Amsterdam – February 10, 2017 – Intertrust N.V. (“Intertrust” or “the Company”) [ticker symbol INTER], the leading global provider of high-value trust, fund and corporate services, today announces fourth quarter and full year 2016 results.
To read the full version of the press release click here.
To read the Q4 and full year 2016 Results presentation click here.
Intertrust financial and operating performance for Q4 and Full Year 2016
- Q4 revenue of €120.7 million increased by 31.9% year-on-year and underlying* Intertrust revenue for Q4 increased by 4.0% year-on-year.
- Luxembourg Q4 revenue was up sharply reflecting clearance of the Q3 backlog by new billable employees.
- In Cayman the outflow of entities over Q4 slowed and loss of revenue to competitors decelerated versus Q3.
- EBITA was €40.2 million in Q4 and EBITA margin including costs related to the acquisition of Elian was 33.3%. Adjusted EBITA margin for the quarter contracted by 153bps to 39.9% reflecting the consolidation of Elian while underlying* EBITA margin was unchanged at 41.5%.
- Adjusted FY 2016 EPS was €1.27 (including Elian full year contribution, adjusted net income per share of €1.44). The integration of Elian continues to be on track for completion in 2018.
- The final dividend will be €0.25 and will be paid on June 12, 2017, subject to shareholder approval, resulting in a total FY 2016 dividend of €0.49.
Intertrust Group Q4 2016 figures
David de Buck, Chief Executive Officer of Intertrust, commented:
“I am pleased with our solid performance over Q4 and the progress we have made on the integration of Elian. Our efforts to improve the Luxembourg operations have been successful. In Cayman, we see an improvement versus Q3 and outflow of entities reduced in Q4 as well as during the start of 2017. On the basis of a full year of Elian, our adjusted net income per share in FY 2016 would have been €1.44. Our growth in 2016 was largely driven by clients’ needs for more added-value services per entity. Geopolitical uncertainty such as Brexit caused a slowdown in Foreign Direct Investment and M&A activity which impacted the rate of creation of new entities. For 2017, we expect to achieve underlying revenue growth of 4-5% and maintain our adjusted EBITA margin (39.9% for FY 2016). We welcome Maarten de Vries as our new CFO. Going forward, IT, Operations and Finance will report to Maarten.”
Intertrust Group FY 2016 figures
Intertrust standalone presented for historical comparison purposes
– * See definitions
– ARPE, Adj. Revenue/FTE and Adj. EBITA/FTE in all tables shown in € thousands
– Standalone 2016: Intertrust excl. Elian. Standalone 2015: includes Jul-Dec 2015 CorpNordic figures
Notes to Adjusted figures:
- Adjusted Revenue is Revenue adjusted for one-off revenue in 2015 which consisted mainly of revenues related to the release of one-off provision(s).
- Adjusted EBITA is defined as EBITA 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 on financial performance. Specific items include (i) transaction and monitoring costs of €5.3 million in 2015 and €4.2 million in 2016; (ii) integration costs of €3.1 million in 2015 and €8.5 million in 2016; (iii) income / (expenses) related to disposal of assets of €3.7 million in 2015 and (€0.5 million) in 2016 (iv) share-based payment upon IPO and integration of €4.4 million in 2015 and €4.5 in 2016. 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 provision. The one-off expenses are related to redundancies, legal costs and settlement fees.
- Adjusted net income is defined as Adjusted EBITA less net interest costs and less tax costs
- Adjusted earnings per share is defined as Adjusted net income divided by the average number of shares outstanding at December 31, 2016. Average for Q4: 91,995,836. Average for FY2016: 88,942,943
Highlights Q4 2016
- Q4 revenue of €120.7 million grew by 31.9% on a year-on-year basis including Elian’s contribution. Underlying revenue grew by 4.0% driven primarily by an increase in clients’ needs for more added-value services per entity.
- Luxembourg Q4 revenue was up sharply, 17.7% higher year-on-year as sufficient billable employees were in place to absorb market growth and address the Q3 backlog.
- Cayman Islands standalone revenue declined 10.2% in Q4 year-on-year while net entity outflow during Q4 was 207 compared to 1,891 over the first nine months of 2016 and compared to 1,413 net outflow in Q4 2015.
- Elian contributed €26.9 million in revenue and €9.2 million in Adjusted EBITA over Q4, slightly behind initial management estimates. Performance of Elian’s capital markets business was strong, with Jersey operations experiencing some weakness related to Brexit. Elian continued its track record of high single digit constant currency revenue growth on an annual basis.
- The integration of Elian continued in Q4 and is on track for completion in 2018, with expected run-rate synergies of £10.4 million to be achieved by year-end 2018.
- Standalone adjusted EBITA margins were maintained at 41.5%. Including Elian’s lower margin profile and on an adjusted basis, group margins decreased by 153bps to 39.9%.
- Net debt decreased to €758.5 million at end Q4 (from €771.1 million at end Q3). The net debt leverage ratio decreased from 3.79x (end Q3) to 3.72x (end Q4). An interim dividend amounting €22.1 million was paid out in November 2016.
Highlights FY 2016
- In FY 2016, revenue grew 11.9% to €385.8 million. Underlying revenue grew by 3.0%, with growth in Luxembourg and the Netherlands of 7.4% and 4.3% respectively, while Cayman’s revenue decline of 10.6% on a constant currency basis had a significant impact.
- EBITA for the year was €135.9 million (35.2% margin). EBITA margin of 35.2% included €17.9 million in one-off costs mainly related to the Elian acquisition. Underlying EBITA margin was down slightly by 16bps to 40.3% year-on-year due to the decrease in Cayman margin which could not be fully compensated by the increase in Luxembourg margin.
- The number of entities worldwide on a standalone basis decreased by 5.4% during the year of which the majority due to end-of-life with the remainder being due to portfolio optimisation, loss to competition, compliance reasons, bad debtors and insourcing. Underlying ARPE showed growth of 8.9%. This was driven by both a decrease in entities as a result of loss of low-ARPE entities to competitors and end-of-life and an increase in added-value services stemming from increased regulatory complexity and substance requirements.
- The Elian acquisition and our strategic focus on investing in people enabled us to increase the number of full-time equivalent employees (FTEs) at year-end to 2,359. Average revenue per FTE increased by 1.3% on a standalone basis. At year-end 2016 we had 75.4% billable employees.
- Cash from operating activities was €152.4 million. The cash conversion ratio, excluding strategic capital expenditures, was 94.5%.
- Net Income was €52.0 million or €113.2 million on an adjusted basis. The main adjustments were Elian-transaction related costs (total €17.9 million), depreciation and amortisation (€33.8 million), and forex (€9.6 million).
- Earnings per share were €0.58 based on the average number of shares outstanding over the year (88,942,943).
Market trends 2016
Management estimates that the market continued to grow in line with 2015 rates, with increasing ARPE being the primary component driving growth. This growth in ARPE is the result of an increase in regulation and more complexity, leading to more reporting requirements for clients. Management believes that entity creation may have been negatively impacted by global political uncertainty which contributed to a decrease in deal-making worldwide.
Demand by regulators for transparency increased following the Panama Papers, contributing to pressure on smaller Trust and Corporate Services providers in some jurisdictions.
The guidance below pertains to 2017. Management will update the medium term guidance at our first Capital Markets Day on September 21, 2017.
- Underlying revenue growth for 2017 is expected to be between 4-5%.
- Underlying EBITA margins in 2017 are expected to expand slightly due to synergies and continued operating leverage, which will compensate for the margin pressure inherent to Elian’s lower margin profile. This will result in expected adjusted EBITA margin being roughly stable versus 2016 (39.9%).
- Dividend policy over 2017 continues to be 40-50% of adjusted net income.
- Previous guidance on synergies (£10.4 million by end CY 2018E, of which 75% by end CY 2017E), capex (2-2.5% of revenue), effective tax rate (circa 16%), and cash conversion (in line with historical rates) remain unchanged.
To read the full version of the press release click here.