Good morning, everyone, and thanks for joining us today for the announcement of Cuscal's FY 2025 full-year results. I'm Craig Kennedy, Managing Director of Cuscal, and I'm joined today by our CFO, Sean O'Donoghue. Today, we're also pleased to announce the strategic acquisition of Indue. Before we begin, I would like to acknowledge the traditional custodians of the land on which we gather today, the Gadigal people of the Eora Nation, and pay my respects to their elders past, present, and emerging. I extend that respect to all First Nations people joining us today. Today, I'll touch on some highlights from the last 12 months before taking you through the Indue acquisition and why we're enthusiastic about the combination of Cuscal and Indue. Sean will then review the FY 2025 financial performance in a little more detail, and I will then cover the outlook for FY 2026 before opening for questions.
Turning to slide six, we've made a solid start to life as a listed company following our successful IPO on the 25th of November 2024. We've delivered earnings growth across all our core capabilities in FY 2025 while retaining our strong investment discipline. This has enabled us to modestly exceed our prospectus forecast. Reflecting our balance sheet strength, strong earnings, and confidence in the outlook, the board was pleased to declare an FY 2025 final dividend of $0.055 per share, fully franked, which is in line with our prospectus forecast. As a result, total dividends paid and declared for FY 2025 are $0.10 per share. Turning to slide eight, we're pleased to announce the strategic and financially compelling acquisition of Indue. This cash-funded acquisition represents an important development for both businesses, bringing together two organizations with a shared heritage, similar values, and a complementary client base. Cuscal and Indue are better together.
The acquisition is expected to generate material synergies and result in a more resilient, more sustainable payments business, delivering benefits for our clients, their customers, our people, and our shareholders. Slides nine and ten provide an overview of the acquisition executed under a share sale and purchase agreement for a total consideration of $75 million, representing a 1.1x book value and a P/E of 3.7x on a post-run rate synergy basis. The consideration is subject to a number of adjustments, including some transaction-related expenses that are to be borne by Indue. The acquisition is subject to customary conditions precedent, including regulatory approvals from the ACCC and APRA, and is expected to be completed by 31 December 2025. Following the acquisition, the combined entity is anticipated to have a common equity tier one position of around 18% - 19%.
This is in line with Cuscal's target and above our regulatory minimums. Our experience in seamlessly integrating acquisitions and large-scale client migrations, along with the steps that we've taken to ensure our success, including establishing an advisory committee and appointing one of Indue's current independent directors to the Cuscal board on completion, will help us effectively combine the two businesses. We look forward to welcoming the Indue team and clients to Cuscal. Slide 11 provides more detail on Indue, which, like Cuscal, is an APRA-regulated ADI and a respected name in the Australian payments industry with a 50-year history. Indue has a diverse client base with extensive products and capabilities across the value chain, which will be complementary to Cuscal's existing client base and our capability set.
This is shown in a little more detail on slide 12, where you can see that Indue brings government clients that Cuscal doesn't access today, as well as additional capability in terms of prepaid card solutions. On combination, Cuscal will have more than 150 clients and enhanced capability. Slide 13 shows the financial profile of the combined entity on a pro forma basis, which will have enhanced scale and a platform for further profitable growth. As shown on slide 14, the acquisition is expected to generate run-rate cost synergies of between $15 million- $20 million per annum after tax, which are expected to be fully realized by FY 2029. The two organizations have some complementary clients and product, but duplicate the underlying infrastructure to service them.
Cuscal is uniquely placed to realize these synergies, given the integration is largely a client migration exercise, which Cuscal delivers repeatedly every year with excellent outcomes through a mature process. Non-recurring costs to execute the integration program are projected to be in the range of $25 million- $30 million after tax, incurred over a three-year period, but largely recognized within the first two years post-completion. Full migration will take some time, largely due to the terms of Indue's contractual arrangements with its vendors. Product and technology transition will also be driven by external factors such as scheme compliance dates. We're also committed to the secure transition of clients whilst minimizing the disruption to their business, which takes time.
To summarize on slide 15, a combined Cuscal and Indue entity is anticipated to deliver material benefits to our clients, as well as creating a more resilient, competitive business, which will ultimately realize significant value for our shareholders. I'd like to thank the Cuscal and Indue teams who've worked very hard to get us to this point. There's still a lot of work to do, but we feel we're well positioned to deliver the maximum value from this opportunity and acquisition. With that, I'll hand over to Sean to look at our strong FY 2025 result in more detail, and as a reminder, we'll take some questions at the end.
Yeah, thanks, Craig. I'll touch on some of the key financial highlights for the full year ended 30 June 2025, most of which are thematically consistent with what we disclosed in our half-year results.
Consistent with the prospectus, we're presenting the financial results on a pro forma basis, which normalizes the circa $9 million after tax in offer costs, which resulted in statutory profit being $28.7 million against $31.6 million for June 2024. We've seen solid growth across the board, and our pro forma NPAT of $38.4 million modestly exceeds our FY 2025 prospectus forecast of $36.6 million. As Craig mentioned, we saw continued growth in total transaction volumes across all core capabilities, and this continued momentum in transaction volumes supported growth in adjusted EBITDA and NPAT. Adjusted EBITDA was up 13% on PCP to $65.7 million. Pro forma NPAT was up 17% on PCP to $38.4 million.
Growth in net operating income investment and broader cost management has seen continued expansion in our operating leverage and margins, with adjusted EBITDA margin up 140 basis points to 22.6% and NPAT margin up 120 points to 13.2%. Pro forma earnings per share are similarly up 16% in line with NPAT, and pro forma return on equity was up 90 basis points to 10.5%. We have made good progress in reducing the NPAT drag from data services during the year. This NPAT impact reduced 18% on FY 2024 and 20% against the prospectus forecast. In terms of net operating income, total transaction volumes were up 8% over the year, issuing up 6%, acquiring up 11%, and payments, a blend of NPP and batch, up 12%.
Adjusted net operating income closed slightly ahead of prospectus forecast, up 6% to circa $290 million, with NOI growth across all capabilities demonstrating continued value from our diversified revenue model. We slightly exceeded our FY 2025 prospectus adjusted NOI forecast. For issuing, NOI was up 5% to $167 million, a consistent 58% contribution to total NOI. Issuing transaction volume was in line with prospectus at 6%. Underlying transaction-based revenue, that is, excluding a couple of one-offs that positively impacted the June 2024 result, was up 6% as expected and in line with transaction volume growth. For acquiring, NOI was up 11% to $30 million, a consistent 10% contribution to total NOI. As flagged at the half-year, acquiring transaction volume growth of 11% was lower than the 17% prospectus forecast, largely due to client-specific delays. Transaction volume-based revenue was up 9% and broadly correlated with transaction volume growth.
We saw some recovery from the prior period volume decline, which was due to two specific client events affecting the June 2024 result. For payments, NOI was up 6% to $71 million, a consistent 25% contribution to total NOI. Remember, payments, transaction volumes, and revenues are a blend of both NPP and batch with different growth profiles. That is, NPP is higher and batch is lower. Payment transaction volume growth of 12% was higher than the 10% prospectus forecast, with NPP up 3% and batch in line with prospectus. Underlying transaction-based revenue, that is, excluding a batch-related one-off that positively impacted the June 2024 result, was up 13% as expected and in line with transaction volume growth. Turning to operating expenses, total operating expenses were down 2% to $234.8 million, or 80.9% of adjusted NOI, reflecting the merging operating leverage.
FY 2025 benefited from a one-off $14 million write-down of a data services intangible asset in June 2024 through DNA. This was not repeated in FY 2025. FY 2025 operating expense was also impacted by slower-than-planned ramp-up in employment expenses for the year, offset by substitution and higher technology and risk uplift costs over the full year, and this was consistent with H1. Excluding the impact in June 2024 of the intangible asset write-down, total operating expenses would have been up a modest 4%, lower than net fee and commission income revenue growth of 6%. Employee expenses were down 4% to $122 million, reflecting the previously flagged slower onboarding of planned FTE during the H1 period, impacting the full year run rate, with average FTE 6% lower than for June 2024. Employment expenses were down 4% on the prospectus forecast.
Occupancy expenses were down 19% due to a one-off adjustment in June 2024 relating to Cuscal's old premises. DNA expenses were down 59%, largely due to the mentioned intangible asset write-down in FY 2024. Excluding this impact, DNA expenses were otherwise down 4% on June 2024. DNA expenses were in line with prospectus forecast. Non-salary technology expenses were up 24% to $66 million, consistent with H1. This reflects both the timing and nature of executing our risk and technology uplift investment profile, that is, via third parties in lieu of additional FTE. Non-salary technology expenses were broadly in line with the prospectus forecast. Other expenses were up 9% to $32 million, also largely reflecting the timing and nature of executing our investment profile, higher client marketing and related expenses offset by lower other third-party consulting expenses. Other expenses were down 7% on prospectus forecast.
Turning to the balance sheet, balance sheet and regulatory capital position both remain strong. Equity now obviously includes circa $25 million of net capital raised proceeds, and although we saw a late decline of around 3% in client deposits, which was largely timing related, both supported a higher net interest income. Regulatory capital was 27.3% at June 2025, well above prudent minimums. The acquisition of Indue should see regulatory capital migrate to the guided target range of 18% - 19% as we deploy that excess capital. Slide 21. Our regulatory capital excess will reduce further when the impact of the declared final dividend is paid to shareholders, that is, from 27.3% to 26.2%. Regulatory capital is a function of risk-weighted assets held predominantly in cash and liquid holdings. Risk-weighted assets increased 3% for June 2025.
These risk-weighted assets are a combination of traditional credit risk-weighted asset charge and a specific operating risk charge. As a proportion of total risk-weighted assets, credit risk-weighted assets was 52% and operating risk-weighted assets was 48%. Given the nature of our business, Cuscal has a larger proportion of risk-weighted assets generated via operating risk than a traditional retail bank would. Overall, we were very pleased with our strong FY 2025 financial results and the company is well capitalized and carrying strong momentum into FY 2026. With that, I'll hand back to Craig to talk more about our strategy and outlook.
Thanks, Sean. Turning to slide 23 in the RBA's review into the payment industry, which we understand has been a focal point for the market.
Consistent with our prospectus disclosures, we do not expect any material impact from the RBA's proposed changes, as we do not receive any revenue from interchange or surcharging fees. Longer term, we think the removal of surcharges will be viewed positively by consumers and will likely shift current consumers using cash into using cards, which may benefit Cuscal as card volumes increase. We expect card issuers to review loyalty points, transaction fees, and interest rates to help mitigate any potential reduction to interchange income. The RBA may amend some of their recommendations following this consultation period, and we continue to monitor those developments closely. Turning to slide 24, after a busy year, we remain focused on executing our key strategic priorities. We will continue our client-focused innovation and support across all of our key capabilities.
We will continue to uplift our risk maturity and technology and extend our products to new segments of markets, including enhancing our fraud prevention and data analytics. The completion and integration of the Indue acquisition will be a priority. Importantly, we maintain our strong outlook for mid to high single-digit transaction volume growth, translating to double-digit underlying NPAT growth. To ensure comparability, we will be reporting on both underlying and statutory earnings. Before I open for questions, I'd like to reiterate the opportunities for Cuscal ahead. The business is well positioned for growth and operating leverage with a diversified revenue model underpinned by a long-tenured client base and multiple growth drivers. We expect operating leverage to continue to emerge, and our strong balance sheet supports the ongoing investment in the business to drive organic and inorganic growth and returns to shareholders.
On that note, I'd like to also thank our shareholders for their strong support during and since the IPO. Lastly, with Sean having announced his upcoming retirement in November, I'd like to acknowledge his significant contribution to Cuscal over the past decade and thank him for his partnership through a really pivotal period for Cuscal and the company. Taking us through a successful IPO and more recently the acquisition of Indue have been significant undertakings, and the board and management team extend our gratitude to Sean. We look forward to welcoming Jennifer Bryce as Chief Financial Officer in October. I'm confident in the experience and value that she will bring to Cuscal. With that, we'll now open up for questions. Thank you.
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 today comes from Alastair Hunter with Ord Minnett. Please go ahead.
Thank you and congratulations on the acquisition and result. Just a couple of questions on Indue in terms of its profitability as a standalone versus sort of current year. What are you expecting it will earn by the time you sort of fully integrate it in 2029?
Yeah, the result for the full year FY 2025 was $2.9 million over the year. We'd expect, I guess, that to continue as a contribution to the broader Cuscal earning profile in addition to the synergy benefits we're looking to realize as a result of the acquisition.
As you think about dividend payments through the transition phase of Indue, current policies are based off statutory earnings, which will be impacted in the next couple of years by the implementation costs running ahead of the synergies. Is there any intention, as many companies do, to look through the implementation costs and effectively would be paying it out on underlying earnings? What's the view?
Yeah, that's a, yeah, you're right. I mean, our dividend policy is in that 40%- 60% bracket of statutory earnings. We'll look at the timing of integration and synergy realization, I guess, across the next three-year period and will be in line with that dividend policy.
Statutory, not underlying profits remains the denominator for you?
By default, we can only pay dividends out of statutory profits, but our policy is 40%- 60% and we'll operate within that banding of statutory profits.
In terms of the customer base of Indue , you mentioned the sequencing will be based on contract maturity in terms of some of the onboarding. Can you provide some ideas for us as to what that renewal contract rollover profile looks like over the three years?
It's not the client contract renewals that are determining the timing of migration. It's the major vendors that Indue consume is the bigger issue. They've got some term to run on those contracts. We get no benefit of moving anyone prior to that. What I would say is that the program, in simple terms, requires us to build connection layers to some of their periphery systems, which is what we do all day, every day when we take on new activity. Things like their financial crime system, card management. When we move their core business over to our environment, it can still talk to those systems and still provide the ongoing support they're required from that environment. You'd organize them more around who uses a common core banking system or who uses certain components of the environment. It has nothing to do with the maturity profile of the client contracts.
I'd also say, if anything, we've had some appetite from their clients to already extend those arrangements. I think that's where you're going, Alastair.
Yes, yeah. Maybe final one for me before I let others ask questions, just in terms of your existing Cuscal contracts with clients in the next sort of 12 months, can you provide any indication as to any material contracts that are up for renewal? I mean, you've got 10 or 12 of them every year rolling on average. Is there any materiality that we should be aware of for the next 12 months?
What I can share is that if you have a look at the profile that we had in the prospectus in terms of those that have still got a couple of years to run on their contracts, coincidentally, the profile is almost identical, but it's obviously got a different composition because some people have run off and then renewed and other people have got less tenure to run on their contract and others have come through. If I look at those that are required or have some upcoming renewals, we're actually ahead of our renewal schedule at the moment. Looking pretty positive, Alastair.
Yeah.
Just to be clear, the profile is very comparable to the prospectus, but the composition of it is different.
At the prospectus, it was 64% of contracts had at least two years to run.
Yeah, it is now, Sean. 64% of contracts with greater than two years to run.
There was an additional 7% evergreen. Is that still the same?
I'd imagine the evergreen profile really hasn't changed very much at all. I can validate that for you later.
Thank you.
Once again, if you wish to ask a question, please press star one on your telephone. We'll now pause a short moment to allow any final questions to register. Thank you. You have another question from Hayden Nicholson with Bell Potter. Please go ahead.
Yeah, hey team. I'm just looking at the outlook comments here. One of them to flag is focus on the risk and tech uplift. You're saying expecting some operating leverage to keep coming through. The acquisition in terms of your capital position on set one would bring you back into that target band of 18 %- 19%. Anything here we should read in terms of the regulatory outlook? Like you're flagging that you're pretty comfortable there, or is it more just a factor of picking this up because it makes sense?
There's nothing to disclose in terms of regulatory outlook. We've got an investment pool that we manage each year, and you've just gone through a requirement for CPS 230, which was due at the end of June. We've met all of those requirements. We've got a broader uplift program that's all in hand, and all of that's built into the profile that we have there. There's nothing new in terms of the outlook or the regulatory environment, and there's no additional expenditure. If anything, we've made some pretty phenomenal progress in the last 12 months on that front.
Yeah, and looking in terms of the cost out as well, is that on a line-by-line basis? Also, just looking through the deck, you've pointed out that they've got just over 200 employees, and sort of saying as well, there's not going to be any redundancies in that first 12 months. I just wanted to get a feel of how you've arrived at that number, whether it's a broad stroke or, as I said, line by line.
No, it's extremely detailed ground up. Just keep in mind, these businesses started in a very similar place a very, very long time ago, and they've developed a little bit differently. The key differences between Indue and ourselves is that they have a card management system that has some broader functionality than what we've developed, and specifically, they have clients using prepaid cards, which we don't do. Aside from the activity they have in that area, that's also taken them into some arrangements with the Australian government. They've got both some capability and some clients that we don't address. The other thing I would call out is they source their card processing from a third party where we do that in-house.
This is a very detailed bottom-up what it takes to retire the common infrastructure because even though we've diversified a little differently in terms of our product set and our client base, the underlying infrastructure is entirely duplicated. This is built up from the ground as to what it takes to retire each of those, what vendor contracts go away. The run-rate synergies are really specific and very quantifiable in terms of the time, investment, and effort required to do it and to move them away. We reconcile that against the programs we've already done, which have had an identical nature, and we've also reconciled that against every individual client we've ever moved onto our portfolio and what that takes, and then allowed for some benefits when you get to move them in bulk under a common cohort.
For example, there might be four or five clients that share the same version of the same core banking system. They can move as one cohort rather than having to move them individually. Because this is something we do all day, every day, we've been very specific. This is not a broad brush number that we expect to have to keep coming back and updating as we learn more. We think we've already done that work.
Yeah, fantastic. All right, thanks for that. Last one from me, maybe just moving away from that acquisition. Do you think, you know, pointing as well to fraud and, you know, even just looking at CBA, they spent, you know, close to $1 billion on some of those capabilities? It looks like your NOI from financial crimes over issuing and payments is sort of stable or trending up. Interested, I guess, to get a quick sense of the economics there and, you know, what you're saying. Should we expect that to continue to trend up?
We're filing if it trends up. The whole idea of providing financial crime services is to allow our clients to grow their real-time payments and card payments in a safe environment. If they were all left to their own devices and had a narrower data set and maybe less tech and capability to do that work, they would be at a competitive disadvantage to everyone else offering retail transaction accounts. The whole idea about financial crimes, and whilst we may not have the scale of the CBA, in many ways we have more diversity. If you have a look at the diverse data points coming in, and I know you said whilst this is not about the Indue acquisition, one thing Indue would give us is more scale and more diversity in the data that informs our tools that helps detect and prevent scams and fraud.
The whole idea of that line of activity is for it to generate enough contribution to keep reinvesting and to maintain the quality of the service that we currently provide to our clients. I think if we were to be quantifiable in terms of basis point losses and false positives and activity required, I think we're performing as well or better than the market in most disciplines. This gives you a sense of how we perform versus larger organizations. Just keep in mind, the whole idea of that is to protect our clients to grow their transactions because that's where we make our money. We want them to safely grow their transactional business and pay us for the transactions. If we start getting greedy on trying to get profit out of financial crime systems, all we're doing is adding to their cost of serving and ultimately making them less competitive.