlook

Whilst acknowledging the uncertainty around the medium and longer-term economic impacts of the global COVID-19 pandemic and the continuing lack of clarity around the Brexit process, the first half performance of the Group demonstrates the resilience of its business model that is predicated on diversified markets, long-term recurring revenues, healthy margins and strong cash generation. This, together with the performance to date and an encouraging pipeline of new business opportunities, gives the Board confidence in both delivering a full year performance in line with its expectations, as well as the long-term strategic opportunity.

Martin Schnaier

Chief Executive Officer

Operational Review

The Group's four reporting segments are: Europe, Middle East and Africa (EMEA); Channel Islands (CI); North America (NA); and, Asia-Pacific & Mauritius (APM). As highlighted in the full year result for 2019, a realignment of client revenues between EMEA and CI was undertaken at the end of 2019 to better match client revenues with the jurisdictions within which the client teams operate. Whilst this exercise was largely done by the end of 2019 and therefore the full year segmental reporting reflected this, the results below for the first half of 2019 have been re-presented to reflect the new alignment.

Unless otherwise stated, all growth rates discussed in the segmental reviews are on a constant currency basis.

Europe, Middle East and Africa (EMEA)

SANNE's EMEA segment operates across Luxembourg, Ireland, the United Kingdom, Spain, France, the Netherlands, Malta and South Africa. This division provides services across all our closed-ended investment strategies (Private Debt, Capital Markets, Real Estate, Private Equity and Loan Agency, including Depositary) as well as the Group's open-ended Hedge and corporate clients.

Following a strong revenue performance and good momentum coming out of 2019, the EMEA business saw a good start for revenue growth in 2020 which was subsequently adversely impacted by the COVID-19 pandemic from mid-March. Despite this the segment saw robust revenue growth of 8.8% versus the prior year.

The European jurisdictions saw solid performances across almost all product lines. During the period we have successfully launched our closed-ended fund administration capability in Spain with our first Real Estate fund clients. Good growth was also seen across the Loan Agency book which has benefited from a strong return to activity towards the end of the period. The Group is also well progressed in the process of applying for its AIFM Depositary licence in Ireland which would add a significant additional service offering for the jurisdiction at a time where few other third-party administrators can offer the service.

The most severe effects of the COVID-19 pandemic were seen in the first half across the Group's Hedge business in South Africa and Malta. As highlighted last year, the business had seen abnormally high one-off client losses in 2019 which were expected to be offset by particularly strong new business wins. However, whilst the new funds came on to the platform in Q1 of this year, COVID-19 has significantly delayed the allocation of capital into the new funds. Whilst this delay in allocation is expected to be temporary, given the ad valorum fee structure in the Hedge business, this has materially impacted the first half performance.

The segment's margin in the period has been disproportionately impacted by the delay in revenues in the Hedge business as this product offering is highly operationally levered. This combined with elevated costs in Luxembourg as we reorganise the operation following the revenue reallocation exercise has led to a dilution of the margin in the first half.

The first half of the year has also seen the acquisition of the Inbhear in Dublin on 30 April 2020. During the first half the Inbhear team relocated into SANNE's office and the integration process in progressing well.

Channel Islands (CI)

Note: The results above include only continuing operations

SANNE's CI segment operates in both Jersey and Guernsey. The segment provides services across all our closed-ended investment strategies (Private Debt, Capital Markets, Real Estate and Private Equity). The segment also includes the majority of the Group's services to corporate clients. The results exclude the contribution from the Group's Jersey Private Client business in the first half following agreement to dispose of the business. The disposal completed on 1 July 2020.

Revenues from the CI segment saw growth in the period of 9.8% which reflects a similar impact from COVID-19 as seen and discussed above in EMEA. The segment saw a solid performance across all asset classes with PE and Debt funds driving much of the growth whilst Real Estate in particular saw subdued transaction activity as a result of COVID-19. The period has seen us invest in the management teams across both jurisdictions with new Heads of each appointed and settling in well. Following 2019 the Group has sought to invest in Guernsey in particular. SANNE has historically been underweight on the island but there continue to be good growth opportunities that we can target with the new team in place.

The realignment of client revenues at the start of the period has allowed local management to start driving an improved margin performance in the first half which is expected to continue to improve.

Asia Pacific and Mauritius (APM)

SANNE's APM segment operates across Hong Kong, Singapore, Shanghai, Tokyo, Mumbai and Mauritius. This segment provides services across all core products areas.

The segment delivered revenue growth of 8.3% driven by another strong year across the Asia Pacific offices as well as encouraging growth in Mauritius.

The APAC offices delivered growth of 16.2% in the first half despite the impact of COVID-19 affecting almost the entire period. This was helped with the contribution of revenues from Japan compared with none in the prior year as well as good levels of new business, particularly across private equity. In addition to COVID-19, the region continues to see a certain level of disruption in Hong Kong due to on-going protests and unrest. However, given the non-discretionary work SANNE undertakes, this disruption has had minimal impact on existing structures.

Mauritius saw revenue growth of 4.5%. Again, the region has been impacted by COVID-19, particularly in the region's largest end market of India, but has also benefited from good levels of new business wins and continues to perform very well against the local competitors.

The segment's gross profit margins increased in the period to 70.3%. This was delivered despite the new and fast-growing office in Japan dampening margins slightly and was largely driven by an improved margin in Mauritius.

North America (NA)

SANNE's NA segment primarily services closed-ended alternative fund clients in North America.

The first half of the year saw revenue growth of 12.4% whilst slightly improved margins helped contribute to 16.4% gross profit growth. The majority of the segment's operations are in New York which was impacted particularly heavily from mid-March onwards by COVID-19 related restrictions which have had a similar impact to the rest of the Group, dampening growth particularly in the second quarter.

This strong performance continued to be delivered from opportunities across the region's traditionally strong presence in the Private Equity sector. Travel restrictions have delayed the launch of the Group's loan agency offering in the region, but this is expected to launch later in the second half.

Financial Review

Group Income Statement

Turnover and Net Revenue

In these interim results, we have sought to separate out third party fund management fees for the first time. These relate to asset management fees for a small number of funds that are clients of the Group's AIFM Management Company in Luxembourg. These revenues are the management fees for the asset manager in each funds case, but contractually are paid by the fund entity to SANNE's management company before being dispersed to the relevant asset manager. This has started occurring as a result of new engagement structures through the management company that result in these fees being recognised as turnover for SANNE under IFRS 15. Given these revenues are not economically SANNE's we have sought to separate these out. Historically, these amounts have not been material, but given strong growth of management fees in H1 2020, it is deemed appropriate to split these out and refer to Net Revenue as the relevant income for SANNE. Turnover for the period grew by 12.6% on a constant currency basis and 13.8% on an actual basis in the first half when the third-party asset manager fees are included.

Net revenue increased by 9.5% on a constant currency basis in the period to £83.9 million (2019: £75.9m). Organic revenue growth in the period was up 8.9% on a constant currency basis for the whole group. This ignores the revenues earned in the period from discontinued operations.

Note: See the Alternative Profit Measures section for organic growth calculation methodology

Gross profit

Gross profit for the period was £49.8 million (2019: £45.3m). The gross profit margin was 59.3%, broadly flat on the prior period result of 59.7%. This result reflects both the negative margin impact that arises as a result of issues in the South African Hedge business, where the direct cost base is largely fixed, so the drop in revenues has a notable impact on gross margin and the continued increase in investment in the Group's Product and Business Development teams. These have been offset by improvements to resourcing controls in the EMEA and CI divisions following the reallocation of client revenues at the end of 2019.

Underlying operating profit and overheads

Underlying operating profit grew by 14.0% on a constant currency basis to £23.0m (2019: 19.2m). This reflected the robust net revenue and gross profit growth as well as an improvement in the overheads cost as a proportion of net revenues.

Group overheads, excluding non-underlying items, were broadly flat on the prior year despite the growth in the business. These costs represented 31.9% of net revenue for the first half compared with 34.5% for the first half of 2019. These overhead costs continue to contain the costs to support the discontinued activities which are not separated as they were not part of the disposal perimeter.

Non-underlying costs and reported operating profit

Non-underlying costs in 2019 saw a decrease to £10.6 million (2019: £13.8m). Non-underlying items within profit measures include share-based payments and earn-out costs where they relate to acquisitions (£1.2m); acquisition and integration costs (£1.2m); amortisation of intangible assets (£8.1m) and other costs. For further detail on non-underlying items, please see note 4 in the financial statements.

Reported operating profit for the period has increased significantly in the first half of 2020, up 90.0% on a constant currency basis and 109% on an actual basis. This is a result of both the growth in underlying profits as well as the drop in non-underlying items, most notably the lack of any impairments recognised compared with last year.

Net finance expense and other gains and losses

Net finance expense was broadly flat on the prior year at £2.2 million (2019: £2.3m). However, the Group benefited from £1.5m of foreign exchange gains (2019: £0.2m). The foreign exchange gains arose largely as a result of the Group holding funds to settle the Inbhear acquisition which saw some delays in completion at a time sterling devalued materially against the Euro.

Taxation

The Group's underlying effective tax rate for the first half was 18.4% (2019: 21.0%). When adjusted for non-underlying items, the reported effective rate for the half year for the Group was 21.0% (2019: 36.0%).

Diluted earnings per share

Underlying diluted earnings per share grew significantly to 12.3 pence (2019: 9.4p). Reported diluted earnings per share, which includes the post-tax contribution from discontinued operations, also grew significantly to 6.7 pence (2019: 2.4p).

Dividend

Despite the backdrop of the current global COVID-19 crisis, SANNE continues to be a highly resilient and cash generative business. This enables the Board to continue to adopt a progressive dividend policy where it seeks to increase the absolute value of the dividend each year, subject always to maintaining a sufficient level of dividend cover. Accordingly, the Board is recommending an interim dividend of 4.8 pence per ordinary share (2019: 4.7 pence). The interim dividend will be payable on 16 October 2020 to Shareholders on the register at close of business on 18 September 2020.

Cash flow and working capital

The first half of 2020 has seen another strong period of cash generation with underlying operating cash conversion of 101% (2019: 111%). The main movements in the cash flow are summarised below:

Following the development of improved processes during 2019, SANNE has continued to manage working capital well resulting in high levels of cash conversion.

Capital expenditure in the year comprised equipment and software purchases and software development costs. The purchase of equipment and software largely relates to office fit-out costs in the Group. The software development costs relate to the joint development project with Colmore, which will offer the Helios technology and data analytics platform to our global alternatives client base.

The payment of deferred consideration of £3.3 million shown in the Group cash flow statement and included in the above table in the cash flow statement within "Non cash non-underlying items" relates entirely to the final settlement of the earn-out payment for AgenSynd which has been accruing as a non-underlying item since the acquisition.

Capital management and financing

At 30 June 2020, the Group's net debt was £87.3 million (2019: £55.0m), including gross cash balances of £51.5m (2019: £44.2m). This reflected the strong operating cash generation seen in the year and comes after the funding of the earn-out payment for AgenSynd, the acquisition of Inbhear and dividends paid to shareholders. As a result, the Group's headline net debt to underlying earnings before interest, taxation, depreciation and amortisation calculated ignoring IFRS 16 (net debt to pre-IFRS 16 EBITDA) ratio was 1.7x at the period end (2019: 1.2x). At 30 June 2020 the cash ring fenced for regulatory capital requirements ("regulatory cash") was £13.3 million (2019: £9.0m). Excluding this regulatory cash from available cash, the Group's net debt to pre-IFRS 16 EBITDA ratio increases to 1.9x (2019: 1.4x). 

Foreign Exchange

The Group's results are exposed to translation risk from the movement in currencies. Overall, the average movement from currencies has increased net revenue and underlying operating profit by £0.9 million and £1.1 million respectively. In addition, this currency movement in the first half has resulted in £13.3 million of other comprehensive income recognised in the Consolidated Statement of Changes in Equity which relates to the non-cash translation gain on the Group's goodwill balances where they are created in non-sterling currencies. During the six months ended 30 June 2020 the key individual exchange rates have moved, as shown in the table below.

Discontinued activities

SANNE entered into an agreement during the first half of 2020 to sell its Jersey based private client business. The results for this business are included in these financial statements as discontinued operations under IFRS 5 with further details in note 6.

Principal risks facing the business

SANNE operates an embedded risk management framework which ensures the principal risks facing the Group are reviewed regularly by the Board. There are a number of potential risks that could have a material impact on the Group's financial performance and position which remain as set out in the 2019 Annual Report. These are categorised as Acquisition Risk; Strategy Risk; Competitor & Client Demand Risk; Data & Cyber Security Risk; Process Risk; Staff Resources Risk; Compliance Risk; Financial Crime Risk; Fiduciary Risk and Financial Performance Risk. In response to the COVID-19 pandemic our Group-wide response programme was initiated during January 2020 as our APAC offices started to be impacted. The Group continued to service clients throughout the period and all of our offices have re-opened with full COVID-control measures.

ALTERNATIVE PERFORMANCE MEASURE DEFINITIONS

The Group uses alternative performance measures (APMs) to provide additional information on the underlying performance of the business. Management use these key measures to assess the underlying performance of the Group's business and the adjusted performance enables further comparability between reporting periods. The APMs used to manage the Group are as follows:

NET REVENUE

Net revenue comprises turnover less third-party fund management fees. These third-party fund management fees relate to asset management fees for a small number of funds that are clients of the Group's AIFM Management Company in Luxembourg. These revenues are the management fees for the asset manager in each funds case, but contractually are paid by the fund entity to SANNE's management company before being disbursed to the relevant asset manager. SANNE has started recognising these third-party fees as turnover under IFRS 15 because of new engagement structures through the management company. Given these revenues are not economically SANNE's we have sought to separate these out and believe that net revenues are a more accurate reflection of the income that SANNE earns for its services to the relevant fund entity.

ORGANIC REVENUE GROWTH

Organic revenue growth is net revenue growth adjusted for acquisitions on a like-for-like basis. To arrive at a like-for-like basis, revenue from any acquisition made in the year is excluded. Where an acquisition was made part way through the prior year, the current year contribution will be reduced to include only the same period as had been included in the prior year. A reconciliation is included in the Financial Review. Organic revenue growth measures are a key performance indicator for the growth of the business excluding the impacts of any acquisitions undertaken.

CONSTANT CURRENCY GROWTH

To highlight our period on period performance, we discuss our results in terms of growth at constant currency. This represents growth calculated after translating both year's performance at the prior year's applicable exchange rates.

UNDERLYING PROFIT MEASURES

Underlying profit measures are used to present the period on period performance of the Group excluding one-off or non-trading related income and costs. These are arrived at by adjusting reported profit measures for non-underlying items as disclosed in note 4 of these financial statements.

UNDERLYING OPERATING CASH FLOW

Underlying operating cash flow represents the cash generated by total operations in the year, adding back the cash charges within non-underlying items and reducing for the total cash out flow in relation to the Group's leases that have been accounted for under IFRS 16. A reconciliation is included in the Financial Review.

UNDERLYING OPERATING CASH CONVERSION

Underlying operating cash conversion is the underlying operating cash flow as a percentage of continuing underlying operating profit. This measures the Group's cash-generative characteristics from its underlying operations and is used to evaluate the Group's management of working capital.

UNDERLYING FREE CASH FLOW ATTRIBUTABLE TO EQUITY HOLDERS

Free cash flow attributable to equity holders represents our underlying free cash flow prior to any acquisitions, refinancing or share capital cash flows. It is a key measure of cash earned for the shareholders of the Group that can be used to generate cash returns or be invested in the future growth of the business. A reconciliation is included in the Financial Review.

UNDERLYING EFFECTIVE TAX RATE

The underlying effective tax rate is determined as the reported tax rate for the Group adjusted for the tax effects of non-underlying costs. The underlying effective tax rate best reflects the applicable tax payable in relation to the underlying performance of the Group. A reconciliation is provided in note 5 to these financial statements for the underlying effective tax rate.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE INTERIM STATEMENT

We confirm to the best of our knowledge that:

o The unaudited condensed set of financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and give a true and fair view of the assets, liabilities, financial position and profit for the Group; and

o The interim management report includes a fair review of the information required by:

A. DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

B. DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

The interim statement contains certain forward-looking statements which are made by the directors in good faith based on the information available to them at the time of their approval of this interim statement. Forward looking statements contained within the interim statement should be treated with some caution due to the inherent uncertainties, including economic, regulatory and business risk factors, underlying any such forward looking statements.

We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. The interim statement has been prepared by Sanne Group plc to provide information to its shareholders and should not be relied upon by any other party or for any other purpose.

Martin Schnaier

Chief Executive Officer

9 September 2020

Independent review report to Sanne Group plc

Report on the consolidated financial statements

We have reviewed Sanne Group plc's consolidated financial statements (the "interim financial statements") in the Interim Results of Sanne Group plc for the 6 month period ended 30 June 2020. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

The interim financial statements comprise:

· the Consolidated Balance Sheet as at 30 June 2020;

· the Consolidated Income Statement and Consolidated Statement of Comprehensive Income for the period then ended;

· the Consolidated Cash Flow Statement for the period then ended;

· the Consolidated Statement of Changes in Equity for the period then ended; and

· the explanatory notes to the interim financial statements.

The interim financial statements included in the Interim Results have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The Interim Results, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the Interim Results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Interim Results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

London

8 September 2020