Full Year 2016 adjusted net income per share including Elian on a proforma basis
of approximately €1.42 expected
Intertrust N.V. Q3 & 9M 2016 results
Amsterdam - November 3, 2016 - Intertrust N.V. ("Intertrust" or " the Company") [ticker symbol INTER ], the leading global provider of high-value trust and corporate services, today announces its results for the third quarter and the nine months ended September 30, 2016.
Presentation of financial and other information
Financials are presented on an adjusted basis, before specific items and one-off revenues/expenses. Year-to-date (YTD) financial information represents unaudited financial information for the nine months ended September 30, 2016. The acquisition of Elian was closed on September 23, 2016.
In € millions | 9M 2016 | 9M 2015 |
Adjusted revenue | 265.0 | 253.4 |
Adjusted EBITA | 105.6 | 102.6 |
Adjusted EBITA Margin | 39.9% | 40.5% |
Adjusted net income | 77.7 | |
Adjusted net income per share (€)* | 0.88 |
Note: Rounding differences may occur as calculations are based on nine month figures not rounded to millions.
* Adjusted Net Income per share calculated using weighted average number of shares outstanding as per September 30 (87,917,883), including issuance of shares for the acquisition of Elian
David de Buck, Chief Executive Officer of Intertrust, commented:
"We are generally satisfied with the overall performance of the group, the main exception being Cayman. Excluding Cayman, our Adjusted revenue on a constant currency and proforma basis grew 4.6% in Q3 and 5.3% for the 9M period.
Our third quarter revenue growth was negatively impacted by weaker-than-expected performance in Cayman, fewer available billable hours due to the continued tight recruitment market in Luxembourg and continued weakness in specialised services in The Netherlands. The underlying business remains strong with our sales pipeline being 8 percent higher than same period last year. One of the short-term effects of Brexit has been the delay of investment decisions due to uncertainty surrounding how Brexit will play out.
The Elian acquisition was closed on September 23 and the integration is in full swing. The new, post-merger management structure was announced and implemented. All but one of the office moves and the rebranding of Elian to Intertrust will be completed in the coming 6 weeks. Combined sales strategies for the newly adopted service lines have been finalised and are being implemented. We have received positive feedback from clients and business partners across the globe and cross-selling opportunities between the companies are already being realised. Synergy forecasts of £10.4 million remain unchanged. Per the period September 23 - September 30, 2016, Elian contributed €1.6 million in Adjusted Revenue and €0.6 million in Adjusted EBITA. We look to the coming year with confidence, and we are excited with the opportunities Elian brings us."
Highlights Q3
Intertrust stand-alone Key Financials Q3 and 9M 2016
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(i.e. excl. Elian contribution as of September 23, 2016)
Q3 | Q3 | % Change (reported) | % Change (CC ) | % Change (CC & Proforma) | 9M | 9M | % Change (reported) | % Change (CC ) | % Change (CC & Proforma) | ||
2016 | 2015 | 2016 | 2015 | ||||||||
Adjusted revenue (€m) | 86.7 | 87.3 | -0.7% | 1.0% | 1.0% | 263.4 | 253.4 | 3.9% | 5.1% | 2.6% | |
Adjusted EBITA (€m) | 34.0 | 34.7 | -2.2% | -0.7% | -0.7% | 105.1 | 102.6 | 2.5% | 3.4% | 2.1% | |
Adjusted EBITA margin | 39.2% | 39.8% | -59bps | -68bps | -68bps | 39.9% | 40.5% | -58bps | -65bps | -22bps | |
Operating free cash flow (€m) | 33.8 | 35.7 | -5.2% | 106.5 | 105.3 | 1.1% | |||||
Cash conversion ratio including strategic capital expenditure (%) | 92.9% | 92.4% | 94.2% | 93.1% | |||||||
Cash conversion ratio excluding strategic capital expenditure (%) | 94.0% | 97.7% | 95.8% | 97.7% | |||||||
Adjusted Net Income | 25.3 | n.a. | 77.2 | n.a. | |||||||
Adjusted Net Income per share (€) 2 | 0.30 | n.a. | 0.91 | n.a. | |||||||
No. of entities 3 (000's) | 38.5 | 42.1 | -8.6% | ||||||||
Average Adjusted revenue per entity (ARPE) (€k) 4 | 9.12 | 8.0 | 13.8% | ||||||||
No. of full-time equivalents (FTEs) 3 | 1,746 | 1,713 | 1.9% | ||||||||
Adjusted revenue per FTE (€k) 4 | 201 | 197 | 2.0% | ||||||||
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Financial highlights Q3 2016 versus Q3 2015
Financial highlights 9M 2016 versus 9M 2015
Adjusted net income and Adjusted net income per share
Outlook
Performance in key jurisdictions
The Netherlands
Q3 | Q3 | % Change (reported) | 9M | 9M | % Change (reported) | ||
2016 | 2015 | 2016 | 2015 | ||||
Adjusted revenue (€m) | 29.7 | 28.5 | 4.5% | 88.1 | 83.4 | 5.5% | |
Number of entities (000's) | 4.3 | 4.5 | -3.8% | ||||
Annualised ARPE (€k) | 27.2 | 24.8 | 9.7% |
1. Adjusted financials before specific items and one-off revenues/expenses
In the Netherlands YTD 2016, Intertrust achieved year-on-year adjusted revenue growth of 5.5%, driven by continuing international investments and increased billable work force. Inflow of new entities YTD 2016 was in line with inflow over same period 2015. Inflow in Q3 2016 was higher than in Q2 2016 and at the same level as Q3 2015. A significant part of YTD outflow (approximately 170 entities) was related to a one-time administrative correction of a group of capital markets entities which were terminated before 2016. The correction had no revenue impact. Outflow in Q3 was in line with Q2 2016, predominantly reflecting end of life of client structures. ARPE growth continues as a result of transaction complexity and regulatory requirements demanding value-added services.
Luxembourg
Q3 | Q3 | % Change (reported) | 9M | 9M | % Change (reported) | ||
2016 | 2015 | 2016 | 2015 | ||||
Adjusted revenue (€m) | 18.9 | 18.5 | 2.2% | 57.4 | 55.4 | 3.7% | |
Number of entities (000's) | 2.6 | 2.7 | -2.7% | ||||
Annualised ARPE (€k) | 29.5 | 27.7 | 6.6% |
In 9M 2016, Intertrust Luxembourg achieved year-on-year Adjusted revenue growth of 3.7%, driven by increased billable workforce and renegotiation of fixed fee agreements in order to align fees with the current services provided. Growth was lower than expected due to unavailable hours and fewer billable hours due to fewer FTEs than budgeted because of a tight recruitment market. New business from existing clients showed strong growth, specifically PE/VC activity. The number of entities decreased by 2.7% compared to September 2015 due to less incorporations in the market mainly driven by deal flow in the PE and real estate markets. Outflows due to end of life and insourcing were balanced by inflows with similar revenue.
ARPE growth of 6.6% reflects continuous increase in substance requirements and more complex structures leading to higher fees.
The Cayman Islands
Q3 | Q3 | % Change (reported) | % Change (CC 1 ) | 9M | 9M | % Change (reported) | % Change (CC) | ||
2016 | 2015 | 2016 | 2015 | ||||||
Adjusted revenue (€m) | 12.2 | 14.7 | -17.1% | -16.8% | 37.9 | 42.6 | -11.0% | -10.8% | |
Number of entities (000's) | 15.7 | 19.0 | -17.4% | ||||||
Annualised ARPE (€k) | 3.2 | 3.0 | 7.8% | 8.0% |
In the Cayman Islands, on a constant currency basis, Adjusted revenue decreased in 9M 2016 by 10.8% driven by a decline in the number of registered office entities as well as the sale of its banking activities in Cayman to Cainvest at the end of 2015, partially offset by higher registered office transfer-out fees.
The re-entry of a competitor in the Cayman Islands led to a reduced inflow and an outflow of 1,554 entities in 9M 2016 (2,898 entities since re-entering the market mid 2015). Remaining outflows in Cayman of 406 entities were driven mainly by end of life and bad debtors. Outflow of Cayman entities in Q3 was almost half of outflow in Q2. Growth in the other businesses, like fiduciary services, fund administration and corporate secretarial services, was less than anticipated. Cayman has had a new MD since September 23
rd
, with the former MD of Elian Cayman leading the combined teams.
ARPE in constant currency grew by 8% due to outflow of lower ARPE structures, which improves the mix of business.
Guernsey
Q3 | Q3 | % Change (reported) | % Change (CC 1 ) | 9M | 9M | % Change (reported) | % Change (CC) | ||
2016 | 2015 | 2016 | 2015 | ||||||
Adjusted revenue 1 (€m) | 6.5 | 6.9 | -7.2% | 11.1% | 21.0 | 21.2 | -1.0% | 9.3% | |
Number of entities (000's) | 3.0 | 3.3 | -10.2% | ||||||
Annualised ARPE (€k) | 9.3 | 8.5 | 10.2% | 21.7% |
In Guernsey, on a constant currency basis, Intertrust achieved Adjusted revenue growth of 9.3% in 9M 2016. This is driven by additional revenue on FATCA filings and compliance remediation work.
YTD ARPE increased by 21.7% in GBP (10.2% in EUR), driven by the exit of lower margin private client entities from Guernsey and Cayman as well as taking on more complex structures over the last year that generated higher revenue. The decrease in the number of entities was due to an administrative clean-up of 276 entities.
Rest of the World
Q3 | Q3 | % Change (reported) | % Change (Proforma and CC) | 9M | 9M | % Change (reported) | % Change (Proforma and CC) | ||
2016 | 2015 | 2016 | 2015 | ||||||
Adjusted revenue (€m) | 19.4 | 18.6 | 4.0% | 4.7% | 59.0 | 50.8 | 16.1% | 5.0% | |
Number of entities (000's) | 12.9 | 12.7 | 2.0% | ||||||
Annualised ARPE (€k) | 6.1 | 5.4 | 13.9% | 2.9% |
In the Rest of the World (ROW) at constant currency and on a proforma basis, Adjusted revenue grew by 5.0% year on year. The 9M 2016 figures include CorpNordic, acquired in June 2015. On a proforma and constant currency basis, Adjusted revenue growth was driven by strong performance of Spain, Ireland and Singapore, but partially offset by Hong Kong and Switzerland. This growth continues to be driven by increased M&A activity, increased private equity activity and growth in demand from financial institutions.
On a proforma basis, the number of entities remained stable, mainly driven by net inflows in Spain, Ireland, UK, Dubai and Delaware, offset by net outflows in Hong Kong, Curacao and Switzerland. ARPE improved further from €5.4 k in Q3 2015 to €6.1 k in Q3 2016, driven by more complex services resulting in a higher-value service offering to new client entities. The increase in Asian M&A activity is resulting in an increased outbound deal flow from all Asian offices to the network of Intertrust. We also see stronger growth in ROW countries by client wins away from competitors, as a result of a flight to quality.
Group HQ and IT
Q3 | Q3 | % Change (reported) | % Change (CC) | 9M | 9M | % Change (reported) | % Change (CC) | ||
2016 | 2015 | 2016 | 2015 | ||||||
Group HQ and IT costs (€m) | -10.4 | -9.0 | 15.4% | 16.1% | -30.2 | -27.3 | 10.6% | 10.9% |
Group HQ and IT costs increased by €2.9 million year-on-year driven by IT costs. The increase mainly comes from IT staff expenses in order to support business and IT initiatives, higher software maintenance costs due to the new applications and higher software amortisation costs due to BAR investments. BAR applications were deployed in most jurisdictions, and this project is completed. Plans to decrease IT latency and down-time are under review, as well as a further strengthening of monitoring and control activities to ensure client data is well-protected.
Financial Calendar
Q3 2016 results - November 3, 2016
Intertrust NV share quotation ex-interim dividend 2016 - November 9, 2016
Record date interim dividend 2016 entitlement - November 10, 2016
Payment date interim dividend 2016 - November 30, 2016
FY 2016 results - February 10, 2017
Publish audited financial statements - April 3, 2017
Q1 2017 results - May 4, 2017
AGM - May 16, 2017
Intertrust NV share quotation ex-final dividend 2016 - May 18, 2017
Record date final dividend 2016 entitlement - May 19, 2017
Payment date final dividend 2016 - June 12, 2017
Investor call
Intertrust CEO David de Buck and CFO Ernesto Traulsen will hold an investor call today at 9:30 a.m. CET to discuss the Company's 9M 2016 Trading Update. A webcast of the call will be available on the website. Details can be found at
http://investors.intertrustgroup.com
.
For further information
Intertrust N.V.
annelouise.metz@intertrustgroup.com
Anne Louise Metz Tel: +31 20 577 1157
Director of Investor Relations, Marketing & Communications
About Intertrust
Intertrust is the leading global provider of high-value trust and corporate services, with approximately 2,400 employees located throughout a network of 42 offices in 31 jurisdictions across Europe, the Americas, Asia and the Middle-East. The Company focuses on delivering high-quality, tailored services to its clients with a view to building long-term relationships. Intertrust's business services offering is comprised of corporate services, fund services, capital market services, and private wealth services. Intertrust has leading market positions in selected key geographic markets of its industry, including the Netherlands, Luxembourg, the Cayman Islands and Jersey. Intertrust works with global law firms and accountancy firms, multi-national corporations, financial institutions, fund managers, high net worth individuals and family offices.
Intertrust N.V. - Consolidated Profit/Loss (unaudited)
The following figures include Elian from September 23, 2016
In € millions | 9M 2016 | 9M 2015 | ||
Revenue | 265.0 | 253.0 | ||
Staff expenses | (118.7) | (109.7) | ||
thereof equity share-based payments upon IPO | (3.7) | - | ||
Rental expenses | (13.7) | (12.7) | ||
Other operating expenses | (30.9) | (28.3) | ||
thereof transaction & monitoring costs | (4.7) | (3.2) | ||
thereof integration costs | (1.0) | (1.0) | ||
Other operating income | 0.1 | 2.4 | ||
EBITDA |
101.8 |
104.7 | ||
Depreciation & amortisation | (28.7) | (27.5) | ||
Profit/(loss) from operating activities | 73.1 | 77.2 | ||
Net Finance costs | (23.1) | (56.1) | ||
Profit/(loss) before tax | 50.0 | 21.1 | ||
Income tax | (13.9) | (6.8) | ||
Profit/(loss) from continuing operations | 36.1 | 14.3 | ||
Basic Earnings per share (€) 1 | 0.41 | n.a. |
EBITDA to Adjusted EBITA analysis | ||||
In € millions | 9M 2016 | 9M 2015 | ||
EBITDA | 101.8 | 104.7 | ||
Transaction & monitoring costs | 4.7 | 3.2 | ||
Integration costs | 1.0 | 1.0 | ||
Other operating (income)/expense | - | (2.4) | ||
Equity share-based payments upon IPO | 3.7 | - | ||
One off revenue | 0.3 | |||
One-off expenses | 0.6 | 1.0 | ||
Adjusted EBITDA | 111.7 | 107.8 | ||
Depreciation and software amortisation | (6.1) | (5.3) | ||
Adjusted EBITA | 105.6 | 102.6 |
Intertrust N.V. - Balance sheet items (unaudited)
9M 2016 | 9M 2015 | |||
Total Net debt 2 (€m) | 771.0 | n.a. | ||
Leverage ratio 3 | 3.79 | n.a. | ||
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Definitions
Adjusted EBITDA is defined as EBITDA before specific items and before one-off revenue / expenses. Specific items of income or expense are income and expense items that, based on their significance in size or nature, should be separately presented to provide further understanding about financial performance. Specific items include (i) transaction and monitoring costs; (ii) integration costs; (iii) income / expenses related to disposal of assets and (iv) share-based payment upon IPO. Specific items are not of an operational nature and do not represent core operating results. One-off revenue consists mainly of revenues related to the release of one-off provisions. The one-off expenses are related to redundancies, legal costs and settlement fees.
Adjusted EBITA is defined as Adjusted EBITDA after depreciation and software amortisation.
Adjusted EBITA margin is defined as Adjusted EBITA divided by Adjusted revenue, and is expressed as a percentage.
Adjusted revenue is defined as revenue adjusted for one-off revenue as defined under Adjusted EBITDA.
Stand-alone is defined as Intertrust without the incorporation of the financials of Elian as of September 23, 2016.
Adjusted net income is defined as Adjusted EBITA less net interest costs and less tax costs.
Adjusted net income per share is defined as Adjusted net income divided by the number of shares outstanding as specified, i.e. either before additional issuance for the acquisition of Elian, or weighted average during the period, or the actual number at the end of the period.
Proforma means including the CorpNordic contribution for the period January - June 2015.
CC is defined as constant currency.
Capital expenditure is defined as investments in property, plant, equipment and software not related to acquisitions.
Cash conversion ratio including strategic capital expenditures is defined as Adjusted EBITDA less capital expenditure, including strategic capital expenditures, divided by Adjusted EBITDA and is expressed as a percentage.
Cash conversion ratio excluding strategic capital expenditures is defined as operating free cash flow divided by Adjusted EBITDA and is expressed as a percentage.
EBITDA is defined as earnings before interest, taxes, depreciation and amortisation.
Operating free cash flow is defined as Adjusted EBITDA less capital expenditure, excluding strategic capital expenditures. We define strategic capital expenditures as capital expenditures relating to the Business Application Roadmap, or relating to investments in IT infrastructure in connection with the Business Application Roadmap.
Forward-looking statements
This press release may contain forward looking statements with respect to Intertrust's future financial performance and position. Such statements are based on Intertrust's current expectations, estimates and projections and on information currently available to it. Intertrust cautions investors that such statements contain elements of risk and uncertainties that are difficult to predict and that could cause Intertrust's actual financial performance and position to differ materially from these statements. Intertrust has no obligation to update or revise any statements made in this press release, except as required by law.