Release Date: September 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Group revenue increased by 21.1% to GBP147.1 million, and EBITDA rose by 22.3% to GBP49.1 million, reflecting strong financial performance.
- Net organic revenue growth was 12.5%, surpassing the updated Cosmos era guidance of 10% plus per annum.
- Record new business wins of GBP18.8 million, up 28.8% period on period, indicating strong market demand.
- Successful M&A activity with six new businesses added, including the significant acquisition of Citi Trust, making JTC the world's largest global independent trust company.
- Private client services division saw revenues up 46.1% and EBITDA up 51.7%, with a margin of 37.4%, showcasing exceptional growth and profitability.
Negative Points
- Gross new organic revenue decreased from GBP44.1 million to GBP38.3 million, driven by the prior period's commercial office offering launch.
- Gross attrition was GBP10.6 million, which is 4.8% of annual revenues, indicating some client losses.
- ICS division's EBITDA margin decreased by 0.9 percentage points due to increased regulatory obligations and longer onboarding times for new business.
- Net debt increased by GBP103.9 million, driven by the 2023 drawdown to fund the SDTC acquisition, raising concerns about leverage.
- The macroeconomic environment has led to delays in new business and a slowdown in the launch of new funds, impacting growth opportunities.
Q & A Highlights
Q: Can you provide more details on the recent acquisition of Citi Trust and its expected impact on JTC?
A: Nigel Le Quesne, CEO: The acquisition of Citi Trust is significant and transformational for JTC. It makes us the world's largest global independent trust company. Citi Trust brings a high-quality portfolio of ultra-high-net-worth clients, over $70 billion of assets under administration, and employees across seven trust jurisdictions. This acquisition will enhance our private client services division, with expected run-rate revenues around GBP200 million post-completion in the first half of 2025.
Q: What drove the strong revenue growth in the first half of 2024?
A: Martin Fotheringham, CFO: Our revenue growth of 21.1% was driven by net organic growth of 12.5%, which is above our medium-term guidance. This was supported by record new business wins of GBP18.8 million, up 28.8% period on period. Additionally, our M&A activity, including six acquisitions, contributed significantly to our growth.
Q: How is JTC managing the increased regulatory engagements and their impact on margins?
A: Nigel Le Quesne, CEO: We actively engage with our 26 different regulators and have seen an increase in regulatory engagements from 46 in 2022 to an expected 80 in 2024. While this is a drag on margins, it also drives demand for our services. We have launched Northpoint Governance to provide specialized services to address these regulatory challenges.
Q: Can you elaborate on the performance of the US market for JTC?
A: Martin Fotheringham, CFO: The US market has been a leading growth jurisdiction for us, with strong organic growth and strategic M&A activity. Our US revenue base has increased significantly, now representing 32% of our total revenue. The acquisitions of SDTC and First Republic Trust Company have bolstered our presence, making us the largest independent provider of private trust company services in the US.
Q: What are the key factors contributing to JTC's successful M&A strategy?
A: Nigel Le Quesne, CEO: Our M&A success is driven by our clear strategic plans, cultural fit, and disciplined approach. We focus on finding quality off-market opportunities, understanding vendor motivations, and ensuring seamless integrations. Our reputation as a reliable home for acquired businesses and our unique shared ownership culture also play crucial roles.
Q: How has the institutional client services (ICS) division performed in H1 2024?
A: Nigel Le Quesne, CEO: The ICS division delivered solid results with revenue of GBP87.5 million, up 8.5%, and EBITDA of GBP26.9 million, up 5.5%. We achieved organic growth of 11.9% and secured new business wins of GBP10.7 million. The division also benefited from four acquisitions, including Blackheath and Hanway, which enhanced our UK client base and governance services.
Q: What are the financial highlights for JTC in H1 2024?
A: Martin Fotheringham, CFO: Key financial highlights include revenue growth of 21.1% to GBP147.1 million, underlying EBITDA of GBP49.1 million with a margin of 33.4%, and earnings per share up 9.4%. We also achieved strong cash conversion of 104% and maintained leverage below our guidance range at 1.39 times underlying EBITDA.
Q: How is JTC addressing the macroeconomic environment and its impact on new business?
A: Nigel Le Quesne, CEO: We have seen delays in new business due to the macroeconomic environment, with longer onboarding times. However, our pricing growth for time and material and fixed fee clients was 7%, helping us recover most of our inflationary cost increases. We remain confident in our ability to navigate these challenges and continue to invest in the business for long-term returns.
Q: What are the future growth prospects for JTC in the Cosmos era?
A: Nigel Le Quesne, CEO: We aim to double the size of the group within three to four years through a combination of organic growth and strategic M&A. The Citi Trust acquisition and our strong performance in the US market are key drivers. We also see opportunities for further M&A and remain disciplined in our approach to ensure quality and strategic fit.
Q: Can you provide more details on the interim dividend declared for H1 2024?
A: Martin Fotheringham, CFO: We have declared an interim dividend of 4.3p per share, up from 3.5p in H1 2023. This reflects our strong financial performance and commitment to delivering value to our shareholders.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
