Quilter plc (QLT) Earnings Call Transcript

Hello, and good morning, everyone. Thank you for taking the time to join us this morning for our interim results presentation. Hopefully, when we next present, we won't be limited to a virtual format, and I look forward to meeting you in person. In the meantime, I hope you and your families are keeping safe and well. I'll start with some words about our industry and cover the highlights of the entire business. Mark will talk to our financial performance with a focus on the continuing business. And then we'll switch over to a live call, where I'll be joined by my executive committee colleagues to take their questions. We're pleased to be announcing a good set of results today. Before we dive into those, I want to start with a broader perspective on Quilter's position within the wealth management industry and the main themes defining the industry landscape. First, there's an enduring need for the advice we provide. Times are particularly uncertain as we adjust to living with the pandemic. Easy monetary policy and targeted financial support prevented a social and medical catastrophe from becoming an economic one. But as those measures are withdrawn, they'll have to be paid for, potentially through higher taxes. All these uncertainties create demand for financial advice as clients look for guidance in a hard-to-navigate world. Second, our industry is being transformed by digitalization. Its potential to drive efficiency has been apparent for a while now. And the pandemic has turbocharged, both client and adviser adoption of new and more convenient ways of working. In the technological leadership was the philosophy that underpinned our investment in our new platform. The new platform provides the digital foundation for all things Quilter by linking products, business lines and distribution channels. We can now do things that we simply couldn't have considered with the old platform. It allows client self-service options and means we can offer a wider range of services more efficiently than ever before. Looking forward, both advisers and investment managers will continue to embrace digital means of serving clients to drive efficiency and enhance productivity. That makes embedding digital strategies into core operating models essential. Third, our market will continue to consolidate, and I'm not just talking about M&A. Over time, assets will migrate to the scale players who can afford to invest to deliver compelling competitively priced solutions. Weaker players, if they're not acquired, will simply fade away. We're going to be a winner here. And while we never rule out acquisitions, they're not currently on our agenda. Our business is in the shape we want. We have the scale and capabilities to cover all clients and their needs right across the wealth market in the U.K. Finally, ESG, and particularly the E is increasingly central to any successful business model, both the pandemic and the recent extreme climate events globally have brought this home even to the skeptics. I want Quilter to be the U.K.'s leading responsible wealth manager, with ESG philosophies fully embedded within the advice process. We'll provide ESG ratings right across all the funds on our platform, and we're positioning our solutions in Quilter Cheviot and Quilter Investors to deliver good ESG outcomes and good investment performance. Right. Let's now turn to our first half performance. In our familiar format, let's consider progress along 3 dimensions: financial momentum, operational improvement and strategic progress. I'm delighted to report that we've made excellent progress on all 3 fronts. Financially, we've achieved a strong improvement in gross and net flows, driven by our new platform, and we delivered 20% growth in adjusted profit to GBP 85 million. We've lifted our interim dividend to 1.7p per share versus GBP 0.01 a share last year. We drove a 3 percentage point improvement in the operating margin despite absorbing cost headwinds, which Mark will cover later. And as you know, we've also returned around GBP 265 million to shareholders through our buyback program with nearly GBP 100 million completed since our full year results in March, leaving just over GBP 100 million to go, which we plan to get done this year. Operationally, our optimization plans, which we upscaled to GBP 65 million back in March are on track. We have deployed the first phase of our new general ledger, which will ultimately replace the multiple ledgers in place today and achieve operational and control efficiencies right across the business. We've also been hard at work implementing productivity initiatives in Quilter Financial Planning, and we are investing to transform that business. Finally, in terms of strategic progress, we completed our platform migrations and we announced the sale of Quilter International, which was overwhelmingly approved by shareholders in June. While we're pleased with where we are and the progress we have made, there is much more that I know we can do. That's why we have a plan with demanding growth and efficiency targets to deliver much improved operating margins. I'm looking forward to sharing more details of these plans with you at our Capital Markets Day in November. You've seen this slide before. A summary of our net flows. We haven't been delivering this level of client flow since 2018, and we're just getting started. I'm delighted by the strong improvement in our platform flows, and I'll drill down into that in a moment. But what I want to draw out here is the sharp improvement across the whole business. Our platform shown in dark green delivered its best performance in over 3 years. Quilter Cheviot in black doubled net flows on last year and finished the quarter with strong momentum. We've also seen a welcome pickup of flows into Quilter Investors in light green. This was supported by the strong improvement in investment performance for the Cirilium Active range over the last year. There's a slide showing investment performance at Quilter Investors and Quilter Cheviot in the Appendix to this presentation, which summarizes their strong performance outcomes. Let me now turn to our Advice business. Here, we're very focused on adviser productivity and strategic alignment. We want to ensure that we have the best targeted adviser force across the entire wealth spectrum. This is all about providing an integrated proposition for advice, platform services and investment solutions to an excellent standard across all our core client segments. We are pleased with the more focused shape of the adviser mix. But it's not just about the number of advisers, we have also been investing in Quilter Financial Planning's infrastructure to support growth while strengthening processes and controls. You'll recall that at the full year, we said that we would see a reduction in advisers and an improvement in productivity. And you can see this is coming through in the charts on the right, essentially fewer more productive advisers driving higher flow onto our platform and into our solutions. We expect further reductions in adviser numbers in the second half with some departures still working their way through the system. By the end of 2021, we expect to be at a steady state. Thereafter, new additions will lead to a resumption in net growth. And rightly, we're being discerning on new hires. Finally, you know that we've been working through some of the legacy DB to DC transfer advice given by Lighthouse with the skilled person review. This review has identified some instances of unsuitable DB to DC advice beyond that relating to British steel pension scheme transfers. Even though this advice predates our acquisition of Lighthouse, our focus remains on doing the right thing by customers. We've, therefore, increased our provision by GBP 7 million to cover the potential for additional remediation together with the associated costs. Let me now say a few words on our U.K. platform. As you can see from the graphic on the right, we've seen substantially improved gross flows, up 50% from GBP 3 billion to GBP 4.5 billion overall. Now beneath that strong performance, our 2 distinct trends in flows across both channels, our own advisers and independent advisers, and both are excellent trends. Flows from our own advisers have been growing steadily for the last few years as we've grown the business. And despite a lower number of restricted advisers this year, we've seen a 30% increase in flows from them onto our platform. Our new platform is now capturing flows from our advisers, which would previously have gone elsewhere, but it's in the IFA market where there has been a huge turnaround. We lost some market share with IFAs during the platform migration process, but we are definitely back. The 60% increase in flows from this channel absolutely demonstrates the attractiveness of our new platform to independent firms. It's still early days, but we're pleased with feedback and adviser activity on the new platform. Over 2,700 firms on the platform have increased their business with us year-on-year. Our new discretionary investment hub functionality allows advisers to hold assets in discretionary managed portfolios. We've been encouraged also by the speed at which early adopters have made use of this functionality and look forward to building this momentum. And nearly 40% of all new business flows in the first half used our market-leading family linking capability to join accounts and reduce their charges. Since the soft launch of the platform back in 2019, we've been using adviser and customer feedback to refine our proposition. We'll be implementing more enhancements to the system over the next couple of months. Looking forward, our priorities include stepping up marketing of the new platform to independent adviser firms later in the year. And you'll see the benefit of that coming through in flows in 2022 and beyond, linking Quilter Cheviot with the new platform. This will mean that Quilter Cheviot clients can use our platform to access pension wrappers, and it will mean that other platform clients can fully access Quilter Cheviot's discretionary fund management capability. Finally, we'll also be enhancing our Wealth Select offering as a more streamlined ESG-friendly proposition for both our restricted advisers and IFAs. Before I hand over to Mark, let me summarize what is on our to-do list for the next 6 months. We'll drive flows as we build towards our medium-term targets. We'll complete our current optimization plans and keep focused on efficiency to meet our 2023 and 2025 operating margin targets. We'll continue the repositioning of Quilter Financial Planning, creating a highly productive, strategically aligned and client-focused adviser force. We'll complete our existing capital return program this year, assuming market dynamics allow. And finally, we'll complete the sale of Quilter International before year-end. And with that, let me hand over to Mark to walk through the financials.

Thanks, Paul, and good morning, everyone. As Paul has said, we are pleased with our financial performance in the first half. I'll start with a snapshot of how the total business has performed, including Quilter International. Then I'll drill down into the performance of the continuing business, which is obviously more relevant for the future. So let's get started with a snapshot of the entire group. We made GBP 85 million of adjusted profit in the half year. That was up 20% on the prior period despite some headwinds, which I'll get into later. Picking out some of the highlights on this slide. We were delighted with the big step-up in flows. We continue to see good retention. We improved our operating margin, up 3 percentage points. We delivered stronger EPS growth and adjusted profit growth, supported by the ongoing buyback and a low tax charge. And through our higher dividend and ongoing share buyback, capital management clearly remains a focus for us. All good progress, I hope you all agree. Before I drill down into the ongoing business, I wanted to remind you of a few transitional items, which arise from the Quilter International sale and the new U.K. platform implementation, all of which we've talked about previously. Let's start with Quilter International. First, as a result of the sale, there are recoverable costs, which we will reclaim from utmost during the life of the transitional services agreement. We highlighted these in April. And we focused on reducing the impact as much as we can during the TSA period. And second, there are unallocated costs. Even though Quilter International remains within our corporate envelope until completion, its cost base now purely reflects its direct costs and those that will be reclaimed under the TSA. In these results, we haven't allocated Quilter International any of the head office and IT costs that had previously carried. So the continuing business has had to absorb approximately GBP 5 million of costs, which obviously depresses profitability and operating margin. Now the platform. When I talk to the financial performance of our new platform later, you'll see an uplift in costs. But you should bear in mind that the 2021 cost base is not directly comparable with that of last year. Last year's expense base reflected the costs of running our own platform, whereas this year, we are paying FNZ to run the new platform. And what we pay FNZ is a bit higher than the internal costs we have been able to shed in the short term. As we've always said, the business case behind re-platforming was about improved functionality, ensuring greater IT resilience and driving long-term operating leverage. It was never about reducing day 1 costs, our operational platform costs on our links to assets under administration on a tiered basis as are our revenues. We've rebased to a modestly higher, but more flexible cost base. Finally, I wanted to explain the low tax charge, another anomaly in this half, but unrelated to the platform of Quilter International. You'll be aware that we've had a net deferred tax assets on our balance sheet. When the Chancellor's proposal to increase the U.K. tax rate to 25% received Royal Assent earlier this year, we recognized an uplift in the value of that net asset, which gave a tax credit of GBP 12 million. That GBP 12 million was broadly equivalent to the accrued tax liability for this half year. Hence, we show a 0 tax rate in the first half, which flows through into post-tax profit and the EPS calculation. To be clear, the GBP 12 million credit is not expected to change for the remainder of this year. We anticipate a normal tax charge in the second half. This will probably lead to a high single-digit tax rate for the group over the year as a whole. For 2022, following the sale of Quilter International, we'd expect an average tax rate a couple of percentage points below the U.K. standard rate in line with our existing guidance. Right. Let's get back to the results of the continuing business. Adjusted profit was up 19% to GBP 56 million. Let me walk through the detail of how we got there. Starting top left, net flows more than doubled on those of a year ago, with higher integrated flows particularly encouraging. Together with higher market levels, this led to an increase in average AuMA of 16% on first half of 2020. And top right, you can see revenues were up 9%, reflecting the AuMA uplift and 3 basis points decline in the revenue margin, which was entirely in line with our expectations. Costs, bottom left, were up 7% or GBP 16 million. So below the rate of income growth, positive jaws if you like. That gave us an operating margin of 18% on a continuing business basis. This operating margin includes the costs that were previously allocated to Quilter International that I mentioned earlier and FSCS levies, which, as you know, mainly come through in the first half. If the FSCS levies were evenly spread over the year, our operating margin would have been around 23% instead. As a result, we've delivered a 19% increase in adjusted profit. And more impressively, adjusted diluted earnings per share of 3.3p was up 50% on last year. The higher growth in EPS than adjusted profit is due to the share buyback program and the 0 tax rate that I've just covered. It's a good momentum across the business. Let's draw down a little further, starting with revenue margins. This slide is one you have seen before, it breaks revenue margins out by business unit. As a reminder, our guidance and group revenue margin continues to be for margins to gradually ease and then stabilize over time as we drive up integrated flows as a proportion of total AuMA. This increases the proportion of assets on which we earn more than 1 revenue stream. Within the group, 32% of total AuMA is integrated compared to 30% a year ago. Turning to the first half trends. Nothing here should come as a surprise. But let me draw out some of the dynamics for you. First, you'll notice the 2 basis point decline in Quilter Investors revenue margin shown here in light green. This reflects our success in delivering one of Quilter Investors' strategic goals, attracting new money into a broader range of solutions. We've increased balances across the board, including Cirilium Active. And importantly, we've seen particularly strong flows into our well select range, which we opened up to our restricted advisers last year. The proportion of Quilter Investors total assets in the Wealth Select range increased by around 2.5%. Similarly, the proportion of assets in Cirilium Passive and Cirilium Blend has also increased. You'll find the detail on the product mix at the back of this presentation. Each of those 3 solutions come at a lower all-in cost than the more actively managed Cirilium Active range. Therefore, the blended revenue margin for Quilter Investors is slightly lower, even though total income is higher. This is entirely in line with our strategy. As I've said before, we expect continued mix shift in Quilter Investors revenue margin with this driven by client and adviser preferences. Next, our U.K. platform. Here, again, there was about a 2 basis point revenue margin decline from the second half of last year. About half of that is due to the normal attrition we expect over time, and the other half was due to 2 factors. First, market growth. Higher markets mean more client assets falling into lower pricing tiers. Higher equity markets led to a GBP 5 billion increase in average assets on last year. That means more revenue overall, but at a slightly lower revenue margin. And secondly and a lot less materially, a change in the way the average balance is calculated following the move to the new FNZ platform. So revenue margins are as we expected. Now let me turn to costs. This slide shows you how we've controlled costs year-on-year. I've taken last year's cost of GBP 264 million and stripped out Quilter International's direct costs of GBP 32 million. You can then see the impact of cost push from the external environment, inflation and higher regulatory levies. And then on the right, our optimization activities as well as the reversal of last year's tactical cost savings, which mainly relate to staff compensation. The net increase in costs was GBP 16 million. I think it is a great outturn, especially given that the combination of the higher regulatory levies and the tactical costs online added up to a GBP 22 million drag, evidenced that our optimization program and cost management initiatives are being effective. Next, let's look at the platform's financial performance in the first half. This is a bit a one-off disclosure, if you like. Now that Quilter International is reported as a discontinued business, the platform's performance is clearer to see. So I thought a few words of context might be useful. You've heard Paul talk about the substantial improvement in flows, which are already growing in line with our medium-term target. And I'm just as pleased with the year-on-year increase in profitability. As you know, our platform is highly scalable and it's going to be a source of considerable operating leverage. In that context, it is worth calling out the main contributors to expense growth. These were higher regulatory costs, a reversal of last year's tactical cost savings and the switch across to FNZ running the platform, which I mentioned earlier. Improvements in the platform's operating margin will be one of the significant drivers behind achieving our operating margin targets, and the platform will also be a key contributor to our future profit growth. Turning now to our capital and cash positions starting with our solvency ratio, which you can see remains strong. The decline in the ratio to 203% at the end of June was principally due to share buybacks and the deduction of the interim dividend after allowing for the final GBP 100 million of the GBP 375 million buyback, which is still to come. The Solvency II ratio would be around 190%. We've always considered cash to be more important in terms of actually running the business. And here, we're in a strong position, too. Cash balances of just under GBP 520 million at the end of December reduced to just under GBP 400 million by the end of June. As with capital, the main drawdown through the payments of the final dividend and GBP 100 million of share repurchases in the first half. We upstreamed around GBP 110 million from subsidiaries, a material improvement on the GBP 27 million in the first half of 2020. You'll recall, we were cautious in extracting capital from subsidiaries last year due to the uncertainties around COVID. Remittances this year were partially offset by around GBP 40 million of capital contributions into subsidiaries as well as GBP 30 million spend on transformation initiatives and head office costs. The remaining share buyback, decommissioning costs for the legacy platform, optimization spend and the interim dividend will reduce the end June cash position by around GBP 150 million in total. That will leave about GBP 250 million for managing the business, which is an appropriate buffer to cover stress scenarios. The Board declared an interim dividend of 1.7p per share. That is a meaningful step up on GBP 0.01 per share we declared at last year's interims when we were deliberately cautious given the uncertainties around COVID. As previously announced, we are breaking this year's dividend down between the contributions from the ongoing business of 1.2p per share and Quilter International of 0.5p per share to provide the line of sight to a sustainable dividend base in 2022 and beyond. We continue to make good progress with the capital return from the sale of Quilter Life Assurance, and we've now returned around GBP 265 million out of the planned GBP 375 million at an average share price of about 140p. The current buyback tranche will complete by the end of August, and regulatory approval for the final GBP 100 million tranche is in place. So subject to Board approval, we expect to be able to push on once the current tranche completes and aim to finish the total GBP 375 million buyback by around year-end. Then of course, we have the sale of Quilter International to look forward to. Here, all is going to plan. You'll recall that the transaction was structured as a locked box mechanism with a sale price of GBP 460 million plus the ticket, which we estimated at GBP 23 million, assuming the deal completes on 31 December 2021. Good progress has been made on regulatory approvals. This means there is a possibility of completion in the fourth quarter prior to 31 December, and that would, of course, lead to a commensurate reduction in the ticket. We continue to consult with our shareholders on the best means of returning the majority of the net surplus proceeds and expect to update on that by completion. Now guidance. You know the slide well. And the only notable change share is revised guidance from the tax rate for this year, which I explained earlier. The other thing you may want to note for your models is that we transferred Quilter Private Client Advisers into Quilter Cheviot at the end of July. You'll see in the press release that PCA had GBP 13 million of advice revenues in the first half, and so you'll need to update your segmental forecast accordingly. Segment costs, of course, do not change. So in conclusion, I'm very pleased with the first half results. The business is in good shape. The trend in revenue margins is in line with our expectations. We continue to keep costs well under control. And lastly, we've got a strong balance sheet with our capital return program progressing well. We plan to conclude the current program and update on the next stage of capital returns by the end of the year. And with that, let me hand back to Paul to wrap up.

Thank you, Mark. Before I open up for questions, let me just conclude with a few key messages. These results have demonstrated our continued ability to deliver strong top line growth and sharply improved flows with more to come. We've created a highly scalable business that will drive operating leverage. We've got both a strong balance sheet and a strong track record of returning capital to shareholders. And there's definitely more to come there as well. We look forward to updating you all on this and more at our Capital markets Day on the 3rd of November. And with that, let me open for questions.

[Operator Instructions] And our first question comes from the line of Andrew Sinclair of Bank of America.

Three for me, if that's okay. Firstly, just on financial adviser numbers. I know it's something we've spoke quite often. You've talked about returning to net growth from 2022, which is great to hear. But I really just want to ask again, what sort of growth do you think is achievable? I think it will be really helpful to provide some guidance there, particularly given that some of your peers are having some disruption in the short term that maybe something that can be exploited. I'm not sure we'll hear more about this at the Capital Markets Day. That's question one. Secondly, just on Quilter Investors. Flows there maybe a little bit below what I might have hoped for in Q2. Just really what sort of feedback are you getting here from customers? GBP 0.2 billion a quarter in net flow just doesn't seem quite far. I'm sure you'd want that to be. And thirdly, just on Slide 8. I know you talked about the uptick that you got from your own advisers, but I actually thought that might even be a little bit more as maybe some of your own advisers move to use the platform for the first time and the new platform gives a bit more opportunity. Just could you give us a little bit more color on what's achievable here for your own advisers.

Thanks, Andy. It's Paul. Yes, so we've said we expect to return to net growth in adviser numbers by 2022. This year, you're already seeing, I have to say, quite an increasing productivity from our own advisers from GBP 1.5 million per adviser to GBP 2.2 million per adviser, the 40-odd -- 47% increase, 30% increase in overall flow from our own adviser base. So I'm actually quite pleased with that. But I think what we would expect to see is what we've guided to in the past, mid-single-digit net percentage growth in adviser in RFP, restricted financial planning numbers per year. So in the past, we've done a bit better than that, but that's where we've guided to and I think that's what we'd expect to get back to from 2022. In terms of Quilter Investors flows, and it's certainly better than last year, our investment performance of Cirilium Active and our investment solutions. Our 1-year performance has certainly been very good, and that adds to our longer-term excellent performance. And of course, we've got something that we want to talk to you about at the Capital Markets Day, which is brand new. It was kind of a huge revamp of our Wealth Select investment solution coming towards the end of the year, which, again, we think -- which was not possible on the old platform. Now I won't go too much of that, and that we're going to steal our thunder at the Capital Markets Day. But we, of course, expect to see now that starting to ramp up with Quilter Investors as well. What I really want to see is, first and foremost, greater capture of platform flows. As you know, last year, we were capturing around 50% of platform close from our own advisers. This year to date, we're capturing around 77%. So we've seen a greater than 50% pickup over like vast reduction in leakage. It wont get to 100%, so long as we've still got clients and other platforms that need topping up. And once we get to, let's say, the 80% level, and I want to see a big proportion of that flowing through into Quilter -- into our own investment solutions, whether it's Quilter Investors or Quilter Cheviot with our Private Client Adviser business. In terms of what's possible from our own advisers, clearly more. But again, I think I'm happy where we've got to within the 6 months of this year given that we only landed our new platform in early March. So -- but we will see that ramping up as we, again, continue to reduce leakage, which we are doing, and continue to increase productivity and continue to have a more strategically aligned adviser force because now it's all about us having the courage of our own conviction. It's all about having strategic alignment in the pursuit of a common purpose. And that's why those advisers who perhaps didn't want to come on the journey with us on this, we've had to say goodbye to. But it means we've got a lot more to invest with those advisers and those adviser firms that are on the journey with us, and we're already seeing the fruits of that labor.

Our next question comes from the line of Greg Simpson at Exane BNP Paribas.

If I could go back on to the adviser question. Could you provide any color on how the adviser school is going, building out a way to grow advisers without looking on empowering from the IFA industry? So any kind of update on how that pick up? Next question is on [indiscernible] costs. Could you provide any color on how you're thinking about costs for the full year? Is that kind of GBP 5 million of inflation in that side a good guide to the level of inflation you're seeing across the business? And then on just finally on Slide 16, the following slides, GBP 66 million of platform expenses. Just to understand, does that include -- does that still include kind of costs of running the platform of the previous kind of internally run platform and systems that eventually can be retired at some point? Just to understand the mix between what is FNZ and what is other costs within the platform cost base?

Okay. Thanks, Greg. I'm going to -- I'm going to ask Steve Gazard to answer your first question. Steve, as you know, the CEO of Quilter Financial planning. Mark, of course, can take the costs for the full year and I think probably also you could take the third one on the GBP 66 million. So Steve, do you want to take about where we are with the adviser school?

Again, we're really pleased with where we are with the adviser school. Last year, we did a lot of work to move it through primarily a digital offering in response to COVID, but also as part of the generational move as we bring younger advisers into the mix. That's going very well. We continue to see that drive new advisers into both our existing businesses in the network, but also our international. So we're pleased with where we expect that to be.

And Greg, just on your -- the first question was around the general cost for the business and guidance on that. We had previously guided towards about GBP 560 million of full year expenses for this year, which I'm still more or less guiding towards. That obviously includes Quilter International in -- for a full year, so completion of that has to happen earlier. There'd be a proportionate amount that would come down, but fees in the revenues on that side than to whenever that completion could happen. In terms of inflation guidance, at the moment, we pretty much sort of still, I think, seen around about sort of a 2% inflation type impact overall. But clearly, started to feel a bit more pressure in that just as you would have generally noted in the U.K. more generally. So on a go-forward basis for this year, I'm still guiding towards that sort of number. But down the line, there may need to be some revisions just in terms of inflation expectations insofar as those go. And what I'd probably also just use this opportunity to do is just remind you that in the first half of this year with the U.K. still being substantially sort of a remote working type environment, the tactical cost unwinds that we called out last year haven't fully unwound in total. So while we've had the variable components come back, the areas around travel, entertainment, marketing, some development spend, those are things I'm expecting that as the U.K. and as we a business, going to more of an office-based working environment. Again, that some of those costs will go up in line with what we said at our full year results. On the platform expenses, the first half is still a bit of a transitional period because we've got a portion of it that was still operating the old platform and then a portion of it that's all been on the new platform. So there's a little bit of a double count in terms of some of those costs. We are still going through decommissioning costs on the existing platform. Most of those decommissioning costs, the actual costs of the decommissioning rather than the run costs are in the below-the-line item around the platform transformation program, but the operational costs do have an element of inefficiency given that it was taking place over the transitional period. So hopefully that answers that.

[Operator Instructions] And our next question comes from the line of Gurjit Kambo of JPMorgan.

Just 2 questions from me. So firstly, in terms of the platform sales, you've seen good gross sales increasing to GBP 4.5 billion, I think, from GBP 3 billion. And we've seen redemptions grow to GBP 2.7 billion from GBP 2 billion. Just on the redemption, is that really a function of the advisers who are perhaps not restricted and therefore leaving. And then as you -- as we sort of get through this year, would you expect that redemption number to also potentially sort of become more stable, even come down. So that's the sort of first one. Just trying to think about dynamics of net flows on the platforms. Obviously, gross is good, maybe redemptions also come down, so you get a double benefit as you go into '22 and beyond. And then on the ESG, I think you mentioned, there's a bit more going on around the ESG making your funds ESG compliant. What sorts of demand you're seeing from clients? Is there a much bigger demand now for the ESG side? And where are you on that? Do you think you need to invest in it? Or are you kind of already there?

Okay. Thank you, I'm going to pass to Steve Levin. I think you can take both of these questions actually. But just let me just say very quickly on ESG. We certainly are seeing greater demand. At the same time, we're taking a view ourselves that we want to be leaders in this area. So we're not waiting around for that demand to match supply. We're going to push forward with it. But Steve, first of all, platform what you expect on redemption numbers and then what you're seeing of ESG on Q1.

So on the outflows. Outflows have increased as the market activity has increased. So if you go back to last year, outflows were quite depressed as a rate because those adviser activity less transfer of pension business around the whole market slowed down quite a lot last year. We've seen all of a normalization of that. We also saw last year a lot of customers actually reducing the drawdowns that they were taking, and customers were taking a conservative approach and not trying to sell a lot of markets, particularly in the first -- sort of first half of last year when markets were down. Again, that is normalized. We track outflows, specifically looking at outflows to transfers to other to companies, which money moving around the industry and outflows direct to customers, which are paying up the benefits of the product. So different drivers on each of those. One of the other factors in outflows has been, as you point out, some of the advisers who have left the restricted advisers. They typically can end up at another place and then end up using a different platform as a preferred platform. And so we do see outflows from that cause. But by and large, actually, on a rate of outflow basis, our outflows are actually improving compared to longer-term trends. So we're seeing less transfers, and we've seen that as a benefit of our new platform. And we're expecting that there will be some continuation of that because there's less need for advisers to transfer us the way for requiring different functionality and things like that. So a little bit of a detailed answer on outflows, but hopefully that helps. In terms of ESG, I think as Paul mentioned in response to an earlier question, we are investing heavily in a new expansion to our Wealth Select proposition, which will be launched towards the end of this year or potentially early next year, and that will have a significant ESG offering embedded within it and a whole lot of processes for advisers to give great price and help customers select ESG capabilities. We're in the build phase at the moment, and we're very pleased with where we are. So i think that's probably all I'd say on ESG at this point. We do see it, obviously, strategically very important.

Our next question comes from the line of Ben Bathurst of RBC.

Three questions, if I may, this morning. Firstly, just on the platform. I appreciate the color around the reduction in leakage. I'm just wondering if you could perhaps give an update on the stock or maybe just a reminder on the stock of adviser assets that are sitting on other platforms and perhaps comment as to whether or not you started to see any sort of meaningful movement of that stock onto the Quilter platform yet. I'd also just sort of wondering that's almost arithmetically, you were to have an adviser transfer across where that would sit within that kind of leakage statistic. Secondly was just on the financial planning revenues. I think in the outlook comments, you referenced the benefit of higher residential property transaction activity in the first half. I wondered if I can ask for maybe just a split of the revenues that you think were linked to housing market activity in H1 and how that moved year-on-year, so we can try and form a view of how that might reduce in the second half and beyond if residential property transactions do fall down. And then third question was just to try and get a kind of a temperature check on client sentiment and activity. I think others in the industry are expecting Q3 to be somewhat slower just due to people taking holidays and what have you. Would that be kind of a fair assumption for the Quilter for Q3 and then maybe speak to those activity to pick up again in Q4?

Thanks, Ben. Look, I'm going to say a few things first on platform and adviser assets and other platforms, then hand over to Steve Gazard very quickly to talk about what we're doing there. And then in terms of QFP revenues, I'll hand over -- and particularly with regard to mortgage and protection revenues from our adviser force, and I'll hand over to Mark. And then I think just in Q3, sure, I mean, we've been pleased with how Q3 has started, but we certainly expect that we'll have some seasonality as we always do every year. And Q3 is usually our slowest quarter simply because people like to go away on holiday. And I think this year, people are gagging to go away on holiday. Certainly, I am. But we'll -- and we'd expect that to then pick up properly again in Q4. So just in terms of adviser assets on the platform. Our #1 priority when our new platform went in, in Q1 was not to move that books of assets from other platforms. It was to capture a far greater percentage of our own advisers, new business flow onto our platform because, clearly, that's the litmus test. Advisers will use your platform more for new business and basically try it out more before they'll move clients and assets from other platforms. So I set myself an internal goal of what I -- I'm not doing a mistake in what I wanted to see in terms of total platform flows coming to our platform. I can tell you we are very close at 77% to that number, but not quite at it yet. And for this year, that's the core goal, to see greater -- to capture a greater percentage of flow of new business. We'll never capture 100% of brand-new business so long as there are clients on other platforms that need top-ups, okay? So as long as there's top-up business, there's always going to be about 20% going to other platforms because that tends to be where the top-up business is, okay? And in terms of new business, we wanted to capture a big percentage, and we're at 77%. So in terms of the amount of other assets from QFP on other platforms, I'm going to ask Steve Gazard to come in and to say some of the things that we're looking at there.

Yes. So I mean, entirely, as Paul said, our focus has absolutely been on driving the adoption through new business. The way advisers work is that they will absolutely route that first and then look at the back book activity. We've been really pleased with our progress to date. And that clearly with the reshaping of the QFP business means that all of our teams, whether that be in the field or operations, have far more time to focus now on the right type of adviser who want to engage with us and want to move productively towards that. So our focus is now shifting towards helping advisers look at their opportunities with their back books and look efficiently at how we move across in doing so. That's really where we're driving our next agendas.

If I just answer the question just around the actual proportion of revenues linked to mortgage. I can give you the mortgage and protection a number on it rather than mortgage specifically. But across the business, the GBP 59 million of quarter financial planning revenues, GBP 13 million of that was driven by mortgage and protection business over the first half. So it's around about 22%, which is a very similar percentage to what it was for the same period in 2020. So you'd expect a -- so proportionately, that's the sort of number we're talking about. Clearly, there is going to still be a lot of activity in there, but there might be a slight softening of that given in the second half, given the change in stem duty situation in the U.K. So that sort of gives you, I think, a feel for the order of magnitude.

Our next question comes from the line of Nicholas Herman of Citigroup.

Hopefully, you can hear me okay?