abrdn H2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 4, 2025

There are 12 speakers on the call.

Operator

Well, good morning, everyone. Thank you for coming. Lovely to see you all.

Operator

Welcome to our presentation. Today, I'm joined by Ian Jenkins, our Interim CFO. And on the front row are all the members of my senior leadership team. So look, before I start, just one change that you will no doubt have noticed this morning, that we are changing the name to Aberdeen Group PLC with the name written out in full. For me, this was a pragmatic and simple decision, allowing us simply to demonstrate our pride in the name and the brand Aberdeen and make the most of it in the marketplace.

Operator

And we also have the name Interactive Investor. So we've got two principal brands, and that's how we will be out marketing ourselves and going forward this year. So enough on that. I'll now just turn to the presentation. So I'll start with the key points, then I'll hand over to Ian, of course, to take us through a little bit more detail on the 24 results.

Operator

I'll then give you an update on our strategy and targets and the path forward for the group. And of course, then we're up to Q and A. So let me start just with the highlights and the overview of the strategy at the highest level. Well, how do I see Aberdeen? It says an Wealth and Investments group, and that's how we're going to describe ourselves.

Operator

The Wealth business, of course, is Interactive Investor and Aberdeen Advisor, both of which operate in The UK with excellent customer experience built on efficient technology at the heart of their success. Aberdeen Investments operates internationally. And in a competitive and rapidly changing industry, we need to act with pace and with clarity to be successful. When I started at Aberdeen, I knew we had to reverse the decline in performance. And as CEO, I have been able to get to grips with the business, and I'm happy to say that we have seen a shift in momentum, but there's much further to go.

Operator

Last year, profits increased across all three of our businesses with adjusted operating profit up by 2% to $255,000,000 and net capital generation up by 34% to $238,000,000 dollars So we are seeing improvement overall. But I want to be clear on this. None of our businesses are close to their full potential, which is why our number one priority is to transform performance. And this requires many things, including simplifying the business, removing drags on profitability and focusing on where we have competitive advantage. Our transformation program delivered well against the targets we set out a year ago with significant savings as well as benefits for our clients and our colleagues, and we're on track to deliver at least GBP 150,000,000 of annualized savings by the end of this year.

Operator

We're also announcing today we've made progress on our pension plan, which will improve capital generation from mid-twenty five, and this in turn supports the dividend. And with the changes to my leadership team and other key appointments across the business, I'm confident we've now got the right people in the right roles at a senior level, which is very much in line with the strategic importance that I place on strengthening talent and culture. Of course, my other overriding priority is for us to improve client experience with a focus on our service and our products, which neatly takes me on to my next slide. So today, we're setting out a clear path forward for each business to deliver more for our clients, and we're establishing a set of clear and relevant performance targets. Interactive Investor had an excellent performance last year, achieving number one position in The U.

Operator

K. Direct to consumer market measured by net flows and now serves nearly 440,000 customers. Our priority for Interactive Investor is to sustain that growth, and we're targeting 8% per year growth in customer numbers. We'll do that by meeting a broader set of customer needs, building on the Interactive Investor brand further and always remaining very efficient. Advisor is number two in an attractive growth market, but we recognize that the recent trends in flows have been disappointing.

Operator

With the revamped management team now in place, we're redoubling those efforts on client service, enhancing our offering and sharpening our pricing, all with the aim of returning to net flows as soon as possible, targeting GBP 1,000,000,000 of net inflows in 2026. And for investments, our key focus is on delivering a step change in profitability. This will be achieved by repositioning the business to concentrate where we have real competitive advantage and clear growth prospects. And we're targeting GBP 100,000,000 adjusted operating profit in 2026. So with the relentless focus on execution, I'm confident these priorities will lead to a significant improvement in financial performance.

Operator

And to that end, in putting these business unit targets together, we're announcing new group targets. We're targeting adjusted operating profit of at least GBP 300,000,000 in 2026, which is an 18% increase on GBP 24. And together with much lower expected restructuring costs and the pension scheme arrangement that we've entered into, we're targeting net capital generation of around million in 'twenty six, which is a 26% increase on 2024. And of course, this will support the dividend. And I'll share a few more details on our strategy in a moment.

Operator

But first, let me hand over to Ian to go over the results.

Speaker 1

Thanks, Jason. Thank you. So good morning, everybody. Let me begin with a summary then of our key financial highlights. The group delivered growth in 2024 with continued strong momentum within the Interactive Investor and a marked improvement in flows within investments, partly offset by the outflows in the Advisor business.

Speaker 1

We improved the group's efficiency through the good progress in our transformation program, resulting in a 7% reduction in adjusted operating expenses, and this delivered an increase in the group adjusted operating profit of 2% with profit growth in all three of our Wealth and Investments businesses. This resulted this result is reflected in both the adjusted and the net capital generation, and dividend cover improved to 1.2x on an adjusted basis and 0.9x on a net basis. These improved cover metrics do not yet reflect the action taken to unlock the value from our DB pension surplus, which is expected to improve capital generation by around GBP 35,000,000 per year from July 2025. So let's now move on to the 2024 group results. The group delivered an adjusted operating profit of GBP $255,000,000, a 2% increase on 2023, benefiting from the significant progress we have been making in achieving our efficiency savings.

Speaker 1

Adjusted net operating revenues were $1,321,000,000 pounds 6 percent lower than 2023, reflecting the impact of net outflows from higher margin products as well as the revenue related to disposals, including our private equity businesses and Aberdeen Capital. Adjusted operating expenses were $1,066,000,000, dollars 7 percent lower than 2023 and slightly below our previous cost guidance. IFRS profit before tax significantly improved from a loss of $6,000,000 in 2023 to a profit of $251,000,000 in 2024. This improvement reflects lower restructuring costs, a lower loss from the change in fair value of significant listed investments, obviously, including Phoenix and lower amortization and impairment charges. Adjusted capital generation was up 3% to three zero seven million whilst net capital generation increased by a third to GBP $238,000,000 as a result of lower restructuring corporate transaction expenses, net of tax, which fell to GBP 69,000,000 compared to GBP 121,000,000 in GBP 23.

Speaker 1

These results, together with our strong capital position, enable us to maintain our total dividend at GBP 14,600,000,000.0 with improved coverage ratios on both an adjusted and net capital generation basis. So turning now to our businesses results. Each of our three businesses delivered growth in adjusted operating profit in 2024. Within II, adjusted operating profit, excluding Aberdeen Capital, was up 5% to million with higher revenues partly offset by increased investment as we create that capacity for future growth. Within Advisor, adjusted operating profit grew 7% to $126,000,000 dollars This reflects the twelve month revenue benefit from the previously reported revised distribution agreement, offset by a modest increase in expenses.

Speaker 1

And across investments, we've improved adjusted operating profit by 22% to $61,000,000 with lower revenue more than offset by 11% reduction in operating expenses through the progress we've made on our transformation program. So now perhaps looking at each business in more detail. Within Interactive Investor then continues to deliver strong customer growth, reinvesting in the business to sustain this growth and create additional capacity. Total customers were up 8% to twenty twenty four in 2024 with SIP customers, obviously a key focus area of the business, up 29%. We've seen strong momentum inflows with net inflows of billion, almost doubling compared to 2023 and ranking Interactive Investor as number one for net inflows in The UK D2C market.

Speaker 1

Excluding Aberdeen Capital, revenue grew by 7% to $278,000,000 with the business improving the cost income ratio then to 58%. Particularly strong growth was seen in trading transactions with revenues 46% or $22,000,000 higher and benefiting from a 28% increase in trading volumes. Treasury income increased by 3% to $138,000,000 reflecting growth in customer cash balances. And the average cash margin was two twenty nine basis points compared to two thirty six basis points in 2023. And subscription revenue was up 3% to $60,000,000 gross of marketing incentives.

Speaker 1

So excluding Aberdeen, capital operating expenses increased by 9%, reflecting investment in marketing, proposition development, creating capacity for future growth with the benefits of this investment already evident in the improved brand awareness. In summary, Interactive Investor continues to make great progress in delivering sustainable growth while maintaining the operational rigor that underpins its efficient business model. Turning now to the Advisor business. Net outflows were $3,900,000,000 for the year. AUMA of $75,200,000,000 was broadly flat as higher market movements offset net outflows.

Speaker 1

Revenues increased by 6%, primarily reflecting the full twelve month benefit of the revised distribution agreement for the RAP SIP. And overall net revenue yield on AUMA was slightly higher at 31.2 basis points. Treasury margin on cash balances was two sixty three basis points, up 35 basis points and consistent with the figure reported at the half year. Adjusted operating profits grew 7% to $126,000,000 Expenses were 5% higher, reflecting investments made to enhance our client proposition and included the one off, again, gain or a GBP 70,000,000 benefit from a temporary third party outsourcing discount. While we've seen some early encouraging signs in addressing past service related issues, We recognize there remains work to be done and returning the business to positive flows.

Speaker 1

Moving to our Investments business. Institutional and Retail Wealth saw a significant improvement in flows. Growth flows, excluding liquidity, were up 31% to $25,500,000,000 and net inflows of $300,000,000 were over CHF 18,000,000,000 higher than the CHF 17,900,000,000.0 of net outflows in 2023. Recognizing net flows in equities continues to present a challenge. There's been good momentum in our Quant strategies, Liquidities and Alternatives, with net inflows in both Real Assets and Alternative Investment Solutions both key areas of future growth.

Speaker 1

Insurance Partners net outflows increased to $4,300,000,000 compared to $1,100,000,000 in 2023 and primarily related to the ongoing runoff in the heritage business. Total AUM across investments was up 1% to $370,000,000,000 as positive market movements more than offset the net outflows and corporate actions. Excluding the sale of our European private equity business and the acquisition of closed end funds from First Trust, AUM increased overall by 3%. Adjusted operating profit grew by 22% to GBP 61,000,000, driven by cost savings, which more than offset the lower revenue. We remain focused on driving efficiency and investments and expect further improvements to profitability as this transformation work continues.

Speaker 1

Adjusted net revenue yield was 21.3 basis points compared to 23.5 basis points for 2023 as the asset mix continued to feel the effects of those industry headwinds. So now moving to the transformation program and the benefits it's developing for the group. So as Jason outlined in January, we're targeting annualized savings of at least GBP 150,000,000 by the end of twenty twenty five compared to the expense base we reported in 2023. The program remains on track to deliver this target and we have realized $70,000,000 of in year savings in 2024. As a result of these efficiency improvements, 2024 adjusted operating expenses were $1,066,000,000 dollars and that's down 7% year on year.

Speaker 1

In total, $106,000,000 of the annualized run rate savings had now been achieved from the actions already completed in 2024. This strong progress and visibility of future savings underpins our confidence in achieving the EUR 150,000,000 target. And these actions create capacity for some reinvestment across the group whilst also improving our net capital generation and supporting shareholder returns. As well as the cost related benefits, the programs delivered improved outcomes to both clients and colleagues, and this work is very much continuing. So now turning to the capital generation.

Speaker 1

In 2024, adjusted capital generation increased by 3% to $3.00 $7,000,000 due to higher profits. Net capital generation was 34% higher at million as restructuring and corporate transaction expenses, net of tax, reduced to million. Looking ahead, we expect net capital generation to converge with adjusted capital generation, and we continue to expect much lower restructuring costs in 2026. On an adjusted capital generation basis, dividend cover was also stronger at 1.2 times, up from 1.1x in 2023. We remain committed to improving capital generation to support shareholder returns.

Speaker 1

And now turning to the group's capital position. We continue to benefit from a strong capital position with CET1 of EUR 1,500,000,000.0 covering 139 of our regulatory requirement. This is further enhanced by billion of gross AT1 and Tier two debt, 500,000,000.0 of which contributes to that regulatory capital. In addition, we have 1,300,000,000.0 of net assets not included in capital. This comprises 500,000,000 stake in Phoenix and a $800,000,000 IAS 19 pension plan surplus.

Speaker 1

Our Phoenix stake underpins a very important relationship, and we receive a $56,000,000 dividend in 2024 as a result of holding this. This source of capital generation continues to support our dividend. So in summary, our capital base remains strong, enabling us to maintain our dividend and invest in our business. So finally, now turning to the outlook for our business and financial guidance for 2025. Within Interactive Investor, we expect continued strong growth in customers, net flows, revenues and adjusted operating profits.

Speaker 1

Cash margins are expected to be in the region of 200 to two twenty basis points and benefit from the higher customer cash balances. For Advisor, the repricing announced last year has now been rolled out to the existing customers earlier this quarter, and we expect this to lower Advisor's revenue margin by around three basis points in 2025. Advisors' cash margin is expected to reduce to around two twenty five basis points and profitability is expected to reflect the end of the third party outsourcing discount, which again benefited expenses by GBP 17,000,000 in 2024. Across investments, we do expect some further contraction in revenue margin. In total, for 2025, we expect this to be below 21 basis points, around 30 basis points for Institutional and Retail Wealth and around eight basis points for Insurance Partners.

Speaker 1

Based on what we know today, we are expecting net flows in our core institutional retail wealth business to be roughly flat in the first quarter. However, we are anticipating a redemption of around billion from a very low margin insurance mandate with an average revenue value of about million. Operating expenses are expected to continue to benefit from our transformation program and the majority of the remaining cost savings will be reflected within the investments business. At a group level, we remain confident in achieving our transformation program target of delivering at least GBP 150,000,000 of annualized cost savings by the end of twenty twenty five. Thank you very much indeed.

Speaker 1

And I'll now pass you back to Jason.

Operator

Thank you, Ian. So our strategy is actually quite simple, and that's to seize the opportunity in each one of our three core businesses. I and my leadership team are really excited by this opportunity, and we're committed to driving this group to new heights and to set up Aberdeen for sustainable long term growth. So with this in mind, I'd like first to talk about our ambition for the group. Our purpose is to enable our clients to be better investors, and this is what unifies us as a group.

Operator

And our ambition is to become The U. K. Leading wealth and investments group. We'll build on the strong positions that each of our businesses hold in their respective markets and our deep and long standing relationships with customers. We will target fast growing U.

Operator

K. Wealth market through our II and advisor businesses or focusing asset management capabilities where we have existing strength. This will be underpinned by commitment to excellence in client service, investment in technology and in our talent. We have an enviable base from which to build, but we do know there is much more to do. It's an exciting time for the group, and we think we can deliver much more for stakeholders.

Operator

Just let me take a moment to touch on the market growth opportunities. On this slide, we set out the structural factors that we, as a group, are well positioned to benefit from. In The UK, over £5,500,000,000,000 of wealth is expected to transfer between generations over the next twenty five years. The number of people retiring annually over the next three years is expected to be around 750,000. This is a huge opportunity for both our Wealth businesses given their deep expertise and breadth of products and the opportunity to do more in retirement solutions.

Operator

As we know, individuals are increasingly having to take more control of their long term savings and retirement planning, driving the need for easily accessible solutions to access their savings and investments, whether directly or through advice. With the advice gap continuing to grow, with at least 20,000,000 people in The U. K. Estimated to be in a gap. In this context, the government and consumers are looking for affordable, tailored guidance and execution.

Operator

Both of our businesses in wealth are well placed to address this need. And our investments business is also able to offer relevant products through its managed solution range. In asset management, we see investing requirements becoming more complex, supporting the need for active asset management, especially in higher margin alternatives, while we already have the scale and a strong product offering. One area where we are seeing growth is a transition to a low carbon energy. And given the strength and scale of our Real Assets business and our capabilities in sustainability, investments is well placed to capture this opportunity.

Operator

I'll now talk to each of our businesses in turn, starting with Interactive Investor. From strength to strength. Richard Wilson and his team have done an exceptional job in creating the fastest growing D2C platform in The UK measured by net flows. I'm genuinely excited about the future growth prospects for II. As this slide sets out, the D2C market currently comprises less than 10% of U.

Operator

K. Savings and wealth, and II have a 20% share of that D2C platform market. The market is forecast to grow assets by over 13% per annum. This is a market where the four biggest players last year accounted for around 90% of net sales. II has a disruptive and market leading subscription pricing model underpinned by a platform which has excellent customer experience, which, of course, you can test for yourselves.

Operator

Our proven service and exceptional customer value offering alongside our program of product innovation has resulted in II winning a number of accolades. Last year, II had more five star Trustpilot reviews than all of our direct competitors combined. We'll continue to invest in the Interactive Investor brand. And last year, we achieved a 12 percentage point increase in brand awareness to 25%. Turning now to the outlook for II's performance.

Operator

As you can see from the chart on the left, II achieved strong organic growth in its Platform business in 'twenty four with total revenues, excluding cost of sales and marketing, 12% higher than in 2023 and up by 45% compared to 'twenty two. Percent. Importantly, II benefits from having three diversified and resilient revenue streams, all of which increased last year. Trading revenues improved substantially year on year as customers made increasing use of the platform's trading and FX capabilities. Subscription revenues are also higher year on year, and treasury income remains an important component with the potential to grow as cash balances increase.

Operator

As Ian just noted, treasury margins for Aya are expected to be between two hundred and two twenty basis points in '25. And beyond this, we see margins as being less sensitive to future base rate changes than is currently assumed by the market. Taken together with an expected continuation of strong customer growth, particularly in SIPs, where cash balances are slightly higher, I'm confident about the outlook for treasury income. And I do not foresee and we are not witnessing regulatory concerns on the II pricing model. In fact, we're convinced we offer exceptional value to customers, which is indeed at the heart of the business's success.

Operator

Turning now to how II is innovating to meet broader customer needs. Our strategy is to focus on sustaining efficient growth by building on a differentiated proposition and investing in the Interactive Investor brand. Let me talk through each of the three pillars briefly in turn. First, new offerings for '25. We're launching three innovative and exciting propositions to serve more of our current customers' needs and appeal to new customer segments, segments that are currently underserved in The UK D2C market.

Operator

Following our managed ISA launch last year, we'll be releasing a managed SIP product this year, again designed by Aberdeen Investments. This will provide more support and guidance to less confident investors. We'll be launching II360, an advanced trading platform to support more sophisticated and active investors. And we will launch IIAdvice, a digital advice service, which brings our disruptive and tech led ethos to the world of financial guidance, where there is a clear need for something different and better. Our second pillar is continuing to drive customer engagement through value added products and continued investment in the Interactive Investor brand.

Operator

And of course, that leads to positive customer recommendations. The third pillar is to ensure II sustains efficient growth. In fact, it's already very efficient with a cost to asset ratio of 22 basis points in 2024, but we're going to go further. With a combination of strong growth, operational discipline and the scalability of the business, we're aiming to reduce this ratio to less than 20 basis points by 2026. So in summary, by leveraging our excellent technology base and disruptive pricing model to deepen and widen customer engagement, we are well placed to enjoy the compound effects of gaining a growing share of a growing market.

Operator

Turning now to Advisor. Before I talk about the action being taken by Noel and his team, I want to discuss the opportunity and ambitions for

Speaker 2

this

Operator

business. We are absolutely focused on realizing the value from the significant investment we've made in Adviser. We're number two in The U. K. Market, serving over 50% of IFAs with just over 400,000 end customers.

Operator

We have an 11% share of the Advise segment, a segment which is set to also grow at 13% a year. So as demand for Advice continues to grow and IFA's look for ways to serve their clients better and more efficiently, the opportunity for us is clear. Following the significant investment in the upgrade, the wrap platform is now working well with the tools and infrastructures to support our IFAs to serve their customers. We have brought in more competitive pricing to support our commercial objectives. And we strengthened the leadership team with three new appointments.

Operator

Overall, we're well placed to respond to clients' evolving needs, and our primary objective now remains to return to growth. So I'll now turn to the actions being taken by the team for our clients. Over the past year, the business has improved service delivery with reduced times across a number of core processes. Examples include the average speed to answer calls, which has been reduced by about 80% and the time to process SIP cash transfers out reduced by a working week. We're building on this with additional resources to support onboarding processes and assist with peaks in demand as well as taking further steps to automate and improve other key processes.

Operator

And we will further enhance our product offering. Last year, we launched our money market MPS option in February and cash savings solution in July. We're now building on this with the forthcoming launch of our Aberdeen SIP. We're also focusing on creating capacity for IFA clients to grow their business with us. Advisor holds an enviable position in an attractive market.

Operator

Over time, we're focused on reestablishing a leadership position in this market, but our first priority is to return to growth as soon as possible. We're targeting a net promoter score of greater than plus 40 and inflows of plus 1,000,000,000 in 2026. Turning now to investments. We have a scale investments business with three seventy billion pounds of AUM with strong recognition internationally and many talented investment professionals. However, for various reasons, some structural, some that were avoidable, we are not yet growing with sufficient profitability.

Operator

As highlighted by a significantly improved net flow position and our improved one year investment performance to 77, beating benchmark, 2024 was much better than 2023 or 2022. We therefore look forward with optimism and conviction about the Aberdeen Investments business of the future. We believe there are significant opportunities for specialist active asset managers in a transitioning industry. To do so, we will build on our heritage and across key growth asset classes where we hold competitive strengths. These are specialist equities, public and private credit and real assets.

Operator

I would like to highlight two areas we will focus on. First, private markets and alternatives and second, wholesale, where predicted growth rates are 107% per year, respectively. Alongside their growth potential, I would note that both these markets have margins that are typically 1.5x to 2x higher than for traditional institutional business. With a careful repositioning of the business, we can therefore not only drive increased flows, but also capture improved revenue. With our new leadership in Xavier Meijer and our new operating model, we're able to apply greater focus and pace to building a specialist asset manager that can optimize in existing areas of value.

Operator

So how will we win? In the near term, our focus is to deliver a step change in profitability, targeting over GBP 100,000,000 of profit in 'twenty six by delivering further on efficiency and repositioning the business to those areas of strength and growth opportunity. In Private and Alternatives, we have GBP 70,000,000,000 in AUM across real estate infrastructure, private and hedge fund solutions. Notably, in real assets, we will look to build on our excellent capability and scale of billion. In wholesale, we have good scale with billion of AUM.

Operator

We're a top 10 player in The UK with 50 funds globally rated four and five star by Morningstar. By expanding access to our institutional grade credit and specialist equities products, we're looking to achieve growth globally in wholesale. We're also positioning our offering for areas of potential future demand. This includes private market solutions and active ETFs. Well, last week, we converted two funds in The U.

Operator

S. With approximately $130,000,000 of AUM into active ETFs. We are also seeing opportunity in scaling our existing strengths, focusing on insurance solutions and on closed end funds, where we're the fifth largest manager in The U. S. And The U.

Operator

K. Of course, we recognize the importance of sustained investment performance in attracting and retaining clients. So we'll continue to build on the progress already made by our CIO, Peter Brana, and his team. This will include further investment in people, processes and technology. Our target is for three year investment performance to be better than 70% by 2026.

Operator

We'll also continue to enhance the business's operating model to improve agility, enable us to add scale efficiently, which I'll come back to in a moment. I'll now turn to the senior leadership team. Since I was appointed CEO, I've taken action to evolve our approach to delivery across the group, put in place a new streamlined group operating committee in November. Alongside me, this committee combines the three CEOs of our businesses: our CFO, our Chief People Officer, Tracy Hahn and our Group General Counsel, Richard Aberhan, all of whom are here today. Ian has done a phenomenal job as interim CFO on his second stint.

Operator

And as announced on Friday, Siobhan Boylan will be joining us this summer as our permanent CFO. The smaller group has been instrumental in bringing greater discipline to how we operate. We meet weekly with a clear remit to transform the group's performance, increase the pace of decision making, drive accountability and accelerate progress against our priorities. We'll ensure that capital is deployed where the rationale is strongest and provides most value to shareholders. We're also focused on strengthening our talent and culture.

Operator

First, let me just take a moment to thank all of our colleagues. They've been instrumental in the shift in momentum we've seen across our businesses. Strengthening talent and culture is one of my three priorities, and there are four aspects I'll just briefly touch on. First, the importance I place on leadership. We're redefining what leadership means at Aberdeen by resetting our expectation around the role leaders play in creating clarity, fostering teamwork and driving performance.

Operator

In addition to the leadership changes I just outlined, we've appointed Alan Corbabas, previously CCO and Interactive Investor, as Chief Operating Officer of our investment business. Second, operating model. Alongside the group operating committee, we've revamped the executive leadership team to have a more commercial and client focus, adding our investment CIO and all of the most senior client and product colleagues from across the three businesses. The ELT ensures effective cascade of our growth and efficiency objectives and removes any obstacles to better decision making. Third, we're reaffirming our commitment to invest in our people.

Operator

We have incredible talent at Aberdeen. We're committed to doing more to support career development and providing opportunities for learning and growth. I want this to be a business our people are proud of. And finally, we're evolving the culture. We want to make Aberdeen a place not only where talent is our competitive advantage, but to create a culture that drives innovation, understands the power of automation and is constantly looking to be more efficient for our clients.

Operator

And where we're seeking better is the constant refrain, which neatly moves me on to our new COO and transformation. In November, Richard Wilson was appointed as group COO in addition to continuing in his role as Interactive Investor, CEO. Building on more than three decades of experience delivering change, in this new role, Richard has overall responsibility for our technology capability, implementing automation and driving efficiency. And Richard will take on a leadership of our transformation program. To call out three examples of where we will focus: First, enhancing our operating model and investments, including reviewing our key processes second, driving efficiency across technology and operations with a particular focus on rationalizing third party supplier relationships and third, reviewing our functional support model, including improvements to our control environment.

Operator

So overall, Richard is tasked with driving the organization harder and improving operational efficiency, leveraging what has already been achieved in Interactive Investor. By doing all of this, we'll be more focused on growth, deliver better outcomes for clients, create a more agile cost base and invest more in developing our colleagues. I'm confident Richard will help me unleash the potential of this group. So now I'll change gear and just a word on capital management. We set clear principles by which we allocate capital across the group.

Operator

As you'd expect, the overarching aim, of course, is to direct resources to where they can generate the best return for shareholders. But first and foremost, we will sustainably grow earnings across our businesses. This is the source of capital for future investment and for dividends. Second, we'll preserve our strong balance sheet by increasing net capital generation and retaining additional sources of capital, not least our £500,000,000 stake in Phoenix, which underpins our strategic relationship with them. We do expect to reduce our gross debt over time, although we have no immediate plans to do so.

Operator

Our commitment to shareholders is that the group will have a resilient dividend. Over the medium term, I'm not expecting to grow the dividend per share, but I am expecting the coverage to improve markedly to improve that resilience. The actions we're taking to unlock value from our defined benefit pension plan will support the same. I'll come back to that in a moment. While there are no immediate plans for significant inorganic activity, I would note that any such activity will be subject to a demanding return hurdle.

Operator

So on to that pension agreement. The group's DB pension plan has been successfully managed over many years, and that's resulted in a significant surplus. We're pleased to announce today that we've reached agreement with the trustee to use the surplus to fund the cost of providing defined contribution benefits to our U. K. Based employees.

Operator

We expect this arrangement to deliver a significant boost to net capital generation of about £35,000,000 per year starting from July 2025. Whilst this is a structural solution with a significant annual benefit to capital generation, it does not preclude optionality in the future, for example, an insurance buyout. I'd like to thank all of my team involved and the trustee for reaching this agreement. So to close, we have significant headroom in each of our three core businesses. We've identified the key focus areas to enable them to realize their growth and profitability potential.

Operator

Interactive Investor will enhance its offering further, investing in its differentiated platform and brand to sustain efficient growth. We're targeting 8% per year customer growth and a cost to asset ratio of less than 20 basis points by 2026. Advisor will focus on delivering leading client service and improving our product offering to support a return to net inflows. We expect a net promoter score of greater than 40 and net inflows of at least GBP 1,000,000,000 in GBP 20 6. Investments will seek a step change in profitability by further repositioning to areas of strength and opportunity.

Operator

We're targeting adjusted operating profit to increase to more than GBP 100,000,000 in GBP 26 through further improvements in efficiency. In addition, we're aiming for three year investment performance versus benchmark to rise above 70%. And today, we're setting group targets for GBP 26, namely to increase adjusted operating profits to more than million and net capital generation to around million. Achieving these targets will support the sustainability of the current dividend. This ambitious set of targets reflects our confidence in the group and its future prospects.

Operator

I see this as a position from which we can build. It's by no means the limit of what we think the group can achieve in the longer term. We can create a much stronger business that our colleagues can be proud to work for, that delivers better outcomes for our clients and offers much more attractive returns to shareholders. And with that, we'll open up to your questions. Thank you.

Operator

Right. Nicholas, I

Speaker 2

think you've got the mic. Thank you, Jason. Thank you, yes. Thank you for today's update. It's a lot to digest, but really appreciate the detail.

Speaker 2

I guess I'll just start at the top in terms of, I guess, group overall targets, please. Yes. So three questions from me. Just firstly, can you please talk about the embedded assumptions and market assumptions in your plan? Secondly, can you give us a sense of whether and how much your new targets are ahead of the implied targets that you announced the market in January 2024?

Speaker 2

And I'm just trying to get I mean, obviously, they're notably ahead of consensus, so just trying to understand how much of it is you upsizing your targets versus maybe consensus market expectations just getting a little too cautious? And then finally, if I think about the bridge from market expectations to your 2026 targets and look at the divisional targets, it looks like the biggest delta to expectations may be in treasury income in Interactive Investor. Is that fair? And as part of that, thank you for providing us with that Slide '21 with expected cash margins over time. Can I just ask on cash balances?

Speaker 2

Cash balances are now 8% of AUA. That's the highest it's been since June 23. Presumably, that continues to tick up given the growth in SIP and maybe also falling interest rates. So where do you see cash balances as a percentage of AUA, trending to settling out over time from the 8% today?

Operator

Okay. There's quite a lot there. If I don't answer all of that, then forgive me. In terms of assumptions, basically, to hit these numbers, we're not assuming the market's going on a rip. We're extremely we've got the way we plan is to have very conservative fixed income and equity growth assumptions, that's on which this is built.

Operator

If there were a material crash or reduction in fixed income values, that would be a problem, okay, to hit this target. But it's not predicated on major growth. But obviously, people are taking more risk and investing more, markets tend to go up and it tends to be a compound effect there. In terms of the plans versus consensus, I think we set out I was quite new when we set out the transformation target last year. It was something that we thought hard about and Ian helped design and we implemented, it was around a sort of reengineering of the business.

Operator

So we're comfortable that was the right plan for them. We've made really good progress in 2024, and we'll continue to seek further efficiency. Richard will pick up the mantle of this, and we'll take it on. We'll finish the program. That's the 'twenty five objective.

Operator

And then we'll continue to be looking for efficiency within that business because the revenue shift in investments will continue. We are expecting margins to fall further. So we do we will need to continue to be more efficient to be successful and to hit our targets. On the expectations versus market, I think we've largely got easy one for me is the market's largely got adviser about right, which is a step down because of pricing and the way that the costs are going through. I think on investments, there's more to do for us to convert people over.

Operator

But broadly, it's not 1,000,000 miles off. I think revenues will continue to be under pressure. It's not to say flows are under pressure, but we are seeing growth in lower margin areas. We have to face into that. But we can do more on cost.

Operator

And then Interactive Investor, I think you're right. There's a series of elements where I think we're doing better than people are expecting, both in terms of growth, but also in terms of treasury income, and we've given some clear guidance on that. Richard, on the cash balances, they're probably ticking up slightly. Anything you would add?

Speaker 3

Yes. I don't have a great deal to add to what Jason has said. You're right that cash balances as a percentage of AUA in 2023 were at a historic low. And as the rates environment evolves, we're expecting that to uptick marginally. And as Jason pointed out earlier, the relative or comparative percentage of cash on AUA in SIP is moderately higher than it is in the other wrappers.

Speaker 3

So with our ongoing growth in the SIP penetration, we'd expect that to expand moderately.

Operator

Thank you. We'll go to Hubert next, just in the second row.

Speaker 4

It's Hubert Lam from Bank of America. I have three questions. Firstly, on Slide 13, you do show that cost basis continues to go down this year as well as next year. Where are the cost savings coming from after already doing a lot of cost saves already? Second question, again, I want to dig a little bit deeper in terms of the investments profit guide of 100,000,000 plus in 2026.

Speaker 4

Maybe how much of that is driven by revenues and how much is driven by costs in terms of the profit improvement? And again, in terms of assumptions, do you still expect revenue fee margin to come down further? Because obviously, that's a headwind in terms of improving your revenues. And lastly, in terms of year to date flows, thank you for the guidance around flat this year so far this quarter, sorry. Are you seeing any improvement in terms of demand for equities, just given that there's been a shift from The U.

Speaker 4

S. Forward to possibly China, EM, etcetera? Is that are you benefiting from any of that change? Thanks.

Operator

Okay. And do you want to cover the source of the cost saves?

Speaker 1

Yes. So transformation, I mean, we've obviously got 106,000,000 of to date. That's predominantly come from contract negotiation, third parties, tech, some AI innovation, rightsizing a little bit of the teams we did right upfront, a lot of work on process simplification. And we'd expect much of that to continue under as Richard sort of pushes forward. So we've got a good book of work to complete our $150,000,000 and that's how it's really set up.

Operator

So on the second question, and Toby, you can get ready to talk about demand for equities. On the second question on the outlook for revenue and costs, it's mainly cost that will come through and we've set that out. As I just said, previous question, we do see basis points ticking there, probably not as fast as we've seen as the book shifts between some of the more traditional products and some of the areas where we're growing. So I don't anticipate revenue growth in investments, but that's not to say we're not anticipating growth in the outlook for the business to be more positive and to make up the difference. We are going to become more efficient.

Operator

On the year to date flows, we did want to highlight the one redemption that we've had. There's a revenue value of around million contract value. So not it will look bad in Q1 numbers from a flow perspective. It's not a big revenue issue. I just want to be clear on that.

Operator

And then, Savi, do you want to talk about the outlook for the Specialist Equity business?

Speaker 5

Sure, definitely. So from an industry point of view, appetite for equity has actually slightly recovered over 2024 and the trend is continuing. It's not necessarily a massive trend and it's also a trend in 2024 that has been very much directed towards The U. S. And MAX7 in particular.

Speaker 5

What we are now seeing actually, which is a very recent trend, is opportunities and pockets of opportunities is a more specialized area out of MAX seven, if you think about small cap, for example. So it's quite early in the year to know and have a precise view whether it's going to be a very supportive year for equity or not. But we are operating in an environment that is better than what we have been facing over the last two years. This being said, emerging markets and in particular, Asian equity is still a bit of a challenging picture. Our eyes in terms of opportunities are focusing on China and the stimulus that and the reason of stimulus that are expected to come from China.

Speaker 5

Thank

Operator

you. Enrico, I think Pass the mic back to Rose, please.

Speaker 6

Thank you. It's Erik Wolcenu, JPMorgan. First question on II. I think pretty impressive stats also on market share. You have a number of new features that are coming out this year.

Speaker 6

Can you remind us on whether some of these will be available by the end of the ISA season? So might see a benefit, tangible benefit already. And then on the managed SIP in particular, can you remind me if this will include also the accumulation, so you'll be able to actually provide managed solution when it comes to the accumulation phase that will be helpful? And then again, I guess related to that, we are expecting from the FCA the outcome of the Advise guidance boundary review. What implication do you expect for the business?

Speaker 6

Do the targets include any tailwind from that at all? So these are my questions.

Operator

I think that is a perfect chance to get Richard back on his feet.

Speaker 3

Thank you. So in terms of the first question, which is the feature set, the answer is no. There won't be major new releases prior to the tax year end. We are entering into the beta release of II360 in the coming days, but we're going to spend whatever time we need to harden that environment over the coming months before we go into GA or general release. The managed SIP is live date is in Q2.

Speaker 3

And the initial version of the managed SIP is accumulation. And I can't remember the third question. Accumulation, yes.

Speaker 6

Yes. Oh,

Speaker 3

yes. The ethereal guidance boundary. Clearly, as we all know, the that's going through an extended level of review with the regulators. So we don't have a hard fix on the boundary position between targeted support and personal recommendation. Our engineering is insensitive to that.

Speaker 3

Having said that, we don't have any great expectation in terms of a hockey stick on the financials from the digital advice offering. That's a multiyear commitment. So we'll adapt our journeys when that guidance position becomes clear. And that for us will just be part of our flex. We've got no interest in taking conduct risk, so we'll be very prudent in terms of how we deploy.

Operator

Thank you, Richard.

Speaker 7

Michael? Thanks, guys. Mike Werner here from UBS. Thanks a lot for the presentation today and all the details. Just two questions from me.

Speaker 7

First, on the capital generation coming from the pension plan, can you just give us a little bit more color? Is this something that we should think of as like an annuity? Is it going to be stable over time? How is that going to potentially change in terms of the, I guess, the transfer to from the surplus into your capital base? And then second, there was a news report, I believe, a week or two ago about a potential tie up with a Chinese bank.

Speaker 7

I was just wondering if you could provide any commentary there. And then ultimately, just thinking about any incremental opportunities you have and how that might have an impact on your 26 targets.

Operator

Okay. So easiest one is the CapGen target. It is an annual benefit. It's about $35,000,000 or so. The surplus depends on how you measure it, of course, but IS 19 is about $800,000,000 economic surplus a bit lower.

Operator

But the surplus will, on average, refresh itself as we expect the performance on the assets to be higher than the payments out of that surplus. So it's not going to deplete the surplus materially. And certainly, I mean, it's only whatever it is under 5% of the accounting surplus per year. And the cap on it is effectively how much contribution we're making to D. C.

Operator

So that's rather than anything to do with the surplus, it's just the actual cash cost of providing pensions to our employees. So as I say, it's a structural solution, and we see that as an annual benefit. I mean, nothing on those news reports. There were news reports. There weren't comments from us.

Operator

So I can't really say anything further on that. The incremental opportunities, of course, we are always eager, red blooded and all that to find things for us to do that is more exciting. But M and A is not a massive part of the way I think about it. We might take opportunities if they arose, but there's we're not sitting on a sort of pipeline of ideas and things. It's very much a self help fix the get the cost base right, get the marketing right, get the product and service areas right, and really focus on the core businesses.

Operator

And that's hopefully, that came through in the presentation, but let me just repeat that. That's what we're doing. Who's next? Charles then Andrew.

Speaker 8

Thank you very much. A couple for Richard, if I can, on II360. I was just wondering if you could flesh out what the offering will look like? Are we expecting CFDs, futures, options, margin lending, etcetera? Or is it going to be a bit more streamlined than that?

Speaker 8

And are you going to be competing with IBKR, Robinhood? Is that the idea? I'm just wondering whether this will entail a sort of two tiered pricing structure where commissions and FX are cheaper on the active trader platform? And then finally, just be interesting to know how you've managed to build out a new offering without materially upgrading the cost guidance? Thank you.

Operator

Yes, Richard, go for it, please. Thank you.

Speaker 3

Thank you for that complicated question. First of all, like most of the developments that we undertake, they are very carefully thought through, and we do nothing which will conflict with our underlying discipline and focus to make sure that our operating capability and our ambition stay connected. We've been working on a number of initiatives, which hopefully, for those of you who make the journey to Manchester in June, we can show you the underpinnings of we've been working on those for a number of years. An example of that is II Community, our social investment platform that went live initially in October of 'twenty four. We've been working on that for four years.

Speaker 3

II360, we've been working on that for a number of years also. The proposition is we I mean, II as a brand is a long only investment platform. It targets long term investment and is not geared or priced to attract active traders. That clearly is a very close adjacent market, and we have a number of sophisticated customers who would prefer to have those services, which today we can't offer. The platform will provide access to all the wealth markets.

Speaker 3

It will be long short. You will have a stock loan, you have CFDs and derivatives. I don't have an ambition to offer the kind of leverage and churn and burn model that some of our colleagues elsewhere in the market offer. And we'll stage that deployment over the next quarters as we harden the environment. The pricing, we will disclose when we're ready, but you can assume that it will be on the disruptive side as opposed to on the monetizing side.

Speaker 3

Hope that answers the question.

Operator

And the costs, Richard?

Speaker 3

The costs, we come from myself and my wonderful colleagues come from a market infrastructure background. So we're very careful and thoughtful about how we layer adjacent services so they interoperate. So the vast majority of the costs that we have incurred are already in the book. So there's no material balance sheet carry on that investment. And we work very closely with very close partners to make sure that we can deliver that in a non dilutive way.

Speaker 3

So don't expect any cost surprises on that.

Operator

Thank you. Mr. Crane.

Speaker 8

Hello. It's Andrew Crane with Autonomous. Three questions. Of the remaining million of cost savings, how many will fall in million versus million? Secondly, looking at your capital generation, net capital generation target of 300, if I took the '24 of February, took out the restructuring costs and then added in the benefit of the pension scheme, you'd be at sort of $3.40 ish.

Speaker 8

So the target of 300 looks as though it's a bit lower than that. Why is that? And then can you tell us what is the flows? I mean, you said it for the Advice business, but what is the flows ambition within the investments target in 2026? And if we can get a sense of that, I mean, it's all very well doing loads of liquidity flows, but they're irrelevant to the revenues.

Speaker 8

So if you could give us a sense as to the high value flows within that target.

Operator

Okay. So on the cost saves, I think we'd expect we did 70,000,000 in the P and L this year out of $106,000,000 so a minimum of $36,000,000 will come through. Somewhere between we've got separate here the cost saves will hit the bottom line and then offset by growth in II II primarily. So it's somewhere in the sort of $50,000,000 to $70,000,000 ish at a net basis, I would say, yes, in that range. I don't know yet.

Operator

It depends on what we do in terms of reinvestment and what we do in terms of the overall, but we should be able to get really good progress on that through the year.

Speaker 1

I think the new saves over and above the 106, about two thirds of that will be recognized within the P and L. We may well use some of that to reinvest, but the other third will bleed into 2026.

Operator

So that's going well, that program. The on the capital generation side, I mean, we've given you a sort of profit aim, aim point for '25. We've got the pension, we've got the Phoenix dividend, so that and then we've got restructuring costs. We're not saying they're going to get a zero, there'll be some, but they'll be materially lower as you think to I think that gets you to about $300,000,000 The one line item that will probably come down a little bit is the return on group cash. It's a contributor to PBT and capital generation.

Operator

Rates, not nominal rates, we think, will be lower and we also think we'll have slightly less cash. So I'd see that figure coming down just a little bit. That's another contribution. And I'm not going to be foolish enough to give you flow targets for 'twenty six. We're going through this.

Operator

We've got plans. We're trying to set up an opportunity to grow in certain areas. And of course, we've got plans in the business. And Xavier has cascaded very clear plans to his team. But markets change and things change.

Operator

But we are very committed to returning to positive flows, obviously, in that business.

Speaker 8

If you're giving us a profit target, you must have a flow target?

Operator

Right. As you said, we've got flow plans, but I'm not giving out targets on it externally. Christian, over here.

Speaker 9

It's David McCann from Deutsche and Numis Fries from me as well, please. A question on the Advice business, because we haven't had one on that yet. So you obviously given us the billion flow target in 2026. I mean, in the context of its billion or so of assets, its position in the industry, billion doesn't really reestablish that business as a market leader. Your words as to what you want to do with it, it probably should be like three or four.

Speaker 9

So maybe you can talk about what was your ambition beyond '26 in terms of flow for that business? Because I appreciate 1,000,000 is better than it is now, but it's still not really a market leading business as I would view it. Secondly, on the pension surplus, what prevented you from doing a more complete pension buyout here rather than the plan you have adopted in terms of using it for DC Petrocontributions noting that you said you hadn't ruled it out forever, but what has stopped you doing it right now? And then final question really, Jason. Just wanted to confirm that you do remain, as you said before, committed to the three core divisions using your language for the long term of this business, not just the short term?

Speaker 9

Just seeking that confirmation would be great.

Operator

Well, I'll start on three, absolutely. The configuration of the group I'm very comfortable with with wealth and investments. We're very committed to improving all three and maintaining the growth in all three of our core businesses, but also making sure that we stay laser focused on developing those, not getting distracted. On the I'll go in reverse order. On the pension surplus, we think what we've done, it does create significant value and a sustainable value.

Operator

As you say, we haven't got full legal and tax clarity to do a buyout, and I mentioned that six months ago. So right now, that wasn't available option to us. It might become one in the future, but it's that has proven much more tricky than I certainly anticipated. So be it, that's where we are, but it could take a number of years for us to get that clarity. It's a complex, archaic structure that we're unable to get the confirmations that we would need to go ahead with it.

Operator

We would then have the choice what we would do, but we're very comfortable with what we've reached today. A good point on Advisor. We have got we're coming off minus $3,900,000,000 in 2024. So to get to plus $1,000,000,000 is a $5,000,000,000 swing, give or take. So I talk about shifting momentum.

Operator

It would be great if we could do more than that. I just think it will take time. And I want to give us and make sure that we've got sensible plans to get back into that leadership position, but it's not an overnight fix. You need to win the confidence over. People don't chop and change platforms.

Operator

It's not the sort of thing people change often. So it takes time to build relationships, it takes time to build confidence, it takes time to get people back into the right place to commit to this platform. We come at this we're still number two position in the market, so we've got great relationships. Noel has built those over many years. Just getting people back into the vein of working with us and growing with us, I think it will take a little bit of time.

Operator

I see 'twenty five as very much a year of transition and we'll expect to grow in 'twenty six. Any more questions?

Speaker 2

Which case? Which case?

Operator

Are we going to oh, we're opening up. Any questions on the line?

Speaker 10

And we do have a question from Bruce Hamilton from Morgan Stanley. Please go ahead. Your line is open. Hi. Thanks for all the detail.

Speaker 10

Thanks for taking my questions. Hopefully, you can hear me loud and clear. In terms of the kind of the benefits of the three divisions sitting side by side, can you maybe talk a little bit more around any further kind of revenue synergy opportunities perhaps around either retirement solutions, any products or just how to think about that? Obviously, the tech backbone and the ability to drive efficiencies across costs, I can see, but just in terms of the revenue opportunity. Secondly, on the equity sort of performance and strategy, obviously, there's been a decent pickup in the one year performance across the investments division.

Speaker 10

But within high margin equities, could we get a number there? Because I think that's been the bit that's been lagging. And on your active ETF strategy, is the way to think about that is really going to be U. S. Products and converting mutual funds into ETF?

Speaker 10

Or do you have broader ambitions kind of launch new active ETF products? And then finally on costs, I think in the annual report, you say costs below $1,250,000,000 in 2025, but that wasn't on the slide. So I just wanted to check that, that's the way to think about the '25 cost base sort of trajectory. Thank you.

Operator

Yes. On the costs I gave Andrew, I can hear you loud and clear, Bruce, so thanks for the question. On the costs, that's about right, below that figure. I don't want to get too fixated on a precise P and L figure. So the number I gave to Andrew was sort of the gross number, but we've got some investment opportunity on the cost side as well.

Operator

On the group configuration, I'm very comfortable with the way that we are. We collaborate around we're in the investment business. We focus with one regulator. We have simplified processes. So that works.

Operator

In terms of products, I think there is more that we can do. And you pull into it to deCum products, which will be huge. We talked for many years about what other than annuities could we offer to people in decumulation. Absolutely, we've got the componentry to do better in that market, and there is clearly an opportunity there. Right now, we've got managed products that Knowles' team offer, and we've got the managed ISO and the managed SIP products through Richard, plus other things that we can do.

Operator

Obviously, I has an independent position in the market, and we're not going to undermine that. That's an important part of the way that we face in. But we've been very helpful, for example, in investment trusts. II customers own 14% of their investment trust market. Aberdeen has got a big investment trust business.

Operator

So we can bring the two together in terms of content, meet the manager, voting preferences and start to create a community of interest in investment products certainly within The U. K. Wealth sphere. So there's definitely more that we can do without majorly changing what we do. Equity performance actually, Zevi, do you want to take equity performance and our plans in active ETFs, if that's all right?

Speaker 5

Yes, sure. So overall performance has increased materially from 55% over one year to 77% on the one year performance. If you look at the equity component of that, we have also seen a material improvement from 15% outperforming benchmark a year ago to 32% outperforming benchmark right now. It's not yet at the level we want it to be, but 2024 has been a very difficult year for any equity asset manager and on the active side to outperform the benchmark. So that probably put us in line with peers in terms of overall equity performance for 2024.

Speaker 5

In terms of margin of that business, the margin that we see on our growth flow on the equity business is at par, if not slightly higher than the average margin of our book of business on equity. And regarding plans for active ETF, it's an instrument that we have keen interest on. We are making active conversion in The U. S. On some of our funds into active ETF as referenced by Jason earlier on.

Speaker 5

And we also have an active ETF in Europe and we are complementing that vehicle with two other listings to come soon in April.

Operator

Thank you. Next question on the phone.

Speaker 10

Our next question comes from Gregory Simpson from BNP Paribas. Please go ahead.

Speaker 11

Hi, yes, morning. Thank you for the presentation. A few from my end. Firstly, the release mentioned a strategic review of Finimize. I think this is a loss making business.

Speaker 11

Can you confirm the operating loss from this business last year? And then secondly, I don't think you talked about your financial planning business, which I think was also loss making. Can you confirm if you're doing a review here and if and what kind of loss that had last year? And then finally just on II, subscriptions grew by 3% excluding marketing incentives but declined by 4% including them. Can I just check what these marketing incentives are?

Speaker 11

Are they mostly targeted at new II joiners where you maybe pay up year one, but then they have high customer lifetime value? Thank you.

Operator

Okay. So Finimize, we do need to review what we're doing with it. It made a small single digit loss last year. And as I've said before, I want to be focused on the three core businesses as to what we're doing. So I like what Freedom Eyes does.

Operator

It's got a great sort of business model. We haven't yet been able to commercialize it into something that makes profit. So we need to take action to do that. So that's what the strategic review means. Financial Planning, I think, similarly makes a very small contribution sort of it depends and it's not big companies how much overhead you layer them up, but they make a positive contribution for any overhead, probably a small negative with a little bit of overhead.

Operator

So it's Rich has done a great job at sort of streamlining that business under his leadership. We'll continue to make progress with it. And on II, I mean, there are marketing incentives, vouchers, discounts, offers that you actually make to entice people. I hope most of you have signed up to II because they will be offering you all sorts of SIP incentives to join, and there are other types of propositions in the marketplace to get you to join. So it's just simply the quantification of those marketing incentives to bring people in, then you expect obviously, there's sort of new business strain in insurance speak, then you'd expect then the actual percentage growth in customers to throw through into subscription revenues over time.

Operator

Clearly, 8% growth in customers in the year doesn't mean eight percent growth in subscriptions because you don't win them all first of Jan. Any more on the phones?

Speaker 10

Currently, we have no further questions over the telephone.

Operator

Okay. Any more in the room? Well, look, thank you all very much for attending. I really do appreciate your interest and taking all the questions. Look forward to following up with you in the coming days and weeks.

Operator

Thank you.

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