IFG Group plc - Interim Management Statement Q1 2017

IFG Group plc is a focused financial services group with full market listings in London and Dublin. The company provides a range of financial solutions through its subsidiaries, James Hay and Saunderson House. James Hay is a market leading UK retirement wealth planning platform and Saunderson House is an award winning independent financial adviser.  IFG Group plc issues the following trading update for the 3-month period to 31 March 2017.  

Highlights  

  • Total Assets under Administration and Advice have increased to £28.0bn, up 5% since 31 December 2016 (£26.7bn) and up 17% compared to 31 March 2016 (£24.0bn).  
  • Assets under Administration in James Hay, as at 31 March increased to £23.3bn (31 December 2016 - £22.1bn), with inflows from new and existing clients of £0.8bn. 
  • New clients in James Hay of 1,600 were 45% ahead of the same period in 2016 (1,100), with higher average case size, demonstrating the benefits of the focused distribution strategy. Attrition remains in line with 2016.
  • The lowering of the UK base rate in Q3 2016 has impacted James Hay revenues and profits in Q1 2017 by £1.6m compared to H1 2016 as previously indicated. Pricing changes will take effect in H2 2017 leading to an improved revenue and operating margin trajectory from H2 2017.
  • Saunderson House now serves 2,017 clients, up from 1,956 in December 2016, with new client wins in Q1 2017 of 86, bolstered by the success of our new discretionary management service offering, which is attracting a broader range of clients to Saunderson House. 
  • Assets under Advice in Saunderson House were £4.7bn, up from £4.6bn in December 2016. 
  • The investment spend, which we committed to in James Hay despite short-term challenges to revenue, has now peaked. We expect the benefits, together with the pricing changes, reduced run rate on cost in H2 2017, and strong Q1 client and asset growth, to drive a much-improved financial performance in H2 2017.
  • We are addressing a legacy issue in James Hay which is discussed in detail under Other Matters below.

  John Cotter, Group Chief Executive, commented:  

The Group has recorded another strong quarter of client and asset growth. The Group continues to attract an increasing level of high quality new business which has driven growth in Assets under Administration and Advice, reflecting the benefits of a focused distribution strategy in James Hay and the discretionary offering in Saunderson House. Changes to interest rates in 2016 impacted the Group revenue trajectory and masked the underlying performance of the business short-term, but this is being mitigated whilst we continue to drive improvements to our propositions and operating capability. The cost base in James Hay will normalise in H2 2017, as we see the benefits of the efficiency gains from the investment spend. We expect both businesses to continue to grow, and the changes we have made will deliver, from H2 2017, improved underlying financial performance.” 


John Cotter     Group Chief Executive       Tel: +44 203 887 6181  
Andrew Price  Group Chief Financial Officer  Tel: +44 203 887 6181

James Hay
James Hay provides a platform for retirement wealth planning, underpinned by a specialist capability in pension administration. James Hay administers self-directed pension schemes, in addition to offering ISAs and general investment accounts in the Modular iPlan (“MiPlan”) for almost 57,000 customers. As of 31 March, it has £23.3bn in Assets under Administration (31 December 2016 - £22.1bn).
James Hay has added more than 1,600 new clients in Q1 2017, principally to the MiPlan product which has attracted new business due to its transparent pricing and flexibility. MiPlan, which was launched in 2013, now represents £10.3bn of the Assets under Administration across almost 26,000 clients.

As disclosed in the 2016 Annual Report, we increased investment in the operational and change capability of the business over the last 18 months, which has impacted the cost base.  We believe these investments were necessary to deliver improved capability to the business, to ensure James Hay provides a compelling proposition for clients.  We are now coming to the end of this increased investment phase and we will see the run rate on cost reduce in H2 2017, as this investment delivers efficiency gains, which will translate into reduced headcount and related costs, by the end of 2017.  

Saunderson House
Saunderson House offers award winning financial planning and investment advice with Assets under Advice, as of 31 March 2017, of £4.7bn (31 December 2016 - £4.6bn). It provides holistic financial and investment advice and discretionary portfolio management to high net-worth individuals, with 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 investment performance to clients. 

Saunderson House has continued to attract new clients, whilst attrition remains at de-minimus levels. In the first quarter, we added 86 new clients. This is driven in part by the success of the discretionary offering which is attracting a broader range of clients to Saunderson House, and is enabling Saunderson House to compete much more effectively in segments of the market where it previously did not have a suitable offering.   

Other Matters

As has been reported in the media, HMRC is investigating a non-standard investment known as “Elysian Fuels”, which was a structured investment in biofuel businesses initiated between 2011 and 2015, an equity component of which was held by some investors through their SIPP. Some of these investors are clients of James Hay.  Around 500 of James Hay’s 57,000 clients invested a total of c.£55m in Elysian Fuels.
James Hay did not advise investors in relation to these investments; it acted solely as pension administrator. James Hay has received, in April 2017, assessment notices for sanction charges from HMRC for the tax years 2011/2012 and 2012/2013 in total for £1.8m. These have been appealed and are the subject of ongoing discussions with HMRC.   
The extent of any ultimate exposure to the Group is uncertain at this stage, and may in any event be mitigated by indemnities available to us. Sanction charges can be levied by HMRC on SIPP providers where there is deemed unauthorised payments, the amount of which is dependent upon the individual circumstances of each investor. We believe James Hay acted appropriately and in accordance with its clients’ instructions in relation to these investments. We will be incurring ongoing legal costs in relation to this issue.

As part of the transfer of the Group’s support functions to London, in order to co-locate with the Company’s primary businesses, the Company’s office at The Oval, Shelbourne Road, Dublin 4 will be closed on the 31 May 2017.  Effective the 15th May 2017, the Company’s registered office address will change to: 

70 Sir John Rogerson’s Quay Dublin 2 Ireland

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