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 The 2011 financial year will be remembered as the year The Trust Company celebrated its 125th anniversary across the country and took a critical step forward in its journey towards becoming the pre-eminent trustee company in the region with the acquisition of New Zealand’s largest independent trustee, The New Zealand Guardian Trust Company Limited (‘Guardian Trust’). The acquisition rounded off a solid performance for the year both financially and operationally and saw us start to leverage the fine work done by the Executive Team since the completion of the strategic review late last year
The financial results for FY11 came well within guidance, with Operating EBITDA up 13% to AUD17.7m. This result was achieved through good cost control and strong revenue growth in our Corporate Client Services team in a market that remained subdued for our Personal Clients Services area. Given the work plan activities underway and the attention given to the acquisition, this was a pleasing performance. The Operating NPAT increase of 18% to AUD13.8m was supported by strong dividend income and interest on surplus assets. One-off costs relating to the strategic review and the Guardian Trust acquisition lowered the increase in Reported NPAT to 4% at AUD11.3m, and given the 100% payout policy in place, the final dividend declared at 18.0 cents per share brings total distributions for the year to 35.0, fully franked. These total distributions are up 4% on last year.
Truly independent trustee businesses of Guardian Trust’s quality are rare indeed, and it was clear from the start of our investigations that our respective organisations shared a similar history, cultural DNA and strategic intent.
I congratulate our Chief Executive Officer, John Atkin, and his whole management team for the work plan they have delivered this year. I would also like to formally welcome the Guardian Trust team to The Trust Company ‘family’.Truly independent trustee businesses of Guardian Trust’s quality are rare indeed, and it was clear from the start of our investigations that our respective organisations shared a similar history, cultural DNA and strategic intent.
This acquisition certainly accelerates the development of the company in line with our strategic plan, and has given greater impetus to the five year Change Program (outlined right) we discussed at the last Annual General Meeting (AGM) in June 2010. Our Change Program frames the team’s focus through this period of transition, and I would like to remark on the major outcomes achieved in the last 12 months and what this means for the future of our business. John will cover the 2011 financial result and more specific details around the Change Program in his report to shareholders.
Market Positioning
There are constant reminders and references made about the importance of independence and client-centric professional services in the reviews and commissions that have followed the recent global financial crisis (‘GFC’). The role of the ‘fiduciary’ is truly in the spotlight which aligns well with our professional trustee ambitions in our geographic region. Our new name and brand identity as “The Trust Company”, supports and underpins this leadership positioning and has been well received in the market. Internally, the new brand model is also beginning to galvanise our people, an initiative we intend to extend to the Guardian Trust team in the forthcoming year.
The acquisition of Guardian Trust is an important step in expanding our regional footprint and meeting growing demand for our services across the critical Singapore/New Zealand/Australian corridor. It coincides with an undeniable shift in the balance of economic power back towards Asia – a shift accentuated by the GFC – and we are excited by the regional prospects for our clients and consequently our business.
The role of the ‘fiduciary’ is truly in the spotlight which aligns well with our professional trustee ambitions in our geographic region.
The Trust Company is proud of the positive impact we have made through grants from The Trust Company Foundation or on behalf of generous benefactors, past and present. To sharpen our focus and to better monitor social impact of these distributions, we will be launching Engaged Philanthropy – our refreshed approach to the ‘art of giving’. Engaged Philanthropy means improved dialogue and partnership-building with the non-profit sector, and a sharper focus on program areas for discretionary distributions. It is a concept I personally believe in and that The Trust Company is committed to strategically. Simon Lewis, our Executive Team member who oversees Strategic Relationships, Communications & Community, is leading a team effort on this initiative and will be basing his engagement with our important philanthropy stakeholders from Melbourne.
The recent natural disasters in Brisbane, Christchurch and on the East Coast of Japan have drawn out the community spirit in all of us, and together we raised over AUD75,000 from The Trust Company Foundation, workplace giving programs and friends. This mirrors a strong uptake of over 70% of staff participating in our volunteering program this year, which is just the momentum we need as we implement Engaged Philanthropy.
Our Clients and Services
The client surveys we have conducted this year provide important data to benchmark our service and performance as we seek to demonstrate superior client management and quality. Pleasingly, the Corporate Client Services survey has shown that the Company has made a remarkable improvement across the board in client focus and service levels. We initiated the Personal Client Services survey this year and, as with its Corporate Client counterpart, the feedback illustrates areas of significant strength such as the Health & Personal Injury team, and also areas for improvement. The “Client First” initiative also launched this year ensures the whole company gets behind the words and actions espoused within our client service charter. While we are constantly seeking out new clients for our business, there is an imperative to deliver outstanding service to existing clients.
Our People
A well-defined performance framework is an essential step in building a high performance team. Andrea Free, Head of People & Development, and her team have done an outstanding job implementing this and we will be looking to integrate Guardian Trust into the same framework in the forthcoming months. In this regard I would also like to personally welcome John Botica, Managing Director of Guardian Trust, and his team to The Trust Company family. I have been extremely impressed with the calibre of the people in our New Zealand business and the work they have already done to strengthen and streamline their organisation. I am confident they will play a significant part in growing and strengthening The Trust Company team.
The development of our performance framework has also seen changes introduced to our incentive structure. The new Short Term Incentive (STI) plan introduced this year – open to all permanent employees – means many staff will also become shareholders as at least 50% of all STI awards are made in the form of shares of The Trust Company. This is an important step in aligning the motivations and actions of all our staff to those of our shareholders generally. We are finalising measurable objectives for our policy on workplace diversity at The Trust Company which further complements our already-strong record of a high level of female representation at both the Executive and Senior Management level.
Finally, in March 2011, we farewelled Vicki Allen, our Chief Operating Officer for 2 years and Executive Team member for 4 years. Vicki made a profound contribution to our Corporate Client Services business, which she led with distinction in her first 2 years. She brought her renowned insights, tact and integrity to governance roles as Chairman of The Trust Company (Superannuation) Limited Board as well as The Trust Company (RE Services) Limited Board. In her last two years as Chief Operating Officer, Vicki provided leadership to the Personal Clients Services business and ushered in new initiatives to improve the skills of our client-facing staff and system and process improvements. We thank Vicki for the personal investment she made in the transformation of The Trust Company and wish her success in her future career.
Our processes, systems and facilities
As a professional trustee in the information age, our processes, systems and technologies are key enablers for us. During the year, we began work on better, tighter processes aligned across the business and centralised in Sydney where appropriate. This prepares us well for the eventual upgrade and overhaul of our Information Technology and software applications that are necessary to provide our clients with integrated, effective, client friendly and efficient solutions. To facilitate this change, we welcome Cathy Stephenson to the Executive Team as Executive General Manager of Business Solutions & Operations. Cathy has spent many of her recent years assisting Suncorp in unbundling its conglomerate structure in New Zealand, giving her an excellent perspective and experience in building efficient solutions for the business. We are delighted to have her leading the roll-out of a new company-wide IT platform. It is pleasing to see this important initiative gaining momentum.
The past year also saw us institute a review of all our facilities within the Company to ensure that they are ‘fit-for-purpose’ and in keeping with our brand. Our new Head Office at 20 Bond Street, Sydney should serve as an illustration of this. Our staff in Singapore also began operating from a new office this year, and we set up a branch office in Perth to explore trustee work in the personal injury space as a precursor to a more comprehensive rollout of our services.
Finally, as professionals in the area of governance, The Trust Company has been upgrading its own governance structures to meet the demands of an expanding business. We have enhanced the diversity of the Board by introducing a new Director, Josephine Sukkar, while a Board Committee for Philanthropy and Community was established. Importantly, we have strengthened our audit, risk and compliance processes.
These highlights illustrate the comprehensive nature of the transformation under way. It is pleasing to see all the key components of the Company’s strategic plan now being put into place and in strategic alignment since the review started back in 2009.
Looking ahead
The Trust Company needs to continue to strengthen its leadership position in the Corporate Trustee market, especially by leveraging our networks in New Zealand and Singapore, and return to its original focus on inter-generational wealth management and servicing family clusters in Personal Client Services. Strengthening our engagement with our personal clients, particularly the beneficiaries of continuing and absolute estates, and ensuring we are providing services that meet their needs must be a key priority. We also need to ensure our investment management services and products (including superannuation) are relevant and competitive. The experience within Guardian Trust will assist
us in developing our Personal Client Services business model.
While adhering to our objective of consistent growth in shareholder dividends, we are also conscious of the need to invest in the business, especially in strengthening the foundations for future growth we spoke of last year – clients, people, and systems. The acquisition of Guardian Trust provides a greater revenue base upon which to make system and process improvements across the business.
Reflecting the increased complexity of our expanded business and the transformation being undertaken, we will move away from providing detailed earnings guidance this year. With respect to reporting periods commencing 1 March 2011 and beyond, we will adopt a dividend policy payout ratio of not less than 80% of reported profits. Having now utilised spare equity capital on the balance sheet to finance the Guardian Trust acquisition, we have undertaken a review of the business’s capital management needs and have decided to reopen the dividend reinvestment plan (DRP) with effect from the interim dividend due in October 2011. These steps will provide all shareholders an opportunity to further invest in our transformation. Directors are also considering the introduction of a share purchase plan to operate in conjunction with the DRP.
Finally, I would like to
thank my fellow Directors for their support and commitment through an intensive year, and I know they will join me in commending the whole team at The Trust Company for their significant
personal contribution in
the transformation program to date.
As a trustee business now operating across Australia and New Zealand and with an important foothold in Singapore, our vision of being the pre-eminent trustee business in our region is one step closer. The transformations we have undertaken in the first year since our strategic review and the strong strategic alignment of our business model ensures we are well prepared to take on the challenge. We are confident all stakeholders will benefit.
Bruce Corlett AM
Chairman
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