Strategy and markets

Strategy

Intertrust’s strategy is built on five key success factors:

  • Invest in human capital
    Strengthen its business through continued investment in its employees and its attractiveness as an employer
  • Grow organically
    Grow its business organically and strengthen its leadership position in the trust and corporate services industry by expanding its global network and service offering
  • Lead market consolidation
    Drive industry consolidation globally to further enhance its growth
  • Continuously improve operational excellence
    Continuously improve operational excellence to further increase margins and maintain its attractive cash conversion profile
  • Maintain industry-leading risk management practices
    Maintain its industry-leading compliance standards and continue to invest in risk management functions to support sustainable growth

Intertrust’s industry

The trust and corporate services industry provides a wide range of value added services to assist clients with setting up, structuring, managing and unwinding their corporate, investment, finance and fund entities. The trust and corporate services industry is largely focused on countries with developed tax laws and regulations. In particular, the sophistication, predictability and stability of a country's legislative, regulatory and judiciary landscape are important. Some of the most important trust and corporate services jurisdictions include the Netherlands, Luxembourg, Cayman Islands, Jersey, and Guernsey.

The trust and corporate services market is highly fragmented with many providers worldwide, mostly operating on a local basis with a limited service offering. Intertrust is one of the few global service providers. Other trust and corporate services market participants include on the one hand multi-regional and regional providers, who offer a broad range of services but focus on specific countries in one or more regions, and on the other hand medium-sized and local providers, who have a narrower service offering and a smaller geographical coverage. Some major banks, fund administrators, legal and accounting firms also operate in specific segments of Intertrust’s service offering.

The client base in the trust and corporate services industry can be divided into corporate clients, funds, capital markets and private clients. Clients tend to attribute high value to quality of service, reputation, personal relationships, expertise, reliability and responsiveness of trust and corporate services providers.

Key strengths

Leading global company in the trust and corporate services industry with a comprehensive services offering
Intertrust offers a comprehensive trust and corporate services offering from its global network of offices through a well-educated workforce of 1,608 FTEs, as at 30 June 2015, the majority of whom have higher education or university degrees and are supported by a structured, global performance management and talent development process. The company is a leading player in selected key geographic markets of the industry, including the Netherlands, Luxembourg, the Cayman Islands and Guernsey. Intertrust has a competitive advantage over smaller service providers that provide a more narrow service offering or operate in fewer jurisdictions. Clients increasingly prefer to work with a global service provider that offers an integrated and comprehensive set of trust and corporate services across a range of jurisdictions. The time and resources required to create a global and integrated network that can offer a comprehensive set of high-quality and high-value services creates substantial barriers to entry to any new entrants that aim to compete with Intertrust on a global basis.

Resilient business model with recurring revenue and diversified client portfolio offering the potential for further growth and improved margins
Intertrust operates a resilient business model with recurring revenue and a diversified client portfolio that offers the potential for further growth and improved margins. Intertrust estimates that approximately 85% of its total revenue is generated by non-discretionary services, which clients generally require irrespective of their financial or operational performance. As at 31 December 2014, its clients were based in more than 100 countries and included 38% of the Fortune Global 500 companies.

Intertrust believes that it has the infrastructure in place to further grow its business and improve its margins across the various countries in which the Company operates. There is a global sales strategy in place aimed at driving organic growth of the business through active coverage of the existing network of global and local business partners, cross-selling and providing additional services to existing clients. Intertrust has a track record of increasing the revenue generated per client entity. In addition, it has realised margin improvements from the optimisation of its cost base and operating leverage. As Intertrust grows its business and increases the number of its fee earning employees, its variable personnel expenses increase. However, other operating expenses, such as expenses related to IT, insurance, rent and non-fee earning employees, remain relatively constant, which allows Intertrust to leverage its fixed cost base. Intertrust believes that this scalable business model provides it with the potential for further improved margins as the Company expands its business.

Operating in a global industry with secular growth drivers and resilient characteristics
Growth in Intertrust’s industry is expected to continue to be driven by increased globalisation and foreign direct investment with multi-national corporations and financial institutions continuing to expand outside of their home countries. Intertrust notes that clients in its industry increasingly rely on outside service providers to handle increasing regulatory, risk management and compliance requirements. Furthermore, the Company believes that clients will continue to increasingly outsource certain of their non-core activities in order to focus on their core competencies, reduce their administrative burden, manage their costs and reduce their organisational complexity.

Strong track record of synergetic acquisitions and well positioned for further consolidation in a fragmented industry
Intertrust has over the past five years demonstrated its ability to identify, execute and integrate acquisitions in the fragmented trust and corporate services industry through the acquisition of Close Brothers Cayman, Walkers Management Services, ATC, CRS and CorpNordic. Intertrust has instituted acquisition and integration procedures. The Company applies a strict set of selection criteria when evaluating potential acquisition candidates and is disciplined and selective in the targets that it identifies as suitable acquisition candidates to pursue as takeover targets. Intertrust believes there are opportunities for further consolidation in its industry and that its track record of successfully executing and integrating acquisitions, together with its position as a leading global trust and corporate services provider, puts the Company in a strong position to participate in and benefit from further consolidation in the industry.

Experienced management team with a clear strategy and strong culture of excellence
With average experience of approximately 20 years in the financial services industry, Intertrust’s management team of nine members has delivered profitable organic and acquisition-based growth, margin enhancement and strong cash conversion. The management team of Intertrust has successfully completed and integrated four acquisitions: Close Brothers Cayman, WMS, ATC, and CRS and is currently managing the integration of the latest acquisition, CorpNordic. Management have demonstrated an ability to deliver synergies between its business and the acquired businesses and an ability to retain key senior managers and key employees of the acquired businesses.

Intertrust’s management team fosters a culture of driving business growth without compromising on risk management and compliance. The Company wants to be recognised as the global leader in its industry and as the most professional trust and corporate services provider. To this end the management team strives to maintain the highest standards on risk management, compliance, quality of services and responsiveness across the Intertrust organisation by promoting that employees work together as "One Intertrust, One Team".

History of above-market revenue growth combined with favourable margins and strong cash conversion
In the past four years, Intertrust has grown both through acquisitions and organically. Adjusted revenue has grown with an organic compounded annual growth rate of 6% since 2011 to €296 million in 2014. In addition, adjusted EBITA increased by an annual compounded growth rate of 13% from 2011 to €122 million in 2014. Intertrust believes that its business benefits from an attractive financial profile with favourable adjusted EBITA margins and strong cash conversion. The adjusted EBITA margin was 41% in 2014. Intertrust has historically benefitted from strong cash conversion, with a normalised cash conversion ratio of 95% in 2014.

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