Please raise your virtual hand, and I'll allow you to ask a question verbally. Grant, I'll now hand it over to you. Thank you.
Great. Thanks very much, Simon, and thanks very much to all the shareholders that are jumping on today. It's been an outstanding result for the group over the first half of FY 2025, and we're thrilled to report some of these numbers and the growth in all areas of our business. I will take you through the slide deck. I will get Terence to take you through the financial result and the breakdown between the Generation Life and the Lonsec businesses. We will talk about the momentum moving forward and the outlook for the group. We will take some questions at the end. I know most people on the call know our business relatively well now. We've been doing this for a long time.
When we first started off here back in 2017, we were very much a monoline product that we were selling out in the marketplace with investment bonds and trying to lead the way there. A very, very different business. The composition has changed quite materially over the last few years. As you can see there, we're now very much a highly diversified financial services group. We're growing very, very fast in all of the key areas and sectors that we want to be in, which usually are supported by either structural or legislative changes. Whether that's investment bonds, lifetime annuities, obviously the research and ratings business on the Lonsec side, and of course, the big structural change that we're seeing in managed accounts. That's really reflected in some of the numbers that you can see on the right-hand side there.
One, we had AUD 12.7 billion to close the calendar year in Lonsec Investment Solutions. Combining that with the Evidentia acquisition that we did a couple of weeks ago, that's taken us to over AUD 25 billion in fund in the managed account space. We really are the market leader in there. We've got plenty of great ideas and already sort of executing very well with both of those teams at the moment. I'll talk a little bit more about that in the outlook. Number one in the investment bonds in terms of inflows, you can see there's 29% CAGR over a four-year period in terms of the sales growth. That's obviously reflected in fund at 27% CAGR. In terms of some of the strong regulatory tailwinds, obviously there's a big change of people going into retirement, living longer, hence the reason we really like the lifetime annuity space.
We haven't been able to get to that product quite to the scale that we would like yet. It's certainly improving. It's certainly growing in sales. We're getting more traction with financial advisors and doing the education piece that we need to in that space. We have also got some big strategic initiatives that we're going to launch over the course of this year, which we're really excited about, that we think is really going to support that product and support that category and really drive some great opportunities for Generation Life. In terms of our business model, we put up there with Capital Light. The way we've structured products like our lifetime annuity, it's really just operational risk that's required from a capital point of view with APRA.
Instead of being a product provider that covers both the longevity and the reinsurance, so the longevity risks are in the investment risk, we just cover off the insurance piece. We 100% reinsure the longevity risk, and the investment is borne by the actual investor or policyholder into that particular product. Instead of having 4% or 5% of funds under management of capital that you would hold, obviously for every billion, that's either AUD 40 million or AUD 50 million. For us, it's only 40 basis points. It's only around AUD 4 million for a billion dollars of fund that's held. That includes our internal buffer there as well. We want to make sure we're a capital-light business because we are intending over the next 12 or 18 months to increase our dividend payout ratio. It's certainly the business model that we see moving forward.
In terms of growth within our underlying business, you can see in the life company there, over a four-year CAGR, we've had growth of 28%. It's actually 39% we've got there in brackets. You're probably wondering what that difference is. We used to have a pooled development fund license, which meant our corporate tax rate was 15%. And we also had a lot of tax losses sitting in entities when we joined the group. We've extinguished all of those losses. We've relinquished the PDF as part of that Lonsec transaction that we did and completed on the 1st of August last year. Therefore, we're just a normal corporate tax-paying entity. Therefore, that's the sort of differential that you see between the numbers.
If all things were the same and the status quo had not changed with that transaction, it would be a 39% CAGR in terms of our impact growth over that four-year period, but it is 28% now with that tax expense. I will get Terence to talk a little bit more in detail just around the taxation within the group now moving forward, given that is obviously a material change to what we had this time last year. We are number one in the research place when it comes to Lonsec. It has very, very strong brand recognition. I think most people know and appreciate the Lonsec brand. It is utilized a lot through the financial advice space and obviously through fund managers to be able to access distribution and get on approved product lists so they can sell their funds or their products to retail clients.
Just moving through to the next slide before we get into the financial overview, then I'll pass it over to Terence to talk through. You can see here, these are the two key businesses for us in the first half of FY 2025. There is going to be obviously a third that is added given we are restructuring the group, given the growth in managed accounts and the Evidentia deal that was recently completed. Just running through the investment bond side of the business, you can see there our FUM that we closed on the 31st of December 2024 was AUD 3.8 billion or a 27% four-year CAGR. Number one in terms of market inflows, we take over 50% on a 12-month rolling average. We are number two in total fund, which I do not really like.
I'm looking forward to saying that's number one when we're sitting here again, hopefully in a few months' time. That fund continues to grow at a rapid rate in terms of the inflows that we're seeing at the market at the moment and obviously being supported by strong financial markets. You can see there almost a 30% four-year CAGR number for the half there just on AUD 5.6 million in terms of underlying profit for that area of the business. The lifetime annuity, I've touched on that a little bit already. It's an investment linked to lifetime annuity. Your income for that lifetime annuity is actually attached to your chosen investment. If you want to go anything from cash, we've got all the different asset classes, as you can see on the slide there.
If you want to go anything from cash, fixed interest, all the way up to some of the single-sector funds or high-growth funds or high-growth diversified funds, you can choose that, or you can have a mixture of all 29 funds in there if that's something you want to do. Whatever that unit price appreciates to is how much your income appreciates. If you end up living until you're 110, that capital will obviously be fully extinguished, but your income will continue to be paid at whatever that rate of return is for the rest of your life. You also get those age, pension, or Centrelink entitlements, which is a discount of 40% on the assets and the income test for a lot of Australians, depending on what it looks like in the means test and their overall financial assets.
We're able to offer a lot of flexibility in that product, the traditional lifetime annuities, which is just a fixed rate of return, and you're not able to really switch in between any other products or be able to really have a little bit more optionality around how you sort of set your risk profile around that particular product. We're getting close to AUD 50 million in funds under management there. Like we've already touched on, we've got a lot of strategic initiatives that we're about to launch over the course of this year, this calendar year, that is, to be able to help drive and grow that and get that up to scale. On the Lonsec side of the business, again, another great set of numbers.
The team have really delivered a phenomenal result, obviously led by Michael Wright there and Lorraine Robinson on the research side, and Amanda Smerdon, who's the Group CFO there, have done a great job in leading that business. You can see they're up 25% on the prior corresponding period, and their EBITDA growth to AUD 14.8 million. Just a tad under AUD 15 million there. LIS has grown over AUD 2 billion in the half, all organic growth. There is nothing that we've acquired as part of that. That has gone from AUD 10.6 billion we closed the last financial year to AUD 12.7 billion. You can see the four-year CAGR number of over 70%. iRate, which is really our access to research where you pay a subscription fee and you're able to utilise some of the analytical tools and portfolio construction tools in there.
We've got 4,749 subscribers there, and that's increased throughout the course of the half. Great, strong inflows in comparison to this time last year. The first six months of FY 2025 compared to FY 2024, we're up over 120% in net flows. Outstanding to see that the team has really been able to convert a lot of the pipeline and the work that they've done over the last 12 months and bring those new customers on board, either in SMAs or MDAs. Currently in the research space, including SuperR atings, we research over 2,000 products. I'll pass it over to Terence now to talk through some of the financial attributions to the half and the result. I have to compliment the team on this.
They've done a great job in terms of not only managing the inflows and obviously the margins within the business, but also the expense management's been very, very strong. We haven't underinvested anywhere in our business to be able to drive a really strong set of numbers that I'll pass across to Terence to run through in a bit more detail now.
Thanks, Graham. As you can see from the results, all the good, strong performance is reflecting the good set of financial results there. What you see there is the two consolidated columns. That is the actual results that we have achieved. There is a new separate section you see on the far right in relation to half year 2024 based on 100% of Lonsec. That is just for comparable purposes so that you would get a better feel for how we have performed if we had owned Lonsec for the full period in 2024, which we did not. If I were to focus just on the extra consolidated amounts, with good set of financial results, you can see operating leverage coming through with revenue growing much faster than expense growth. The resulting impact was a 152% increase in underlying profit after tax from AUD 4.9 million up to AUD 12.3 million.
We've held the dividend steady at AUD 0.01 to what Grant alluded to earlier. We'll look to upping the payout ratio in FY 2026 after the Lonsec payout once we know what the amount could be. What's driving the great results in terms of the investment bonds business, you can see strong fund growth there. That's through a combination of very strong sales as well as strong investment markets. That's resulted in an increase of 31% in investment bond flows. In terms of capital for the business, we remain very well capitalized. You can see we had gross cash equivalents of AUD 38.6 million, Lonsec had about AUD 17 million of debt there. We would have had net debt equivalent of just over AUD 21 million in second half 2025. We remain really, really well capitalized.
If I were to move on to the next slide, I'll be able to talk through the earnings for the investment bond and annuity business in a bit more detail. Pleasingly, you can see revenue growth there of 37% and expense growth fairly muted at 23%. That's resulted in underlying profits after tax benefit increase of 99%. We have been very happy with that result. In terms of income tax expense, we relinquished a PDF last year. We now pay income tax expense there. One thing to note for the first half of FY 2025, there were some timing differences inherited from last year. By way of, I guess, analyzing it, if the second half earnings for FY 2025 were to double, the income tax expense will probably increase about 50%. It will not double.
That's some timing differences where we paid a bit more tax in the first half for income tax. We continue to contain costs within the annuity business. You can see that's quite flat. The overall underlying profit for the investment bond business was AUD 3.6 million, including the annuities business investment. Moving on then to Lonsec, to what Grant alluded to earlier, again, very, very strong set of results from Lonsec. You can see underlying profits growing by 35% there. That's through a combination of both research going really, really well as well as strong fund growth in the LIS business. Thank you. Pass it back to you, Grant.
All right. Good stuff. Thanks, Terence. Yeah, no, it's great to see that the business has performed so well across all of its key metrics. I will deep dive now a little bit more into the Generation Life business and some of the key metrics that we really look at in terms of, I guess, not only the first half, but some of the forward-looking indicators around that business. Just moving on to the scoreboard, on the next slide, you can really see that we're up on fund 31% YoY . We are up almost a billion dollars to AUD 3.8 billion to close out the calendar year. Sales, we were bullish about sales coming into this year. We felt like we had really good momentum.
The more tax discussion around tax reforms, whether that's super, whether that's trust, any other areas that the government intends on changing tax income, particularly for highly affluent, high-net-worth individuals or high-marginal tax-paying individuals, that certainly helps and supports our businesses because financial advisors recognize that they can't just utilize the traditional structures that they have or just put money into superannuation anymore because the goalposts just continue to shift. We had an all-time record quarter in Q4 of FY 2024. We went into Q1 thinking that a lot of the pipeline might be dried. It resulted in an all-time record for Q1. We hit Q2, and it was an all-time record again.
We had three in a row, which is an unbelievable result that the sales team and the entire business, and obviously Felipe Araujo, who leads that business now as the new CEO from the 1st of January this year, have really driven a phenomenal result, that AUD 460 million in total investment bond sales. It was only a few years ago we cracked AUD 400 million for the first time. To see that sort of number in the first half was certainly well above our plan and what we anticipated. I can say that momentum has continued into this calendar year, which is great to see as well. The other product, obviously sitting within the life company, almost AUD 12 million of sales in the annuity product. We have also been able to pick up a bit more momentum in that particular product coming into this calendar year as well.
Resulted in a very strong market share result, which I've touched on, over 50% on a 12-month rolling average. We have plenty of APL coverage, approved product list, that is. That is up 8% over the half, to AUD 751 million. Access to distribution to be able to sell the products through the intermediary channel, through financial advisors and practices and the dealer groups. The product ratings, you can see on the right there, that allow us to be able to get onto those APLs. One of our real key metrics is this active financial advisor numbers. That is if they've written one or more products with us on a 12-month rolling average. You can see that is up 16% on the first half of last year, which is great because that baseline has grown a lot.
It is not like we have seen a lot of reforms come through in terms of the quality of advice review be legislated, which really support the growth in financial advisor numbers in the industry. We would love to see a lot more of that. We certainly support that and support those reforms. We want to see more Australians being able to access financial advice. To see that up 16% when we had a huge amount of growth in active financial advisors in 2024, it is great to see that that momentum has continued. Again, that flows through to new bond numbers, up 42% to over 18,000. You can see savings plan, regular savings plan, which is just a direct debit that we do on a monthly basis, is up 10% to AUD 52.1 million. You can see the investment options that we have there.
We've also got our income funds that are very, very tax effective and also the life income, which is the investment-linked lifetime annuity product with 29 investment options there. What's really great about every dollar that we receive on what I'll call our platform, it has an average life cycle of 14.6 years. A very, very long time in terms of the maturity profile. You can really see that coming through when we do our quarterly updates on our fund result. Just on the last one in Q2, not only did the percentage come down quite materially on opening fund, which is the way we look at it, but the actual quantum year on year came down, even though we had almost an extra billion dollars worth of business sitting there just in the investment bond space.
I think it was AUD 44.9 million and it's down to about AUD 40 million over that quarter in terms of both withdrawals and also death maturities as well make up that number. Now, just moving through to the next slide, this just talks through to the competitive landscape that we're in. You can see Generation Life there in the yellow bar chart taking the lion's share of the inflows, followed by Australian Unity and maturity. The line chart there goes to total market share. You can see we're very, very close to AU. We were number one in that space, but AU acquired the Insignia investment bond book about 18 to 24 months ago. Therefore, they overtook us in total market share. You can see we've closed that gap relatively quick.
I think within six months' time, given the momentum, touch wood that remains within the business that we have right now, we feel like we'll be able to take the number one position in both of those areas of inflow and total market share. Moving through to the next slide, this just really talks about the trajectory of the business over the past few years. You can see there on the left-hand side, that makes up kind of four different things: half-year, full-year inflows, and then you can see gross inflows as well as net inflows. We had a phenomenal year from FY 2021 to FY 2022, where we saw almost a 57%-58% uplift in sales from AUD 404 million to AUD 639 million. I'm guessing these numbers because my eyes are 44 and I can't see anything now on the screen. I hope I'm getting them right.
You can see we came down a bit when inflation was going through the roof. Interest rates were jumping up every five minutes. Sales came off a little bit. Markets were a little bit shaky, but we still did over AUD 500,000,000 in 2023. You can see we got back to record highs in FY 2024 to that AUD 657 million. It really was the second half of the year. You can see that split in between the bar chart there that really drove that result. We have sort of just kept growing from there on moving forward into the first half of FY 2025 with a massive result of AUD 460 million of gross inflows. Like I said, Q3 has certainly kicked off very, very well. We feel really confident that we are able to continue on a really strong trajectory in terms of our sales.
On the right-hand side there, it's a really nice-looking picture. It's one I want to maintain for the next few years and continue to accelerate that where we can. That's our total FUM that sits on the investment bond. The nice thing about this business, when you look at from December 2023 to December 2024, we've almost tripled the fund there, but we've had no margin compression whatsoever in that. In fact, in some of our products, we've even had a slight bit of margin expansion. You can see that coming through the numbers from some of the life company results that Terence just spoke through. Great to see that massive uplift from December 2023 through to December 2024. Now, just jumping onto the Lonsec business. Again, this is a very, very strong brand in the marketplace.
I don't think there's a single person that doesn't know the Lonsec brand in financial services. Obviously, it's been really leading the way over the past three decades in terms of qualitative research. It's been number one in there for many, many years. It's had the paper-based portfolios, which then in 2015 moved into managed accounts, which is, of course, Lonsec Investment Solutions. Got a very strong brand in Super Ratings and then iRate. You can see here, over the course of the first half of FY 2025, we completed the acquisition, the other half of Lonsec. We'd slowly been moving up our equity from about September 2020 up to that 3rd of June where we did the capital raise and then completed that on the 1st of August where we took 100% ownership in that asset. They've delivered some phenomenal numbers again in the first half of this year.
You can see revenue up 14% on the prior corresponding period to AUD 35.5 million. EBITDA growth there to AUD 14.8 million, which is 25% up on PCP. That operational leverage really starting to flow through in the business. You can see up there up to AUD 8.7 million or 34% on the prior corresponding period. They continue to have great momentum, not in any particular part of the business, but the overall business. You can see that really on the research side, there's a big pipeline of products and new products that we're starting to research as well as the existing products that we're already doing research on.
has also been expansion in terms of if you have received a Lonsec sort of stamp or been highly recommended for five years or more, which is quite a significant achievement for any product manufacturer or any fund manager to be able to do and to have that sort of stability. There are other sort of product initiatives and research initiatives that we are doing to be able to grow that business moving forward. We have a very, very strong pipeline of opportunities coming into the second half of this year.
The pipeline sitting in Lonsec Investment Solutions is also particularly strong given the amount of pitches that we've done to various financial practices over the course of not just the last six months, but even the last 12 months and starting to convert into FUM and to new opportunities both across the SMA side and the MDA side of the business. Moving on to the next slide that just gets into the breakdown of some of those numbers in a little bit more detail showing the three-year CAGR numbers. You can see revenue over a three-year CAGR up just over 20%, EBITDA 35% on a three-year CAGR. Very consistent in terms of performance and improving YoY . That's flowing through to gross profit, almost a 20% CAGR over the same period.
Of course, that operational leverage reflected in the impact there of 41% CAGR and a big jump from first half of 2024 through to 2025 and that impact result of AUD 8.7 million. Moving on to the next slide, which starts to talk about the breakdown by division. There are two core divisions that sit within Lonsec. Again, I know there are a lot of people that understand that business, but there are also a lot of new investors that have come on board, particularly with the recent capital raise that we did on the 10th of February this year. You can see the breakdown on the first half of FY 2024. 62% of the revenue was driven by the research and ratings business and the other 38% driven by the asset management or the LIS business, Lonsec Investment Solutions.
When we reflect on the first half of this year, we can see that composition has changed slightly to increase to 40% of the revenue contribution there from the LIS business and obviously 60% therefore on the research and ratings business. Now, to be totally honest, and I probably said this on the full-year results call, given the growth that we're actually seeing in Lonsec Investment Solutions to over AUD 2 billion just over the first half of this year, I know it's all organic. I thought that revenue composition might change a little bit more. I thought it might be around sort of 42% or 43% before these numbers kind of got verified and we went through the detail of it.
You can see there that the research business has done an incredible job led by Lorraine Robinson, Peter Green, and all the team there to be able to not only get new products on board, but to do a lot of out-of-cycle research, which again provides a little bit of increased margin per product that they can do there. Also, some of those other initiatives that they've also driven in the research business as well. They've been able to continue to grow that business. Therefore, that change of revenue split probably hasn't happened as dramatically as we thought it would have. You can see there on the gross profit split down to 33% and 67% on the research and ratings side of the business.
Moving through in a little bit more detail just around the research and ratings business, you can see the revenue for the first half of 2024 to the first half of 2025 up 10% to over AUD 21.3 million. You can see the revenue split there just on the pie chart, just the breakdown across the three key services that we see in the research and ratings part of the business. Obviously, the lion's share of that is Lonsec Research. We can also see Super Ratings there making up 20% of that and then a small amount of iRate. Really, I sort of talk about this being more like the Apple sort of products. Once you're into one access to Lonsec Research, you obviously get on and subscribe to iRate. You then start looking through iRate and looking at some of the analytical tools there.
It also takes you into looking at managed accounts and obviously some of the SuperR atings side within that business. You start to do sort of more business with Lonsec. That obviously enhances the, I guess, barriers to exit in terms of utilizing a brand like Lonsec if you're dependent on their research or any other products that you might be utilizing. You can see the transfer of revenue going down to gross profit there. Again, the leverage coming through the business. That's up 16% half on half compared to 2024 and 2025. That is obviously the composition and the breakdown within the gross profit split there. Here's just the research and ratings business in terms of you can see there on the left-hand side from FY 2021 through to FY 2024, just the blue part. That's YoY .
That's the 12-month growth that we've seen. The half-year growth is only six months of growth in that. That's why the proportion is not quite as wide that you're seeing in comparison to the other parts of that particular graph. We've been able to increase our research by over 50 new products. I can share that the pipeline for the second half of this year is particularly strong. We expect to see more growth coming through towards the end of this financial year as well. Moving to the SuperR atings side there. What you can see in the green line there, sorry, if we could just go back one slide. What you can see in the top right-hand side there, just in the green part of that particular graph on the line chart there, that's the consolidation of the super funds.
That's pulled up quite a bit. We know APRA were encouraging that quite a few years ago to see a lot of those smaller funds consolidate and obviously some member benefits flow through because of that consolidation and the scale of the hyperscale of some of those big super funds that they have. That's slowed down a lot now. We have seen that number flatline, which you can see as part of the line chart there in the green bit. What Kirby Rappell, and the team have done there in SuperR atings exceptionally well is they've been able to do more consultancy and more products with each of those super funds and really become another limb of their business. You can see that that's meant with close to a 25% uplift in revenue per client.
You can see that big jump from FY 2024 to half-year, full-year, annualized number in the sort of gold yellow part of that bar chart. It's great to see, yeah, less clients, less opportunity, but more revenue per client. You can see an iRate subscriptions there. That's gone slightly up compared to FY 2024 in the first half of this year. The green part of that particular line chart is just really a reflection of registered financial advisors out in the industry. It's great to see that the contraction from the Royal Commission of that sort of 40%+ that we saw coming down to that 15,000 or 16,000 advisors in Australia started to flatline.
Like I've already touched on throughout this presentation, we'd love to see more reforms from the federal government that encourage people to go into financial advice, particularly when so many Australians are entering into retirement. We've got one of the biggest pension pools in the world, and we want to make sure that people are getting sound financial advice, everything from tax through to estate planning and making sure that they've got income that'll see them out for their retirement. Moving on to the next slide. This was a big part of the investment thesis originally into Lonsec. If we go back to June 2020, where you can see that AUD 659 million worth of fund, we saw a great opportunity in the managed account sector.
We saw that a lot of financial advisors were looking at this structure to be able to manage their clients' FUA, the Funds Under Advice. There are more tax advantages there. It is easier from a compliance point of view. They are able to scale up their business a lot more, and it just gives them a lot more time back where they can actually spend more time either growing their practice or spending more time with their clients. We really saw that change happening. Lonsec has been a big beneficiary of that, and we have obviously invested a lot of time and effort and energy into that. The sales team have done a phenomenal job in converting that into funds under management for the group. You can see there the organic growth is the blue part of the chart. That is the SMA part of the business.
We did an acquisition that was completed in August of 2022 of implemented portfolios, which is the managed discretionary accounts, so the MDA part. You can see that has grown over time. That is more of a tailored bespoke solution for your high-net-worth clients, but a high-margin business for us. It is close to 40 basis points there. As much as the growth, the organic growth is not as much as what we are seeing in the SMA space, a very high-margin business. Also, the product set within there, obviously you can get a more tailored and direct equities, and the exposure that you can get there at an individual client level is quite unique. We want to continue to see both of these areas obviously grow, but a great-looking graph there.
Again, similar to the life company Generation Life, we've seen that trend continue coming into this calendar year as well. Just touching on a bit more of a breakdown in terms of the financial sort of profile and result on the next slide there, you can see that the revenue numbers have obviously jumped up on the back of that growth in funds under management. You can see there we've got a 65% CAGR, I think it says there on the slide, over the course of the last three years to almost AUD 14 million of revenue driven in that part of the business, an 87% CAGR growth in terms of gross profit.
Again, the economics within that business are very similar to a normal funds management business where a lot of the operational leverage will come through, and that has obviously started to come through quite materially in that business. We will see that accelerate as we bring Lonsec Investment Solutions and Evidentia again together in the managed account. This will bring me to my last slide, and then you can stop hearing from me and we can throw it back to Simon for questions. Really, the outlook for the group at the moment, we feel really, really positive with everything that we have got going on at the moment. We have got a lot of big initiatives that we are starting to already execute this year.
We've got a new PDS coming out for the bond business, which is going to be a new bag of goodies that advisors are going to be able to use for strategies for their clients, which we're pretty excited about. We continue to leverage off any sort of discussion from the federal government around tax reforms and being one of those stable, steady structures and obviously giving a great sound alternative for financial advisors. We are also a big beneficiary in terms of estate planning requirements and needs. Again, that sort of almost AUD 5 trillion of wealth that's transferring to the next generation or bypassing a generation over the next 30 years. It's unequivocal that the bond is one of the best structures to do that. It's tax-free upon death, and it goes to that beneficiary regardless of who it is and not one of those have been overturned.
Just to give you a bit of an insight on why it's so good from an estate planning point of view, we want to continue to capitalize on the structural changes in wealth management. Obviously, a lot more adopters of managed accounts.
Obviously, the opportunity there to be able to bring the number one and number two player with Evidentia and Lonsec Investment Solutions together to create a really large number one player in that particular sector and managed accounts of over AUD 25 billion of funds under management and all the scale benefits that will come through, not just for our business and shareholders, but most importantly, for clients on the other side that utilize these products and the product differentiation that we actually have by covering off everything from implemented portfolios through to tailored solutions for either a dealer group or a financial practice or off-the-shelf sort of products where you can get an SMA depending on what your risk profile looks like off a hub or a net wealth platform for maybe some of those smaller practices that don't really need that high level of tailoring.
We'll continue to see that sector grow. The numbers that we saw from June this year in terms of the total market was about AUD 206 billion. That's intended to grow under the data from both IMAP and the research from NMG Consultancy to AUD 474 billion by 2030. If you look at our market share of sort of 12%-13% of that sector and the fact that we're taking a lot more than our natural market share, you can sort of work out what the number would look like, the FUM, if we continue to execute as well as we are today or continue to improve and grow and be better. That's going to be quite a material number in the Generation Development Group business over the next few years. We want to continue to build and grow opportunities in the research division.
There's a lot of opportunity, particularly when we look at private credits obviously being massive over the last couple of years as interest rates have driven upwards. We see private assets as another big opportunity for us. We've got more products coming out in that space in the research and ratings business that will continue to see revenue uplift. Obviously, there's more real assets and other areas of high-net-worth individuals that we want to continue to really look at and start to be able to provide research around and be able to give people reassurance that the products that they're looking at are supported by a business of credibility such as Lonsec Research. We're looking at further embedding, obviously, the new operating structure post the acquisition of Evidentia.
As part of that announcement and capital raise that we did a couple of weeks ago, we really wanted to make sure that we set up a structure moving forward that continues to deliver great performance, but also optimize accountability. It is really important that we note that optimizing accountability and for any CEO, any executive within each of our business, if they turn the dial, they get rewarded for that. There are also consequences for poor performance. We are very open about being a high-performing organization, and we set our structures up to reflect that, and we set our reward and recognition system up to reflect that as well. We want to be a high-performance business across the board, regardless of what sector or what area of product that we are in. What we have done around that, I know a lot of people know that structure moving forward.
Obviously, there's the listed entity GDG. What sits beneath that is the life company led by Felipe Araujo. Also under the research and ratings business, transitioning to be the CEO of that business is Lorraine Robinson, who's going to run research and ratings. We are going to be putting Lonsec Investment Solutions, the managed account business, together with the Evidentia Group and combining that business. That will be run by Peter Smith and Michael Wright. Of course, Michael's got a very big brand, as does Peter in the market, given what both of those individuals have been able to achieve. We have been doing joint pitches to a lot of wealth groups in recent time since we've done this acquisition and obviously the merger of those two groups already.
We have refined that pitch, and it really feels like we have built a very, very strong team in that sector, and we feel very confident about bringing that whole sort of relationship between those two groups and the integration of that together. We have already started doing that, and it has been positively reflected by the team and the cultures in there that have really aligned, but also making sure that the research business has that level of independence.
One of the nice bits of feedback that we've received so far is they really like the fact that, I guess, the asset management business that had certain funds that were a part of the managed accounts that could be rated on the research side, even though there were very, very clear walls that were set up in between those two businesses, even where they sit in the office building, were on separate sides. That is how much we wanted to make sure that those businesses were set apart. Actually having a whole new entity there with a different CEO running that business, I think, has really reinforced the independence and credibility of the Lonsec Research.
It has been nice to hear the feedback of the new structure that we are reshaping at the moment and putting in place, and that should fully be in place by the time we get to the new financial year and then hopefully be off and running. Yeah, the focus right now is really just finishing off this year with some good set of numbers and continuing to grow the momentum in the business and making sure that that reshaping and restructuring of the business is done the right way. That is it from my end, Simon. I know there was a lot to digest in there in that result, but there was a lot of good stuff to go through. A big congratulations, I have to say, to the team that have produced these numbers across all of our businesses.
The commitment from all of our staff and all the sales and all the support around that has been quite phenomenal, and the passion and the culture within the business has been really strong. Hats off to them. They're the ones that have got this result. Thanks very much to all the shareholders who've obviously supported GDG over the past few years and believed in what we're doing and the way in which we're doing it. Flick it back to you now, Simon. Thank you.
All right. Thanks, Grant. Thanks, Terence. First question is from Simon Fitzgerald at Jefferies. Simon, please go ahead.
Hi there. Thanks for taking my question. Hopefully, you can hear me, Grant and Terence.
Got you. Got you, Simon.
Thank you. I was interested in a little bit more about your understanding in terms of the size of the investment bond category.
I mean, slide 3.3, 32% as of September 30 suggests that the industry would be around about AUD 12 billion worth, which also sort of tells me it's been fairly static over the last sort of few years. I guess I'm interested to know how far you think you can take your market share if the investment bond market is not sort of going to grow significantly. I guess what's your sort of view in terms of what needs to change to see the investment bond market become a much larger category?
Yeah, no, it's a really good question, Simon. There's a couple of aspects to it. One is that's the reported data. Not everything is captured in that AUD 12 billion. The last two and a half years, it's actually grown more. I've been a part of this business since 2017.
It's actually at double-digit growth over the past couple of years as a sector. It has increased in recent times. We're of the belief that even if things like Division 296, which is that double taxation of superannuation for balances above AUD 3 million and on the unrealized component, even if things like that don't happen, it's the fact that regardless of what side of politics, we know that the Liberal government put the caps in superannuation back in 2017, that financial advisors have to look for alternatives, and we're a great after-tax alternative. We think the sector will continue to grow and probably accelerate. It's not massive. Like you said, it's AUD 12 billion. It's probably overall closer to AUD 14 or AUD 15 billion. We potentially think it could be a AUD 50 billion-AUD 60 billion sector one day.
If more changes come through around things like trusts or other tax reforms, that will obviously drive that. The other part that will drive it too is if we see more financial advisors come back into the industry or more come through into the industry. The reason that that's probably important for a business like ours is because there's a bit of complexity around the product. It's not complex because it's hard to understand once you get it. It's just that there's so many features around it because it's governed by both the Tax Act and the Life Act. That's why a lot of advisors—so we did an eight-figure bond the other day that was purely for estate planning purposes, not for tax arbitrage, but estate planning only. We see a lot of that.
In terms of growing the industry, we take it upon ourselves as probably the market leader and the educator of after-tax investing. As much as that industry is not huge, we're going to take it upon ourselves to really be the market leader and the educator to make sure that we grow that pie to see it bigger. Also, the other limitation—I do not know if Terence has got anything to add beyond what I have just said—is you need a life license to be able to distribute this product. As you can imagine, a lot of the large life insurance companies are focused on other areas where their products are much bigger, much more scaled up, and they are known for them. You can see from our competitor set that even a lot of those competitors in there, Centuria is fundamentally a property business.
AU have got a very diversified financial services business focused in retirement. They have all sort of got conflicting priorities probably within their group that make more money for them. The fact that you need a life license—the competitors have a lot of other products which are their key focuses—makes it hard to get it into the mass market. The other nice thing that we have seen through our figures is even though we have not done much in the direct investment bond space, that is still growing for us YoY , and I think at a double-digit rate as well.
I think one of the important facets there is that we are the ones growing the market. Any sort of growth that we see in the above market share growth, it is all untapped markets that we are the ones growing.
If you look at our peers, by winning market share, we aren't exactly eating their market share. They just aren't growing. On that basis, it's almost untapped from our perspective. As long as we can continue to be innovative and generate new products and have a great focus on after-tax return, we will continue to grow that market, and we will capture all that growth. There's nothing in there right now to suggest that we can't keep continuing to grow, if not accelerate the rate of growth that we've experienced today.
While we're still on investment bonds, there must be some competitors down the bottom towards the stack that aren't really committed to the category, would you think?
Yeah. I mean, they still distribute new PDSs and change things and add more investments and various things like that.
There's been even some estate planning stuff that's been added. They're still committed to it. If there was an opportunity to acquire one of those books, I think the two major things we'd consider, one would be, is it going to be worth the time given the organic growth that we have? If we're doing close to AUD 500,000,000 and a half now, is acquiring AUD 500,000,000 or a AUD 600,000,000 book really worth the time and distraction and the cost to be able to do that? Also, the whole migration of that piece too, sometimes that can be, most of the time, that's a really costly exercise. I think if we can continue to grow at the organic rate that we are, I think we would mainly focus on that.
Anything at the right price, and if it was a simplistic deal, we would certainly look at and review.
Excellent. Just one more question from me, perhaps you, Terence, just in terms of any sort of help for us thinking about the tax rate in the second half.
Yeah. In terms of tax rate, there were some abnormalities in the first half of the two-up from last year where we relinquished the PDF. I think if you sort of half the tax rate growth, it'll be about right. For example, if profits were to double, the tax effective tax would be about half that increase. Rather than doubling the tax expense, I will increase the tax expense by about 50% if profits double.
Great. Thank you.
Thank you.
All right. Next question is from Lafitani at MST. Laf, please go ahead.
Good morning, guys.
A couple of questions for me, if I may. The first is on the Evidentia acquisition. I just wanted to better understand the momentum since the transaction's been announced. Often, advisor groups are now all aware of you guys taking over the business. Can you just talk to some of the feedback? Has the pipeline changed at all? Are the discussions that they were having with potential new big groups, are they still all going according to plan?
Thanks, Lafi. Good question. To be totally frank, it's actually been very positively received so far. It's quite funny. We said there was a mild amount of overlap of a couple of clients that we were in tenders with between Evidentia at that particular point in time.
We've managed to not only get together with that team, work out what the joint pitch actually looks like moving forward between the two groups, but we've actually managed to win a couple of those clients as well now as a collective group. Any of the sort of momentum, any of the sort of tenders or pitches that we had have all maintained throughout the process. Any ones that were sort of close to being sort of executed and won, we've been able to deliver on those as well. The momentum within the business, I'm not going to sort of sit here and say it's accelerated just as yet, but it certainly hasn't gone backwards. Recently, just this week, we've had a couple of really good wins, which both teams were pretty pumped about, which is exciting, right?
Because it feels like we're already winning together. That's been good to see. It's good that it's actually happened so quickly.
Got it. Can I just follow up on the SuperR atings average revenue per client discussion that you had? How should we be thinking about this? Is this a step change in the profile of that business? Are there components of that step up more one-off in nature?
In terms of the overall products there, we see that level at least being maintained at a minimum. There are other opportunities for us to expand that. There's a few, I guess, strategic initiatives that actually sit within the SuperR atings pipeline that could potentially grow the revenue from that pie. Probably not to the same extent that we saw from FY 2024 to FY 2025. That's on that annualized number.
We would expect to still see growth in the SuperR atings area, just not by probably that much.
All right. Thank you.
No worries.
Thanks, Laff. Your next question is from Joseph Michael at Morgan Stanley. Joseph, please go ahead.
Hey, Grant. Hey, Terence. Can you hear me okay?
Yes.
Yeah. I got you, Joe. Thanks, mate.
Okay. Great. Thanks for taking my questions. First question I had was just around Division 296. It looked like it was dead in the water before Chris Murth. Looks like it has made a revival in recent months just to get the latest on that bill, what you are hearing out of Canberra.
Yeah. Similar to yourself, actually. It feels like it is going to get up, and then all of a sudden, it feels like it has vaporized once again.
All of a sudden, they're like, "No, we're not giving up on this." There seems to be some politicians and MPs in Canberra that are very, very committed to seeing this through. What I've been surprised about because it's at the margins in terms of getting the vote in the Senate to have this passed and go into Royal Assent. I thought they would negotiate something to see something go through, but it doesn't seem like there's a willingness to do that. They're still saying if Parliament does sit, depending on when they call an election, of course, next month, that it is going to be on the agenda, but we'll just have to wait and see. We're not sure.
The good thing about it, every time that this piece of legislation is spoken about, positive or negative, it does not matter, it brings a focus back to our business because it demonstrates how a AUD 4 trillion pool now of superannuation that is going to continue to grow, a country that has got an increasing deficit, we have got a budget deficit moving forward from the projections that we have all seen from Treasury, that that pool of money is most likely going to be touched or people just do not have the trust that they once had for it. Yeah, we do not have that crystal ball in terms of where it is going to end up if Parliament does sit next month. We think there is going to be more changes regardless of what side of politics are in power over the next few years, which just really helps drive our business.
I want to be sort of very clear to everyone on the call. We've never had a situation where people pull money out of super and give it to us unless it's just for an estate planning purpose. That's nearly where they're close to end of life or might be terminally ill. There's a large taxable component, so they'll utilize our structure for that. In terms of just pure taxation, we've never encouraged one person to pull it out because obviously this legislation hasn't been passed yet, and it's been debated for a long time. What it has done for our business is made advisors recognize that, "Hey, I can't just put more money in super. I can't just rely on my traditional structures.
I've got to look at other solutions. That's where the strategy around investment bonds has really become a lot more front and center. The more advisors using it, as you can see that number going up 16% on the first half of last year, just means that that marketing and that sort of advocacy has been done for us as well.
Okay. Got it. Just a question on the outlook slide around investment bonds. I think the phrase used is you continue to build on current sales momentum. Does that suggest that inflows have accelerated into 3Q, or is the trend still similar to 2Q?
I think the best way to describe it without going into too much detail—we'll have to do another ASX update—is that the trend that you saw in the last quarter has been maintained in terms of that momentum coming into this year. That step change has definitely remained.
Definitely on a PCP basis, just not necessarily on a QoQ basis because we do have seasonality in our sales numbers.
Yeah. Yeah. On a relative basis, always January buys away short month, obviously, in February. On that basis. In terms of the actual step change for this particular time of year, that's maintained well and truly coming into 2025.
Okay. Great. Just had two more questions. I wanted to quickly sneak in. Investment bonds, anything to call out in terms of seasonality for either the revenue margin or cost base?
The revenue margin was a bit higher in the first half than I expected. I think typically the cost base is a bit higher in the second half. Can you just maybe talk to that, please?
The revenue margin has remained steady. I mean, we've not had any margin compression at all. Just in terms of expenses, we have provisioned a bit more for bonuses, especially for the BDMs, given the sales trajectory that we're seeing. That's probably the main thing. What we've provided for in the first half is based on our view as to where the sales will be for the full year. Naturally, I hope to provision even more in the second half should the trajectory continue because the more sales exceeds budget, the more we'll be providing for bonuses.
What that means is that because we do not have a trailing commission in terms of our payment structure, we reap the benefits in the future income years, where financial years where we start off with a much, much higher opening fund from higher sales numbers. I might not get a full benefit this year because I will be providing for more bonuses in terms of additional sales. Yeah, great upside for a longer term.
Which we have seen coming from last year into this year, really. The fund delta is quite material, and that has transferred into a really good, strong revenue result.
Okay. Got it. The last question I had was just around Lonsec managed accounts fund growth. It looks like the fund growth has been really healthy, but I guess the trajectory has not changed. We have not seen a step change.
I know there's been a bunch of wins in the tailored at scale product. Just wondering if you could comment on the growth of the fund versus the committed pipeline. Is the pipeline actually growing faster? I think you sort of alluded to that the second half might be stronger. Should we start to see some of that pipeline convert into fund over the next six to 12 months?
The first half of this year is materially better than last year. It's up over 120% compared to the net flows of FY2024 half one. A lot of the work that we've done has started to flow through. Some of those new relationships that we've developed, we have one FUM that will come through.
There'll be a couple of probably smaller chunks that are initial transitions, and then the sort of base pipeline continues to grow. Yes, we do anticipate that there should be growth in that area, all things being equal. From what we've seen and what the team's been able to deliver, Mark Haraki's done a great job there on that side. They've won more business in the first half of this financial year than I've seen in any other half. We don't disclose exactly what that number is, but it's been better than what we've had previously.
Got it. Thank you, guys.
No worries. Thanks, Joe.
Your next question's from Nick Burgess at Ord Minnett. Nick, please go ahead.
G'day, guys. Thanks very much for the presentation. Hey, a couple of questions just on Lonsec.
Just on the research side, obviously it looks like business is going exceptionally well there. And 10% revenue growth, I think broadly is at least a couple of percent better than perhaps what the average has been from the last couple of years. Just thinking, are there any pieces—and I know, Grant, that you said the pipeline is very strong—are there any bespoke pieces of work or one-offs in the first half that perhaps might detract a little bit from that 10% run rate persisting or maybe even any seasonality we need to be aware of? Just thinking how sustainable, I guess, that 10% level is.
I'll let you answer the numbers. In terms of the product side, Nick, no, that's all the business that you see there in that sort of 1,782 or 1,783 number in there. That's all repeat business.
We should be able to carry that business moving forward unless they close down one of those products or one of those funds. I'll let Terence answer the financial side of that.
Yeah, I guess in the first half, we did see a pickup in demand for out-of-cycle review. Those are higher margins. You do the same work, but because it is out-of-cycle, you charge more. We make higher margins for that. The other thing coming through is that we are seeing margin improvements come through. The investments that we have done on the research systems the last couple of years, that has enabled us to get more operating leverage through. Each analyst now can cover more products. The uptake in margins you see is probably a combination of two, both from an operational margins piece as well as out-of-cycle on the revenue margins.
Yeah. To Terence's point on that, Nick, I was actually up with the team, the research team yesterday, just looking through their software in terms of how they're doing it now and the updates and how quickly they can actually spit out research in comparison to what they could do previously. The amount of new out-of-cycle research that's even coming this year, it's cranked up really, really quickly. To Terence's point, that's the good high-margin stuff where people just go, "I need the research rating now. I've got to get on APL so I can start distributing my product."
Okay. That's quite clear. Thank you. Your answer there just leads into my second question around EBITDA margins for Lonsec as a whole. Obviously, well into the 40s now in terms of percentage EBITDA margin.
How should we think about the operating margin of that business in stable to improving markets in the second half and into next year?
It will keep improving. I mean, the retail margins might see a little bit more upside from the investments in new systems, but I would expect, yeah, continued, I guess, decent-sized improvements coming through on the LIS business. It's just typical fund manager economics that, I mean, if fund doubles, your cost base is not going to double on that front. That will continue to improve. Naturally, as your base gets bigger and bigger, that improvement will slow down a bit. That is nothing to suggest that we can't keep improving margins for the business as a whole.
Thanks for that. Maybe just a follow-up on that with one further question, but perhaps a bit of a cheeky question.
The Lonsec business, in terms of EBITDA, is certainly doing better than when you did the acquisition or the full acquisition during the year. Any comments in relation to how that business is tracking towards the earnout threshold? Certainly, from this point, it looks like it's tracking towards the top end, but any comments there would be helpful.
All things being equal, they're definitely going to be in earnout territory because they're performing exceptionally well. Where that ends up, we're not sure. All Terence and I are doing is making sure that we're provisioning enough if it's more at the upend than not in terms of making sure we've got a debt facility and plenty of cash in place within the business. We're certainly giving no guidance of where we think that ends up.
Obviously, markets can change a lot in the space of just over three months to go or four months with the year. With that, we think if that remains and they continue to do what they're doing, it's definitely going to be an earnout payment. What that looks like, we're ready for. We're not doing any sort of projections on where that'll end up.
Our preference is always to pay as much of an earnout as possible. It means that the businesses that we've acquired have far surpassed our expectations.
Yeah. Okay. Appreciate your candor on that. Thank you. Just one final question. Just on the annuity business, sounds like there's some initiatives coming down the pipe for that one. How should we think about the potential financial performance of the annuity business?
I guess I'm thinking, should we be thinking about additional cost in the short term as you try and stimulate that particular product line?
No, I think we've got a steady cost base there. I mean, you've probably got CPI-type increases. What will really drive the financials really is the uptake in sales. I think it's probably more revenue-driven rather than cost-driven in terms of the longer-term outlook for that piece because we've made the requisite investments in that space that there won't be any step changes in the cost base there.
You're probably scratching your head thinking, how are they going to drive a new strategic initiative and not spend any money? It's not sending out Terence into distribution.
There is some stuff that we can't talk in sort of any detail around, but we feel confident will provide us more distribution opportunities to be able to scale a product up a lot quicker than what we're currently doing.
Okay. All right. Look forward to further details in that in due course. Thank you very much. That's all my questions.
Thanks, Nick. Cheers, mate.
Next question's from Tom Tweedie at Moelis. Tom, please go ahead.
Hi, guys. Just want to check if you can hear me.
Hey, Tom.
Got you, Tom.
Yeah. Just one question from me.
With the consolidation of Lonsec and Evidentia, just came to better understand what the incremental scale benefit and revenue synergies you can get from that sort of in terms of maybe volume discounts or what you do with the platform operators or what can you do on that side of it that can, yeah, help those revenue synergies?
All the things that you discussed are certainly opportunities for us. We have not gone into any detail and quantified that openly in the market. Obviously, we have a working group that is led by individuals on both sides of that business to be able to drive those revenue synergies and also some of the client opportunities and the benefits that come from that scale. Those plans are in place and currently being executed.
Hopefully, by the time we get to year-end, we'll be able to provide a little bit more detail and some of the benefits that they'll provide both from the client and the business side. We don't want to quantify anything just as yet until we've really done all the work and we feel 100% confident. Obviously, there's a few conversations that need to be had before you sort of finalize elements of that as well. We've discovered quite a number of things that we can do, put it that way. We're confident we'll do them too.
Just as a reminder, when we did the acquisition, it was low- double digit equity without any synergies.
Brilliant. Thanks, guys.
No worries. Thanks, Tom.
Just our last question is from Ross Cameron. Ross, please go ahead.
G'day, Ross.
Hey, Ross.
G'day, fellas.
You can hear me okay?
Yes.
We got you.
Yeah. G'day. Look, great presentation and terrific set of numbers. And Grant, I know you've acknowledged everybody else's efforts, but mate, well done to you too. It's a great set of numbers. So good on you, mate. Hey, question that's probably different to the sort of questions you typically get. With so many people in industry funds, have you considered potentially distributing or selling, even white labeling products through an industry fund, which obviously is not down the IFA sort of channel, but it's quite different? But is that something you've paid any attention to? Actually, essentially selling your product through an industry fund, even if it's white labeled and the customer doesn't know that GDG is behind it.
Yeah, absolutely.
We have actually set up our systems to be able to do that, not just on our lifetime annuity so they can cover off on the retirement income covenant, but also for the investment bond as well. Currently, what we do with some of the industry funds is we are on their approved product list. We do sell our product through them. If they have an advice arm sitting in that industry fund, they will certainly sell our products. It is a morbid-sounding product, but our funeral bond, which gets a discount, I think, of up to AUD 13,750 per product, both on the income and the assets test. It actually provides you about another AUD 1,100 or AUD 1,200 worth of additional age pension for the average Australian. It is very, very popular through a lot of those funds.
In terms of the white labeling solution, we haven't done any of those yet, but I'm sure as the federal government puts more and more pressure around the retirement income covenant, being able to provide longevity solutions for their various cohorts and members, we're definitely set up and ready to do that and able to engage with those funds.
Thanks, mate.
No worries. Thanks, Ross.
Grant, Terence, that concludes the Q&A segment. We've got a couple of submitted questions, which we'll get back to via emails. We've run out of time. Grant, I'll just hand it back to you for closing remarks.
Great. Thanks very much, Simon. Thanks very much to all the supporters we've got out there. Obviously, Generation Development Group's come a long way over the past few years.
Like I said at the opening, we've really diversified the product set to make sure that we're not dependent on any one product or any one business or any one channel. I feel like we've got some great opportunities moving forward. Obviously, that combination of Evidentia and Lonsec Investment Solutions going out to market and being number one there in terms of not just FUM, but the product set and proposition that they have is going to drive further operational leverage within our business. We've got great momentum within the investment bond space, and obviously, the research business continues to grow and strengthen in terms of that brand moving forward. We've started the process of obviously reshaping our business to make sure that we've got those clear accountabilities and we're optimizing all the performance of every asset that we have.
In terms of any sort of organic or inorganic opportunities or any strategic things that we'll look at doing moving forward, we're definitely not going to get ahead of ourselves. I know we've done two pretty big acquisitions over the last eight months that I think have been good acquisitions for the business, the right acquisitions for the business, and something that we wanted to do. We're very, very prudent, very measured, and considered on anything that we'll be doing moving forward. We want to make sure that everything that we have done over the last 18 months is consolidated, and the leadership and the executives within those teams have got those businesses absolutely humming and performing to the degree that we would like them to. Again, a big thank you to everyone that's supported Generation Development Group.
We look forward to returning that vote of confidence through our performance over the next six months and coming years. Thanks again, and thank you, Simon and NWR, for facilitating the webinar today.
Thanks all for attending.