Allfunds Group plc (ALLFG) Earnings Call Transcript

Welcome to the Allfunds 2026 Interim Results Conference Call. This conference is being recorded. [Operator Instructions] Presenting on today's call, we have the CEO, Annabel Spring; the CFO, Alvaro Perera; and the Head of Investor Relations, Carlos Berastain. I will now hand you over to Mr. Berastain to begin. Please go ahead.

Good morning, everyone, and welcome to Allfunds' First Half '26 Interim Results Presentation. Thank you for joining us today. This conference call is being streamed live and a replay will be available on our website later today. The presentation materials are also available on our corporate website already. So without any further delay, I will pass it on to our CEO, Annabel Spring. Annabel, over to you.

Thank you, Carlos. Before reviewing our performance in the first 6 months of the year, let me briefly comment on the recommended acquisition by Deutsche Börse. While the transaction remains subject to various regulatory approvals, it continues to progress, and we remain on track for the expected closing in the first half of 2027. With that, returning to -- Allfunds. We are delivering on the strategic priorities we outlined in the last earnings call. The strategic portfolio review is now complete. We have executed the sale of WebFG and our partnership with Waystone has allowed us to progress the exit of ManCo, ensuring continuity for clients while bringing together complementary capabilities. Alongside this completion, we sharpened our strategic focus on core growth, accelerated innovation and expanded our platform into some of the industry's fastest-growing areas, including private markets, ETFs and tokenization. This expansion includes the launch of our new ETF functionalities, an important milestone that broadens our multiproduct proposition and extends the capabilities available to clients. We also expanded our network of strategic partnerships and blockchain initiatives, including expanding tokenized fund capabilities to the Solana network, creating new distribution opportunities for asset managers and greater flexibility for clients. We've launched tokenization -- tokenized rather private market solutions for institutional investors such as Hamilton Lane, Apex Group and BBVA Asset Management. And in addition, we've partnered with Alchelyst to launch a new API that automates private markets transactions end to end. These partnerships further strengthen our position in the wealth management industry as the leading global dealing and distribution B2B platform while enhancing access, efficiency and scalability across the investment ecosystem. Turning now to our financial performance. We made a strong start in 2026, delivering double-digit growth across our key financial metrics and seeing continued healthy client activity across the platform. AUA reached a record $1.9 trillion, driven by both positive net inflows and favorable market conditions. Net flows were strong at $51 billion, reflecting continued client demand across the platform. We also continue to grow our network, adding 46 distributors and 94 fund partners during the period. Revenues increased 10% year-on-year or 11% excluding NTI, while adjusted EBITDA grew 10%, maintaining a margin of 67.8%. Taken together, these results show the strength of our model, our ability to capture structural growth and, of course, the operating leverage built into the platform. Private markets continue to be a key growth driver for the wealth industry, supported by broader investor access and ongoing product innovation, including ELTIF 2.0 and Evergreen funds. Now despite the attention around liquidity events affecting certain alternative funds, the impact across our platform has remained limited and has been effectively managed in close coordination with our distributors and our fund partners. The investment case for alternative remains compelling. We continue to strengthen our position and now work with over 250 alternative asset managers and more than 490 distributors globally. Including alternative UCITS, our network exceeds 1,100 partners, reinforcing our position as a leading alternatives platform network outside the U.S. Interestingly, growth was broad-based across regions, asset classes and products. Total alternative assets reached $101.5 billion, including both private markets and alternative UCITS. Alternative Solutions AUA grew 54.4% year-on-year to $41.4 billion. Notably, half of this volume came from AUA under distribution agreements, which reached 62% at $21.6 billion. Alternative UCITS AUA also continued to perform, rising 21.3%. These figures point to a clearly broader adoption of alternatives by distributors and continued engagement from asset managers. As the market evolves, clients will increasingly value platforms that combine scale, efficiency and ease of access, and we remain focused on delivering all 3. Now with that, I'll hand over to Alvaro, who will take you through the first half financials in detail.

Thank you, Annabel, and good morning to everyone. To make the comparison easier, we have included both last year's figures, which still included certain businesses exited during 2026 and the restated first half 2025 view, which provides a like-for-like comparison with the current H1 '26 perimeter. We've also included a reconciliation table in the appendix to bridge last year's figures and perimeter to the current basis. With that context, I will start with our financial performance for the first half of 2026. In the first half of '26, we delivered solid growth across our key financial metrics. We reported net revenues of EUR 337.6 million, up 10% year-on-year and 11% excluding net treasury income, reflecting the strength and consistency of our core business. Adjusted EBITDA increased to EUR 229 million, up 10% year-on-year on a like-for-like basis, and our adjusted EBITDA margin increased from 67.6% to 67.8%. If we compare this against last year's reported figures, which still included certain businesses exited during the first half of '26, adjusted EBITDA growth was 11.2% and adjusted EBITDA margin improvement was 2.8 percentage points. Adjusted profit after tax rose by 10%, reaching EUR 141.5 million and adjusted EPS increased by 12%, reflecting our continued ability to convert operational strength into shareholder value. Let's now turn to Slide 9 and take a closer look at the growth trajectory of our core business. As of June 2026, our assets under administration reached EUR 1.94 trillion, representing a 10% increase since December 2025. This growth was supported by strong platform service net inflows of EUR 51 billion with broadly equal contributions from existing client flows and new client migrations. Market performance added a further EUR 84 billion to AUA, supported by constructive conditions across a broad range of asset classes and geographies. Dealing and execution assets also increased by EUR 48 billion, bringing total dealing and execution AUA to EUR 558 billion, while platform service AUA reached EUR 1.39 trillion. Overall, these results reinforce Allfunds' attractive positioning in a growing market and the resilience of our business model. Turning now to margins. Our overall platform margin stood at 3.4 basis points in the first half of 2026, in line with the second half of 2021. Importantly, commission revenue margins remained largely stable at 2.3 basis points. Shifting our focus to revenue performance. We have continued to deliver consistent and structural revenue growth in the first half of 2026. The main driver of this performance was commission revenue, which increased by 14.4% year-on-year to EUR 208.1 million. The other revenue lines also contributed positively, albeit at a more moderate pace. Moving now to expenses. We continue to invest selectively in the business while maintaining a strong cost discipline. Adjusted expenses increased by 8% year-on-year to EUR 110.9 million. This increase reflects both higher levels of business activity and targeted investments to support the long-term development and scalability of the platform. Around half of the increase was driven by inflation and incremental business activity, reflecting the continued expansion of our operations and client engagement across the block. The remaining increase relates to technology and operational enhancements, focused on strengthening our infrastructure, expanding platform capabilities and supporting the delivery of our strategic growth. Importantly, expense growth remained below revenue growth. The combination of strong revenue growth and disciplined cost management has enabled us to deliver double-digit EBITDA growth while further expanding margins. Adjusted EBITDA increased by 10% year-on-year to EUR 229 million on a like-for-like basis. Compared with last year's reported figures, adjusted EBITDA growth was 11.2%, while adjusted EBITDA margin improved by 2.8 percentage points. This reflects the positive impact of the strategic review announced last year and the disciplined execution of our plan. As you may recall, the guiding principle behind that review was to generate sustainable growth and create long-term value for clients and shareholders by focusing on businesses that are truly synergistic, profitable and scalable. As a result, we are increasingly focused on what we do best, our core platform and distribution capability. Allfunds continued to demonstrate strong capital generation capacity during the first half of 2026 and a robust solvency position. Risk-weighted assets remained broadly stable despite the continued expansion of the business, while CET1 capital increased to EUR 603 million, resulting in a CET1 ratio of 34% and providing a resilient capital buffer. This increase in CET1 capital was primarily driven by first half interim profit as well as the reduction in intangibles following the disposal of WebFG, which is anticipated earlier this year have been classified as held for sale. At the same time, we returned EUR 120 million to shareholders through the EUR 0.2 per share dividend paid earlier this year. Looking ahead, our robust first half performance gives us confidence in our ability to deliver on our objectives for the full year. The fundamentals of the business remain strong, supported by continuous client activity, sustained net inflows, a resilient revenue profile and the ongoing benefits of operational leverage across the platform. In summary, we remain firmly on track to deliver our 2026 guidance. Once again, thank you for your attention. And with that, let's open the Q&A session.