Good morning, and welcome to ASX's results briefing for the first half of the Financial Year Ending 31st of December, 2024. Thank you for taking part in this virtual presentation. I hope you're well wherever you're joining us. My name's 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 pay our respects to elders past and present.
We extend that respect to any First Nations people joining us today. Today's presentation will cover four areas, and then Andrew and I will take your questions. So I'll begin with the highlights from the first half, and then Andrew will provide a more detailed view of our financial performance. I'll then provide an update on the delivery of our technology modernization program and growth opportunities, and that'll be followed by some observations on market outlook and its implications for ASX. And we'll finish with Q&A.
So let's begin with the highlights from the first half of FY25. We delivered record operating revenue for a first half, and this was driven by our portfolio of high-quality businesses, which deliver value for our markets and for our shareholders. We saw strong revenue growth in our markets, Technology and Data, and Securities and Payments businesses, with Listings being stable. Andrew will provide more detail on our first half financial performance shortly, including each line of business, and I'll talk about the business outlook at the end of the presentation. We're almost two years into our five-year strategy, and we remain focused on Horizon One.
We have more to do to ensure that we're protecting long-term shareholder value and positioning ourselves to capture future growth opportunities. This means that we are deliberately prioritizing the majority of our investment and effort into our great fundamental strategic pillar, and particularly our key focus areas of regulatory and risk management uplift and technology modernization. We play a key role in promoting financial system stability through the licenses that we hold. And these licenses are foundational to ASX and to shareholder value, and we're further uplifting our risk management practices that support our privileged role in the economy.
And we're making progress, such as the uplift we're making in our control environment, which is driving proactive identification and resolution of issues. However, this is a multi-year journey, and it requires continued investment in our capability and culture as we build a stronger ASX. And one of the ways that we promote financial system stability is through operating our clearing and settlement facilities. Last year, we released a consultation paper to receive stakeholder feedback on certain aspects of our Cash Equities Clearing and Settlement Pricing Policy.
This consultation is part of our focus on listening to our customers to ensure that we provide the best products and services for them. And we've had a significant amount of feedback, and in the coming months, we'll be discussing our response with key stakeholders, including the ASX Business Committee and the Cash Equities Clearing and Settlement Advisory Group. At this stage, we don't expect any potential policy changes to materially impact ASX's revenue.
ASX is underpinned by technology, and we are continuing to build a sustainable, secure, and resilient technology environment. We made good progress in our major technology projects in the first half of the year, with further milestones and rollouts planned in the remainder of FY25. I'll provide more detail on this later in the presentation. And finally, we'll continue to be cost-conscious in the way we run the business, including being disciplined in our approach to prioritization and improving efficiency.
Andrew will talk about our expense management initiatives in more detail shortly. So turning to our financial highlights, as I mentioned, we delivered record operating revenue in the first half, which is up 5.9% compared to the same period last year. Underlying net profit after tax also benefited from growth in net interest income and increased by 10.1%. Statutory profit was up by 5.6% following the impact of a significant item.
The board has determined a fully franked interim dividend of AUD 1.112 per share, reflecting a payout ratio of 85% of underlying NPAT, which is in the middle of our guidance range. It's also pleasing to see that underlying return on equity, the key metric by which we measure the performance of the organization, is up by 90 basis points to 13.5% for the half, and well within our medium-term target range. I'll now hand over to Andrew to provide a more detailed view of the financial results.
Thanks, Helen, and good morning, everyone. As Helen has already mentioned, we delivered record operating revenue for a first half, demonstrating the quality of our portfolio of businesses. Operating revenue was AUD 541.9 million for the half, which was an increase of 5.9% compared to the prior corresponding period, or PCP. Total expenses for the period were AUD 220.3 million, which is down 0.2% and reflects our continued focus on expense management. Net interest income was up by 9.4% to AUD 43.1 million, supported by higher net interest received from ASX's cash balances and collateral balances.
Underlying net profit after tax was up 10.1% compared to 1H24 due to the strong growth in operating revenue and net interest income. ASX's statutory net profit after tax was up by 5.6% following the impact of a significant item, which represents an onerous lease provision incurred ahead of moving our Sydney headquarters to Martin Place later this calendar year. Higher operating revenue and net interest income resulted in our EBIT margin increasing to 59.3% in the period, up by 240 basis points compared to the PCP. Underlying earnings per share of AUD 1.309 is consistent with the trend in underlying net profit after tax.
An underlying ROE generated in the half was 13.5%, up 90 basis points compared to the PCP, which reflects the increase in underlying NPAT. Now turning to the business unit revenue outcomes, starting with Listings. Total Listings revenue was stable at AUD 104.9 million. Annual listing fees make up over half of total revenue for Listings and are driven by market capitalization as at 31 May each year. Higher market capitalization in May 2024 supported revenue growth of 3.7% to AUD 55.5 million in the period.
We recognize the revenue derived from initial Listings and secondary raisings over five years and three years, respectively, and so the revenue outcomes reported mainly reflect prior period activity. This is shown in the bar charts on the slide. This amortization profile was the primary driver for the lower initial Listings revenue recognized in the half of AUD 9.4 million, down 8.7%, and secondary raisings revenue of AUD 34.9 million, down 5.7% compared to the PCP. Total net new capital quoted for the half was negative AUD 9.2 billion, primarily driven by a few large delistings, including Altium and CSR, following the completion of long-standing takeover deals.
However, the new shares issued as a result of the merger of Chemist Warehouse and Sigma Healthcare are due to start trading today. This is expected to add just over AUD 27 billion of new capital to our market. Moving now to the Markets business. This business generated revenue of AUD 168.4 million, up 9.9%. Futures and OTC revenue of AUD 126.4 million was up 10.5% on last year, supported by a 19.9% increase in total futures and options on futures volumes, driven by global 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 24%, 32%, and 19%, respectively. Commodities revenue was down, primarily driven by lower trading activity in electricity derivatives as a result of less volatility in electricity prices. Cash Market Trading revenue was AUD 33.4 million, up 11.3% on the PCP, driven by an 11% increase in the total ASX on-market value traded.
This was also supported by options traded value, which was up by 18.8% and derives higher fees. ASX's share of on-market Cash Market Trading averaged 87.4% for the half, which is marginally down from 88.4% in the PCP. Equity Options revenue was AUD 8.6 million, down 2.3%, reflecting lower trading activity, particularly index options volumes, which were down 13.5%, and single stock option volumes were broadly stable in the period. Now looking at the Technology and Data business, this business had another strong period with total revenue of AUD 132.9 million, increasing by 6.7%.
Information Services generated revenue of AUD 82.2 million, up 8.2%, supported by strong growth in demand in the half, particularly for derivatives market data. Technical Services was also up, with revenue coming in at AUD 50.7 million, up 4.3%, which was supported by modest growth in the number of cabinets at our ALC data center. Finally, moving on to our fourth business segment, Securities and Payments. This business generated revenue of AUD 135.7 million, up 5.2%. Issuer Services revenue was AUD 30.1 million, up 1.7%, driven by a higher number of CHESS statements issued and holder maintenance fees, partially offset by a small decline in subscription revenue.
Equity Post-Trade Services revenue increased by 3.7% to AUD 66.7 million. This was primarily driven by an increase in the total on-market value cleared and domestic settlement message volumes as a result of higher equity market activity. In relation to the CHESS batch settlement incident last December, we have paid a AUD 1 million credit disbursement in the form of a rebate to settlement participants. This rebate was recognized in the Equity Post-Trade Services revenue line in this half. Austraclear generated revenue of AUD 38.9 million, up 10.8%.
It saw a 2.1% growth in issuances to just over AUD 2.9 trillion at 31 December and a 15.9% increase in transaction volume. The Austraclear revenue also includes the net operating contribution from Sympli, ASX's property settlement joint venture. Sympli further reduced its cost base in the half due to uncertainty around the pathway to interoperability between e-conveyancing platforms. While the New South Wales and Queensland governments have expressed interest in proceeding with interoperability, Sympli awaits further information from regulators before a potential way forward and timeline become clear.
ASX's share of Sympli's operating loss was AUD 5.3 million compared to a loss of AUD 5.6 million in the first half of FY24, representing a 5.4% reduction. Turning now to expenses. Total expenses for the half were AUD 220.3 million, down 0.2% on the PCP, which was a period in which there were elevated operating expenses to meet the group's regulatory commitments and technology roadmap. The lower expenses in the half also demonstrate some of the benefits of our expense management initiatives, which are part of the cost-conscious approach to the way we manage the organization.
Employee expenses were down by 4%, reflecting the reduced use of contractors and recruitment costs, as well as a lower number of employees working on operational activities. Permanent and contractor headcount increased from 1,140 in the first half of FY24 to 1,298 at the end of this half. As you can see from the chart at the bottom of the slide, there was a reduction in the number of employees allocated to operational activities in the half, which demonstrates our focus on workforce optimization.
The growth in project-related headcount primarily relates to our technology modernization program and reflects the increased level of activity in the trading, derivatives clearing, and CHESS projects. We saw a significant increase in equipment costs, primarily due to higher licensing fees and costs related to technology projects. This was largely offset by a decline in administration expenses and regulatory expenses, which reduced by 60.3%, reflecting lower legal costs and no costs relating to one-off special reports, which impacted the PCP.
We reported depreciation and amortization of AUD 20.7 million, up 10.7%, as more elements of our new technology systems start to go live. We reconfirm our total expense growth guidance provided at our investor forum in June last year. We expect FY25 total expense growth to be between 6% and 9% compared to FY24. Total expenses in the second half of FY25 are expected to be higher than the first half, primarily due to an increase in equipment costs and also depreciation and amortization. Excluding D&A, we expect operating expense growth of between 4% and 7% for FY25, significantly lower than the FY24 growth rate.
As previously communicated, we also expect a steady step up in D&A in the years ahead as prior-period CapEx spend starts to amortize as various technology systems transition into production. We are continuing our cost-conscious approach in FY25 and have made further progress on workforce optimization in the first half, primarily by reducing the use of contractors. We remain focused on other cost optimization opportunities, including process simplification and strategic procurement.
Our CapEx for the first half was AUD 82.5 million compared to AUD 49.9 million in the PCP, which reflects the increased investment in the major projects as part of our technology program. We reconfirm the guidance provided at our investor forum last June of CapEx spend of between AUD 160 million and AUD 180 million a year from FY25 to FY27, and that our aim is for CapEx to start to reduce. We expect an average depreciation and amortization schedule of 5 to 10 years for these major projects once they go live.
Moving now to interest income. 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 43.1 million, representing an increase of 9.4%. Group interest income of AUD 20.7 million was down 6.8% and was primarily driven by higher financing costs relating to the AUD 275 million corporate bond issued a year ago and costs related to our short-term bank facilities. This was offset by higher earnings on ASX's cash due to the higher average cash rate and higher average collateral balances during the period. Net interest earned on the collateral balances was AUD 22.4 million, up 30.2% compared to the PCP.
This reflects an increase in the average collateral balances to AUD 11.9 billion this half due to growth in activity across our Markets. This was combined with a five basis point increase in the average investment spread on these balances to 15 basis points, as we saw emerging opportunities to achieve higher returns by adding a small amount of tenor to our investment portfolio. We expect this spread to stay around the current level for the remainder of this financial year. The average collateral balances, subject to risk management haircuts, increased from AUD 6.7 billion in the first half of FY24 to AUD 7.7 billion this half as overall collateral balances increased.
As at 31 January, collateral balances of AUD 12.5 billion and balances subject to risk management haircuts of AUD 8.9 billion were higher than the first half average, and this has created a positive start to the second half of FY25 for net interest on collateral balances. ASX's balance sheet continues to be strong and positioned conservatively, with an S&P long-term rating of AA minus. From a shareholder return perspective, underlying ROE for the first half was 13.5%, up 90 basis points compared to the PCP, reflecting the higher reported underlying profit in the half.
As Helen mentioned earlier, the board has determined an interim fully franked dividend of AUD 111.20 per share, or 85% of underlying earnings per share, reflecting the midpoint of the dividend policy to pay out 80% to 90% of underlying NPAT. The board has also approved the operation of the dividend reinvestment plan for the interim dividend, and no discount will be applied to the DRP share price. Our balance sheet and shareholder return profile give us the capital management flexibility to support ASX's future funding requirements.
This includes a dividend payout ratio range of 80% to 90% of underlying NPAT and the potential operation of our dividend reinvestment plan. We have a AUD 300 million corporate debt facility available, which we are currently undrawn, as well as a AUD 275 million corporate bond, which was raised in February last year. We are also in the process of finalizing a leasing program of up to AUD 60 million to help support our future technology equipment requirements. In summary, the record operating revenue we reported in the half reflects the strength of ASX's diversified businesses.
We will continue our cost-conscious approach to expense management as we balance the investment requirements of our Horizon One focus areas with Horizon Two growth opportunities. We have a strong balance sheet and access to various funding sources to support the delivery of the technology roadmap, and we are focused on returns for our shareholders, as illustrated by disciplined cost management in the half, strong underlying NPAT uplift of 10.1% compared to 1H24, and an underlying ROE of 13.5%, well within our target range of 13%-14.5%. With that, I will hand back to Helen. Thank you.
Thanks, Andrew. So I'll now provide an update on our technology delivery and our growth opportunities before finishing with outlook and guidance. But just before focusing on our technology projects, I also wanted to provide an update regarding the delay to CHESS batch settlement that occurred in late December last year. So last month, we published a review which detailed the root cause of the incident and the resolution, as well as the actions we're taking as part of our CHESS work plan to make sure that CHESS remains stable and robust. And we engaged with our regulators during the incident and will continue to do so.
This month, ASIC notified ASX that it's conducting an investigation into this incident, and of course, we take our regulatory obligations very seriously and will continue to cooperate fully with ASIC. And given that this is an ongoing matter, I'm limited in any further comments that I can make at this time. But I want to emphasize that this incident does not impact our overall strategy, including our technology modernization program. And as you can see on the slide, there is a significant amount of work underway with several updates planned to be delivered soon.
So let's start with the trading project. Service Release 15 for Cash Market Trading will deliver a number of important benefits, including the removal of what's referred to as the Opening Auction Stagger. It will also introduce a new post-close trading session to provide the market with additional execution opportunities. Customer testing environments are now available with industry testing to commence shortly.
For ASX 24, our derivatives trading platform, Service Release 4 will deliver changes to help support liquidity during the bond roll period and to improve technical resilience ahead of the move to a new platform. It's currently in customer testing, and we're targeting go-live for this release in March this year. For the derivatives clearing project, the OTC clearing system upgrade is currently in system and integration testing, and we're targeting go-live in May this year. And finally, moving to the CHESS project. For release 1, we're planning for the first industry testing environment to open later this month, which is a really significant milestone for the project.
Work also continues on Release 2 following extensive industry consultation. Our response to this consultation was published in November last year. So as you can see, there's a lot of activity in our technology modernization program. We appreciate that there's still plenty of work for us to do, but we are delivering against our indicative roadmap with several project rollouts planned for the next few months. And while our primary focus is Horizon One of our five-year strategy, we are also investing in selected Horizon Two growth opportunities. We're focused on customer-driven initiatives as we look to add value for our participants and our Markets.
The net zero transition is a structural tailwind for ASX because, as an exchange, we're uniquely positioned to offer the Markets, the connectivity, and the price transparency to support efficient capital allocation and risk management. And we've expanded our suite of products in our transitional energy ecosystem to include environmental futures contracts for Australian Carbon Credit Units, Large-Scale Generation Certificates, and New Zealand Units.
We've seen over 700 contracts traded so far across this product set with solid open interest from the market, and our Wallumbilla Gas Futures product has supported four successful gas delivery cycles with the Wallumbilla Hub in Queensland. These products have been developed in consultation with our customers to meet their growing demand, and initial interest has been promising, but it's early days, and new futures products can take time to build momentum and revenue. In Technology and Data, we're continuing to develop new ways to support our customers as the way that they consume data evolves.
We see a great opportunity to further serve debt market participants with the launch of ASX Debt Market Activity Services planned for the second half of this financial year. We intend to offer new debt-focused data, which was previously not available, and will be a significant uplift in the breadth of data and insights that our customers can receive compared to current offerings. We'll be able to achieve this by using the data from our Austraclear fixed income registry and settlement system. We saw a recent increase in IPO activity in the second quarter of FY25.
Our Listings team worked throughout the cycle to engage with companies, advisors, investors, and other key stakeholders to promote the value proposition of an ASX listing, and this includes a series of local and targeted offshore workshops and collaborations. The team also remains focused on attracting dual Listings to our market, which is an area where we've had ongoing success, including the upcoming listing of Marimaca, the TSX-listed copper explorer and developer. Now turning to outlook.
As I just mentioned, we saw an increase in the number of new Listings and total new capital quoted in the first half of FY25 compared to the second half of FY24, and we're seeing this early momentum continue into the second half of this financial year. It's great to see that the approximately AUD 32 billion merger of Chemist Warehouse and Sigma Healthcare, which includes one of the largest ever share issues on ASX, is due to start trading today, and you may also have seen some other companies speak publicly about their plans for a potential ASX listing.
Total Cash Market Value for the financial year to January was up by 8%, and this was primarily driven by speculation about local and global central bank rate movements combined with international geopolitical events, including changes to U.S. economic policy, which is creating some significant volatility. Total futures and options on futures volume was up by 19% in the seven months to January, with activity across the curve and growth in the number of customers using our rates futures Markets.
The current environment remains supportive of the short end of the market due to ongoing market speculation regarding a move in the RBA interest rate, and we're seeing more normal market conditions now that the COVID pandemic and the RBA's yield curve target are well behind us, which is supporting activity also at the longer end of the curve, and volumes are also being driven by changing global economic dynamics, particularly in the United States and China and their impact on central bank rates and currencies.
The volatility that we're currently seeing demonstrates the importance of all of our Markets as we offer a connected market with price discovery to support our customers to share risk and reward securely. So moving now to guidance. We reconfirm our guidance, which was initially provided at the Investor Forum last June. We expect FY25 total expense growth of 6%-9%, with operating expense growth guidance of 4%-7%, reflecting the expense management actions that we're taking. FY25 capital expenditure is expected to be between AUD 160 million and AUD 180 million and is expected to remain at this level until FY27, and then our aim is for it to start to reduce.
As our CapEx is primarily to support our technology modernization program, inherent delivery risks in the program may impact this guidance. And finally, we remain focused on underlying ROE as the key performance metric driving the organization as we continue to focus on disciplined cost management and revenue opportunities. There's strong momentum at ASX, and the remainder of FY25 is about continuing to listen to our customers and delivering our five-year strategy. Thank you, and I'll now invite your 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 Andrei Stadnik from Morgan Stanley. Please go ahead.
Good morning. Can I ask my first question around futures volumes versus revenues? We're considering the futures volumes are up 20% year in year, but revenues were up about 10.5%. I think there was a few percentage points below what the Street was looking for, and clearly lagging in terms of 20% volume growth. Is the slow revenue growth a function of the change in mix, or was there something around pricing per contract?
Yeah, so it's very much a function of change in mix. What we're seeing is really strong growth in the rates products there. Those are actually at the lowest price point of the futures contract, but obviously a really big driver of the growth. You're also seeing the average fee change, partly because of the product mix and partly because of the customer mix and the impact of rebates too.
What you're seeing in terms of the rates numbers is probably a bit more comparable to in terms of size of the market. If you actually look pre-COVID at the sort of FY18, 19 kind of profile, you'll sort of see then a more similar mix in terms of types of activity and average fee.
Thank you, Helen. Look, my second question, I mean, maybe a slightly tough question, but in terms of thinking about costs and how shareholders should evaluate cost growth, that you're seeing AUD 10 million on risk contract recognition below the line, which pre-tax is AUD 13 million. And it looks like maybe there were some other items netted off, so it feels maybe it was even higher than AUD 13 million pre-tax. But if we add that back on total costs, the total costs were up almost 7% year in year, and that's even setting aside CapEx rising 65%. So how should shareholders think in terms of evaluating the cost performance of ASX?
Andrei, I'm happy to grab that question. Thank you. So the onerous lease provision relates to an early termination of the 20 Bridge Street lease, and that's a negotiated outcome between ourselves and the new landlord. The building's been sold, and there's plans to redevelop the building here. So the negotiated outcome of the lease termination includes also some amortization of leasehold improvements, fixtures, and fittings of the building that won't be worth anything when we move to our new headquarters. We've been in this building for over 25 years. It is a one-off, unusual sort of item, and that's why we've classified it as a significant item.
In relation to the cost discipline, I'd draw your attention to sort of the cost performance for the period. Very pleased. We had a flat cost growth, if you like, compared to this time last year. We're very focused on costs, as you've known. We've talked about it a number of times, focusing on workforce optimization, strategic procurement, simplification, etc., and that focus will continue going forward as well.
Thank you.
Thank you. The next question is from Ed Henning from CLSA. Please go ahead.
Thanks for taking my questions. I've just got a few questions following on from Andrei. Just firstly, on the futures mix, today you touched on electricity derivatives being down, and that's a higher margin product. Can you just talk about, is there any seasonality in this, or was it just lower volatility that pushed down that in the period?
Thanks, Ed. Look, the electricity does have some seasonality in it, but actually, I think what you're seeing in the lower volumes is the impact of actually lower volatility in electricity pricing during the period. So there's both seasonality and there's other factors in terms of some of the factors that drive price volatility in the wholesale electricity market.
So we definitely saw that more subdued in the last half. But I think overall, from a macro perspective, remember that the electricity market generally is one we expect to see continuing to grow substantially given the ongoing electrification of energy. But there certainly are movements which can be a degree of seasonality and can be really linked to just the price volatility or lack of it that we see in the underlying electricity market.
Okay. And then just the next one on costs, and you've reiterated your guidance again, which is great. The first half, obviously, the costs below, and you've talked about the second half picking up a little bit. You're seven and a half months through the year now. With the first half being where it is and you've guided for the second half, are you looking towards the top end of your guidance or the bottom end of the guidance, or how are you feeling about the cost now, and what are the key swing factors to move it to both the top end and the bottom end?
Thanks, Ed.
Ed, happy to grab that as well. Look, we're feeling good about the cost discipline, as I mentioned before, with the results of the first half. We haven't refined our guidance given the period still to come. We've called out today known increases around the depreciation and amortization line in the second half, so that will tick up a little bit. But also continued investment in technology, which means the equipment cost line will also go up in the second half. And so there's sort of two known factors. The range, just a reminder, that 6%-9% represents a range of AUD 13 million. It's quite a small range.
So we're comfortable with our guidance at the moment. As we get close to the full year, we may refine that, but there's still a little way to go. In terms of sort of potential other things that are out there, I'd point to sort of the recent sort of ASIC investigation that was published, and there may be some additional costs in relation to that. Not significant at all, but we're not in a position to refine our guidance at this point in time, but very comfortable with the results for the first half around that cost discipline.
All right, thanks. And if I could just sneak in just one other question. You talked about the Debt Market Activity Services that you're going to provide. Can you just talk about the revenue opportunity here, both in the near term for revenue and also over the medium term?
Thanks, Ed. Look, not at this stage. Obviously, we do have some forecasts in our numbers, but I think at this stage, what we'll do is we'll start to share those as they become more material.
Okay, but at this stage, especially for the second half and early next year, you anticipate it to be relatively minor?
Yeah, I mean, they're launching in the second half, and obviously, it takes a while to sort of go through the sales cycle and get everyone onboarded for that data. So I wouldn't expect any material impact for the second half of this year. These are really investments for the future growth of the organization.
Okay, great. Thanks.
Thanks, Ed.
Thank you. The next question is from Freya Kong from Bank of America. Please go ahead.
Hi, thank you. Just following up on some of the questions we've been asked. On costs, are there any aspects where you are running ahead of what you had originally planned and keeping the guidance as maybe just a bit? And then also on the revenue. Oh, yeah, sorry. I'll let you answer first. Thanks, Freya. Andrew?
Freya, there's always sort of timing issues around the expense portfolio, I would say. I suppose the one that we've focused on is around the regulatory cost line where we saw activity last year that hasn't been repeated this year, but that really doesn't impact our plans for this year. The example we called out was we incurred costs last year around preparing special reports, for example. That's not been repeated this year. But I'd say there's certain timing elements to the expense profile. But as I mentioned before, very pleased with where we've landed for the first half, and we've continued to sort of focus on that cost management.
Great. And secondly, just on, you talked about the debt market offering and not being able to but then on Release 15 and the aftermarket sort of cash trading ability, is there a potential revenue opportunity?
Thanks, Freya. Yeah, we do think there's a revenue opportunity there. It's an additional trading window. Again, that's not going to be a material factor this year. In due course, we'll be disclosing activity levels in that trading period, I would expect. So you'll be able to actually see some of the detail in our activity report of what's happening there, but not a material impact for this half, but should be an additional revenue opportunity for us.
From FY26?
Yeah.
Thank you. The next question is from Nigel Pittaway from Citi. Please go ahead.
Morning, Helen and Andrew. First of all, just a quick question on the move in the spread on participant balances from 10 to 15 basis points. The fact you're guiding to it staying at around 15 second half suggests that sort of extended debt duration was done at the start of the half. Yeah, go back to August, and you didn't seem to think there was too much opportunity to move it from 10. So just trying to understand that a bit better, please.
Yeah, Nigel, I'm happy to take that. So we have seen some duration opportunities or tenor opportunities move as the interest rates are moving around and the curves are moving around. And so we didn't see that at the start of the period, back to that August call, and we've started to see opportunities since that point in time. We've called out, we think it persists in the second half, so we're guiding to sort of 15 basis points, if you like, in the second half also. But it does depend on where the curves are at a particular point in time.
All right, so it's not locked in at all. It just still moves around.
It's very short. Our weighted average maturity in the portfolio is very short, given the nature of, I suppose, the investment mandates that we have. If you think about the collateral balances moving in and out of the organization, the duration of the portfolio is relatively short.
Yeah, okay. Understood. Then secondly, maybe just sort of having another go at this cost question. I mean, from the guidance, I mean, I hear what you say that there might be scope to alter the guidance, but nonetheless, taking at face value, and it depends where you land within it, but you're looking at sort of maybe around about 10% growth in costs, second half versus first half. That would tend to suggest that you've got some pretty good confidence in what's going to happen in the revenue line. Is there any sort of division where you're particularly optimistic about what might happen to revenue in the second half?
Thanks, Nigel. Look, as you know, we don't actually provide guidance on revenue, but what we obviously do do is we publish the monthly activity report, so there's great transparency for you as to sort of what's happening through the year on revenue. I did mention in my sort of outlook comments that we are seeing a degree of volatility. Obviously, there's a lot going on in the world at the moment. I guess what that really emphasizes for me is that that's what the Markets are here for.
It is during these times of uncertainty that actually these public Markets, whether it's derivatives or the Cash Market, provide people the opportunity to come together to a really important price discovery function and enable people to share risks, share reward, come to the market with their own views on what's happening. So I think overall that that's reasonably supportive for activity, at least based on what we can see today. But we don't guide to that. We'll just keep publishing the activity report so you'll get a really up-to-date view.
Yeah, so it's really through the Markets division though, and I guess the flow-on effect through securities and payments that you're seeing that come through because although Listings pick up, it obviously gets deferred, so.
Yeah, we have seen a bit of a pickup in Listings, but also, as we mentioned in our Technology and Data business, one of the things that's driven some of that increase in the information services line is demand for derivatives market data. So we see those impacts ripple through in a few different places.
Okay, thank you.
Thank you. The next question is from Kiran Chhibber from UBS. Please go ahead.
Morning, guys. Can I just circle back? Apologies yet again on the cost topic. Particularly interested in the comment, Andrew, about the D&A profile lifting into second half. Obviously, the CapEx is going up a lot. That's been well communicated. But can you give us a little bit better feeling for how significant that delta is into the second half of the financial year and then sort of given the timing of different projects, how we should be thinking about that delta again into 2026 on D&A specifically?
Yeah, Kiran, thank you. So I'd go back to the original guidance and the settings around OpEx of 6%-9%, but if we exclude depreciation, it's 4%-7%. So you can see that the 2% growth rate represents where we expect depreciation to land, and you can sort of backsolve that into probably the second half depreciation number. And so hopefully that's helpful. And that's still valid, is it? Yeah. Yes, yes. So hopefully that's helpful on the depreciation point in the short term.
What we've said in the past is that we expect a gradual increase around depreciation into the future. Some of the technology initiatives that we're putting into use, you can see by our technology roadmap when they come into use and therefore when they should start depreciating from. Noting that there's quite an elongated depreciation or amortization profile for some of the larger projects, and so that's why the comment is in there around, in the future, post-2025, we expect a gradual sort of rise around that depreciation line. Okay, but the roadmap is fairly high level. I mean, it's very difficult to sort of ascertain. Yeah, so you've got to
. Exactly, and there's no dollars attached to either.
Yeah. So we have called out the dollars on CHESS Release 1 and Release 2, so you can map that. And the other component parts you can follow, I suppose, around our CapEx spend in each of the halves that we're producing as well.
Okay. Second question, just on Sympli another second half, net loss this half, so sort of annualizing 10 still. What is the outlook for that business from here, and what's sort of your willingness to persist, just given the question marks over interoperability?
Yeah, thanks, Kiran. So just a reminder, that market is an attractive market. The e-conveyancing market, it's over a AUD 300 million revenue market, and at this point in time, there's only one market participant in that market. And so we're very supportive of the Sympli opportunity and the platform that they've built, but fair to say we're frustrated by, I suppose, the lack of clarity around the timetable to interoperability.
We're looking for the New South Wales, Queensland, and the ACT to actually make some announcements around providing clarity to that interoperability timetable. So that's a key data point for us going forward, but overall, we will remain disciplined around looking at our equity investments. So right across our equity portfolio, we'll continue to review those positions over the course of the coming period as well.
All right, thank you.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question is from Julian Braganza from Goldman Sachs. Please go ahead.
Good morning, guys. Thanks so much for taking our questions. Just the first one on the spread that's being earned. Can I just ask the underlying spread ASX action that you've taken? Is that still at sort of 10 basis points?
Thanks, Julian. So you're asking what's the spread we're taking on the balances. Is that right?
Yes, that's right. Just the corporate project. Yeah.
So look, one of the things that we did in response to customer requests for greater transparency over the benchmark that we're using is that on the customer balances, we're now paying based on the RBA's ESA payment rate. So we're using that as our benchmark of what we're paying, and that's 10% below the RBA target rate. So that's what we pay on balances.
And then our investments spreads are based on the investments in what is a very conservative, very liquid portfolio, obviously with very tight investment mandates around that, because of course, as a clearing house, we need to make sure that those resources are available in a very short timeframe for dealing with any issues.
Okay, thanks. And sorry, just to clarify, so you're paying them now based on the RBA's ESA rate. And what was it previously? Sorry, just to clarify.
It was previously a haircut on the RBA target rate. Okay, and sorry, is there an improvement just on that, just based on what you're paying as well?
Is there a what? Sorry, did you say?
Sorry, sorry. Is there an improvement in the spread also driven by what you're paying on customer balances? Is that how to think about it, or is it purely just?
No. No, actually, they are certainly, I mean, they may vary in the future, but certainly at the time when we made the shift, those were the same number for customers. It was really just using a more transparent, observable benchmark rather than a derived calculation, but actually, they were essentially the same number, but that might be useful for you going forward because it's an observable benchmark for you as well, but no, the change is really the change in the investments, the investment return that we're seeing.
Okay, and just on the OpEx side, do you see further opportunity to increase the spreads or just how you're thinking about it?
Look, I'd say it's not straightforward to predict. It is a very conservatively invested portfolio. So I think it's important to recognize that there is really a limit to the kind of spreads that are possible for this type of investment portfolio. It's invested with a very strong focus on, obviously, capital preservation and a very high level of liquidity. So that does limit the opportunity for upside. And so it's hard to say exactly where it might go.
It is also interesting. Previous presentations in response to this question, one of the things we've pointed to is the scale of the ESA balances and an expectation that maybe we wouldn't see any of these even short-dated opportunities emerge until those balances came down significantly. Curiously enough, they actually haven't come down significantly, but we have started to see a few of those still fairly short-dated opportunities emerge. So I think your fixed income desks may be able to give you better guidance than I can on that.
Got it. No, I'll ask them after the call. But thank you so much for that. And then just the other bit on just the cash flows. Just want to be clear. Let's give me a free cash flow for dividends and what you're kind of delivering vis-à-vis the funding mix on the balance sheet side, the corporate bond and the debt facility. Just want to be clear that at this stage, you're comfortably funded for your CapEx profile, just given your free cash flow net of dividend payments.
Yeah, Julian, I'm happy to take that call. So we emphasize today the flexibility that we do have in sort of the financial management toolkit, if you like. So it's not only the retained earnings through profitability. It's also the fact that we've issued the corporate bond, AUD 275 million. We've got access to a AUD 300 million corporate bank facility that's currently undrawn. And also today, we've announced an equipment financing lease facility of up to AUD 60 million as well. So we're comfortable that there's significant funding available to fund that CapEx program going forward.
Okay, got it. Thank you so much, Andrew.
Thanks.
Thank you. Your next question is a follow-up from Ed Henning from CLSA. Please go ahead.
Hi, thanks. Just another quick one from me. You were talking earlier about working groups and potential policy changes. And while you said there was likely to be no material changes, do you see any headwinds from revenue from this or at least less ability to increase prices anywhere?
Yeah, let me take that, Ed. This is a pricing policy related to the cash equities clearing and settlement services. Within our business, that's clearing, settlement, and issuer services. That's a service where there are significant regulatory expectations about how we price the service. There have been for a long time. As you know, with the recent legislation around competition and clearing and settlement, some of those expectations are now in law, and ASIC are sort of working their way through actually putting the relevant rules and regulations in place.
It doesn't fundamentally change the expectations of us around that business, but certainly one of the expectations is about how we price that business. We've previously had a pricing policy in place. We've published those accounts for the clearing and settlement business. There's been a really good level of transparency. You can see when you go and look at those management accounts that they're typically at slightly lower return on equity than the average return on equity for the rest of our organization. And I think it's fair to say that the sort of pricing policy approach will continue to provide a constraint there.
So that's, I suppose, why we wanted to make the point that we don't expect this pricing policy to have a material impact on revenues. It's really more a case of sort of formalizing the policy, making sure we're taking on board sort of best practice around regulated pricing models, and then making sure we discuss that with our customers and make sure there's a level of sort of comfort and understanding with how we're approaching that.
Okay, thank you very much.
Thanks, Ed. Thank you.
There are no further questions at this time. I'll now hand back to Ms. Lofthouse for closing remarks.
Great. Well, thank you very much, everyone, for your questions. And just to summarize today's results, we delivered record operating revenue for a first half and strong underlying EBIT growth. And those demonstrate the quality of our portfolio of businesses. From a strategic perspective, we're delivering on our technology roadmap, and we're focused on customer-driven initiatives as we look to add value for our participants and Markets. So thank you very much, everyone, for joining us today, and goodbye for now. Thank you.