Thank you. Good morning to everyone, and welcome to Allfunds Group Financial Results presentation for the first half of 2022. Thank you for joining us today. For today's presentation, we would like to spend the first 30 minutes giving you a business and financial update, and an additional 30 minutes for a Q&A. Before we begin, I would like to point out that our earnings press release, the results presentation, and supplemental Excel information can be found under the IR section of our website at allfunds.com. This call is being broadcast live, and a replay will be available on our website. I encourage you to review the cautionary statement on slide two for customary disclosures. Joining me on today's presentation are Juan Alcaraz, Allfunds Chief Executive Officer, and Alvaro Perera, the company's Chief Financial Officer.
Juan and Alvaro will provide a company update as well as an overview of the company's first-half 2022 financial results. After our prepared remarks, we will open the call to questions. During the Q&A, please limit yourself to one question plus one follow-up. You may get back into the queue if you have additional questions. With that, I will now turn over the call to our CEO, Mr. Alcaraz.
Thank you very much, Silvia. Good morning to everyone. Thank you very much for your interest in Allfunds and for joining us in today's presentation. Let's begin. Very good. Let me start with key highlights on H1 2022. Let's start with a clear message now, which is a solid H1 financial results despite the market volatility. We have 5% revenue growth year-on-year and a 4% EBITDA growth. 58% growth year-on-year also in subscription revenues and maintaining the 73% EBITDA margin. 3.5 basis points from platform revenue margin, stable margin. Assets under management down 3.5% compared to 7.4%.
From the market, a decline, you know, year-on-year in the last 12 months, well, taking into account, you know, the unbelievable no volatility, you know, that we have experienced. Key message, the company grows in revenues. We grow in EBITDA. We maintain and keep our EBITDA margin, and we maintain our platform revenue margin. On the business side, we believe now that we have a pretty resilient business. We continuously win market share, as you will see in the next slides. We have a very strong pipeline distributor on with the secure migrations now of above EUR 40 billion that we will explain in a minute, you know. So very, very strong momentum on the business side. Very strong and fast evolving digital ecosystem, okay.
Subscription-based revenues represent already close to 10% of our total revenues. Remember that last year during the IPO, you know, we were below 5%. We have more than double, okay, the percentage of our subscription revenues. It's true that also thanks to acquisitions, but that is part of our business, no? To keep on improving and enhancing our value proposition organically and inorganically, you know. Finally, a key message regarding significant progress that the company has done in H1 on the M&A, you know. Well, we have closed, as you know, now two deals.
The latest deal that we closed last night, excuse me, makes us, well, I think, again, three acquisitions in six months in order, you know, to focus on those things that are under our control. Which is again, to keep on enhancing our value proposition and these three acquisitions that come with really talented teams, people, I'm sure that are going to help us now to enhancing all the services, products, and tools that Allfunds has, no? If we move to the next slide, regarding just pure financial highlights, I think you have seen all the numbers. Again, 5% on revenues, 4% on EBITDA growth.
Growth in both sub-subscription revenues and also, you know, in our profit after taxes of 31% year-over-year. Very good momentum on the commercial side that we will see in a minute, no? Let's enter into some details, no? Well, the first thing is that I think it's important to contextualize, no, what has happened, no, in the markets, no, in H1, no, because we all know that equity markets have suffered a lot, also fixed income. Well, what I think is very important is to point out that it has been the worst H1 market backdrop in history, you know, when we combine how equity market performs and also fixed income performs, no?
Traditionally, when, you know, in our two decades of history, when equity markets suffer, we always have fixed income, no, as a buffer. But as you can see in this slide, no, in H1, the performance of fixed income has been pretty negative with almost 14% drop, no? It has been very difficult really to find an asset class, no, which will protect, no, the assets from such an incredible, you know, underperformance, no, and volatility. Despite this, if we move to next slide. I think that Allfunds, again, has able to outperform, you know, the market, no? And basically, thanks to two things, no? Migration, so gaining market share, bringing new clients. And thanks to a really well-diversified business, no?
It's all about diversification, no, when volatility is so amazing, no? Diversification by asset classes. We have a significant portion of our assets are in multi-asset category that has behaved better, you know, on average than the rest. Diversification by region, you know that we have clients today, I think that in more than 65 countries, so it's really important. Even though it has been a and it is a global crisis, I mean, the more countries in where you operate, as you can imagine, the better. Finally, I mean, a diversification by client, no? We have all type of distributors, no?
We have private banks, we have wealth managers, we have banks, we have insurance companies, and that also give us an extra layer of diversification and therefore it protects us better from this market volatility. If we move to the next slide, please. Well, this is like we just want to show you what has happened in the past with three of the most I think significant crisis. The U.S. sovereign crisis, U.S.-China crisis, and COVID-19. I think the key message is that our business model demonstrates significant growth outperformance during periods of market turmoil. The recovery is always pretty strong. In the moment that risk appetite, you know, improve, and it will improve, savings and cash savings are invested into investment products.
I mean, it has happened always, and it will happen again, no? This appetite for riskier assets means that, you know, the appetite for open architecture will be there. What Allfunds is, as I said, gaining market share and awaiting, you know, for this return of that appetite for investments, no? Another thing that I think is important, no, is to point out that migrations, in our 22 years of history, we have seen that migrations have never been really affected, no, by market volatility. I mean, clients that want to join the platform join the platform. It doesn't matter, you know, if the market is going up or down, no?
Well, the message is that our experience and track record tells us that we have always emerged stronger after a crisis, and this is exactly what we hope that it will happen with this current cycle, no? If we move to the next slide. Well, this to me is really important because it proves that the business model of Allfunds works, is where we put all our focus as a company and as a management, you know, to keep on enhancing our value proposition, to keep on reinforcing our unique selling points.
You know, the features that make Allfunds unique, this famous one-stop shop, you know, the famous unique buy-free model with distributors, global scale, but having local teams, you know, that we operate as local companies in 16 countries, always close to the client in order to understand their needs, and come back with a solution. The beauty of the flywheel effect and what this is helping us to keep on gaining market share. Of course, also using acquisitions, of course, you know, but also without them. If we move to the next slide, we see how this year in H1 we have been able to onboard EUR 17 billion.
We were expecting a little bit more, it's true, but it's also true that one very big Italian client decided to postpone the migration to H1 of next year. In any case, I think the good news is that we have what we call secure migrations, which are clients with the contract already signed and with a date, a specific date to migrate assets, no? That accounts for EUR 40 billion, no? So it looks like even though or despite, you know, this market turmoil, it is going to be a good year for Allfunds, no, in migrations, no? Regarding fund houses incorporation, again, this is a business as usual for us, no? And this year, we will capture probably the same number as last year or similar number.
If we move to next slide, please, Silvia. Okay. Well, this is slide probably is my favorite slide because you know that I'm very client-centric, client-focused. We are obsessed as a company with our clients. It's difficult, no, or very difficult to maintain these customer retention rates, no? Last year, 99.9%, 99.8% in 2020. First half of the year 99.9%. So this means that our clients, existing clients, like Allfunds. They like what we do, and they keep on working with us. No, they don't change our platform. They don't move to any other place. You know, I mean, it's really demanding, you know, this retention rate, you know.
That's why you will always hear me talking about how to improve what we have today, how to improve our value proposition, because it's in our DNA, okay, to keep on improving, enhancing what we have, again, in order to be able to maintain this unbelievable retention rate. Well, this is a picture of what has happened in H1 regarding both, you know, distributors and fund houses. Again, to me, more important on the distribution side, in this case. 34 new clients coming from 20 different countries. I think this is the most important takeaway, you know, of this slide. It's not that, you know, the clients are always coming from the same place.
If you see the chart by region, you know, the by region chart, to me it's ideal. It's like, we have clients coming from absolutely everywhere. Which means that our business model works. Works not just in a couple of countries or in a region, but it works all around the world. By size, well, our ideal clients are clients between 1-5 billion, okay? So, clients that really have a clear strategy regarding selling best of breed, and therefore clients that love open architecture. Those are the clients that we are targeting. Of course, you know, we have smaller clients, and of course, you know, we have bigger clients that obviously join the platform. Well, I think it's a good mix. Origin, from where are these clients coming?
I think it's also important to see that almost 40% of the new clients, of these 34 clients, 40%, 38% to be more precise, they come from competitors. Competitors from, I mean, global competitors and local competitors. Which means that, again, and for the moment, we keep on having a pretty competitive value proposition, and we are trying to do our best to keep on increasing the gap between what we offer and what our competitors offer. When we talk about fund houses, as I said before, I mean, this is our business as usual. The goal of Allfunds is to have the largest number of fund houses under global distribution agreement.
That I think is, in some way, brings a lot of value to our distributors, you know, that they sign an agreement with Allfunds, and they have access to the largest number of fund houses under distribution agreements. If we move to the next slide. Well, growing pipeline, what does it mean? Well, what for us pipeline means, distributors that have signed an NDA, non-disclosure agreement with Allfunds. So we have already started to negotiate with them, but we have not yet signed an agreement with them. Okay? So, the good news is that, the future pipeline of the company, and when I say pipeline, is 18-24 months, is pretty positive, okay? In fact, it's bigger than last year pipeline, okay?
Obviously, unfortunately, we are not gonna be able to convert to clients, you know, the whole pipeline. Well, it's definitely better to have 130 billion of assets, you know, under non-disclosure agreement than less. We take this migrations pipeline very seriously, and the goal is to keep on always, you know, enhancing that red bubble that you see there. On the right, I think the key message on the right is that the acquisition of Web Financial Group two months ago, you know, has, as we expected, increased significantly, you know, the pipeline of clients.
In the case of Web Financial Group pipeline, the fact of being part of Allfunds Group has helped them, you know, to increase their pipeline 47%. In the case of Allfunds digital services, the fact of having a Web Financial Group team, you know, services, tools, you know, in being incorporated to Allfunds digital value proposition, it has helped us to grow in 62% or to increase in 62% our pipeline. For the moment, first two months, I think very positive result of this acquisition, you know, that, as I said, we made two months ago now. Our famous digital ecosystem, you know, with the four modules, fund solutions, wealth solutions, data and analytics solutions, and regulatory solutions. You know, when we have.
All the M&A activity has a strategy. You know, it's not that we buy companies because, you know, I don't know, we want to grow and we want to. No. I mean, we buy companies because we want to enhance, you know, the value proposition in each of these modules, okay? Web Financial Group is definitely helping us to launch new tools and services under fund solutions. Web Financial Group and now MainStreet Partners, okay, and we will talk later about MainStreet Partners, you know, the deal that we closed yesterday is helping us on the wealth solutions side. Web Financial Group is bringing us multi-asset capabilities. Nextportfolio3 comes from an organic development from Nextportfolio that, you know, well, we have been developing it since 2019.
Now MainStreet is gonna bring us all these capabilities on ESG solutions. Data and analytics solutions. Of course, we have our tools and services, but without any doubt, instiHub, the other company that we bought, I think three months ago, more or less, you know, is what will take the lead inside the Allfunds Group in relation to data and analytics. That's already our team, the team in charge of bringing value solutions, added value solutions regarding data and analytics. On the right, the regulatory solutions model.
Well, today is all about organic services, organic tools and products, and what we are exploring, you know, if there is a way, no, to accelerate and to enhance and improve the services under this model, no? Through a potential acquisition, no? We are always studying and screening, you know, the market to see if there are opportunities. Again, our obsession, as I said before, is always the same, you know, is to keep on enhancing, you know, the services that we provide in order to be able afterwards, you know, to maintain those retention rates. No? Those retention rates reflect that, you know, that we take very, very seriously the level of service that we provide to our clients, no? I think next, please. Okay.
Well, this is also pretty important. No? I mean, it's what I call the subscription-based opportunity. How I see this opportunity, no? First of all, I see an accessible universe of more than 2,000 clients. Here, when I say clients, it's a combination of fund houses under distribution agreements with 1,000 and close to 300 fund houses and close to 900 distributors. That's the accessible universe. Which is the objective, as you can imagine? It's both cross-selling and upselling. Cross-selling is further penetration, okay, of well, of this client base, no? Currently deep penetration is low.
I mean, we talk about that 27% of penetration in fund houses, which means that just 27% of those 1,300 fund houses are paying, okay, for some digital services of Allfunds, so huge room for growth. On the distributor side, just 28%, no, I think, of distributors are using Connect, are paying for some services of Connect. When we talk about how many distributors are using Connect, we go up to 85%, but paying just 28%. Again, huge opportunity, you know, to penetrate and to sell more. Upselling, I mean, if we are able to enhance the services, the products, the tools that we have, we should also be able to increase the average fee paid by each of these clients, no?
Today, in my opinion, this is still very low, no? We can definitely upsell if we have the right products. Okay? We can definitely upsell, and we can definitely, you know, increase that fee ticket, no? On the right, the chart, what you can see is that, well, for the moment the strategy is working. Remember that we launched our first digital services Q3, Q4 2019. In 2020 we already made EUR 6.5 million first half of the year. We increased to EUR 9 million last year, first half. Today, we are already in close to EUR 15 million, okay, first half. It is true with the help already of one of our acquisitions, but in any case, you know, I think that the growth is pretty significant, no? With almost close to 60%, no?
I have been already describing this and covering this throughout my presentation. I mean, again, we have a very clear strategy. It's all about, as I have said during the presentation, you know, it's all about improving, increasing, enhancing, you know, the value proposition of Allfunds, no? Web Financial Group has helped definitely Allfunds with our digital value proposition, as we have seen before. instiHub, as I have said the same, you know, with data and analytic tools. Now Main Street offers us the opportunity, no, to enter into, you know, a new business, a new opportunity. I think the momentum and the timing is perfect. It's really scarce, it's clear scarcity, you know, in this sector of ESG.
I think, you know, that listening to our clients, we clearly detected, you know, that our clients in both sides, distributors and fund houses, needed something. They clearly were asking Allfunds, you know, to help them with ESG, you know? Again, this is our goal, to be close to our clients, listen, understand their pain points, and come back with a solution. This is exactly what we have done with MainStreet. Just to finalize my part, and before asking Alvaro, you know, to walk us through the financials, for me, the message, you know, is that, well, at least the things that are under our control, which are mainly, you know, doing things better, retaining talent, bringing talent to the company, controlling costs, you know.
Again, all about being very close to our client and deliver, you know, better services. That's where we put all our focus. That's where we concentrate all our resources, you know? There's nothing that Allfunds can do, unfortunately, you know, regarding the war in Ukraine or inflation or interest rates. You know, all our focus has to be in delivering value, you know, for our clients and our shareholders, you know. It's in this where we put all our efforts, you know. Thank you very much. Alvaro, I think I have taken 25 minutes, unfortunately.
I'll try to be a bit quicker.
Yeah.
Thank you, Juan. Good morning, everyone. I will run you now through the key financial figures and explain the main underlying drivers of this solid performance. Before we go into details, let's pause a bit on slide 19 and take a quick look at our unaudited income statement for the first half of 2022. As you've seen in previous slides, we have delivered solid financial results, showing great resilience in a challenging environment. Compared to H1 2021, net revenues are up 5% to EUR 259 million. Adjusted EBITDA is up 4% to EUR 188.4 million. Margin is stable at 73%, thanks to good cost management. Adjusted profit after tax is up 31% to EUR 123.5 million.
Let's now deep dive into the details behind the strong performance. As you've heard from Juan, the evolution of AUA has been impacted by an unprecedented negative market performance in both equity and fixed income markets. As a result, total AUA dropped by 13% since the beginning of the year, or 3.5% since last year. Almost entirely driven by negative market performance in both equities and fixed income markets. In the first six months of the year, platform AUA declined by EUR 132 billion due to negative market performance. Net flows from existing and new clients combined were down by less than 1%, thanks in particular to continued growth activity from new client onboardings.
As mentioned by Juan, we expect new client migrations to accelerate in the second half of the year to around EUR 40 billion, compared to the EUR 17 billion that we've delivered in H1. New flows from existing clients were modestly negative in H1. This is entirely consistent with what we've seen in the past with client behavior we have experienced in past periods of market turmoil. We also know by experience that these flows return to our platform in addition to ongoing growth once markets recover. Let's turn our attention to revenues on the following slide, and you'll see that both platform and subscription revenues have grown despite these challenging conditions.
Our H1 revenues grew by 5% on a year-on-year basis, representing a 20% compounded annual growth rate since H1 2020, which is well in excess of our IPO guidance that assumed a normalized market environment, by the way. This was driven by net platform revenues resiliency, which grew by 3% on a year-on-year basis, and the continued uptake of our subscription revenues, which grew by 58% and increased the relative weight from 4%-6% since last year. This excludes, of course, the future positive impact from our recent M&A announcement, which Juan described today. On a pro forma basis, subscription revenue already represent approximately 10% of revenues and will continue to grow from here.
It goes without saying that we're very excited about this trend, what we've achieved since our IPO, and the scale of the opportunity ahead. Focusing on net platform revenues for a moment, remember that these can be split into commission revenue or AUA-based revenue and transaction revenue. The commission revenue has experienced an increase of 8%, driven by larger average AUA during the period, as well as really solid margin resiliency. Transaction revenue have returned to more normalized levels. Bear in mind that the level of activity seen in H1 2021 was extraordinary. If we compare it with H1 2020, the EUR 55 million actually represent a 34% growth. This is all very much in line with our expectations.
Finally, moving on to subscription revenues, as I said, these increased by 58% to EUR 14.6 million, thanks to the effort in selling membership fees and adding new features to Connect. This is in line with our ambitions for this revenue line and has been boosted only marginally so far by the acquisition of WebFG, which has delivered EUR 1.7 million roughly of new subscription revenues since its incorporation to the group. Even without this impact, revenue increased by 41% on an organic basis. Let's now move into margins, and you'll see. Yeah, thank you, Silvia. What I would like to highlight here is that our business has demonstrated strong margin resilience and that the overall net platform revenue margin is in fact at the high end of the guidance we provide, 3.5 basis points.
The platform service margin has decreased by 0.2 basis points from 5.1% to 4.9%, but as flagged in the previous slide, the full year margin of 2021 was impacted by exceptional transactional revenue performance during the first half of 2021, which explains the slight decline in platform service margin. Finally, you will also notice that the dealing execution margin has improved as a result of higher dealing activity and improved pricing in this business line. Let's move. Thank you. Looking at our expenses, you'll see that we continue investing in future growth and scalability, while of course remaining committed to maintaining cost discipline, as Juan said. Adjusted expenses increased by 5.6%, i.e., EUR 3.8 million on a year-on-year basis, of which most is linked to increased adjusted SG&A expenses.
This increase is a result of several factors. First, additional improvement in technological backbone and incremental activity. Secondly, the impact of being listed for the full period. Third, some incremental operational expenses from WebFG and instiHub. Fourth, what we would call post-COVID return of events and travel. Finally, as expected, some incremental BNPP disconnection costs and some marginally inflationary impacts. However, adjusted personal expenses have decreased by 4% versus the first half of 2021, reflecting successful control measures and delivery of synergies related to the integration of BNPP activities. Let me also assure you that we will remain absolutely committed to maintaining cost control discipline, and we have identified drivers to offset potential additional inflationary pressure.
If we move forward, as a result of what I've just explained, our adjusted EBITDA in H1 2022 rose to EUR 188.4 million, which represents an increase of 4% compared to the previous year, and a 23% compounded annual growth rate since H1 2020. Again, on a two-year stack basis, this performance is well ahead of our IPO guidance, which was given under the premise of normal market conditions. Furthermore, our adjusted EBITDA margin remains stable at around 73%. Moving on to investments. Our underlying capital expenditure rose to EUR 15.2 million for the first half of 2022, mainly due to IT development projects to support the future growth of the group.
This growth was mainly driven by the integration work performed following the BNPP acquisition, as well as continued development of our digital offering and our blockchain capabilities. Still, our maintenance CapEx represents roughly 5.9% of total revenues, which is generally in line with previous years. Moving on to cash flow generation. The pro forma normalized free cash flow amounts to EUR 120.8 million for the first half of the year, demonstrating that Orpheus is a high cash generating business with almost 87% pre-cash tax conversion. This is real differentiator of our business model, especially in the current environment. We are highly cash generative, and we can fund our innovation investments organically. Furthermore, recent and future hikes in interest rates will affect our net interest income and expense positively. Why?
Given the high amount of liquidity we have on our balance sheet. At current levels, second half of the year, net interest expense will be reduced significantly. For reference, an additional 25 basis points increase across euro, dollar, and sterling rates would have an annual positive effect of another EUR 5 million. In line with our guidance, if we move to bridge, the bridge to reported figures, you'll notice that H1 exceptional items affecting adjusted EBITDA have been reduced by EUR 37 million, which represents almost 50% versus previous year. Remember that separately disclosed items are mainly the transitional service agreements costs from the transaction with BNP, consultancy costs, and legal fees linked to M&A, as well as some accounting impact, which is non-cash, of the long-term share incentive plan for employees. If we move. Thank you, Silvia.
I think as a final remark for this section, what we wanted to give you is our view on the potential outlook for the remaining of 2022. You've heard this in the past. We operate in an industry with short-term factors that are beyond our control, but we believe that these do not impact the long-term prospects of Allfunds and, of course, not the attractiveness of our franchise. Naturally, our near-term P&L will be impacted by the performance of equity and fixed income capital markets. We thought to give you some visibility of what that means, we have included three theoretical P&L scenarios depending on the underlying market performance assumptions for the second half of this year. We've built what we call a continued bear market scenario, a flat market scenario, and a bull or recovery market scenario.
Our central scenario, the flat market scenario, assumes flat markets for the remainder of the year, no flows from existing clients, and roughly EUR 40 billion from new client migrations to be gathered during the second half of the year. What this means is that under this scenario, total AUA would reach EUR 1.3 trillion by year-end, and low single-digit revenue growth would be delivered for the full year 2022. On the left-hand side, our bear market scenario assumes market performance will contribute with an additional 10% decline in AUA from June till December. Under this scenario, we've also assumed negative flows from existing clients in line with H1 2022, which are going to be or would be offset with EUR 40 billion from new client migrations.
Under this scenario, our total AUA would reach EUR 1.2 trillion by year-end, and revenue for the full year 2022 would be flat versus the previous year. Finally, if we look at the right-hand side, our bull/recovery market scenario assumes that markets will turn positive and contribute with a 10% increase in AUA from June to December. Under this scenario, we have assumed gradual return to positive flows from existing clients, so EUR 10 billion-EUR 20 billion, plus the EUR 40 billion migrations from new clients. Under this scenario, our total AUA would reach EUR 1.4 trillion by year-end, and mid-single-digit revenue growth would be delivered for the full year 2022. In each case, we expect adjusted EBITDA margin to sit above 17%. Of course, this will be partially impacted by our recent M&A activity, which is temporarily margin dilutive.
Finally, we do not expect that our subscription revenues or new client migrations will be materially different between these three scenarios. In summary, you could say that for the current financial year is, at this point, relatively protected from changes in the near-term market environment. Thank you very much for your attention, and let me hand it back to Juan for final remarks.
Thank you, Alvaro. We are gonna go directly to Q&A, so we have 20 minutes. Again, I mean, just, thank you very much, you know, for your interest in this company and please, let's go ahead now with Q&A.
Thank you, Juan. Thank you, Alvaro. Let's move on to questions. Operator, can you please proceed with the first one, including name and company of the caller?
Absolutely. Just as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our first question comes from Tom Mills of Jefferies. Tom, your line is now open. Please go ahead.
Oh, good morning, guys. Congratulations on the strong result and the MainStreet deal, and thanks for the new disclosures and scenario analysis. Perhaps just stepping away from the super short-term for a second, could you please give us an update on where you see the structural shift towards open architecture? Clearly the EUR 130 billion 24-month pipeline gives us an idea, but should we expect further acceleration in the coming years post the current market drawdown? Then secondly, with the MainStreet deal coming on stream later this year, together with the two other deals you've done year to date, how complete do you see your product service offering on Connect now? Are there any other obvious gaps you need to fill in order to ramp up the number of paying clients? Thank you.
Thank you, Tom. Very good questions, really. Okay, regarding the first question, no, I think this open architecture is an absolutely unstoppable trend, no? Thanks to, in some way, regulation, which, after MiFID II, you know, is, well, backing, you know, the access, no, or in some way forcing distributors, you know, and financial institutions to offer best of breed. We have a secure tailwind regulation. Another clear tailwind is outsourcing. There is a clear outsourcing trend from distributors. Small distributors, mid-size distributors, and big distributors regarding outsourcing, there's part of, you know, the services, no, that they could do internally or in-house, you know.
You know, if you have a company like Allfunds that is able to give you a one-stop solution, and in the case of distributors, without any cost, I mean, it's kind of a no-brainer that in this context of cost-cutting, you know, the outsourcing trend is really unbeatable, no? As you said, not so much in a short-term view, but in a long-term view, we definitely believe, you know, that markets will recover, no, as it has always happened, no? Whenever that happens, the appetite for equity products, the appetite, you know, for more sophisticated fixed income product, the appetite for illiquid products will definitely, you know, rise, no?
That's the perfect context for open architecture, which in the end is offering best of breed to investors, no? I think we are in the right sector. It's a clear long-term winner, no? Regarding Connect, if we have already a comprehensive value proposition, I think I don't know really. I think that from 0-10, if I had to rank where we are today, probably we are at 8. You know, with the latest acquisitions, plus all the organic and internal in-house developments, I think we have 80% done, okay? We are still looking for some additional add-on.
Bolt-on acquisitions that could take us to 100%, which means, you know, having the very best value proposition for our clients, no? Again, very close to that 100% value proposition for our clients, and again, distributors and fund houses. Yeah.
Thanks very much, Juan.
Thank you.
Lovely. Thank you. Our next question comes from Philip Middleton of Bank of America. Philip, your line is now open. Please go ahead.
Yeah, good morning. You say that about a third of your new clients come from other competitors. Could you talk a little bit about what sort, in general, of competitors these are? I mean, is this the other businesses roughly like yourself, so the IFSs and the Euroclear of this world, or is this the sort of smaller players or the custodians? And alongside that, have you ever lost clients to any of your competitors?
Okay. Well, I'm talking about, you know, as I said, the global competitors, and I don't include custodians. Those are potential clients, no? So global competitors and local competitors, you know. And yes, we all know who is in that list, no, of global competitors and local competitors. Yeah. Regarding to your question of have we ever lost a client? Yes, of course, we lose clients, but we lose clients because the client is acquired, okay, by maybe by another bank. And that bank doesn't use Allfunds, for instance, no? So in that case, we lose a client. Yeah, exactly.
Because that client, that bank was using Allfunds, and suddenly, as it has been acquired by another bank that is using, I don't know, probably they are not even using our competitor, probably they are using their, they're accessing open architecture directly. They stop dealing with Allfunds, no? That has happened. What it has never happened, at least in the last five, six years, seven years, you know, is that we have lost a client because the client has decided to change our platform. Okay? We were not delivering the service, no? That they were expecting and they decide to change. That has never happened. Okay?
Okay, thank you very much.
Thank you.
Our next question comes from Bruce Hamilton of Morgan Stanley. Bruce, your line is now open. Please go ahead.
Hi. Morning, and thanks very much for the presentation, for the information. I apologize, I haven't been able to access the presentation, so if this has been covered in the slides, my apologies. First, on the revenue margins, obviously 3.5% was pretty good. I think in the first quarter you indicated that, you know, recently elevated levels of transactions as people sold funds had helped. I was just thinking whether you know, as we look forward, do you think that's kind of a sustainable level or any sort of messages around, you know, margin dynamics, Q2 on Q1 and as we enter Q3?
Secondly, on the sort of recovery path based on previous crises, it sounded like in the bull market recovery setup, you were talking EUR 10 billion-EUR 20 billion of inflows, which didn't sound that material. Is that based on what you've seen historically in recovery cycles? Or would it be that there's a bit more of a delay? I mean, what's the sort of delay before you see, you know, the substantial pickup, based on past crises, basically? Thanks.
Do you wanna-
Hi, Bruce. Look, on margin stability, I mentioned it briefly during the presentation, but thanks for asking because it's worth reiterating the message, I believe. We're seeing margin stability across the board. What this means is, look, we guided during the IPO to 3.3 basis points in the mid long term. Of course, we are currently at 3.5, which as you correctly said, is at the high end of what we guided towards in Q1. Q1 was indeed a very strong month in terms of transactional income.
It has cooled off a little bit in Q2, but still, if you think about how much transaction income represents of the platform revenue, H1, I think we're talking about roughly 22% versus 20% on average historically excluding H1 21. So to your question, is this reasonable to believe that this should be a normalized level? I think it is. I think, look, transaction incomes are more volatile by definition, but I think this 20%-22% is a reasonable number, which as we've seen in the past, can increase very quickly if we start seeing higher volatility, you know, in the market.
With regards to the bull market, when we look at past performance, I think, Silvia, we'll be uploading a spreadsheet shortly with historical performance around market and-
Quarterly flows.
Exactly, with quarterly flows. You'll be able to see it by yourself. Yes, of course, we've seen periods where, in bull market scenarios, flows are significantly stronger than the ones we've quoted today. On the other hand, we wanted to be, I would say, relatively cautious in how much we put under this scenario, given this market recovery might not necessarily happen tomorrow, right? It might take a bit of time. As you know, flows typically start reacting after the market impact. We wanted to be sure that, look, the recovery phase can happen in different ways or in different phases, right? I think this bull market scenario is a very reasonable scenario that we feel comfortable with.
Great. That's helpful. Thank you.
You're welcome.
Next question, please.
Take our next question from Alex Medhurst of Barclays. Alex, your line is now open. Please go ahead.
Yeah. Hi, guys. Thanks for the opportunity to ask a question, and congratulations on a good set of results. I just had a couple on the cost side of things. Firstly, I wondered if you could flesh out a bit the cost control measures taken on the personnel side of things during the first half, and also if you could quantify any of those BNPP synergies you also discussed on the call. It would also be useful just to get a little flavor of how you expect costs to develop in some of those scenarios. The follow-up, I guess, is that it's interesting that the operating margin targets are the same in all of those, you know, bear market, flat, bull market scenarios.
It'd be useful if you could just give a quick comment on the levers you have on the cost base in those scenarios and how actively you'll manage the cost base depending on what market conditions are. Thank you.
Sure. Hi, Alex. Look, on cost control, I mean, we're not reinventing the wheel here. We've always been very mindful of our cost base and we've run, I would say, a very tight ship, as you can see, given our high EBITDA margins. But of course, there's things that we can do, right? What we basically do is we look very carefully at any incremental cost. We periodically review third-party contracts. We analyze our outsourcing policy. We, in the context of the recent M&A, carefully identify whether we need to replace people that, for whatever reason, have left the company or that we should be hiring because we're finding somewhere in the acquired entity that can perfectly fit that position, right?
There are more things that, again, I could spend hours here talking about expenses and how we look at this with our IT folks and rest of the team. I think what's important to bear in mind is what I mentioned in my last slide, right? Even with the recent M&A, which is slightly margin dilutive for the time being, we still believe that we can run the ship at above 70% EBITDA margin. Of course, the EBITDA margin won't be exactly the same under a bull case, flat case, or bear case. I don't think we.
I mean, we did not want to entertain starting to provide different ranges for each scenario. As we said during the IPO, this is all about scale. This business continues growing every year, continues scaling. Yes, we guided towards, I think, mid-seventies EBITDA margin in the medium term. We are currently at this 73%. This does not mean that we're gonna get there in a straight line, so we might have ups and downs. Again, back to the message, we think there's still room for further scaling. Regarding your question around quantification of the BNP synergies, we don't like to do that because to us, BNP is already integrated in the business.
What we're finding is that, look, the people that joined the company are not just doing things that they used to do for BNP, but they're doing also stuff for, let me call it Allfunds legacy, right? What we're really doing is we're shaping the structure of the team to make it very efficient, very, of course, profitable. I don't know, Juan, if there's anything you want to add to that.
Well, not many more things, really, Alvaro. We really want to become a truly digital company, you know, and we are not yet there, okay? Because it's not just about offering digital services to distributors and to fund houses. It's also being a digital company in-house, you know, internally, you know. And we still have many manual. So we still do many things on a manual basis, you know. Because, again, we keep on growing extraordinarily fast, many places, different type of clients. So it's difficult, you know, to digitize everything. But I like to see it as an opportunity, you know, to be more efficient and to reduce costs. Not really in the short term and not because of the crisis, you know, but in the long term.
I think this company has a lot of, you know, potential to even be more efficient if we are able, again, to be a more digital company in-house, you know? That's the goal. That's why I'm always so positive with the EBITDA margin. Not just on the revenue side, you know, that you have seen we keep on growing our revenues, but also on the cost side, you know?
Great. Thank you.
As a reminder, if you would like to register a question, that's star one on your telephone keypad. We'll take our next question from Greg Simpson of BNP Paribas. Greg, your line is now open. Please go ahead.
Hi. Good morning. Thank you for taking my questions. First one would be a broader question. You mentioned that sweet spot for new clients is the distributor has maybe up to EUR 5 billion of AUA is open architecture. Is there any way to quantify or think about what the addressable market is in terms of number of clients that are out there that aren't on the platform? I know you show this 13% European fund market share, but that's the total market including larger distributors and then captive models. Just kind of thinking about that. Then the second question would be around the existing client flows which have been negative in H1.
Is there any kind of pattern around client types or regions where, you know, where they're coming from? Or is it, you know, quite broad-based in terms of those outflows? Just any kind of outlook so far in Q3 on that front. Thank you.
Thank you very much. Well, regarding the last part of the question. If we have seen any trend from, I guess, the organic growth. No, negative organic growth, no? We have seen in H1 clients, distributors redeeming. Not investing, but redeeming. I guess we have seen a trend. We don't know if it is yet a trend or not, no. We have seen some asset managers. Asset management arms of banks, you know, redeeming more than other type of clients that we have, like insurance companies or private banks, no, making direct distribution, no.
I believe it's a matter of rebalancing, you know, their portfolios, de-risking their portfolios, probably, you know, moving part of the portfolios to cash and therefore, you know, redeeming more than some of the other clients that we have. Again, that's the beauty of Allfunds, is that we do not just work with insurance companies, you know, or with custodians, or with asset management companies for their final funds or multi-manager programs, but we have all types of clients. Yes, we have seen this trend, especially in Spain, okay, and also in Italy. Regarding the first question, excuse me,
I think Greg, he wants to know whether.
Yeah.
Yeah, whether we could-
Oh.
-quantify.
Well, it's difficult.
Yeah. How you think about the addressable market?
Yeah. It looks like. I say it looks like, because that data doesn't come from Allfunds, as you can imagine. But all the sources that we analyze tell us that we have around that 13% of the business, 13%. So in my opinion, there is still a lot of, you know, room for growth, especially, you know, in regions and countries where our market share is not so high. Like, I don't know, France, Germany. So, I'm not really concerned with the fact that, I don't know, we are running out of potential clients really. No way, no.
Even in Spain, we have an unbelievable market share. Well, this year has been fantastic. We have closed some of the few clients that we were missing. No. Even again in countries like Spain, where it's difficult, you know, for us to grow, we have grown. No, I don't see any issue there really. No. The number of clients is massive, the number of potential clients is massive all around the world. Because again, bear in mind that there are other companies that just operate in one country and probably, you know, they might get an issue, you know, if they have a huge market share. The beauty of Allfunds is that our business model works all around the world. Okay.
That give us a huge potential of keep on gaining market share and growing our asset base.
Thank you.
We have no further questions in the lineup, so I'll hand back over to the management team.
Thank you, Daisy. We have a few questions written that has been sent through. First question from Anthony Boudry from HSBC. Good morning, and thank you for provided scenario. Do scenarios include the positive impact of acquisitions already closed? What do you expect for platform margin in H2?
Let me take that one. Hi, Anthony. The scenarios that we portrayed today include the impact of instiHub and WebFG, obviously just for six, seven months. But we have not included any impact from MainStreet Partners. With regards to your second question around margin, on purpose, we did not want to provide a specific guidance on revenue margin. I'm sure if you look at the target revenue or revenue growth that we sort of guided towards, you can back solve what we have in mind. Bottom line, we don't see any strong margin pressure impacting the business in the short term.
Another follow-up question from Anthony Boudry on M&A strategy. Three acquisitions completed in Connect year to date. Any M&A deals in pipeline to strengthen core business? Update on expansion strategy in the U.S. notably?
Look, I think I have already mentioned that. Of course, we are always looking, not so much for opportunities, but we're always looking for things, you know, people we like, you know, to enhance our team with the best people available, you know, in the market. Therefore, yes, of course, we are always looking and trying to find those leaders.
The strategy, as you have seen, is to acquire companies, yes, but especially also to acquire, you know, the CEOs, founders of these companies that can bring all their expertise, all their leadership to Allfunds and reinforce not just the specific type of service that they will provide, like data and analytics in the case of instiHub, or digital services in the case of Web Financial Group or now ESG solutions with MainStreet Partners. It's not just that. It's that they also help to make Allfunds top management much more stronger and better. Yes, always open to reinforce Allfunds. It is true, as I said before, that there are not so many.
I mean, specific services that we need to keep on improving. We are almost done, you know? We will always look for opportunities. The U.S. is a different topic. U.S., I already said last year that, of course, you know, we have interests in that market. It is difficult to say that you are global without, you know, having a significant business in the U.S., no? Therefore, we will always analyze the U.S. and see if we can, you know, bring value to that market.
One last question, maybe from Jacques-Henri Maynevis. Congrats on such good results. Can you talk a bit about the competition versus IFS, which seem to be weighing some large mandates? Also, what's your leverage today, and can you remind us what is your target capital structure? Would you consider buybacks?
Okay, I will cover the first one. I don't have a competition. Well, we have a clear strategy that has been the same for the last 22 years, no? Buy-free model, one-stop solution, you know. And that's the only important thing, no? We don't look at competitors really. For the moment, we are not losing any client, as I have said, you know, and we keep on winning clients from them. I don't know really. Really nothing to comment, no.
Okay.
Being the leader, you know, gives you that, I think that advantage, you know. Same management for the last 22 years. I don't know. I think that we know what we have to do. Others probably need to, you know, to look at us, trying to replicate what we do. It's not the case of Allfunds. No more comments about that.
Yeah.
The second part, Alvaro.
Sure. I think, Silvia, we have some slides somewhere in the appendix. But again, on leverage, we are. Oh, thank you there. Net financial debt as of the end of June stood at EUR 80.5 million. The way we calculate net financial debt is we take the gross debt, which basically is sitting at PLC level and is coming entirely from the RCF drawdown that we've done so far, which, as you remember, was done in connection with mainly the recent acquisitions, but also some to fund some of the IPO costs at the time.
What we do is we deduct from that amount what we call the notional or the excess capital, which is the amount of capital or cash that we have above the 17.8% regulatory minimum. It, as you can see, I mean, very low leverage. I also mentioned during the presentation that we are a very high cash generative business and that, well, given the high cash conversion and high cash generation, we can fund operations, but also our investments in innovation and to some extent also M&A with our own sources. Finally, the share buyback question. I have to admit that's something that we've considered.
Again, given the liquidity of the stock, we don't want to do anything that would restrict that liquidity for the time being, of course. At the same time, I think we've mentioned this also in the past, we think that the current price or the share price of Allfunds is not reflective of its true valuation. We think it's undervalued, and we think it's a good moment to actually buy. If we go ahead and do that, we would probably do it in the context of funding our long-term incentive plan for employees, for example, right?
Well, thank you very much. With that, we have no more time for questions. Questions that have remained unanswered will be taken by the IR team. Sorry for that. It has been a pleasure to host you on this interim results presentation. Let me wish you a well-deserved summer break, and see you next quarter with our trading update. Goodbye.
Goodbye. Thank you very much.
Thank you.
Thanks a lot. Thank you.