Good morning, everyone. Thank you for joining us for today's investor presentation. This is a presentation on our first half-year results for FY25 at EQT Holdings Ltd. I'm Mick O'Brien, and I'm the Managing Director of EQT Holdings Ltd., and I'm here with Johanna Platt, our Chief Financial Officer. Welcome, Joe. So, for today's agenda, I'll open with an overview of our business performance and the operational highlights for the first half of FY25. I'll then hand to Joe to review the financial results in some detail, and then we'll close with an update on our strategy and outlook. We'll take questions via the Q&A function at the end of the presentation. So, let me give you an overview. We're really pleased with our achievements in the first half as we continue to deliver strong organic growth whilst reaching significant milestones in our transformation journey.
Funds under Management, Administration, and Supervision, or FUMAS, as we call it, reached AUD 224 billion, a 26% increase on the prior corresponding period, excluding the businesses we exited in the period. As a reminder, FUMAS is a key driver of our revenue. That's an increase of AUD 46 billion, of which the majority of that increase came from our clients increasing their funds. Revenue growth was 4.8%, and again, if we excluded the exiting businesses, was 7.6%, so a very healthy top-line growth rate. The AET integration was successfully completed in December, with the Insignia TSA exited as planned, and NavOne, our new platform for TWS, was deployed across all of the business, and all client transitions were completed from the EQT platforms and Insignia's platforms. We completed the exit of the AET platform business.
At the end of January, the U.K. business relinquished its licenses, and the local CEO and directors were released. It only remains to close up the corporate entity. Sales momentum in superannuation and CTS fund services remained strong and continued literally right through to the end of 2024 and into these first few months of 2025. Expenses remained higher as we progressed the transformation activities. Employee numbers, ignoring the release of some 50 people in relation to the exiting businesses, were stable during the period. We expect expenses to materially decrease in the second half of this year. Earnings were impacted by the costs of transformation and technology development, with statutory impact for continuing discontinuing businesses of AUD 0.3 million, declining by 2.9%, as we flagged at the AGM.
The board approved a dividend of AUD 0.55 per share, an increase of AUD 0.04 on the prior corresponding period, and AUD 0.02 up on the prior half. That's in recognition of the growth of the business and the trajectory of earnings. I want to highlight some other achievements for the half. We onboarded two new members to the executive leadership team: Joe as CFO and Naveen Prasad as our Chief Risk Officer. We also acquired the ANZ wealth bank, the nil consideration, to circa 6,000 wealthy high net worth valued clients. In addition to developing and launching TWS's new platform, NavOne, we also deployed the following new technology platforms: Workday's Human Capital Management and Payroll modules, Workday's Finance, Procurement, and Expense modules, added straight-through application processing to our Active Philanthropy platform, iPhi, moved to an infrastructure outsource model and cloud migration for our infrastructure, enhanced our data and platform security.
Now, this page is an illustrative picture of the three-year journey of transformation the business has been undertaking. The last two and a half years has been a period of heightened activity as we've embarked on acquiring AET and integrating it to our business, at the same time as undertaking major technology developments whilst we exited the U.K. and Ireland businesses. The picture shows the enormous body of work undertaken in the last 18-month hump, and finally, the remaining limited tail of work we need to finish off in this half. It's important to appreciate the program work to understand the trajectory of expenses. You can see that the AET integration involved many moving parts: outsourcing small APRA fund administration to SuperConcepts, outsourcing custody services to HUB24, client transitions from EQT and Insignia platforms to the new NavOne platform.
The completion of the body of work to integrate AET is a significant milestone, and we're proud that it's been delivered on time and budget, and synergy benefits realized in excess of our original expectations. The technology modernization program has included the development of NavOne, as I mentioned, which is a single trustee platform for all of TWS's business. There are three further upgrades to be delivered by our vendor in readiness for July 2025 when we move to a BAU posture. We've implemented Workday Human Capital and Payroll, Workday General Ledger and Procurement, extended our Active Philanthropy platform, iPhi, as straight-through application processing, and are halfway through establishing a data warehouse for CSTS, which will bring automation of our fee invoicing for this quickly growing line of business.
As mentioned previously, the exit of the U.K. and Irish businesses is at the final stage of closing after an extended period, as you can see. Turning to the key results. Now, there remains a degree of complexity in our results in this half due to the differences in statutory results and underlying results that exclude the costs relating to the AET integration and the three-year technology program. The other element of complexity arises from the split of continuing and discontinuing businesses and the exit of two of our businesses, the U.K. and AET platforms, in this period. What I'm showing here is simply the total statutory result and the underlying result. Funds under management, administration and supervision grew to AUD 224 billion, an increase of 22% or 26% if we exclude the exit businesses. This was mainly driven by growth in the superannuation and corporate trustee services businesses.
Revenue was AUD 89.7 million, which was 4.7% up on the prior corresponding period and 7.6% up if we exclude the exit businesses, which I mentioned before. Growth was driven through strong organic growth in CSTS and the impact of continued favorable investment markets. Net profit after tax was AUD 12.3 million, and on an underlying basis, it was AUD 16.4 million. Both were down on PCP due to the margin impact of transitioning custody services and clients into NavOne, while internal staff were retained to ensure continuity of service, so doubling of costs in that period. Non-operating expenses increased over PCP due to the peak spend in technology and significant milestones in the delivery that NavOne and Workday were achieved, as shown on that previous slide. Consequently, EPS declined by a similar amount on PCP.
The board declared an interim dividend of AUD 0.55 per share, an increase of AUD 0.04 on the prior corresponding period. The increase reflects the growth in the business and the expected trajectory of earnings. Now, putting these results into a medium-term context, you can see we're consistently delivering growth and ultimately shareholder returns. FUMAS growth is accelerating. In fact, it's been quite extraordinary growth, showing the confidence that large-scale financial services players had in Equity Trustees. That FUMAS growth is translating into revenue growth, albeit not at the same pace given our pricing structures. Revenue and underlying net profit before tax have grown at a four-year CAGR rate of 17.3% and 10.2%, respectively, which is really healthy, and finally, dividends have grown by 5.7% CAGR over that time.
Now, turning to the achievements of each of the two businesses, the focus of trustee-based services business has been the completion of the AET integration program. As I said, this was done on time, on budget, and meeting the synergy objectives. As part of that program, the exit of the AET platform business occurred, the outsourced custody, and also the small APRA fund administration, and that has unlocked approximately AUD 5 million per annum of employee cost savings from December 2024. Revenue synergies equivalent to AUD 6.3 million per annum of embedded investment management revenue was also achieved, together with the completion of the transition to a single operational platform. On the organic growth front, the TWS team secured an additional large community trust appointment through the year. Strong growth in the health and personal injury and charitable segments where we achieved revenue growth of 16% and 10%, respectively.
The longer-term prospects for estate management and continuing trust were boosted by the acquisition of 6,000 wills from the ANZ wealth bank. The team are also very proud of the development work undertaken in the half, fully digitized the Active Philanthropy offer, and the preparations for a full launch of this offer are well advanced for next month. The CSTS business continued to deliver strong organic growth, driven by the achievement of establishing 39 managed investment schemes and new custody appointments in the period. This included the launch of three flagship listed investment trusts, each working to very aggressive timelines, which we are very happy to have met. We've certainly seen strong activity in the launch of private credit managed investment schemes, and we're confident we're delivering market-leading trustee services to fund managers.
This growth is set to continue with an additional 40-plus appointments in the pipeline for the second half. It was a pleasing endorsement of the quality of EQT's superannuation trustee service to be appointed as a trustee of Perpetual superannuation products. This will commence on the 1st of March. It's a portfolio of funds aggregating to AUD 6 billion. From a technology perspective, the team have made positive progress in the development of a data warehouse to enable automated billing and data extraction. Given the ecosystem of service providers that are involved in our oversight model, this will deliver improved control, visibility, and speed of execution. The migration to the new operating model for small APRA funds was also completed in the first half, and we believe this service could be a compelling, unique growth opportunity for the business as we market the offer to the transitioning self-managed super fund market.
This slide provides an overview of the market leadership positions of Equity Trustees in the various segments of trusteeship in which we participate. Equity Trustees is a clear market leader in superannuation trusteeship. This also includes small APRA funds where we will be the only provider in this market. Our FUMAS will be boosted by AUD 6 billion, which I mentioned before, with the onboarding of the Perpetual book taking this overall business to over AUD 80 billion, from AUD 1 billion some six years ago. Equity Trustees is also the clear market leader in providing responsible entity services to the funds management industry. We also clearly believe in the health and personal injury sector. In the segments of philanthropy, native title, testamentary, and estate management are equal one or two, and we now have the scale in each of these market segments.
I'm now going to hand over to Joe to take you through some more details of the financial results.
Thank you, Mick, and it is my pleasure to present the First Half 2025 Financial Results for EQT. To open with three points on the financials being presented today. Firstly, that results are being presented on a continuing operations basis. This means that they exclude the trading results for the former U.K. and Irish operations. Secondly, I will refer to underlying measures of profit, which mean they exclude non-recurring expenses relating to the integration of AET, the three-year technology program, and the divestment costs relating to U.K. and Irish operations, and thirdly, that we are introducing the profit measure of net profit before tax and amortization of management rights based upon the feedback from analysts that this is the preferred measure for tracking cash profits.
So, turning to the results, group revenue was AUD 89.4 million, a growth of 6.5% on prior comparable period or PCP. The top graph to the right sets out the movement in revenue by business unit. AET platform revenue of AUD 0.9 million was included in the first half 2024 result, a business that was exited in the latter part of FY24. Excluding this, net organic growth was AUD 6.3 million, a growth rate of 7.6%. CSTS revenue grew by AUD 3.8 million, underpinned by the 39 new corporate RE and custody appointments that Mick referred to. TWS revenue grew by AUD 2.3 million due to the impact of positive investment markets and growth in key service segments. Underlying expenses, excluding amortization and management rights, increased by 12.3%, and I will talk in more detail on the drivers of change in the next slide.
Expenses increased in the half due to the rate of technology delivery, the impact of transitioning to NavOne and HUB24, which, as Mick mentioned, enabled the release of 43 employees . Consequently, underlying net profit before tax and amortization decreased by AUD 1.6 million to AUD 25.6 million. The second graph sets out the key drivers of changes in this profit, the first two being the revenue drivers noted above, offset by the impact of increased people costs, outsourcing costs relating to custody and administration relating to the small APRA funds, and changes to technology services and financing costs. The decline in profit due to this period of transition was foreshadowed during the AGM in October. Turning to a reconciliation of the movement in expenses on PCP. Statutory expenses for the first half of 2025 were AUD 69.8 million, an increase of AUD 7.5 million on PCP.
This was made up of a AUD 400,000 increase in non-operating expenses and a AUD 7.1 million increase in operating expenses. Walking you from the first half result of 2024 across to the right in this waterfall, non-operating expenses in FY 2024 totaled AUD 4.3 million, and they related to the integration of AET, the technology program, and transaction costs relating to the exit of U.K. and Ireland. Therefore, operating expenses in the first half of 2024 were AUD 58 million. These increased by AUD 7.1 million in the first half of 2025, driven by increases in people costs of AUD 3.7 million, half of which relate to 51 additional FTE on a year-over-year basis up to November, which was subsequently reduced by 43 as a result of the integration activity. The balance of increased people costs relates to the annual remuneration review and extension of the LTI scheme.
Technology costs increased by AUD 700,000 due to the move to an outsourced cloud-based infrastructure as a service model, which will reduce future CapEx demands. Financing costs increased by AUD 900,000, linked to the increase in the other reserves of AUD 600,000 and corporate debt. Completing the outsourcing of custody services and administration increased expenses by AUD 1.8 million. Finally, non-operating or significant expenses in the first half of 2025 totaled AUD 4.7 million. The uptick was in technology spend to AUD 1.7 million, and AET and UK-Irish exit costs also accounted. Turning to EPS and dividends, earnings per share on both an underlying and continuing operations basis declined on PCP by around AUD 0.05 to AUD 0.06 per share. This reflects the earnings decline discussed previously. Given the successful delivery of the measures to realize expense synergies in the second half, the board approved a dividend of AUD 0.55 per share, an increase of AUD 0.04 on PCP.
This dividend equates to an 89.5% payout ratio on an underlying earnings basis. Turning to the performance of TWS. Headline revenue grew at 2.9% to reach AUD 50.9 million. However, there were some one-off events over this time, namely the exit of the AET platform business, which, as I mentioned before, contributed AUD 900,000 of revenue in the prior year, the repricing of a community trust, and the catch-up of invoicing of AET legacy estates. Excluding these events, organic growth and positive investment markets delivered AUD 4.5 million of incremental revenue. Net profit before tax and amortization declined by AUD 2 million due to the impact of elevated expenses as the business transitioned through the outsourcing of custody services, the exit of the platform business, and the migration to NavOne, which collectively enabled the release of the 43 staff in November.
FUMAS grew by 16.2% on PCP, reaching AUD 20 billion, with positive investment markets contributing to this growth. Average revenue yield was 53.9 basis points, a decline of 8.5% on prior year. However, with the one-time events previously described, this equated to 3 bps of this impact. Turning to CSTS, delivered strong revenue growth of 11%, with the super and corporate operations growing by 7.2% and 14.2%, respectively. Interest income from offer financing arrangements grew by AUD 0.6 million or 7.4%. As previously mentioned, 39 managed investment schemes and custody appointments were onboarded in the first half of 2025, and while these attracted fixed fees in the setup phase, we expect some incremental revenue from AUM-based fees going forward.
The bulk of group funds growth was attributed to CSTS, where it reached AUD 204 billion, nearly 27% up on PCP, with superannuation assets reaching AUD 73 billion, an increase of 23% on PCP, and corporate fund services and debt securitization reaching AUD 130 billion, increasing by 29%. Underlying net profit before tax increased by AUD 100,000 to AUD 10.4 million. Profit and margins were impacted by the growth in people costs for this line of business, reflecting the additional resourcing to support the high level of new business onboarding activity. Average revenue yield for director trustee services and super declined in the first half due to the relatively fixed revenue model for these segments. Turning to cash flow. Cash on hand, including liquid investments, declined by AUD 14.4 million from June to December. This was due to the impact of payments previously accrued relating to the AET integration and exit of the U.K. and Ireland.
This one-time cash outflow reduced net cash flow from operations by around AUD 11 million. AUD 5 million of corporate debt was repaid in the half, and regulatory capital requirements remain at circa AUD 75 million. The release of AUD 10 million of regulatory capital linked to the AET, custody, and AFSL licenses is pending approval of either the courts or the regulator. Turning to AUM and revenue sensitivity. Given the growth of the business, we are seeing a change in the mix of revenue and considered it timely to update our view of the sensitivity of the value of assets under management and revenue to changes in investment markets. The top graph shows the line of business view of strategic asset allocation.
For example, in the middle stack, CSTS corporate funds is estimated to be 40% global equities, 18% Australian equities, and 42% other, where 20%-30% is linked to cash or fixed income. The second graph sets out the proportion of revenue for these lines of business that is asset-based and that which is fixed. For example, for TWS, 78% of revenue is derived from asset-based fees and approximately 22% from fixed fees. For clarity, fixed fees includes minimums and regulatory cost recoveries. We plan to spotlight the changes in revenue yield and explain the drivers of mixed volume and variable versus fixed fees in the upcoming EQT Investor Day. I'll now hand back to Mick to close off with an update on our strategy and outlook for FY25.
Fabulous. Thanks, Jo.
As we move to sum up today's presentation, it's important to remind ourselves about the industry dynamics and how they favor our business. There are strong industry tailwinds in all our key markets. For TWS, the older age cohorts of the Australian population are the fastest growing parts of the population. A simple data point is that the over-65s will double in their proportion of the Australian population over the next 40 years. Mandatory growth in superannuation drives the growth in both our superannuation business and our CSTS fund services business. Finally, it's projected that due to the aging of the population and the growth in wealth, that intergenerational wealth transition will be some AUD 3.5 trillion over the next 20 years.
Along with increasing expectations from government, regulators, and the community for greater independent oversight of people's wealth and the expansion of niche areas that require fiduciary oversight, there is strong and building demand for our services. The industry dynamics are very positive, and our market positioning is strong. We have market leadership in multiple market segments for both corporate and superannuation trustee services and trustee wealth services. We have the opportunity to grow the business into new attractive established markets such as custody of real assets and securitization, where we have small market shares, but we are well positioned with our people's expertise and technology. We have the opportunity to expand where we have market leadership, but we are confident the market segment could be expanded materially, such as in the small APRA fund market or in the Active Philanthropy market.
Finally, we're at the turning point on being able to capitalize on our technology investment. We can achieve improved client service, create a better employee proposition, and achieve operational leverage and improved margins. The outlook for the balance of this half is to capitalize on the sales momentum in CSTS with 40 plus investment schemes currently in establishment. We have three new superannuation fund take-ons in this half and fund consolidations to be completed by June. We're well progressed in a CSTS pricing review and will be moving to implement this in this half, as well as increasingly implementing cost recovery in superannuation for major regulatory change. From a technology perspective, we'll be completing the three-year plan. The last three NavOne upgrades will move us to BAU, and we'll be deployed by July.
The implementation of phase two of human resources in Workday will be delivered in May, along with the implementation of the CTS data warehouse delivered in May as well. The launch of the Active Philanthropy office is also on track with a refreshed overall website launching in March. As we've foreshadowed, expenses will materially decline in this second half. Total expenses are expected to decline by some AUD 6 million from the first half. This will broadly be half operating and half non-operating expenses. As we move into clear air post the AET integration, we're focusing more on non-organic opportunities as well. So, in closing, it's been a very busy and productive two and a half years, particularly the last 18 months, where many initiatives have been running simultaneously and are now coming to completion. You can see we're coming to an end of this period of transformation.
We're very much looking forward to finalizing the last technology developments in this half and then capitalizing on our market-leading positions in the market. So, happy to finish there and look forward to taking some questions. So, we've got a number of questions already. So, first, at the AGM, you said you expected slight margin expansion for the whole year. Is that still the expectation, and is it on a statutory or underlying basis? I'll hand that one to you, Joe.
Thank you, Mick. As we've given some guidance on where we have projections for expenses, our comments around underlying margins remain consistent in terms of the guidance we gave at the AGM.
Thank you. Next question is, could you talk through the AUD 6 million reduction in total expenses you're flagging for the second half? Is it AUD 12 million annualized? Are they non-operating expenses?
Can you break down line by line? And the question goes on. So, I might hand that to you to comment on.
Sure. So, in Mick's slide there, we talked that it's around 50/50 in terms of the split between operating and non-operating. And for operating, you can consider that an annualized benefit.
Thanks. Thank you. How did you get appointed to the Perpetual superannuation accounts given their competitive position? Also, what type of margin applies to that AUD 6 billion? Perhaps I'll take that. There's been a lot of change in superannuation regulation legislation, and some of that change, while we can manage it across a large scale of our portfolio, for other parties that have got smaller positions, some of it is actually quite difficult.
I guess the FAR legislation that's coming up would be one reason why individuals might think it's worth getting a more efficient solution to their superannuation trusteeships. I think that's what's happened in this situation. What type of margin applies on this sort of account? Well, it's a fairly large, complex account, and it's priced typically along the same lines as the rest of the portfolio of superannuation, is what I would say. The next question is, can you talk about areas of OpEx growth in the first half? Can I confirm the underlying OpEx reduction is AUD 3 million in the second half and AUD 3 million of below-the-line reduction?
So, Mick, that's correct. We're broadly saying AUD 3 million in operating and non-operating. Obviously, the operating is recurring, so just to flag that again.
We talked through those movers in cost for the first half back on that expense reconciliation page, around AUD 3.7 million relating to people costs on a year-over-year basis. In the pack, we have a reconciliation half-to-half as part of the appendix. To flag, as Mick mentioned, that FTE actually held constant from July through to December once we exclude the FTEs that were part of the November restructure program. So, all other FTEs remained flat. So, that's a good peaking sign in terms of our resourcing.
I think the next question we confirmed is there an annualization of the AUD 3 million underlying OPEX?
Yes.
Yes, Jo. Yeah. Next question, is the AUD 3 million OPEX reduction net of any other costs going in or wage inflation, i.e., the reported OPEX should be lower by AUD 3 million half on half?
So, there'll be no change in remuneration in the second half.
We will go into our normal cycle in the first half of 2026, so that will be something to take into account in the 2026 outlook.
Can you talk about the M&A outlook? Yes, I can. Through the period when we've been integrating AET, we've been singly focused on that and haven't been that active in the market. That's changed in recent months, and we have been active, and there remains a number of attractive opportunities for us to be looking at, and we are looking at those, and hopefully, we'll be able to talk more about that as time goes on. The TWS revenue margin was 54 basis points using simple average FUMAS. Was there a late run-up in FUMAS that brought this down? I would have expected to see margin tick up given the asset management internalization.
As I've flagged, there were a couple of events in FY24 numbers. I'm not sure of your comparison point there, but if it's against the first half of 2024, those were those items related to the platform and the revenue that was billed for legacy estates from AET. So, that's part of the reason why there's a change and also a mix. So, there's no changing in pricing per se across the TWS portfolio.
Yeah. And I'd also say just on that, that effectively we're getting the same type of margin on trusteeship as well as asset management in that business at the level that you've just mentioned. The next question is along similar lines. Are the AUD 3 million in operating cost savings in the second half coming from the reduction of 47 staff in November?
Yes.
By and large, yes. Yep. Next one.
Referring to slide 17, TWS one-off decrease of AUD 1.6 million in revenue. Can we please explain that?
Yeah, sure. I'll just go through those points for everyone again. One moment. Just grab those. So, there was AUD 900,000 of platform revenue in the prior period. So, just to call that out, obviously, the business was exited for FY25. There was a catch-up of invoicing for AET legacy estates that occurred in FY24. It was a one-time event as part of the transition of that book. And there was a AUD 600,000, I think it is, change in pricing on a community trust. So, it's a step change.
Thank you, Jo. Next question is, what type of organic transactions do you wish to look at? That's fairly simple. We're focused singly on trusteeship.
There are more opportunities, I guess, in the corporate trustee part of the market, more so than the private client trustee part of the market. But we're looking for specialist trustee businesses and would only go outside of that envelope to a minor degree. Can you talk through the expected FTE headcount growth into the second half of 2025? Yes. We don't expect really any material FTE headcount in the second half of 2025. I guess the exception to that might be if there's continued very strong sales going on in some parts of the business, and we need to accommodate for that. At this stage, I think we'll see. AET integration. Is this complete? As there's no slide in the presentation on what is remaining for FY 2025? I can say the AET integration is complete and they've completed in December.
So, we have no connections to Insignia other than a partnership in terms of business development. All data has been brought across. All processes are aligned to TWS processes. All people are in the same premises across the country. There is nothing more to do on AET integration. As I mentioned, there are three more upgrades going on to the NavOne platform, but that's just our normal business effectively, and it's nothing to do with AET integration. So, it is complete. We exited the TSA on the 1st of December. That brings us to an end of the questions. I appreciate all those questions from everyone. Looking forward to, over the course of the next week, getting out to see shareholders and others. And I hope everyone has a lovely day. Thank you.
Thank you.