We've got 45 minutes scheduled this morning, and here's the agenda for today. I'll open with a short update on business performance and the operating context. Jo will then step through the financial results in detail. I'll return to discuss strategy and our outlook before we move to Q&A. So as we move into the main part of today's presentation, it's useful to revisit the foundations of our business, what we do, and the markets we serve. This sets the scene for understanding the half-year performance and our strategic direction. Our business operates across two primary revenue-generating segments: Trustee Wealth Services, TWS, and Corporate and Superannuation Trustee Services, CSTS. TWS is the largest part of our business, contributing over 50% of group revenue, and is central to our 140-year history as a specialist trustee.
TWS provides a specialist trustee services across Health and Personal Injury trusts, Community and Native Title trusts, various forms of Charitable Vehicles, and Estate Management. We manage assets on behalf of these clients and deliver investment, administrative, and fiduciary functions tailored to meet their needs, and also related advisory services, including estate planning and financial advice. The breadth of TWS reflects the long-standing foundations of Equity Trustees and remains a core driver of our fiduciary role in the community. The CSTS business has two components: Corporate Trustee Services or CTS. CTS provides Responsible Entity, Corporate Trustee, and C ustody services to local and international fund managers and corporates. CTS continues to grow strongly and accounted for approximately 25% of group revenue in the first half of FY 2026.
Finally, Superannuation Trustee Services, or STS, provides trustee oversight and governance services to superannuation fund originators, as well as managing a portfolio of Small APRA Funds. Superannuation represents around 19% of the revenue and is currently our lowest-margin business and represents just over 5% of earnings in the last half. Our corporate shared services team, predominantly covering finance, technology, risk, and people, provide essential enterprise-wide support that enables the business to operate effectively. Now, I want to recap on the key strengths of the company and its underpinnings. We operate a specialist independent trustee model that aligns well with client expectations and regulatory settings. Our singular focus on trusteeship is unique in this market.
We're exposed to structural tailwinds from Australia's superannuation system for our corporate lines of business, and for Trustee Wealth Services in a generational wealth transfer, which is set to grow at materially quicker rates as Australia's population ages. Our income profile is enduring, with most appointments being very long-term, diversified revenue streams and parts of the portfolio positively linked to markets. We have a strong, low-geared balance sheet, providing flexibility, and our uplifted technology stack is improving client experience and operating leverage. Now, across the half, we saw strong growth and resilience in our core segments. The key segments of TWS continued to drive positive outcomes for the business and our clients. TWS, the margins improved, mostly from new business in health and personal injury, and also benefits from improved processes in estate management. In CTS, the key driver of margin improvement was new responsible entity and custody appointments.
Superannuation had a challenging period with intensifying regulatory and litigation costs, while the underlying business remained strong. This has resulted in management attention to regulatory engagement and governance uplift activities, including the defence of the ASIC proceedings involving a subsidiary, Equity Trustees Superannuation Limited. Now, I'm really pleased to say that the financial results from this activity continue the recent trend of strong outcomes and shows the resilience of the business model, with a very strong uplift in net profit after tax to AUD 20.5 million, up 67% based on strong revenue growth. The underlying result was up 25% due to the first half FY25, which included project costs to complete the AET transition, the exit of the European operations, and significant technology uplift projects. The increase was also assisted by the finalization of the AET synergy benefits during the first half of 2025.
Funds under management, administration, and supervision, or FUMAS, as we call it, is a key driver of revenue, and it grew to AUD 284 billion, up 28%, driven by growth in CSTS through a combination of new appointments and growth in size of our existing portfolio of schemes and superannuation funds. Revenue grew by 11.8% to sit right on AUD 100 million for the first time in our history over a half. Both statutory and underlying EPS saw significant growth, while the total shareholder return to 31% was negative, given the share price is facing challenges post the ASIC litigation. However, the TSR is still positive over a three-year period. The board has declared a first-half dividend of AUD 0.56, which is AUD 0.01 up on the prior corresponding period, and the same as the final dividend for FY25.
Revenue growth has been remarkably consistent over recent halves, and our EBITDA margin remains resilient at just under 33%. This margin excludes the earnings neutral flow-through impact of the ORFR financing, which is reserves used for our superannuation funds. In the first half of 2026, the margin included a temporary headwind of roughly 2 percentage points from litigation, defence, and regulator-driven activity. Without this cost, the margin would have been over 35%. Importantly, the underlying and statutory margins are now aligned following completion of the integration points. The TWS delivered revenue of AUD 55.9 million, up 9.8% on the prior period, is an excellent result and reflects the clean air this business unit has following the integration of AET and the completion of the build of the new platform.
The FUMAS growth is also significant and is driving the revenue growth, with increases in the number and average balances of estates currently being managed in the estate management team. Material growth by 9% on the prior corresponding period in Trustee Wealth Services' larger segment, health and personal injury. An accelerated time to promote probate in estate management processes has also provided a one-off benefit in first half 2026. CTS revenue was AUD 44.1 million, up a headline 15.1%. This continues the consistent revenue growth over recent periods, which is coming from the increase in responsible entity and custody appointments and the high quality of the clients we're working with. In the first half of 2026, we onboarded 77 new funds, including five additional listed schemes.
The listed area is a more complex area, and we're proving to be the preferred provider in this space. We now have a portfolio of 28 listed schemes, with over AUD 20 billion in funds under supervision in that space. FUMAS increased significantly; however, fee structures vary across market-linked and non-market arrangements, so the FUMAS growth can sometimes outpace the revenue growth at times. Current pipeline remains strong, with 30 new schemes and custody appointments currently being established. Turning now to the superannuation side. Underlying revenue growth was 7.6%, and this benefited from new funds that onboarded late last year, and the headline growth rate was higher due to the ORFR balances becoming higher as of before. The income from that is offset by financing costs and broadly neutral to our result.
FUMAS growth reflects a combination of market movements and net inflows, including contributions from clear platform partners. Turning now to regulatory matters. As the market knows, ASIC initiated Federal Court proceedings against Equity Trustees Superannuation Limited, ETSL, regarding the Shield Master Fund in August last year and updated it in October. ETSL is an RSE licensee and a subsidiary of EQT Holdings Limited. It's not guaranteed by the parent. The balance sheet of ETSL includes goodwill, and the business continues to have a good revenue stream. ASIC's claims allege breaches of the ETSL's due diligence obligations when onboarding Shield onto two superannuation platforms. It seeks civil penalties, compensation for members, and declarations of contraventions of the Corporations Act, and costs. We filed our defence, or ETSL filed its defence in December 25, and it's available on our website.
We've previously disclosed potential ETSL exposure for Shield to be AUD 73 million, based on the liquidator's last estimate of recoveries. The group has customer insurances in place, with substantive coverage for compensation and limited coverage for civil penalties. ETSL reserves its right to make an application to the Financial Services Minister under Part 23 of the SIS Act, should there not be full recoveries for the superannuation fund. ASIC's continuing to undertake investigations in relation to First Guardian Master Fund. To date, it has not initiated action against ETSL. Member losses from First Guardian through the funds, where ETSL is a trustee, total AUD 70 million, both on a net and gross basis. Keep the market informed as and when anything changes in respect to this matter. I want to update investors regarding our superannuation business.
I mentioned earlier the dimensions of the business relative to the group, and that is that it represents around 19% of the revenue, but just over 5% of earnings in the last half. The board has decided to initiate a strategic review of the Superannuation Trustee Services business, given the elevated legislative change and regulator activity, which has created uncertainty over the cost base and some increased risk. Review is focused on optimizing capital allocation across the group. We've commenced the process, which may take 6-12 months to complete, but we'll update the market as the review progresses and decisions are made. Throughout, ETSL, the superannuation trustee, will continue to fill its trustee obligations and maintain service quality and governance standards. So with that context, I'll now hand over to Jo, and she'll take you through the financial results in detail.
Thanks, Mick, and good morning to everyone, and I'm pleased to present to you today the strong financial results for EQT for the first half of FY 2026. Starting with the group result versus the prior comparative period. As Mick mentioned, revenue reached AUD 100 million within the half, increasing 11.8%. CSTS contributed AUD 5.8 million of this growth, noting AUD 1.8 million related to the increased income from AET Capital, which is offset with expenses. The remaining AUD 4 million of growth is the net of new business and market impacts, with some minor losses in CTS. There were also the embedding of wins in STS that occurred in late FY25.
TWS revenue grew by AUD 5 million, reflecting the growth in client base in the health and personal injury services segment and higher estate management activity, as previously mentioned by Mick. Operating expenses were AUD 69.7 million, up 7.1%, and this includes AUD 1.8 million of expenses relating to the ORFR capital, AUD 1 million of expenses to support the Shield litigation, and AUD 1.1 million of advisor and consultancy costs to support regulatory and governance uplift programs and license undertakings. We expect these costs to continue in the second half. Despite these costs and the dilutive impact of the ORFR revenue growth, the business achieved a positive jaws ratio and a net profit before tax margin of 30.3%...
There were nil non-operating expenses in the half, and together with the positive impact of top-line growth, delivered an AUD 8.2 million increase in NPAT. As Mick noted, FUMAS growth outpaced revenue due to fee mix, more fixed and non-market linked arrangements within CTS, diluting revenue yield. Looking at performance, half over half. On this basis, revenue grew by 7.5%, whilst operating expenses grew by 9.6%. The increase reflecting the impact of the regulatory and litigation activity in STS and higher ORFR financing costs. Despite the impact of the AUD 2.2 million of costs relating to litigation, defence and regulatory activity, net profit before tax increased by AUD 0.9 million.
Net profit before tax margin of 30.3% was down 140 basis points over the prior half, the net result of a 70 basis point dilution impact from ORFR growth, and the 220 basis point impact of the costs relating to regulatory activity, offsetting the higher margin achieved in TWS. NPAT declined half over half due to a non-recurring AUD 3.2 million tax deduction relating to the exit of the EU business, which occurred in the prior half. Turning to our strategic workforce alignment. People costs represent around two-thirds of our cost base at the group. At December, group headcount was 474, up 460 from June 30. The increase is focused in CSTS to support client growth and uplift in compliance and investment governance.
One additional client-facing role was added to TWS to support the health and personal injury team, and four roles were added to the corporate risk team, aligned to our planned uplift. The vacancy rate was 5.9% in December, compared to 3.9% at June. We consider this vacancy rate to be within a normal range. Turning to segment performance. Firstly, TWS, where we show a short form P&L and a waterfall of the drivers of change in profit for TWS relative to the comparative period. Here you can see the strength of revenue growth increasing by 9.8% and net profit before tax of AUD 19.1 million, up nearly 40% and margins of 34.2%. This is a great set of half-year results for TWS.
It shows strength across all of the business segments, and the standouts of the half were the performance in the health and personal injury trust team and estate management. Health and personal injury team revenue increased by AUD 1.7 million, predominantly from new business, including one larger than normal client that was onboarded in the period. Estate management revenue increased by AUD 2.1 million. This was the result of a higher number of estates and higher average balances, as well as the accelerating of time to probate. This is a benefit for clients and also results in a quicker achievement of key milestones in revenue recognition, a one-time benefit. On the cost side, operating expense, expenses were down due to the reduction in employees that occurred in November 2024 as a result of the integration of AET.
Cost increases since that time have been due to the normal annual remuneration review and selective technology investment. Turning to CSTS, revenue of AUD 44.1 million was an increase of 15.1%. As mentioned before, around AUD 5.8 million, of which AUD 1.7 million related to the additional income from ORFR capital facilities. The balance of revenue growth was driven by incremental revenue of new business, 1 million of market movements, and about AUD 1.4 million of lost revenue from closed schemes or lost RE appointments. Operating expenses grew by AUD 5 million, AUD 1.8 million of which was due to the ORFR financing costs, AUD 2.2 million related to STS litigation and regulatory activity, and the balance being additional people cost to support the growth in CTS and STS.
Despite these costs, net profit before tax increased by AUD 800 thousand. However, margins were impacted with declines in the STS business margins. Turning to EPS and dividends. First of all, it's great to talk about an EPS that is aligned from a statutory and underlying perspective, and the growth against either measure against the prior period is strong. As Mick noted, the board has declared AUD 0.56 dividend for the first half, which equates to a 73% payout ratio, which is within the board's target range of 70%-90%. On a cash flow basis, cash and cash equivalents increased by nearly AUD 106 million over prior period, PCP, with AUD 73 million of this increase relating to the other holdings, which are recognized as offsetting financing and investing cash flows.
Operating cash flows increased by AUD 12.7 million over the PCP due to the increase in NPAT and the timing of redundancy payments that were made in the prior period. We maintain a disciplined approach to capital expenditure, and improvements in invoicing and collections have also helped to reduce receivables. In terms of the balance sheet, it continues to be strong at a low gearing ratio of 10.3%, with no change in corporate debt over the period. During the half, we consolidated the corporate debt facility into a single AUD 60 million facility, which matures in December 2027. The growth of CTS registered schemes has increased the level of regulatory capital to AUD 93 million, an increase of nearly AUD 14 million year-over-year.
We expect that this future capital allocation support will be required as part of the success of the CTS business. ORFR cash holdings are offset with cross funding ORFR borrowings, and there is a AUD 1.6 million differential relating to Small APRA Funds. I'll now hand over to Mick to talk about the outlook and our strategic update.
Thank you very much, Jo. Our focus here is for the remainder of the FY 2026 year are c lear. First, we wanna make solid progress on the superannuation strategic review, which we've already commenced on. Secondly, we hope to advance the resolution of the Shield matter and continue the governance uplift in superannuation business, and continue to have constructive regulatory engagement, as we are with both key regulators. Thirdly, continue to invest in the CTS operating model and technology to support the elevated growth rate that is being experienced in that business. Finally, we need to drive productivity, enhancing the client experience through digital workflows and data automation across the group. Now just go to the outlook. Looking ahead, we remain really positive on the outlook for the business. The structural demand for independent trustee and fiduciary services supports that ongoing growth.
In corporate trustee services, the top-line momentum is expected to continue. I mentioned, the strong pipeline before. In trustee wealth services, growth should moderate from the first half, which included some one-offs, but should still continue to remain very strong. We expect litigation and regulatory costs to remain at the elevated level throughout the second half, with the trajectory easing over FY 27 as the matters progress. The outlook for the superannuation business will be communicated as a strategic review advances, and we'll update the market when appropriate. Whatever the board decides, and other actions in respect of the portfolio will likely have an impact on future earnings and the balance sheet of the group. Results will remain sensitive to investment market movements, as they always do through our asset-linked fee lines. So that brings us to the end of the presentation.
I'm happy to take any questions in the chat function now. Over to you, people. All right, so I'll just get the questions up here. All right, so Trustee Wealth Services margins have ramped up strongly. Can you talk about what the OpEx base is in the business and where we'll go from here? Are there more efficiency gains or will OpEx rise? I might hand that one over to you, Jo.
Yeah, thanks, Mick. We see, as you could see from the headcount page that we showed, that people resources are relatively stable now in TWS, and we feel that there are more small technical, technology-based benefits that we'll receive over time. So we see that cost increases should be fairly modest in the future.
Thank you. Our next question is: Are there ongoing revenue synergies available to the TWS segment? Well, we've achieved a lot of synergies, revenue synergies over the course of the last two years since the AET business was integrated. I think there will continue to be some synergies as we move forward, but I think they'll be extracted over a period of a couple of years as we make changes to the way some parts of the AET portfolio are managed. The next question, CTS growth has been impressive. What does the pipeline of new schemes and custody arrangements look like from here? Well, I mentioned before, I think I mentioned before, we're currently working on about 30 establishments of new schemes or custody appointments.
Most of those are new schemes, and a number of them are listed, vehicles. So that pipeline remains really strong. There seems to be... Well, there is an increasing trend to, for fund managers to extract, grant distribution in the retail markets and do that by listing their vehicles. We've seen that over the last couple of years, and we expect that to continue. There continues to be a great influx of new global fund managers into the Australian market, just given the sheer growth of the superannuation assets in this market. So our now win rate has been higher in the last year or so, and, you know, that would continue to be the case. The next question is: Will you apply for the government assistance via Part 3 of the SIS Act?
Well, obviously, the superannuation subsidiary, trustee, will effectively maintain that possibility of doing that. I think that part of the Act is designed as a recovery of last resort when fraud has been instigated against a trustee in a fund. We'll be doing all other actions first before we head down that track at this point in time. CSTS profit before tax and amortization margins were softer, but not down as much, excluding the Shield cost flagged at AUD 2.1 million. Of that amount, what was the recurring regulatory cost versus one-off?
So in the half, Shield litigation costs were AUD 1.1 million, so we treat those as discrete and related to that matter. There's another AUD 1 million of general regulatory activity. We would see the majority of that as being project-based and one-off as well.
Thanks, Jo. Our next question is: What might be an optimal commercial outcome for the superannuation review? Would a novation of the trusteeship to another provider for some consideration be possible? Well, we have all options on the table, and we certainly see that there is value in that business and be looking to, if there was any change in the way we consider that business, looking for consideration for the appointments that we have over the funds that we have. We'll update the market when we can, but we're looking at all options for that business. Yeah. Can you talk through the board's declaration of an interim dividend, despite the potential risk of an adverse judgment in the Shield First Guardian case?
Is this a read on a confidence in the case outcome, or a confidence in the worst-case cash costs to EQT? That's an excellent question. I think I would look at the dividend and say, well, it's reflective of the earnings results and the cash generation that we've just experienced in this half. There is obviously considerable uncertainty as to what would unfold in relation to the Shield First Guardian matter, and it will take some time for that to unfold for the superannuation subsidiary. So I don't think you'd look at that dividend and say it reflects anything about the confidence or not in the case. We've said that obviously, ETSL is defending that case, and we'll continue to do that.
But it really is a reflection of how the business has performed so strongly in the course of the year, course of the six months. Can you confirm that ETSL has no cross guarantees across EQT Holdings, implying its liabilities are its own? I can confirm that EQT Holdings Limited does not have any guarantees across any of the trustee entities that it owns. It guarantees the services company that provides its employment and all other contracts, but it doesn't guarantee any of the trustee entities. What is the revenue contribution from ETSL?
Yeah, the financial statements of both entities, ETSL and HTFS, are available actually on our website for FY25, so call that as a reference. The market has commented on the value of the HTFS contract being around AUD 5 million per annum, in FY 2026 for trustee fees and 5 of ORFR. So that's representative for the half.
Thanks, Jo. Next question is: Could you help us understand what you believe are the drivers for the preference of larger-scale superannuation funds to utilize an in-house trustee? Well, I think that has been the sort of natural way that larger-scale superannuation funds have operated their business, so the large retail funds, the large industry funds, and some of the platforms. There's no particular reason for that other than, you know, the larger the scale, the more ability to put in the level of resources that are required to run a superannuation trustee, you know, including its board and including a superannuation trustee office that is effectively resourced with a broad range of pretty high-level skills. So obviously, you need scale to do that.
So it's not an option for smaller superannuation funds, but it is once certain superannuation funds achieve significant scale. It does, of course, introduce other potential issues of conflict management that, that need to be managed. So there's a number of considerations that go into any superannuation fund originator thinking about, whether to have an in-house model, or an outsourced independent model. Next question. Hi, Mick and Jo. I've got three questions in one here. We'll take them one at a time. Surprised at the dividend and debt facility being reduced in size, what's the message to investors here given the potential for compensation? Jo, do you want to take that?
I'll take the first part of that question.
Yeah.
So in terms of the debt facility, we originally had two facilities of AUD 40 million. One was corporate, and one was relating to AET, so we now, and the integration. So given that had completed, we've effectively rolled to an increased corporate facility of AUD 60 million dollars. In terms of the dividend, you would have... I made a comment around the growth in regulatory capital, and so we, as part of the dividend consideration, had to take into account the increase in funding required to build reserves, to support that recap.
Thanks, Jo. The next question is, any timeline on the verdict regarding insurance? Well, what I can say on insurance is what I mentioned before, is that we've got what you would expect is customary cover around remediation. And we have some limited cover, very limited cover in respect of civil penalties. Legal costs are also covered under our insurance coverage, so though that has kicked in effectively as we stand today. There's still a lot to go in respect of what will happen with Shield and also what may happen with First Guardian, and that is another separate matter effectively as it relates to insurance, and that hasn't been addressed at this point in time.
How do we think about the headcount growth in the second half, given superannuation is under review? Do you want to...
Yeah, sure. As we said before, CSTS has had significant uplift in resourcing, both permanent employees and some contractors. We see some headcount increase in the CTS side of the business in the second half. We feel we're appropriately resourced to support STS in the second half.
Okay. Next question is: What near-term growth opportunities look most compelling based on the first half performance and market signals? Good question. Well, I think Corporate Trustee Services has had an extended period of very high growth, and it has got good momentum. It's recognized as the leader in the provision of responsible entity services in the market. And I don't see that changing at any point in time, particularly as that market is shifting more to listed schemes. So I would expect that momentum to continue. I think the results for Trustee Wealth Services in the last six months is the best set of results they've printed, you know, in 10 years and really reflect that they've integrated that AET business really well.
It's given them market leadership in so many segments and in most of the states across Australia. I don't think we can repeat exactly that performance going on, but, and it's really pleasing to see how the health and personal injury business is progressing, and also the Estate Management business, which is primarily being driven out of our previous estate planning activities. So, you know, the momentum in that business is really strong. So we're putting a lot of time and effort into that area, and expect to see some good results going forward. We've run out of questions, so that brings us then to the end of the presentation. Appreciate everyone getting online. Sorry, I've got one more question just come in.
Given the increased costs and risks you referred to regarding superannuation, what's the ability to raise prices with customers to share the costs of these increased requirements? Good question. Through the course of FY25, we had a lot of regulatory change, and we did put in place some, if you like, one-off project-type pricing to meet those costs, and we'll be looking to continue to do that through the course of FY 26. Addressing the risk issue is a little different, and but we are looking at all, all of the options we've got in respect to pricing, and there are some constraints on that, but also, there is considerable flexibility available to us. That does look like it's brought us to the end of the questions now. So thank you everyone for attending this morning.
I appreciate that, and hope you enjoy the rest of your day, and thanks very much.