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Edited Transcript of SNN.L earnings conference call or presentation 19-Mar-20 9:30am GMT

Full Year 2019 Sanne Group PLC Earnings Call

St Helier Mar 19, 2020 (Thomson StreetEvents) -- Edited Transcript of Sanne Group PLC earnings conference call or presentation Thursday, March 19, 2020 at 9:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* James Ireland

Sanne Group plc - CFO & Director

* Martin Schnaier

Sanne Group plc - Group CEO & Director

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Conference Call Participants

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* Sylvia Pavlova Barker

JP Morgan Chase & Co, Research Division - Analyst

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Presentation

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Martin Schnaier, Sanne Group plc - Group CEO & Director [1]

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Good morning, ladies and gentlemen. I'd like to extend a warm welcome to all of you attending our first ever virtual results presentation. Thank you for joining us. I'm sure that many of you are rather more dressed down today, working from your bedrooms or kitchens. And therefore, clearly interested in COVID-19 implications for our business. But before we get there, let's go through the 2019 review.

To start, I will provide an overview of the 2019 highlights and then revisit SANNE's strategic objectives against the backdrop of the market drivers we see in our core business areas. James will run through the financial review for the group, as well as covering off the impact of our strategic disposal of the Jersey Private Client business that we announced on Monday. Following that, I will provide an overview of the regional performance of the business and the operational review. In this section, I will also talk about the 2 deals we announced recently as well as shining a spotlight on our 2016 U.S. acquisition. I'll then cover our progress against the group's strategic objectives and talk about our focus for 2020 onwards. To end, we'll have our usual Q&A slot, should anybody have any questions that they may wish to ask.

So turning to the 2019 highlights slide. 2019 was an incredibly busy year for the group, and a year in which we made a significant number of important changes to our group structure and to our operations. I want to begin by saying a big thank you to all our people across the globe. We have been excellent as we made those changes to the business during the year. Since the year-end, I also want to say that the dedication and resilience of the global SANNE family has been incredible during the COVID-19 outbreak. Our people's health is of paramount importance, and we have taken steps to protect them as much as we're able to do, and of course, in line with official guidelines. We will revisit that important topic later in the presentation.

So last year was really an extraordinary year for us, and we achieved a huge amount of which we can be proud. I have picked up some of the highlights to begin with. 2019 was another year of strong revenues as the group delivered double-digit revenue growth across our core business areas. This performance came about despite the operational issues we saw in the first half of the year. From a profitability perspective, 2019 was ultimately a year that was a tale of 2 halves. Following on from the first half results due to the well-documented operational issues, I'm pleased to say that we took decisive actions over the summer. And as a result, materially improved the group margin during the second half of the year. That improvement saw the full year operating profit margin ending within our revised guidance range of 28.2%.

Our business development activity saw us deliver record equal in new business wins of GBP 24.5 million, which was pleasingly well spread across our core products and jurisdictions. The group's underlying operating cash flow generation was strong, and ended up in excess of our guidance at 105%. As reported in September, we completed the strategic investment in Colmore during the second half of last year. We have continued to develop the Helios4GP products, and have begun rolling out the service enhancing product to all our clients during 2020. We have also agreed to acquire Inbhear Fund Services as announced in January this year. This is a quality business with a strong team that further enhances our global platform.

Last year, we announced and embarked upon the strategic review of our noncore Jersey Private Client business. You would have seen from Monday's RNS that this process resulted in a successful conclusion. I'm pleased to say that we agreed to sell the business to JTC Plc, who, as private client experts, will provide a good home for our people and the book of business. For SANNE, this divestment allows us to really focus on our core high-growth business.

We opened 3 new locations for the group during the year in Tokyo, Mumbai and San Diego, whilst also relocating our Rotterdam office to Amsterdam to improve client connectivity in that location. The ongoing investment into our platform continued as we enhanced our processes and procedures. We have also invested in new people at senior levels in the group as we continue to evolve into a global player.

So let's move on now to our marketplace slide. Before we get to the detail of the 2019 performance, I'd like to run through the fundamental drivers for the business, and with start of the market opportunity, which we spoke about quite a bit last year. Whilst it is too early to say what potential effect the COVID-19 pandemic may ultimately result in for our end markets, I'm going to stick to the known facts and cover off the market backdrop as it is reported to date. The demand for alternatives, as an asset class, continued to show great strength on a global level during 2019. The fundraising figures for private markets suggest an increase in AUM of 10% during the year with reported figures at the end of the half year showing global AUM standing at an all-time high of $7.5 trillion.

To put this into context, the market is more than $4 trillion larger than it was a decade ago in 2010. Secondly, regulation has driven growth in our addressable markets significantly over the last decade. We have discussed this quite a bit over the last few years with examples such as AIFMD, FATCA and CRS to name a few. But, by way of summary, the general direction of travel is that the alternative asset classes will continue to attract increased regulation as they become more mainstream.

Third, whilst Europe has led the way in relation to outsourcing because of cross-border complexity and regulatory drivers, we continue to see an increasing trend for outsourcing demand of our services across the U.S. and Asia Pacific. This trend is driven by several factors, including technology investments, platform scale and investor appetite for third-party oversight. As we have previously explained, those 3 drivers have a compounding effect on the growth rate in our addressable market.

Turning to some of the industry dynamics now. With globalization, we are seeing a greater level of sophistication in how our clients and prospective clients are choosing their long-term administration partner. What they're looking for is a service provider that will cover all of their requirements, offering consistent output in each location across the globe. For SANNE, our approach of local excellence on a global platform is benefiting us in this regard.

Touching on the inorganic growth opportunity arising from ongoing industry consolidation, SANNE has an excellent track record of acquiring quality businesses that are aligned with our values, behaviors and quality. We continue to evaluate a number of potential deals as the market continues to consolidate across our core product areas. We use inorganic opportunities to strategically evolve our platform rather than for growth's sake per se. Our key focus, when approaching new deals, is on core products, not just at a diversity play.

Let's move on to the next slide. Looking at our market positioning. This slide tends to show our relative position. And broadly, we see 3 groups here. The largest players, the banks, who provide a commoditized administration offering as an ancillary service to more profitable products, such as credit facilities or custody arrangements. These firms are well suited to high volume, low-touch requirements, which is why they dominate the higher volume open-ended space. On the other side, the traditional corporate and trust service providers provide a low-touch functionalized service to corporate vehicles. Many of these are large global players with a diverse jurisdictional footprint. And in the middle, we see a differentiated specialist group of service providers, SANNE included, that take a professional services model approach to administration. This approach is bespoke, tailored and offers high-touch interactions with clients, and therefore, a high-value contribution for them.

Following the disposal of the Jersey Private Client business, SANNE is one of the largest pure-play private asset administrators in this part of the market, allowing us to really deliver on providing that local excellence on a global platform. As a consolidator with a long-term capital base, we are well placed to be amongst the big 4 or some other number of this industry in the future.

So let's move to the next slide. With so much uncertainty around, not just COVID-19, I wanted to remind everyone about the quality and resilience of our business. I've spoken about many of these characteristics in the past, but let me highlight a few of the key points. We invest in our relationships with our clients, and as a result, these are long-term partnerships. In addition, the client structures with whom we engage are typically 7- to 12-year life structures. Therefore, providing good visibility of our recurring revenue stream. The long-term nature of the structures in private markets can act as a safeguard during volatile market conditions. This has been one of the drivers for the increase in alternative investments compared to traditional liquid equities. It also means that in a downturn, much of our business does not necessarily decline in correlation to falling equity indices.

Our revenues are high in quality, and SANNE is, therefore, highly cash generative. We guide to 90% cash conversion, and I'm pleased to say that we have exceeded this during 2019. Our experience has been that even in a downturn, client structure maturities are often extended to avoid funds having to participate in a value-destroying buy and sell process. Indeed, new opportunities have arisen for our business in the past, such as the advent of the private market for credit funds, following the 2008 financial crisis.

Let's move to the next slide. The group's organic strategy for growth is focused on a series of core initiatives. The key growth objective, to begin with, is my aim to ensure that our levels of client service, enabled by technology, continue to be our differentiating USP. We seek to grow our share of wallet within existing client relationships through that provision of quality service and then further through cross-selling, whilst also targeting new client groups. We want to roll out our services and product offerings at scale across our entire geographic footprint to ensure a one-stop shop offering globally.

We will add new geographic markets to the group's footprints in line with client requirements, and thereby, also access client relationships that are new to the group. We continue to invest significantly in resilient and scalable operating platforms, focusing on technology to support our client service offering. And from an inorganic growth perspective, it's a strategic approach to use acquisitions to augment those 5 organic objectives. As I mentioned, we are not acquiring for diversity's sake.

So over to James now for the financial review of 2019.

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James Ireland, Sanne Group plc - CFO & Director [2]

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Thank you, Martin. So on to my first slide, which is #11. We set out our key financial highlights for the year.

As Martin has already noted, we've now entered into an agreement to sell our Jersey-based Private Client business, which is expected to complete in the coming months. As such, our financial results for 2019 have been prepared under IFRS 5, showing continuing operations and discontinued operations separately. In order to best talk to the historic performance of the group today, for this results presentation, I will talk predominantly to the result for the entire group, i.e., including the results from continuing operations and discontinued operations. Then in future results, we will focus exclusively on continuing operations.

It's also worth reminding everyone that whilst we introduced it at the interims, this is our first full year reporting under the new jurisdictional segments. You can see for our key performance measures here, we have performed in line with our revised expectations for the full year following the trading update in July. Particularly pleasing to note is the second half improvement in the operating profit margin, which I'll come to in more detail and the strong cash generation in the year.

Now turning to Slide 12. Here, I presented the income statement for the total group. 2019 has been another strong year of revenue growth with constant currency revenue growth of nearly 15%, which includes an organic result of just over 12%. When you do strip out the performance of the Jersey Private Client business, that growth is clearly higher, with constant currency growth of just over 16% and the organic equivalent at 13.5%. I will touch on the segmental makeup of this result on my next slide.

Jumping to underlying operating profit margin. This is within the guidance range we gave back in July, and reflects largely an improvement in overhead spend so far, but I'll come to this in more detail shortly. Just on underlying items, there has been an increase in the year of exceptional costs. This is largely due to earn-out payments on acquisitions in 2019, and the intangible impairment we recognized in South Africa and spoke to at the interims.

Underlying interest costs are up in the year. This is largely due to IFRS 16 as well as a higher average net debt. The underlying effective tax rate for the full year is better than we hoped at 19% for the total group, following some actions to be more efficient in the second half. As a result, underlying EPS for the total group was 23.6p per share, and we declared a full year dividend in line with our progressive policy. I've included, as an appendix to this slide deck, the income statement presented on an underlying continuing basis as well. I won't go through that this morning as we focus on past performance, but it should serve as a helpful benchmark for those looking to rebase their models going forward, excluding the contribution of Private Clients.

Now turning to Slide 13. This bridge chart splits out the makeup of our revenue growth in the year. You can see EMEA and North America have been the largest absolute contributors to organic growth in the year. However, it should be noted that as we've talked to before, in recent years, we've seen a bias towards Luxembourg over the Channel Islands due to certain favorable regulations and concerns surrounding Brexit. Combining EMEA and Channel Islands growth, though, is probably more reflective of growth across our broader European market, and we saw that at just over 18% at a constant currency basis in the year.

Asia-Pac and Mauritius has seen good growth, albeit the absolute growth seen on this chart is largely the contribution from our Asia-Pacific offices, which is an exceptionally strong result for the region over -- equivalent to over 35% organic growth in the year. In Mauritius, whilst we have seen an increase in new business winning, 2019 was a year of above-average end-of-life attrition from legacy structures, giving a broadly flat result in the jurisdiction. We've also shown the full year impact from the LIS and AgenSynd acquisitions and the headwind from Private Client, which itself was down 15% year-on-year.

Now turning to Slide 14. Here, I have attempted to translate the challenges we talked to in the July trading update into their impact on our underlying group operating profit margin, as well as setting out the second half improvement and those actions we expect to see improved margin into 2020. The first 3 boxes pull out the 3 principal items we saw impact the first half margin. Firstly, we incurred higher discretionary overhead expenditure, especially in relation to premises and recruitment. Secondly, EMEA and Channel Islands overrecruited staff into growth following the move to the new jurisdictional reporting model. The third item shows the increase in spend on growth initiatives, which covers the team supporting our dedicated product strategies, business development and our centralized onboarding and payments teams, which as we've discussed, was a conscious decision to invest for the future.

We took decisive action in the second half to address the first 2 issues. Firstly, we've implemented tougher cost measures across the various group functions with the problem areas bought under the direct oversight of myself and my finance team. As you can see, this has been very successful and has driven the second half margin recovery. The second action has been to more closely align client revenues across EMEA and Channel Islands with the jurisdiction in which resource required to undertake the work is located. This has involved a large-scale and detailed review across the entire European client base, and resulted in the transfer of some revenues between EMEA and Channel Islands.

This realignment will better -- will enable better resourcing decisions within those segments moving forward, and should, therefore, lead to a margin improvement. This exercise was completed later in the year. So the benefits from this are expected to be seen in 2020 and going forward.

Turning now to Slide 15, looking at the cash flow for the year. 2019 has seen a very strong cash performance for the group, in part, as we caught up on the late debtor collections in 2018. The table on the left shows the free cash flow generated in the year. This is up over 50% on the prior year, largely as a result of the improvement in the working capital. On the right-hand side, I've sought to set out how this cash has been used in 2019.

As a group, we seek to invest the cash generated by our business to earn the best returns for our principal stakeholders. We have very low capital requirements to fund organic growth. Therefore, our principal use of capital is to fund acquisitions and shareholder dividends. As you can see, acquisitions was the largest use of cash in 2019. In the event, we didn't see attractive acquisition opportunities, we clearly then have the ability to deleverage the business.

Turning now to Slide 16, and just a quick look at working capital and our debt position. The table on the left sets out our key working capital items, which in this instance, I have shown a split between continuing and discontinued operations. The top part of the table shows the improvement in working capital position in the year, with the value of working capital on the balance sheet falling to 20 -- from 23% of revenues to under 20%. Accrued income or contract assets, as it's now termed, also remains low. The bottom part of this table shows the working capital linked to Jersey Private Client business.

This shows that the business has a higher proportion of working capital required that we see in our core alternatives and corporate businesses. On the right, I have set out our net debt position. To remind everybody, we have a committed facility of GBP 150 million with an accordion for a further GBP 70 million. The table shows we have a healthy level of liquidity at the year-end. The leverage ratios I have shown are presented on a pre-IFRS 16 basis, and this is due to the fact that our banking covenants continue to be tested on a pre-IFRS 16 basis.

Turning now to Slide 17, and some more detail around COVID-19 for SANNE. Clearly, the situation is changing very rapidly. So it remains difficult to be too definitive at this stage. However, we have a robust platform and a business platform, and a business model that is so far proving to be resilient. Our Asia-Pacific offices have been operating under business continuity plans into January. And I'm pleased to say that despite this being a very prolonged period of time, the business has coped well, and we've seen no material negative implications. More recently, our larger offices have been successfully working under similar arrangements. We haven't seen any material adverse impacts from this so far, but it does remain early days.

We're also yet to see any short-term change to client activity. Clearly, the majority of our work is on the 7- to 12-year contracts, and the day-to-day activity carries on regardless. Interestingly, we haven't yet seen any real change to activity in Asia-Pacific since January. However, we cannot see -- we cannot assume this will necessarily be replicated across the rest of our offices as the pandemic is now having a much more material impact on the global economy.

So thus far, the business has been able to react quickly and effectively and see minimal impact, but the situation remains fluid and fast moving. Looking forward, the long-term nature of our contracts should underpin a resilient performance in 2020.

My final slide seeks to set out a few guidance items for 2020. Most of these are self-explanatory, but it is probably worth highlighting the margin point. The margin in the second half of the year was at the top end of this range. But we are conscious that as we strip out our Private Client business, it will be a little margin dilutive as we can't strip out all the overheads immediately. It's also worth noting, on cash flow, just for people's models, that we should see up to GBP 12 million cash inflow this year in relation to the Private Client disposal, which will offset the circa GBP 7.5 million outflow on the Inbhear acquisition when that completes. And the cash settlement of the AgenSynd earn-out, which is just over GBP 3.0 million.

With that, I will pass you back to Martin.

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Martin Schnaier, Sanne Group plc - Group CEO & Director [3]

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Thank you, James. Let's change slides now. On to Page 20, and look at the operational review by segment and see how the group's regions fare during the year.

Our EMEA and Channel Island segments, excluding the Jersey Private Client business, together saw organic revenue growth of nearly 14% at constant currency, with healthy activity across all alternative asset classes. Within this, you can see the EMEA region growing really well as the Brexit-induced trends to onshore structures continued during the year. Both acquisitions from 2018, LIS in Luxembourg, and AgenSynd in Spain performed strongly in 2019. And I'm pleased to see how well the 2 businesses have integrated into the group. In the Channel Islands, growth across the alternatives book was around 7%, whilst the corporate business remained flat year-on-year.

Moving on to the next slide. In the APM region, revenue growth was heading towards 9% at constant currency, which is made up of significant growth across APAC of 36% where we also benefited from our new Tokyo office that opened in January last year. The larger Mauritius business saw net growth of around 3%, reflecting promising growth again in 2019, but also showing the effect of anticipated higher-than-average attrition from end-of-life structures in 2019. We also opened our Mumbai location during the year to augment the flow of new business to and from India.

Moving on to North America. The business again delivered another very strong year of revenue growth, up to nearly 19% at constant currency from 2018. Private equity remained the largest growth driver, and this client demand also resulted in the opening of our San Diego presence during the year. Having a footprint in the West Coast opens up a number of new possibilities for us. We are also progressing well in the rollout of new products for North America, and we look forward to taking advantage of the opportunities we see in the market for these new products.

So moving to the acquisitions and strategic partnership slide now. We spoke about our strategic partnership with Colmore during our last set of results. And I'm pleased to say that the service-differentiating Helios4GP analytics product is going live with our first set of client groups. Their initial feedback has been incredibly positive. And I would also add that we continue to see a vast amount of opportunities in relation to this differentiating data analytics service proposition.

You will also have seen in the reference -- in our January market statement to the acquisition of Inbhear Fund Services. This deal establishes a first physical presence for the group in the Cayman Islands. This deal should provide an excellent revenue opportunity across the existing client base as well as opening a market for new clients that was difficult for SANNE to unlock historically without a physical presence.

The Cayman business already has a local accounting license. And with the full SANNE business behind it, is now well progressed in obtaining trust license. The acquisition also builds on our existing Irish presence, bringing in a team of highly experienced professionals to augment our existing local offering. I'm pleased to say that the Cayman Islands Monetary Authority approved the deal last week, and we await final approval from the Central Bank in Ireland to complete the deal, which we would expect in Q2 2020.

So moving on to the next slide. I'd like to do a mini case study to articulate what we are looking to achieve when acquiring new businesses. For this exercise, I've used our 2016 U.S. acquisition as an example to provide you with more visibility around what has made this a successful deal for us. SANNE acquired FLSV Fund Administration Services in November 2016. And this gave the group a quality North American business with 75 people in New York City and a further capability of 40 people in Belgrade. Having a quality presence in the U.S. had been and remains an important strategic objective for the group, given the U.S. is the largest private assets market globally.

The business has performed well, and has delivered compound annual growth in excess of 13% since acquisition. The return on capital employed is also double digits in excess of the acquisition case. On the new business, cross-sell front, we have enjoyed material new business activity from our U.S.-based clients seeking European-based services, and we continue to identify further opportunities for cross-sell across the wider group. One of the key benefits of the deal has also been the value of the Belgrade team because of their quality and ability. Belgrade is now a key technology hub for the group. By the end of 2019, we had over 100 people in New York City and approaching 150 people in Belgrade. Our integration of this acquisition has been very successful, and we have learned a lot from this deal. These learnings have been applied in subsequent deals and will continue to inform us in the future.

So let's move on to the next slide. The feedback that I get from people is that SANNE is an exciting place to be. And as I mentioned near the start, 2019 has certainly been a busy year for all of us. And sometimes, it's easy to forget just how much we have achieved in the year. Let's take some time now to review a few of the milestones we passed against our strategic objectives.

At the start of last year, we invested to create our product development team to ensure best-in-class service delivery across our global platform. We invested in upgrading our legacy processes and procedures to enhance client service and also to improve risk management. And we launched the development of the Helios4GP products to provide clients with an innovative service-differentiating data analytics tool, and we are rolling this out in 2020.

Next, we continue to invest in our business development capability. And 2019's new business equaled 2018's record haul of GBP 24.5 million. We continue to seek out cross-sell opportunities throughout the group, and see some good developments here for 2020 and beyond.

During 2019, we successfully rolled out real estate services in the U.S. and in Spain. We launched credit fund administration in Singapore, and also developed closed-ended fund administration in South Africa. We continue to aim to be that one-stop shop solution across the globe.

During the year, we opened new offices in Tokyo, Mumbai and San Diego as well as relocated our Dutch office to Amsterdam from Rotterdam. From 2020, we will also benefit from our acquisition of Inbhear to -- in relation to the Cayman Islands location.

As mentioned, the platform has been strengthened as we invested substantially in enhancing processes and procedures to improve client service as well as mitigate against risks. We secured the group's first ever Chief Technology Officer with a specific remit of transforming our technology strategy and capability. We invested in several new offices during 2019, providing better accommodation for our people. And finally, we continue to strengthen our senior leaders at the executive committee level and beyond. On the inorganic front, I've already covered off how we have furthered our approach during the year. But should note that we do continue to see attractive acquisition opportunities within our core markets.

Moving on to the outlook slide. The decision during 2019 to continue our investments into growth areas, has helped the group achieve good momentum in our core alternatives and corporate business during the year. This momentum should position us well for further growth in 2020. We continue to improve the operational efficiency in the group, and the 2019 second half margin improvement demonstrates the effectiveness of some of those decisive taken -- decisive actions that were taken.

As described today, our markets do remain attractive with structural growth evident throughout our core product areas. With our quality and global platform, we are confident of capturing those growth opportunities as they arise. Our business is resilient with a robust balance sheet, and we expect 2020 to deliver further good cash generation as per James' earlier guidance.

Following the initial outbreak of COVID-19 in APAC, we've been operating on a business continuity measure in that region for a few months already, and thankfully, with minimal issues. We are now operating on business continuity measures across the wider group, and so far, have largely remained business as usual throughout. We do continue to monitor this evolving situation on a daily basis.

On the inorganic front, we do continue to see a healthy pipeline of acquisition opportunities. But we remain thoughtful about potential transactions to ensure alignment with the objectives of all of our stakeholders. Finally, the board expects to deliver a resilient performance in 2020, and remains confident in the medium and long-term prospects for the group.

Thank you for taking the time to listen to us today. I think we'll move on to Q&A, if anybody would like to ask questions, and we also have some questions popping up on the iPad.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question we have is from Sylvia Barker from JPMorgan.

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Sylvia Pavlova Barker, JP Morgan Chase & Co, Research Division - Analyst [2]

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A couple please. First, on the kind of read across from Asia into Europe and the U.S., just on kind of how you're working remotely? And could you maybe tell us just what was, I guess, the most difficult aspect of maybe winning new work or working with customers? It doesn't sound like you have any particular kind of disruption around it, but just maybe to think about kind of how that translates into Europe and the U.S.? Secondly, maybe on the CTO position, maybe just what the first initiatives might be that, that person will be looking at? And then finally, one for James, just around the margin trajectory during the year. If we think about the stranded costs in Jersey from the Private Client business being separated, kind of, how quickly do you think those will be addressed during 2020?

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Martin Schnaier, Sanne Group plc - Group CEO & Director [3]

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Thanks, Sylvia. I think I'll take the first 2 and leave James to the third. So what we've seen across APAC, I think some of the offices there, clearly, in Hong Kong, a lot of people had experience from -- 2003's experience in terms of SARS. And what you saw was jurisdictions that we're able to continue operating quite well under pretty restrictive circumstances. I think the most difficult thing clearly is connectivity amongst people. And I think the guys have done a really good job in terms of using some of the technology we have, like Microsoft Teams, for example, where we can have daily calls. Frankly, people still want to see each other's faces. So FaceTime and things like that has been very beneficial.

And I think that's one of the key learnings that we've seen from our teams in Asia to ensure that the connectivity across the team members in Europe and the U.S. remains as such when we have our own lockdown situations, if and when they come. From a client perspective, same thing really, I think the physical meetings have been an issue, but business has gone on as expected. We have seen, on occasions, some things being delayed just people have physically not been able to go and view assets, those kinds of things. But otherwise, some excellent learnings in terms of resilience across the group.

On the CTO front, so we hired Marie Measures, who joined us beginning of this year, and having gone through a process -- an external process last year to identify a candidate really for a position that at SANNE, we not had before a strategic ExCo position for technology. I'm pleased to say Marie joined beginning of the year, and initial remit, Sylvia, is really to get the group on a strong footing across all locations from a platform perspective. And pursue a data strategy readying us for the next phase of data analytics and service delivery.

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James Ireland, Sanne Group plc - CFO & Director [4]

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And so just coming on to the third one. This is exactly the point really, Sylvia, around the margin guidance being 28% to 30% for this year on continuing. So we will see -- there are costs which we'll be bringing out. And we've known we are sort of aiming to sell this business. So we've built this year's cost base on that basis. So we have addressed a lot of it. But I think throughout most of this year, there is cost that we will grow into or otherwise. So there's a small dilutive effect on the margin for 2020. It's not material, but it means that actually the sort of exit run rate at the top end of the range we've given will pull us back a little bit into this year just whilst we grow into that overhead.

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Operator [5]

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We currently have no other questions coming through. (Operator Instructions)

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Martin Schnaier, Sanne Group plc - Group CEO & Director [6]

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I think we have some on the iPad, which...

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James Ireland, Sanne Group plc - CFO & Director [7]

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We have some come through. So we -- if we take those, the first one, I'll -- I'm not sure on the protocol, everyone. So I'll read this out. So from Rob Plant of Panmure Gordon. You've said in the past that the U.S. is a focus for acquisitions, but valuations are quite high. Is there any update on this?

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Martin Schnaier, Sanne Group plc - Group CEO & Director [8]

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Yes. Thanks, Rob. I think the reality is we clearly define the U.S. as a core jurisdiction for us. That remains the case. But we're seeing opportunities across the globe in our core markets and products. I think valuations certainly were high. But who knows, over the last few weeks, I think some of those have certainly come down. That said, for quality businesses, we've never been shy to pay what those businesses are worth, and what fits with our financial discipline approach to some of these M&A transactions.

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James Ireland, Sanne Group plc - CFO & Director [9]

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So I think the next question's from Kean Marden at Jefferies. Two questions. Is there a reason why debt is overdue by more than 180 days? Has it increased in 2019? How long does it take or vendor price expectations to adjust the stock market pullback and slower U.S. economic growth, which I assume is in relation to acquisitions that we might be looking at and pricing expectations?

So I'll take the first one. We've seen a really strong performance on debtor collections in the year. And this is a result we -- I've talked in the past about the new processes. We got some robotic process automation we brought into the firm to help us with some of that debtor collection. And we continue to have a very strong position as far as our working capital is concerned. We have seen an increase in the slightly older debts in the year, which is more a function of how we've rolled that process out. So in some of the clients where their processes are just that much slower and it can take 6 months for them to authorize clearances, we've been focusing on rolling out the RPA technology in our business this year. And so let's focus on the historic manual processes we've used to chase clients. So there's nothing nefarious or concerning to look at in that. But we'll focus on just improving that over the course of the next 6 months.

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Martin Schnaier, Sanne Group plc - Group CEO & Director [10]

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And in answer to the second question, thanks, Kean. I think it's very early to say. The conversations that we've had with people remain ongoing. We haven't seen any change so far, as you'd expect today are in price expectations. But as those conversations evolve, I'm sure we'll start to see some changes in -- leading towards pricing.

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James Ireland, Sanne Group plc - CFO & Director [11]

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So the next question we have is from David Brockton at Numis. Two questions. One, please could you give some insight into expected revenue attrition in FY '20, including end-of-life structures, so we can understand the required level of new gross wins? And second question, please, could we -- you give an insight into the quantum of new wins year-to-date?

So on the first item, at the moment, we wouldn't call out anything different to our normal guidance, which is somewhere between 5% and 10% of end-of-life attrition. Clearly, the potential implication of what is happening at the moment is a recession and, what we would normally expect to see during a recession is actually fund lives do get extended. As people, whether they be debt, real estate, private equity funds assets, don't shift as quickly. And therefore, assets or fund lives need to be extended, and we see attrition drop right down. It is far too early to start talking about that being a factor as to whether it is happening or it will happen, but the theory remains sound.

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Martin Schnaier, Sanne Group plc - Group CEO & Director [12]

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Yes. And I think on the second one, David, and I think there's actually another question on new business from Dan. As a general point on new business per se, it's very lumpy. It can come, as we saw in H1 last year, in large lumps and others can get pushed back into later periods, which is what we saw in H2 last year. So some of those wins came in beginning of this year. So it is quite lumpy. And I think we always -- we like to report those new business wins in the market to give you a good guide of where we're going. But I guess, they're not prescriptive.

Dan, in answer to your question on COVID-19 and the implication for new business, I guess, we haven't seen anything yet that suggests an impact so far. Clearly, we're not naïve enough to think that transactions may or may not be affected. But at this stage, it's very early.

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James Ireland, Sanne Group plc - CFO & Director [13]

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And then Dan, second question -- sorry, Dan Cowan from HSBC, was Colmore's product looks exciting. Will it contribute directly to organic growth this year?

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Martin Schnaier, Sanne Group plc - Group CEO & Director [14]

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Yes. So I think the feedback, as I mentioned, from clients we've seen in the product has been incredibly positive. And this ties into the data strategy that I mentioned that Marie will be focusing on too. Because clients really are looking for more and more granular data and how they access their data. So very promising in terms of what Helios4GP does for the group.

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James Ireland, Sanne Group plc - CFO & Director [15]

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So then two more questions from Rahim at Liberum. On revenues, can you remind us what proportion is linked to assets under administration? And what level of volatility you're seeing on that front? Second question, can you remind us of your sensitivity to FX rates? And third question, how is the onboarding of new wins from last year progressing?

So to answer the first question, there is less than 5% that is linked to liquid assets under management, and that is our hedge business, which is almost -- which is predominantly based in South Africa. We do now have clients in Europe and in Asia. So it's a very small proportion as we stand today. As everyone remember, the AIFMD ManCo that we have in Luxembourg, which is the LIS acquisition we made, is also -- has a revenue model on basis points. But clearly, these are closed-ended private asset structures. So you don't see the volatility in asset prices there. So at the moment, we're not seeing much impact from asset price volatility.

On the second question, we are broadly 1/3, 1/3, 1/3 sterling, euro and dollar in our revenues. Slightly more euro and dollar, actually today and sterling is about 30%. And then we have that circa 4% in rand, which is the hedge business in South Africa. Costs are slightly more weighted towards sterling as we have a greater proportion of people in Europe. There's a sort of a legacy in some of those group services structures. So it has a little bit more of an impact. So we are -- we would expect, in our reported numbers this year, to see a tailwind if FX rates stayed quite where they've got to in the last 5 days. Onboarding of new wins from last year continues to progress well. So as we've come through last year's wins, things coming onboard well. And we've seen no issues there. It's all been relatively positive.

And that is all the questions we've had from the online system.

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Martin Schnaier, Sanne Group plc - Group CEO & Director [16]

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So I guess, you all know where to find...

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Operator [17]

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We currently have no further questions on the line. (Operator Instructions) No more questions coming through from our end either, just to hand back over to you.

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James Ireland, Sanne Group plc - CFO & Director [18]

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Okay. Thank you all very much for joining us today in interesting circumstances and appreciate your support as ever. Thank you very much.