Good morning, and welcome to ASX's financial results briefing for the first half of the financial year ending 30 June 2024. Thank you for taking part in this virtual presentation. I hope you're well wherever you're joining us. My name is Helen Lofthouse, and I'm the Managing Director and CEO of ASX. I'm pleased to be presenting these results today along with ASX's Chief Financial Officer, Andrew Tobin. I'd like to acknowledge the Gadigal people of the Eora Nation, who are the traditional custodians of the country where I'm speaking today. We recognize their continuing connection to the land and waters, and we thank them for protecting this coastline and its ecosystems. We pay our respects to elders past and present, and we extend that respect to any First Nations people present today. Today's presentation will cover four areas, and then Andrew and I will take your questions.
I'll begin with an overview of the results for the first half of FY 2024 and our focus areas. Then Andrew will provide a more detailed view of our financial performance, including each line of business, and I'll then update you on how we're tracking on our strategy, and I'll provide some observations on the market outlook and its implications for ASX. We'll finish with Q&A. I cover four topics in the first part of today's presentation: some highlights and commentary on our results, an update on our two near-term focus areas of regulatory commitments and technology modernization, and I'll provide some detail on the business rationalization actions which we've been taking. Turning now to our financial highlights. ASX demonstrated solid revenue growth in the first half of FY 2024 despite challenging markets.
We delivered AUD 511.7 million of revenue, which is a record for the first half of the financial year. Our diversified business model supported the revenue performance with growth in markets and technology and data offset by a decline in our listings and securities and payments businesses. Total expenses were up by 26.9% compared to the first half of FY 2023 and 10% compared to the second half of FY 2023. It's important to note that the significant increase in investment in our key focus areas began after the first half of FY 2023, and therefore the second half of FY 2023 is a better comparable. The first half of FY 2024 figure also includes several items that are one-off in nature, which Andrew will explain in more detail shortly.
Clearly, this level of growth is not sustainable and reflects the critical demands placed upon ASX in the past year and the investment required to support our long-term sustainability. Our FY 2024 total expenses growth guidance is unchanged, and we have a business rationalization program underway which is expected to reduce our total expenses growth rate in FY 2025, which I'll talk about shortly. Underlying net profit after tax decreased by 7.8% to AUD 230.5 million. Statutory NPAT increased substantially given the prior corresponding period included the loss from the de-recognition of the CHESS Replacement Project. ASX's dividend payout ratio is 85% of underlying NPAT, which is in the middle of our range, with the board declaring a fully franked interim dividend of AUD 1.012 per share. The board has also approved the reactivation of our dividend reinvestment plan for the interim dividend, with no discount applied to the DRP price.
The next series of slides will provide an update on our near-term focus areas of regulatory commitments and technology modernization. Our investment in these areas is crucial to support the long-term sustainability of ASX and to increase shareholder value. Our licenses are some of our most important assets. They're the foundation of ASX, and they drive our revenue and shareholder value. We've made significant progress on our regulatory commitments during the past year, delivering a series of important reports and initiatives that provide additional transparency to our regulatory agencies and other stakeholders on how we're changing and improving. The implementation of the recommendations covered in the reports is also valuable, as it underpins further improvement in our governance, stakeholder engagement, and delivery capability.
Increased stakeholder engagement has formed part of our new strategy in the past year, and we're starting to see how our actions in various stakeholder forums are supporting a positive shift in industry sentiments. These forums are not only key to delivering projects such as CHESS Replacement, but they also allow for better customer relationships and opportunities for growth. We're also focused on our delivery capability, and we're implementing recommendations from the three special reports to ASIC, which we published last year. This will benefit the delivery of our current and upcoming projects, including in technology modernization as well as business-as-usual activities. We currently have other regulatory commitments that are ongoing, including work underway to address the recommendations in the RBA's annual FSS assessments. The ASIC investigation into oversight statements and disclosures around the CHESS Replacement Project remains ongoing, and we're cooperating fully.
We're providing input on two key areas of legislative reform as well. Firstly, the implementation of the competition in clearing and settlement services legislation, which was introduced last year. As we indicated previously, ASX supports the policy intent of this legislation, and we're currently preparing a submission on the scope of services to which the legislation will apply. Secondly, the financial market infrastructure regulatory reforms. Among other things, the proposed reforms would provide powers for the RBA to step in and resolve a crisis at a domestic clearing or settlement facility to ensure the continuity of critical clearing or settlement functions and to protect financial system stability in Australia. We've recently made a submission which is supportive of the reform package and its objectives and suggests some modifications to address some practical issues and risks and ensure that the reform operates as intended.
Along with our licenses, technology underpins ASX's businesses, and it drives revenue and shareholder value. We're continuing to invest in modernizing our technology to ensure that it's sustainable in the long term. As you can see from our enterprise technology roadmap, we're making good progress with the three major projects underway. The first major project is CHESS Replacement. I'll provide an update on that shortly. The derivatives clearing project includes an upgrade to our OTC clearing system initially before the replacement of the futures clearing system. The third major project is the upgrade of the trading applications and network. All of these projects involve significant stakeholder consultation, and we're developing a coordinated industry implementation plan to manage the change load. The execution of these projects is enabled by investment in our technology platforms.
We're building modern technologies and practices which should allow us to increase efficiency, quality, and consistency between business lines, to leverage automation, and to improve the speed of delivery. As I mentioned earlier, we've also been investing in our delivery capability, and this has included uplifts in integrated planning, quality engineering and testing, as well as skills and training. These steps will help us to simplify and standardize our technology and take a strategic approach to technology solutions and project delivery. Replacing CHESS is expected to provide substantial benefits for the Australian market and ASX. In November last year, we announced the selection of the TCS BaNCS for Market Infrastructure product as the solution for the CHESS Replacement Project. This product is operated in multiple geographies by a range of major financial service providers, including exchanges.
It's a good fit for the Australian market, specifically offering support for direct holding structures, as it's already operating a similar model in Finland. This significantly reduces the amount of customization required. Some of the other key benefits include improved scalability to support future market growth as needed. And we're taking a staged implementation approach which should reduce delivery risk compared to a single cutover approach and also help stakeholders better manage their change load. And there's the potential for reuse of industry investments in workflow development and global messaging standards, subject to consultation on the scope and detailed design. Interoperability is another benefit, which is facilitated by a modular architecture. This will enable unaffiliated market operators, clearing and settlement facilities, and other providers to access and interoperate with the individual clearing, settlement, and subregister services using standardized interfaces.
The TCS product will also support innovation by offering connectivity with alternate and emerging technologies. This will create opportunities for new services to be introduced by ASX or by other providers as driven by market demand. As I mentioned earlier, stakeholder engagement has been a key area of uplift for ASX. We've listened to our stakeholders, and we propose to deliver the project in two releases, which is expected to reduce overall delivery risk and help manage the change load on industry stakeholders. Release one will be the clearing service, with an indicative delivery timeframe of 2026 and an estimated cost of between AUD 105 million and AUD 125 million. Release two will be the settlement and subregister services, and the scenarios being considered estimate completion in 2028 or 2029.
Now that we've announced the CHESS Replacement solution design, industry consultation is underway to finalize the scope and timing of the releases and develop the industry work plan. This includes industry evaluation of a potential move to T+1 settlement. We expect to determine and communicate the timeline and estimated cost for release two in the December quarter of 2024, following industry consultation. So we've made good headway in our key focus areas, and we need to continue this momentum. We're also focusing on building capabilities and on opportunities to deliver what matters to our customers. And to do this well, we'll need to make some difficult decisions to ensure we're prioritizing the most strategic and efficient outcomes for the group while continuing our cost-conscious approach.
We've had to manage an elevated level of expenditure given the heightened regulatory demands and the velocity of technology change and delivery in the past year, but we're highly conscious that the current level of total expenses growth is not sustainable. We've sought to address this strategically through a program of business rationalization that aims to sharply prioritize activities, simplify processes, reduce duplication, and optimize our workforce. Last week, we initiated a targeted restructure that better aligns our people to our strategy. For example, in our technology division, our Chief Information Officer will have centralized oversight and dedicated resources to deliver ASX's technology modernization roadmap. This restructure is balanced with the need to prioritize investment in our key focus areas of regulatory commitments and technology modernization, and we still expect to add people to support this.
Once this targeted restructure and prioritization process is complete, it is expected to result in a net non-project-related headcount reduction of approximately 3% and an estimated annual saving of approximately AUD 11 million in operating expenses. This demonstrates that we're prepared to make difficult decisions and be disciplined in our approach to prioritization and efficiency to deliver on our strategy and to manage operating expenses. At our Investor Day last year, we'd flagged that we would be undertaking expense management initiatives to address expense growth, and we've made progress on tightening our procurement protocols and optimizing our workforce by reducing the use of consultants. We've also previously flagged a review of our equity portfolio. You've already seen us take action in this area, such as the sale of our stake in Yieldb roker towards the end of last year.
We're exploring options regarding our equity stake in Digital Asset, following our decision to use a product-based solution for CHESS Replacement. Regarding Sympli, we continue to see e-conveyancing as an attractive market, and we're enthusiastic about the opportunity to bring an efficient and customer service-focused competitor to that market. We now have additional clarity over the likely timing for industry readiness, and this is following last month's publication by the National Conveyancing Council requiring readiness for interoperability for key registry instruments by the December 31st, 2025. This will be subject to final approvals and any extensions that may be granted. Sympli's cost base has been reshaped to reflect the timing of this requirement, and the team continued to progress its customer offering. These actions demonstrate that we're making active choices to manage our equity portfolio in a disciplined way.
All of these actions will create a more sustainable expense base and give us the foundation for growth as we move towards the next horizon of our strategy. I'll now hand over to Andrew to talk through the detailed financials for our first half results.
Thanks very much, Helen, and good morning, everyone. As Helen has already mentioned, our first half 2024 financial results demonstrate the resilience of ASX's diversified business model despite challenging markets over the half. The underlying and statutory profit for first half 2024 was AUD 230.5 million, with the underlying profit after tax down 7.8% compared to 1H2023. However, ASX's statutory profit after tax was significantly higher given the comparative period included the de-recognition charge of the capitalized costs associated with the CHESS Replacement Project. Operating revenue for 1H2024 of AUD 511.7 million increased by 2.4% compared to PCP and was a record for the first half of a financial year. Total expenses for the period were AUD 220.7 million, up 26.9% on PCP, or 10% compared to the second half 2023 period, and I will speak further on the expense profile and our business rationalization action shortly.
We saw a strong rebound in net interest income in the half, up 20.9% to AUD 39.4 million, supported by further RBA cash rate increases on ASX's cash balance, offset by lower collateral interest due to the decrease in the participant collateral balances. The increase in expenses relative to the revenue outcome resulted in our EBIT margin falling from 65.2% in 1H2023 to 56.9% this period. The 7.8% decline in earnings per share to AUD 0.119 is consistent with the trend in underlying net profit after tax. Reflecting this underlying earnings result and a dividend payout ratio of 85% being the midpoint of the current dividend policy range, the board has determined an interim dividend of AUD 0.1012 per share. Underlying return on equity generated in the half was 12.6% compared to 13.4% in the PCP, with the decline reflecting the fall in underlying profit in the half.
Now, turning to the business line revenue outcomes. Total listings revenue was 4.4% lower than PCP at AUD 104.9 million. The annual listing fees, which are set based on each listed company's market capitalization, declined by 0.7% to AUD 53.5 million, and this makes up nearly half of the total listings revenue. As noted earlier, the continued uncertain macro environment has contributed to the lower initial and secondary capital raising activity. There were 28 new listings with a quoted market cap of AUD 33.2 billion in the half compared to a market cap of AUD 2 billion from 40 new listings in 1H2023. Secondary market capital raised fell by 25.3%, with AUD 22.5 billion raised this half compared to AUD 30.2 billion in the PCP.
As you may be aware, we recognize the revenue derived from initial and secondary listings over five years and three years, respectively, and so the revenue outcomes reported mainly reflect prior period activity, and this is shown in the bar charts on the slide. Therefore, initial listing revenue recognized in 1H2024 was AUD 10.3 million, down 12.7%, and the secondary revenue was AUD 37 million, down 6.3%. Moving now to the markets business. The markets business generated revenue of AUD 153.2 million, up 10.4% compared to 1H2023. Futures and OTC revenue of AUD 114.4 million was up 16.6% on 1H2023, supported by a 17.6% increase in total futures volumes driven by interest rate volatility in the period. Strong growth was observed across all major products, including 90-day bank bill futures and three and 10-year Treasury bond futures, with traded volumes up 34%, 19%, and 13%, respectively.
However, value cleared through our OTC clearing service was down 16% compared to 1H2023. Cash market trading revenue was AUD 30 million, down 7.4% on PCP, and that was impacted by overall ASX on-market traded value of AUD 660 billion in the half compared to AUD 733 billion in 1H2023. As outlined in the chart on the lower right of the slide, the majority of this decline came from open trading value, with the auctions and Centre Point values broadly consistent with the PCP. ASX's share of on-market trading averaged 88.4% in the half, which is marginally lower than the 88.9% share generated in the PCP. With increased equity market volatility, we also saw higher single stock and index option volumes, leading to a 6% increase in equity options revenue to AUD 8.8 million. Now, looking at technology and data.
The tech and data business had another strong period, with total revenue of AUD 124.6 million, increasing by 6% compared to 1H2023. Information services generated revenue of AUD 76 million, up 8%, supported by strong growth in demand for equities and futures data, as well as benchmark and index volumes. Technical services was also up, with revenue coming in at AUD 48.6 million, 3.2% more than 1H2023. Growth in customer infrastructure and connections at ASX's data center drove this revenue increase, with the number of customer cabinets remaining steady at 388. The number of service connections between data center customers increased by 4.9% to 1,378 connections by the end of the period. Finally, moving on to our fourth business segment, securities and payments. The securities and payments business generated revenue of AUD 129 million, down 3.4% compared to 1H2023.
Issuer services revenue was AUD 29.6 million, down 9.5%, impacted by a decline in average HIN volumes, resulting in lower subscription fee revenue. Subdued levels of trading activity and a reduced number of new IPOs also adversely impacted revenue in the period. This was partly offset by an increase in the use of the primary market facilitation service in the half. Equity post-trade services include cash market clearing and settlement activities, and revenue from these services declined by 7.5% to AUD 64.3 million compared to 1H2023. The total on-market value cleared for the half was AUD 699 billion compared to AUD 773 billion in 1H2023, and total settlement message volumes related to the settlement, transfer, and conversion of securities fell by 6.7% in the period, primarily due to lower levels of equity market trading. Austraclear generated revenue of AUD 35.1 million, up 12.1% compared to the prior comparative period.
Austraclear saw a 5.4% growth in holding balances to just over AUD 3.1 billion on December 31 and a 2% increase in transaction volume. The Austraclear revenue also includes the net operating contribution from Sympli, ASX's property settlement joint venture. Sympli continued to meet significant development and operational milestones in the period while also reducing its cost base in the half. ASX's share of Sympli's operating loss was AUD 5.6 million compared to a loss of AUD 6.8 million in 1H2023, representing a 17.6% improvement in the operating result. Turning now to expenses. Total expenses for the half were AUD 220.7 million, up 26.9% on PCP, or 10% compared to 2H2023. This growth reflects the different demands on ASX during the period, given the significant increase in expenditure incurred to meet the group's regulatory commitments and also technology modernization roadmap, which commenced after 1H2023.
Expenses in the half also reflect certain regulatory compliance costs that are one-off in nature. Like many other companies, ASX has also observed inflationary pressures impacting our expense line. The largest growth in expenses was in relation to staff, where expenses were up by AUD 28.3 million, or 29.3%, with permanent and contractor headcount increasing from 945 in 1H2023 to 1,140 in 1H2024. Approximately 25% of this headcount increase was allocated to projects which are part of our CapEx spend for the period. We also saw a significant increase in administration expenses, the ASIC supervisory levy, and incurred AUD 7.3 million of regulatory costs, which are one-off in nature, mainly comprising of professional legal fees and audit fees associated with the preparation of special reports requested by ASIC.
Reducing our total expense growth rate is a key focus as we recognize that the current growth rate is not sustainable into the future. As Helen mentioned, last week the group initiated a targeted restructure to better align ASX's people with our strategy. The impact is estimated to be around 3% of our non-project workforce, with several divisions undertaking a reorganization of team structures. Following this action, ASX expects to achieve annualized savings of approximately AUD 11 million. We expect the total expenses figure in the second half of FY 2024 to be lower than the first half as we start to realize the benefits of our business rationalization actions, and we expect the one-off costs that I referenced earlier to reduce in the second half.
Other ways that we intend to mitigate the expense growth rate beyond FY 2024 are by continuing the review of our workforce mix across consultant, contractor, and permanent resources, leveraging process simplification and automation, and pursuing strategic procurement opportunities. We expect that these initiatives will lead to a reduction in the total expenses growth rate in FY 2025 compared to FY 2024 guidance, and we will provide FY 2025 total expenses growth guidance at our investor forum in June.
Net interest income consists of net interest earned on ASX's cash balances and net interest earned from the collateral balances lodged by participants. Total net interest income for the half was AUD 39.4 million, representing an increase of AUD 6.8 million, or 20.9%, compared to PCP. The group net interest income of AUD 22.2 million was up 82% and was driven by higher investment returns due to the higher RBA target cash rate during the period.
Net interest earned on the collateral balances was AUD 17.2 million, down 15.7% on 1H2023. The average collateral balance decreased from AUD 12.1 billion in 1H2023 to AUD 10.4 billion in 1H2024, and the investment spread on the total collateral balances remained consistent at 10 basis points, given the significant levels of excess capital in the financial system. The decline in collateral balances reflected the reduction in the market volatility and therefore participant margin requirements during the half. The average participant balances, subject to risk management or interest haircuts, declined from AUD 8 billion in 1H2023 to AUD 6.7 billion this half, and this was the key driver of the overall fall in net interest earned on the collateral balances. The excess cash in the financial system is expected to persist, leading to investment spreads on collateral balances remaining around this current level for at least the next 12 months.
ASX's balance sheet continues to be strong and positioned conservatively, with the S&P long-term rating of AA- reconfirmed during the half and a nominal amount of drawn debt for working capital purposes. Of note, amounts owing to participants fell by approximately AUD 1.5 billion over the half year, reflecting a decrease in collateral lodged by those participants. This decline also drives the level of cash and other financial assets held at balance sheet. From a shareholder return perspective, underlying return on equity in the half was 12.6%, down 79 basis points compared to 1H2023, reflecting the lower reported underlying profit in the half. We expect the ROE to move back into our medium-term target range of between 13% and 14.5% as the future total expense growth rate moderates.
As I mentioned earlier, the board has determined an interim fully franked dividend of AUD 1.012 per share, or 85% of underlying earnings per share, reflecting the midpoint of the revised dividend policy to pay out 80%-90% of underlying NPAT. The 1H2023 dividend reflects the previous dividend payout policy of 90%. The board also approved the reactivation of the dividend reinvestment plan for the interim dividend, and no discount will be applied to the DRP share price. In terms of capital management, we also plan to issue a corporate bond to raise between AUD 200 million and AUD 300 million to support the medium-term CapEx program that underpins our technology modernization plans. We plan to issue this bond in the second half of FY 2024, subject to market conditions.
Our CapEx for 1H2024 was AUD 49.9 million compared to AUD 56.6 million in 1H2023, with AUD 13.9 million of this spend allocated to the CHESS Replacement Project. Other key project spend in the half includes the derivatives clearing and trading projects. Given our strategic focus on technology modernization and the ongoing need to replace the CHESS systems, alongside other major projects, we expect the CapEx spend to increase in 2H2024, noting that the CHESS Replacement Project is now moving into the execution and delivery phase. CapEx guidance for FY 2024 is unchanged, with a range of between AUD 110 million and AUD 140 million, and we plan to provide FY 2025 CapEx guidance at our investor forum in June. In summary, the 1H2024 result reflects the strength of ASX's diversified business, as demonstrated by posting a record first-half revenue outcome.
We have been operating with an elevated expense base reflective of the current key focus areas and priorities, and we are focused on reducing our total expenses growth rate in FY 2025 relative to FY 2024, with a number of actions underway to achieve this. With that, I will now hand back to Helen. Thank you.
Thanks, Andrew. Our vision is to be the market's choice, inspiring confidence and trust. One of the ways that we'll achieve this is by having great fundamentals, which is a key pillar in our five-year strategy. I talked earlier about how our licenses and technology are fundamental to our business and how we're making good progress in our regulatory commitments and technology modernization focus areas. People are the other fundamental part of our business.
There's been significant change at the executive level over the past 12 months, with Jane Franks also joining as our Chief People Officer in November. With a strong team now established, we remain focused on building a vibrant culture where our people are empowered with clear accountability to deliver great outcomes for our markets. I've spoken today about the investment required to protect our core businesses, but we haven't forgotten about growth. You've heard me talk consistently about how I'm a believer in customer-driven growth, and we're listening to our customers to understand their emerging needs. For example, in our markets business, we intend to expand our core electricity derivatives offering to include gas and carbon futures as part of an energy transition ecosystem. We recently announced that we're working with the Clean Energy Regulator to undertake exploratory work on developing the Australian Carbon Exchange.
This has the potential to broaden our offering further by providing an exchange where Australian carbon credit units can be traded, cleared, and settled. We look forward to talking to you more about the growth strategies for each of our businesses at the investor forum in June. We have a portfolio of high-quality businesses with diverse revenue streams which drive our strong revenue performance throughout market cycles. We have unique strengths that are not easy to replicate, and we're privileged to have leading positions in a number of markets. We bring local, regional, and global customers together in fair and transparent markets which provide deep liquidity and access to a wide range of products and services. And we play a crucial role in the Australian economy, operating critical market infrastructure in a highly regulated environment. ASX also benefits from clear structural tailwinds.
Australia has the fifth-largest and fastest-growing pension system in the world, which is an important part of what makes ASX an attractive listing venue compared to global peers. Also, as a data-rich environment, we're always looking at new ways that we can leverage the ongoing growth in demand for data. I already mentioned our intention to grow our energy transition ecosystem in our markets business as one of a range of potential decarbonisation opportunities that ASX is focused on. Turning to outlook. Many of the trends seen during FY 2023 continued into the first half of FY 2024. Cash market trading activity remains subdued, which is also a trend we're seeing at our regional peers. While average daily value is down in the half compared to the prior corresponding period, it is worth noting that it's up 4.9% on the pre-COVID level.
Easing inflation and growing confidence around the interest rate peak should see a return to growth in cash market volumes. However, heightened geopolitical tension remains, creating some uncertainty. An improvement in these market elements, though, would be expected to drive increased activity in the IPO market as well. And despite a quiet start to FY 2024, there remains a solid pipeline of entities looking to list on ASX as conditions improve. Also, dual listings provide Australian investors with the ability to trade quality, large companies in the local currency and time zone, with Newmont, Arcadium, Light & Wonder, and Capstone Copper being recent examples. These companies also benefit from access to Australia's deep capital pool, index inclusion, and local sector knowledge. And ASX then benefits from listing fees, trading, clearing, and settlement revenue.
It's also worth noting that net new capital quoted has been positive over the past 5 years on our equity market, which underscores the ongoing appetite from corporates and investors for access to public markets. Our futures business continues to be a beneficiary of current market conditions. Rates futures are performing particularly strongly, with calendar year 2023 being a record year for 90-day bank bill futures trading. We're also starting to see activity move further out along the curve as the market takes a firmer view on peak interest rates. In terms of guidance, FY 2024 total expenses growth is expected to remain between our previously stated range of 12%-15%. We have a business rationalization program underway to bring this growth rate down in FY 2025. Our capital expenditure guidance for FY 2024 of between AUD 110 million-AUD 140 million is also unchanged and primarily supports our technology modernization program.
We have the capital management flexibility in place to support this investment, including the proposed launch of a corporate bond of between AUD 200 million and AUD 300 million in the second half of FY 2024, subject to market conditions. We remain focused on underlying return on equity as a key performance metric driving the organization, which we expect to move back into our medium-term target range of 13%-14.5% as the total expenses growth rate moderates. To conclude, the first half of FY 2024 delivered solid revenue growth in challenging markets, which was offset by growth in total expenses.
We're continuing to invest, and we're making good progress in our near-term focus areas of regulatory commitments and technology modernization to protect the long-term sustainability of ASX and to drive shareholder value. We're focused on reducing our total expenses growth rate in FY 2025 relative to FY 2024 with actions underway. Thank you, and I now invite questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Ed Henning with CLSA. Please go ahead.
Thank you for taking my questions. Just on costs and then some competition. But firstly, on costs, looking at the banks for a very long time, regulatory costs are just the gift that keeps on giving. Why are you so confident that they're going to drop away? And if you think about your plans, at least for next year, have you got assuming regulatory costs go up at all, or are they just dropping out? If you can give us any insight on that as a first one person.
Sure. Thanks for the question, Ed. So I'd say it's not so much that we are confident about regulatory costs dropping away. I agree that the regulatory environment has changed and the cost associated with that. As what we've articulated today is more about the breakdown of some of the costs that we've seen in the first half and just really drawn out which components of those specifically are one-off costs. And that combined with our business rationalization work is really what's aiming at bringing our growth rate down.
Okay. Thank you. And then if I just think about the guidance you've given today, if we annualize what you're going to print in the second half, is that a good starting point and then take off the AUD 11 million and then obviously add some investment and add some inflation onto thinking about our FY 2025 number? Or is there any reason why we shouldn't annualize the second half number as a run rate?
Andrew, do you want to?
Yeah, Ed, I might grab that question. Thank you for the question. We do need to get through our business planning exercise over the next couple of months. And as we said today, we'll come out with sort of FY 2025 expense guidance in June. But these actions that we've taken do provide us with confidence around that sort of growth rate going into FY 2025. So some of the comments you've made don't appear unreasonable, but we do need to get through our sort of business planning process, and we'll come back to the market in June.
Okay. No worries. Just one last one. You talked about the competition and clearing settlement legislation. When do you anticipate that to finalize?
Well, the process at the moment is about specifying which particular services that will apply to. And then there's a process of regulators going through defining the detailed regulations around that. So I don't have a view at this stage of what that timeline would be. It's certainly in progress. But I would expect it'll take a while for the regulations to be written up, the consultation process around those to happen, and then presumably some implementation time period. So those are the inputs, and then your guess is probably as good as mine on what that adds up to in terms of a final timeline.
Even when you drop your first clearing point in 2026, the regulation may or may not be there for potential interoperability. Is that how I should read it?
Well, I don't know because I don't know the timeline on the regulation, so I can't really comment on that. I guess what I would comment on, though, is bear in mind that we already support interoperability, for example, with unaffiliated market operators, with share registries obviously interacting with the subregister. So interoperability isn't a completely brand new concept. What we're trying to make sure is that as we build the new solution, we're absolutely supporting interoperability in a consistent, standardized way with each separate element of the clearing, settlement, and subregister modules. And that's something that we're getting on and doing anyway.
Okay. All right. Thank you.
Thank you. Your next question comes from Simon Fitzgerald with Jefferies. Please go ahead.
Hi there. Just on the headcount to 1,140. I was just hoping you might be able to break it down a little bit, Helen, in terms of how many of those staff, in terms of the increase from June, represent people supporting the licenses versus development staff?
Andrew, do you want to take that?
Yeah. So Simon, thanks for the question. I made a comment around the sort of shift over the last 12 months or so. And about 25% of that increase related to CapEx spend, so projects in the main that we've got going on across the organization, that were the headcount there that sort of came in over that 12-month period.
Excellent. Okay. Thank you. And then how should we think about how that'll look towards the end of the calendar year, just given that you said 3% reduction? And I note that that is the non-project-related staff numbers. But any sort of thoughts on how that'll look towards the end of the year?
Yeah. Simon, I would sort of encourage you to think about that in terms of the overall sort of expense guidance that we've provided rather than a specific headcount number at this point in time. And that's our key focus. There are a number of different expense categories that we think about. And so remaining within that guidance range is what we've guided to the market at this point in time, 12%-15% for the full year. And that implies, and we've called out specifically today, a reduction in expenses in the second half.
Okay. That's fair. Then just on maybe the net interest on collateral balances, I can see that as you mentioned, Andrew, that the biggest driver of that is actually the average collateral balances that have come back down. But even at sort of 10 basis points in terms of the average spread, it really does look like that's going to be a difficult line to make that much out of just for the moment.
Yeah. I might comment on that one, Simon. I think firstly, bear in mind the collateral balances came down significantly because of a change in margin requirements. Actually, that's just the margin levels on particular positions declining as margin models reflect what's appropriate for the conditions. That's the reason for the significant change towards the beginning of this year. What we have seen is steady growth in open interest in derivatives balances. But the sort of change down in terms of margin requirements was the biggest shift. The steady growth that we're seeing as a result of increased open interest is more of a gradual build back in those balances. I guess that's the first thing I would say, that those balances, the open interest side of things is moving positively.
I would hope that we would continue to see that grow in the future. I think the other side of that equation, as you say, is the spread that we generate on those balances. That's remained at 10 basis points. You can see from the guidance that Andrew provided is we are expecting that to remain for certainly the next 12 months and perhaps more. I know we've talked previously about the scale of cash in the system. It's quite easy to see that if you have a look at the ESA accounts at the RBA and the level of balances there, which I think are still around AUD 300 billion.
350 billion at the end of January, I think, is the number.
Still significant.
Still significant. And so I think that some of that cash coming out of the system and therefore the kind of spreads on cash and short-dated instruments, those are going to change more slowly. And I think it'll take some time for that situation to rebalance.
There's just one thing to note there also. The TFF balance, Simon, is in that total balance of AUD 350 billion. And I think just over AUD 100 billion is due to mature around about July this year. So we need to look beyond that as well. But it's still a substantial balance of cash in the system.
Just thank you for that. Just one final question. Could you just remind me if there are any new pricing structures that we should be aware of that will be implemented in calendar year 2024, just across all the various products?
Simon, maybe we can come back to you on that one because there are some.
Yeah. Sure. No trouble.
There are some areas where the price increases, if they apply, tend to kick in in the January 1st. But let us just come back and just check that one so we can give you that detail.
Okay. All right. Thank you.
Thank you. Your next question comes from Andrew Buncombe with Macquarie. Please go ahead.
Hi guys. My questions have been asked. I'll let you keep moving. Thank you.
Thanks, Andrew. Thank you. Your next question comes from Kieren Chidgey with Jarden. Please go ahead.
Morning guys. Likewise, most of mine have been asked. But I just wanted to clarify some of the commentary coming through around some of the cost initiatives you've already started undertaking. I mean, maybe firstly, the mF und closure, is that fairly small in terms of potential benefit to the cost base? And is it largely headcount anyway that's included in that AUD 11 million number you've provided?
Yeah. I'd say it's quite small. That's really about looking at the complexity of our business and figuring out which bits actually make sense, both for us and for the market in terms of complexity of options for the market. So rather than having a material cost associated, it's more of a general complexity reduction for everyone.
Sure. Yep. And so when we sort of arrive at the investor forum in June, should we be expecting broader cost-out initiatives? Or is the message today that the headcount reduction and the AUD 11 million of savings is essentially the lion's share of what's to come in terms of what you're planning on doing?
Look, at this stage, Kieren, our focus is really on embedding the changes that we've just made. And that'll take a little while to sort of bed in and make sure that's really effective. Going forward, you can certainly expect to see us very carefully prioritizing to make sure that we're delivering the right outcomes for our strategy. But my hope will be we've got regular review processes; our quarterly business review processes. So, our aim will be that we will use those to keep on track and make sure we're directing investment to the right places on a regular basis.
Okay. From the sounds of it, no sort of significant step change then above what you've announced today?
Sorry. Was that a question?
Yeah. Well, yep.
Yeah. I think I've covered what I can. But I guess I would just reiterate, you can certainly expect to see us focusing on prioritization. Whether it'll be necessary to do this kind of step change to achieve that, I'd hope that we would be able to do that in more of a regular BAU way.
Okay. Thanks. And just another point of clarity on the regulatory cost number, yeah, which was AUD 13-odd million in second half of 2023, AUD 7 million this half. You do use the words one-off in the presentation talking about it. So is the expectation the second half of 2024 that that number moves to zero? Or is sort of is there an expectation we will still see some higher costs there through the back out for 2024 and maybe into 2025?
Yeah. Kieren, I might grab that question. So, we don't expect it to go to zero in the second half, but we're expecting it to fall based on what we know at this point in time. Calling FY 2025 is a bit too early to call it. And just a reminder of the things that have been in there, there's legal fees, and there's also sort of assurance costs around those special reports. Now, we completed those three special reports last calendar year. So, you wouldn't expect those costs to repeat, for example, in the second half of this year.
Okay. That's great. Thanks.
Thanks, Kieren.
Thank you. Your next question comes from Andrei Stadnik with Morgan Stanley. Please go ahead.
Good morning. I want to ask my first question just to run costs into the second half. I just want to check what kind of just the arithmetic around just how much work is required in the second half to hit guidance. The arithmetic suggests that the total costs need to be down about 5% in the second half versus the first half in order to actually come in at 15% growth or less for the year, right? And that's quite a big step down, especially considering D&A probably isn't going to step up, might actually, sorry, might actually step up. So is that arithmetic broadly there? And so then kind of what gives you the confidence that you can really pull back costs in the second half by 5% or more?
Andrei, yes. Your arithmetic is correct. We've called that out today, a fall in the second half expenses compared to the first half. There are a number of different lines that we think about that gives us confidence and a number of actions that gives us confidence as well. We've talked about the one-offs today. I've just mentioned that around the regulatory cost line. There are a number of other lines. Admin went up in sort of this half compared to the prior comparative period that we're not expecting to have the same level in those lines and staff that we've talked about as well. There are a number of different lines that we think about. It's based on the activities that we were sort of undertaking in that first half of this financial year.
Those increased regulatory requirements and compliance requirements, we don't think, will be repeated to the same extent in the second half.
Thank you. My second question, just around rate futures. Rate futures volumes have recovered very nicely. What's the latest you've seen on that? What's feedback you're getting from the market? Apologies, it's been a very busy morning. Can you also talk a little bit about the pricing per contract trends on rate futures?
So in terms of how the rates futures are performing, as we've said, we've noted for a little while now that the short-term derivative futures have been performing very well. What's really nice to see from this result is actually you're seeing particularly the 10-year futures recover more strongly than it has done for quite some time. And I think that reflects kind of a growing confidence about the overall shape of the interest curve and really is enabling people to more actively think about the whole curve. I don't have anything specifically on the contract pricing today, really in terms of any new update there, I'm afraid. Or was your question more about the average contract fee and the mix there?
Yeah. Yeah. It's been a bit of a morning. I haven't been a bit lazy here. Yeah, what happened in this half year?
Got it. Let us check that one, Andrei. Maybe we'll loop back to you on that one once we've got a bit more detail.
Yeah.
Thank you. Your next question comes from Siddharth Parameswaran with JP Morgan. Please go ahead.
Good afternoon. A couple of questions, if I can. Firstly, just on the ROE target, the 13%-14.5%. I was led to believe that that was sort of a target range. And there'd be corrective action taken if you reached the bottom end of that range. And you're now quite a bit below that range. I'm just wondering if there are levers that you can pull on the pricing side or anything else that will help raise that. And what time frame do you think you'll actually need to get back into the bottom end of that range?
Thanks for the question. Look, I think my first comment would be ROE is a really important overall performance metric for us. We're very focused on that. We absolutely do focus on that as to where we're going to. I'll let Andrew just comment on the route back into that range.
Yeah. See, it's all around the expense number, really, is the critical thing for us to think about first and foremost. And we've talked a lot about that this morning already. And so if you think about where we're heading in the second half around our expense numbers and also the comments that we've made around the growth rate into FY 2025, that return is not too far away into that range, 13%-14.5%.
Okay. Can I ask a question just around debt as well? I thought you were originally going to raise some debt in the first half. That's been delayed to the second half. Just keen to understand exactly what that's for. I mean, I know that you have dropped your payout ratio already. Just keen to clarify, I mean, is this just for CHESS Replacement? On my calculations, you could probably fund it with a lower having your payout ratio at the low end. Just wondering, that's quite a large amount that you're raising. Just what's that for?
Yeah. I might grab that question, Sid. This commentary around this is consistent with our Investor Day last June. It's sort of resetting capital management more broadly to give flexibility to the board and management as we think about the future. There were a number of actions that we proposed last June. We're sort of playing those out. I suppose one of those was resetting the dividend payout ratio to a range of 80%-90%. Today, we've determined an 85% payout ratio. Consideration for the DRP. The board has activated that DRP this time around. That will provide retained earnings and funding going forward as well. The third element is introducing a corporate bond and some funding into the capital structure more broadly. As you would know, ASX is completely ungeared. We've got a AA- credit rating.
We think we can optimize the capital structure with some corporate debt into the capital structure more broadly. A number of those things that we think about as well as thinking about forward CapEx programs and demands on the business as well.
Okay. And just a final question, just around D&A. That's still extremely low, well below CapEx. I was just wondering if you could give us some guidance around FY 2025. Presumably, you have some visibility now on that, Andrew.
Yeah. See, we'll come back and provide further sort of guidance in June, as I mentioned. But I've mentioned previously on prior calls that we wouldn't expect a dramatic step up in D&A. It'll be a gradual process over the next couple of years. A number of these projects that are underway are still in their build phase. And so until they're put in use, we won't be starting to amortize that capitalized cost.
Okay. Thanks very much.
Thank you. Your next question comes from Scott Russell with UBS. Please go ahead.
Yeah. Good morning, everybody. Just a couple of questions from me, please. The first is just picking up on the costs. And you've announced the business rationalization. Helen, if I go back six months, we were talking about an expense management review underway to reduce the expense growth rate in FY 2025. Can I confirm, is this announcement today around the rationalization, is this that review complete? Or do you envisage that it'll be more comprehensive by the time we're in June and the Investor Day?
Thank you, Scott. Our expense management review is a broader set of initiatives, some of which are ongoing. So we've been looking at things like procurements and how we manage those processes, looking for efficiencies, and a number of different actions there, looking at the workforce mix, for example, between sort of consultants, contractors, and permanent employees. So there's a number of levers there that we have been working on through the half. And that's in addition to the specific targeted restructure that we announced today. So you can expect that that focus on expense management and expense discipline will continue. The targeted restructure was a specific set of organizational changes, which was actually a mixture of some restructuring for efficiency and focus and strategic prioritization. And obviously, there were some headcount impacts coming out of that too.
Okay. And a similar question, just given there's so much activity at the ASX at the moment with all the projects that are on at present, how much visibility do you actually have on your cost base at the moment just in terms of timelines of projects, the ultimate need for consultants and personnel thinking out beyond even six, 12 months?
Might throw that one to you, Andrew.
Yeah. Scott, it's an ongoing process. We're thinking about long-term planning around some of these longer-term projects. The CHESS program is a good example of that. And we've got long-term plans in place to think about that. And that was part of the announcement back in November in terms of thinking about strategic partners, Accenture in this case as the systems integrator to augment our resources that we have in the organization. So there's different ways that we're thinking about this. But we think about it both short-term, manage it on a monthly basis in those reviews through the annual budget and business planning cycle, but also plan over the longer term. So we are looking at it from different angles.
We also think about that, obviously, from an OpEx perspective and a CapEx perspective and sort of those optimal resourcing mixes across both of those sort of spend streams, if you like.
Okay. Thanks, Andrew. And just another question around Sympli, you've announced that you'll maintain that investment. And I think you mentioned the justification being around a significant market opportunity you see there. Some people would say that marketplace for e-conveyancing is well and truly sewn up now. So I'd just be interested in any comments on a market entry strategy given it's going to cost I think you're losing about AUD 11 million per annum. And you probably won't generate a dollar of revenue for over 12 months.
Mike, do you want to take that one? I'll wrap it up.
Yeah. Sorry.
Sorry. No, that's okay. So on Sympli, we do continue to see that as an attractive opportunity. We're pretty enthusiastic about it. I think it's a sizable market. And yes, you're right. There's only one player in that market at the moment. But there's absolutely a recognition that competition is going to be a good thing for that market. And that's why both government and regulators have focused on that and introduced the interoperability reforms, which I mentioned today. I think the other thing to bear in mind is that we actually think that there is a real opportunity to deliver a product to that market which offers a much better customer experience and better integration with the broader conveyancing process. And that's something that I think we're well positioned to do along with our JV partner, ATI.
Okay. I'll leave it there. Look forward to hearing more about it. Thanks, guys.
Okay. Thanks, Scott.
Thanks, Scott.
Thank you. Your next question comes from Nigel Pittaway with Citi. Please go ahead.
Good morning, guys, or afternoon, there. Just sorry if I missed it. But are there any costs associated with the AUD 11 million of savings?
Yeah. Nigel, I'm happy to grab that question. There is redundancy costs associated with that. So there's a small net cost that will incur in the second half. But that's all factored into our guidance for the full year and the second half expense number going down.
Okay. So it's all going to be same above the line?
That's correct, Nigel. Yes.
Yeah. Okay. Secondly, I mean, are there any sort of project costs, etc., that you're already aware of for FY 2025? Or is sort of everything that you've had to do now pretty much in the base?
Sorry, Nigel. Would you just say your question again?
Yeah. I'm just interested. So I mean, obviously, you've given us sort of a flavor for where the sort of base, I think you answered to Ed's question right up front about where the base for going forward costs might be in terms of using the second half. Can we just apply a normal growth rate to that? Or are there sort of anything that you're aware of that would sort of drive that higher than a normal growth rate already in terms of projects? Because you've obviously had a big lift this year. You've got a lot of commitments to do. But that's already in the base. Is there anything further to come in 2025?
Nigel, look, appreciate the question. But as you can imagine, we've got detailed planning and forecasting to do before we can really give you that transparency. But we will be coming back at the Investor Day in June. And we expect to give you FY 2025 guidance at that point.
Right. Okay. So at this stage, the right assumption would be just a normal growth rate, or?
The only thing we've said so far, and that is really all I can say at this stage, is we are absolutely focused on ensuring that the growth rate in FY 2025 is lower than the growth rate that we saw in FY 2024. Beyond that, we'll really be coming back with further guidance in June.
Okay. Let me have a go at this one then. I mean, if you sort of take your cost guidance, you're going to end up there or thereabouts for AUD 30 million. You've got some savings coming through this year. So let's say you get the seven of your 11 left for next year. You flag AUD 7 million of one-off costs. So if we take the two seven s off AUD 430 million, you get to a base of about 415, 416. Anything wrong with the logic? Not asking you to comment on the numbers, but just the logic.
Yeah. Nigel, I think Andre asked a similar question. So the approach is not unreasonable. I suppose it's difficult for us to comment right now. But what I would take out is that we've got a lot of confidence from the actions that we've taken to date and also the plans in front of us for the next half, right? And we'll come back to you in June with further detail around this. But the actions we've taken, we're playing out those sort of expense review actions more broadly, whether that be across headcount, workforce optimization, strategic procurement, etc. There's a number of things that we're thinking about to sort of reset the expense base of the organization.
Right. But the logic of working out the base was reasonable or unreasonable?
I don't think it's unreasonable, Nigel.
Okay. Fair enough. Thank you very much.
Thank you. There are no further questions at this time. I'll now hand back to Ms. Lofthouse for closing remarks.
Great. Thank you so much for your questions, everyone. Today, we announced solid revenue growth in challenging markets, which was offset by growth in total expenses with actions underway to address this. From a strategic perspective, we're making good progress in our near-term focus areas of regulatory commitments and technology modernization to protect the long-term sustainability of ASX and drive shareholder value. Thank you very much for joining us today.