ECONOMIC REPORT
Results of operations
Development of total revenue
Total revenue increased
Despite the tough market conditions already described, the MLP Group was able to increase its total revenue in the financial year 2020 by 8.3% to € 767.3 million (€ 708.8 million) and reached another new all-time high since the sale of our own insurers. This success can be attributed to the significant diversification of its revenue basis over the course of the last few years. With the exception of old-age provision, MLP was able to record gains in all consulting fields. This growth was primarily driven by the increase in commission income, which rose by 8.5% to € 730.4 million (€ 672.9 million). As a result of the ongoing low interest rate environment, revenue from the interest rate business remained below the previous year's figure at € 15.2 million (€ 16.6 million).
Wealth management once again records significant growth
The MLP Group was once again able to record gains in the wealth management consulting field, with a considerable increase in revenue of 17.3% to € 262.1 million (€ 223.5 million). The main contributor to this pronounced growth was a massive rise in performance-linked compensation at FERI. Group-wide assets under management rose to a new record of level of € 42.7 billion (€ 39.2 billion). Gains were recorded at the subsidiary FERI and, in particular, in MLP's private client business.
Old-age provision under the influence of the corona pandemic
In the last financial year, old-age provision revenue declined slightly due to the effects of the corona pandemic and was € 214.6 million (€ 225.8 million). This decline can be attributed to a downturn in new business where total premiums paid fell by 9.0% from € 4,183.2 million to € 3,805.2 million. Occupational pension provision was particularly hard hit by the effects of the corona pandemic. New business declined by 24.6% to € 659.7 million (€ 875.2 million) here. MLP is continuing to play a pioneering role in the transition to new guarantees. Pension insurance policies with classic guaranteed interest rates now represent just 3% (3%) of newly brokered contracts at MLP. The proportion of new guarantees was 75% (74%), while purely unit-linked contracts represented 22% (23%).
Non-life insurance enjoys continued growth
Revenue in the non-life insurance consulting field increased again in the last financial year. It rose by 8.4% to € 137.2 million (€ 126.6 million). The portfolio of non-life insurance policies enjoyed positive development. The premium volume received through the MLP Group rose to € 430.8 million (€ 405.5 million).
Health insurance above previous year
At € 50.6 million (€ 48.3 million), revenue in the health insurance consulting field was slightly up on the previous year. MLP therefore enjoyed positive development, despite the reservations displayed by many citizens in terms of signing up for fully comprehensive private health insurance policies.
Real estate brokerage displaying significant growth
We were also able to record significant growth in the real estate brokerage business, which we have been expanding since 2014. Revenue increased by 67.4% to € 39.5 million (€ 23.6 million) in this consulting field. Since the acquisition of a majority stake in DEUTSCHLAND.Immobilien on 2 September 2019, revenue from real estate project planning has been disclosed alongside the revenue from real estate brokerage. In the reporting period, this revenue was € 2.6 million (€ 0.1 million). An extremely dynamic fourth quarter made a particular contribution to the positive development recorded for the year. The real estate volume brokered by MLP increased significantly to € 403.8 million (€ 294.0 million).
Brokered financing volume sets new record
We also reached a new record level in the brokerage of loans and mortgages. Revenue here improved to € 21.8 million (€ 20.8 million). At € 2,357.5 million (€ 1.958,5 million), the brokered financing volume reached a new record level. The reason why the increase in revenue from loans and mortgages was less dynamic than the rise in brokered volume can be attributed to commission payments, which are only received at a later date.
Forecast surpassed
Despite ongoing capital expenditure to further strengthen our young segment, and thereby also secure future revenue and earnings potential alongside further implementation of the digitalisation strategy, we significantly surpassed both our original forecast and our updated forecast from April 2020. This can largely be attributed to considerably better performance in the wealth management business and the generally positive operating development with an EBIT of € 59.4 million (€ 47.1 million).
Analysis of revenue performance
Revenue rose by 8.1% to € 745.5 million in the reporting period (€ 689.6 million). Commission income, which increased from € 672.9 million to € 730.4 million, played a key role in this. This growth was supported by virtually all consulting fields, but in particular by wealth management and real estate brokerage. Other revenue rose to € 21.8 million (€ 19.2 million). The increase can essentially be attributed to one-off higher income from VAT refunds that were accrued in the Banking segment. Interest income declined to € 15.2 million (€ 16.6 million) in the last financial year due to the ongoing period of low interest rates. Total revenue rose by 8.3% to € 767.3 million (€ 708.8 million).
Wealth management enjoys significant growth
The wealth management consulting field made the greatest contribution in terms of commission income. As a result of the successful diversification of the revenue basis it was 35.9% (33.2%). Old-age provision contributed a share of 29.4% (33.6%). With an overall increase in commission income, non-life insurance accounted for 18.8% (18.8%). The following table provides a detailed overview.
Breakdown of revenue
| All figures in € million | Share in % | 2020 | Share in % | 2019 | Change in % |
| Wealth management | 36% | 262.1 | 32% | 223.5 | 17.3% |
| Old-age provision | 29% | 214.6 | 34% | 225.8 | -5.0% |
| Non-life insurance | 19% | 137.2 | 19% | 126.6 | 8.4% |
| Health insurance | 7% | 50.6 | 8% | 48.3 | 4.8% |
| Real estate brokerage | 5% | 39.5 | 3% | 23.6 | 67.4% |
| Loans and mortgages | 3% | 21.8 | 3% | 20.8 | 4.8% |
| Other commission and fees | 1% | 4.6 | 1% | 4.3 | 7.0% |
| Total commission income | 730.4 | 672.9 | 8.5% | ||
| Interest income | 15.2 | 16.6 | -8.4% | ||
| Total | 745.5 | 689.6 | 8.1% | ||
Analysis of expenses
Commission income above the previous year
Commission expenses primarily comprise performance-linked commission payments to our MLP consultants. They represent the largest item under expenses. This item also includes the commissions paid in the DOMCURA segment. The variable expenses result from the compensation of brokerage services in the non-life insurance business. Added to these are the commissions paid in the FERI segment, which particularly result from the activities in the field of fund administration. In this business segment they are primarily accrued due to compensation of the depository bank and fund sales. Commission expenses are also accrued in the Holding and Others segment. These are essentially the result of expenses from real estate development at DEUTSCHLAND.Immobilien. Against a backdrop of increased commission income, commissions paid were also above the previous year at € 397.0 million (€ 369.9 million). Net commission income therefore rose to € 333.3 million (€ 303.0 million).
Inventory changes increased to € 7.3 million (€ 3.9 million) in the reporting period. These result from real estate development and represent the change in asset values generated in the current phase of the projects within the reporting period. This item will increase in future as the respective projects progress and then decline again with the gradual sale of project units.
Interest expenses fell to € 0.4 million (€ 0.6 million) due to the ongoing low interest rate environment. Net interest was € 14.7 million (€ 16.0 million) in total.
Gross profit (defined as total revenue less commission expenses and interest expenses, plus inventory changes) improved to € 377.1 million (€ 342.2 million).
Administration costs marginally increased
Administration costs of the MLP Group (defined as the sum of personnel expenses, depreciation/amortisation and impairment, as well as other operating expenses) increased to € 318.5 million in the reporting year (€ 297.2 million). It is important to take into account the fact that DEUTSCHLAND.Immobilien was only incorporated in the income statement for the first time in the third quarter of 2019.
Personnel expenses increased to € 148.0 million (€ 135.7 million). This was influenced by various factors, including the announced strengthening of our young segment, which we have been expanding since 2017 through intensified recruiting efforts aimed at young consultants, a slightly higher overall number of employees, higher performance-based compensation components, as well as general salary increases. Among other things, this includes € 127.2 million (€ 116.8 million) for salaries and wages, € 17.1 million (€ 15.9 million) for social security contributions, as well as employer-based old-age provision allowances of € 3.7 million (€ 3.0 million). In addition to this, MLP staff that worked at least 19.5 hours per week received a coronavirus bonus of € 900. Trainees and students received a special one-off payment of € 200. Depreciation/amortisation and impairments increased slightly to € 27.7 million (€ 26.4 million). Other operating expenses were € 142.8 million (€ 135.1 million).
Breakdown of expenses
| All figures in € million | 2020 | in % of total expenses | 2019 | in % of total expenses | Change in % |
| Inventory changes | 7.3 | -1.0% | 3.9 | — | 87.2% |
| Commission expenses | -397.1 | 56.0% | -369.9 | 55.7% | 7.4% |
| Interest expenses | -0.4 | 0.1% | -0.6 | 0.1% | -33.3% |
| Personnel expenses | -148.0 | 20.9% | -135.7 | 20.4% | 9.1% |
| Depreciation and impairment | -27.7 | 3.9% | -26.4 | 4.0% | 4.9% |
| Other operating expenses | -142.8 | 20.1% | -135.1 | 20.4% | 5.7% |
| Total | -708.7 | 100.0% | -663.8 | 100.0% | 6.8% |
The result of MLP Hyp, which as a joint venture with Interhyp is reported as net income from investments accounted for using the equity method, increased to € 3.6 million (€ 3.0 million). The result of the DI Group project companies accounted for using the equity method is also included in this item. This amounted to just under € 0.1 million (€ 0.0 million) in the reporting period. Overall, the result from investments accounted for using the equity method amounted to € 3.7 million (€ 3.0 million).
EBIT significantly increased
The EBIT of the MLP Group improved significantly in the last financial year to € 59.4 million (€ 47.1 million).
The finance cost declined to € –3.0 million in the last financial year (€ –2.3 million).
The following table provides an overview of the earnings structure, as well as the development of earnings and margins:
Earnings structure, as well as the development of earnings and margins
| All figures in € million | 2020 | 2019 | Change in % |
| Total revenue | 767.3 | 708.8 | 8.3% |
| Gross profit ¹⁾ | 377.1 | 338.1 | 11.5% |
| Gross profit margin (%) | 49.1% | 47.7% | — |
| EBIT | 59.4 | 47.1 | 26.1% |
| EBIT margin (%) | 7.7% | 6.6% | — |
| Finance cost | -3.0 | -2.3 | 30.4% |
| EBT | 56.3 | 44.8 | 25.7% |
| EBT margin (%) | 7.3% | 6.3% | — |
| Income taxes | -13.1 | -7.8 | 67.9% |
| Net profit | 43.2 | 36.9 | 17.1% |
| Net margin (%) | 5.6% | 5.2% | — |
Pronounced increase in earnings per share
Group net profit increased by 17.1% overall to € 43.2 million (€ 36.9 million). This was essentially due to a significant increase in commission income in wealth management.
Group net profit
| All figures in € million | 2020 | 2019 | Change in % |
| Continuing operations | 43.2 | 36.9 | 17.1% |
| GROUP | 43.2 | 36.9 | 17.1% |
| Earnings per share in € (basic) | 0.40 | 0.34 | 17.6% |
| Earnings per share in € (diluted) | 0.40 | 0.34 | 17.6% |
| Number of shares in millions (basic) | 109.2 | 109.2 | 0.0% |
| Number of shares in millions (diluted) | 109.3 | 109.3 | 0.0% |
Appropriation of profits
Our dividend policy is to pay 50% to 70% of Group net profit to our shareholders in the form of dividends. MLP paid out a dividend of 21 cents per share for the financial year 2019. The total dividend paid was therefore € 23.0 million.
We have announced that we will be continuing our dividend policy for the financial year 2020. On this basis, the Executive Board and Supervisory Board will propose a dividend of € 0.23 per share to the Annual General Meeting on 24 June 2021. This corresponds to a distribution rate of around 58% of operating net profit.
