Thank you for standing by, welcome to the HUB24 Limited 1H FY2023 results call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by one on your telephone keypad. I would now like to hand the conference over to Mr. Andrew Alcock, Managing Director. Ple ase go ahead.
Good morning, everyone, and welcome to our first half financial year 23 results presentation. Great to have you with us. I'm absolutely, certainly pleased on behalf of our great team here at HUB24 to be able to present some really solid results to the market this morning. We absolutely work very hard and are very focused in HUB24 and committed to what we do. We really believe in the value we're creating for our customers and shareholders, and it drives us to absolutely try and challenge ourselves and deliver in the marketplace. We do that, if we turn to the next slide again. As you will all know, we're about empowering better financial futures together.
Now more than ever, the together is important for us, given we've made acquisitions over the last couple of years that bring into our stable a whole lot of capability that allows us to continue to lead in the marketplace, create change, disrupt the market, provide better solutions and opportunities to extend our lead from a market competitiveness point of view. More importantly, to create opportunities for customers and unlock value for them. Real opportunity and real value based on us working together across our capability in the business, which is core to our overall strategy. Of course, working together with the broader marketplace, fund managers, financial advisors, licensees, other technology providers. We certainly believe in an integrated open architecture world.
That's what we're about. We think that's underpinning the great results we've got today and will do so more and more in the future to build a longer-term sustainable growth pattern for the business. If I move to our financial highlights slide this morning, it is great to be able to talk about these numbers. From a revenue perspective, the total HUB24 Group had AUD 138 million, up 69%. Our underlying EBITDA, just shy of AUD 50 million, but also up 68% on first half FY23. Breaking that down for the platform, it's AUD 102.7 million for the platform, up at 33%. The underlying EBITDA there up 38% at AUD 41.4 million.
Tech Solutions, having had Class in our business for a full six months for this half, Tech Solutions revenue increase is obviously large from prior to that acquisition at 33.4% and AUD 10.5 million underlying EBITDA. Leading to a statutory NPAT for the group of AUD 15.5 million, that's up 85% on the prior corresponding period. The underlying NPAT up AUD 26.6 million. Again, a large, increase, 87%. Underlying NPAT is taking out some transaction costs or integration costs for the Xplore integration, which I'll talk about later, and some investment in what we call HUB, sorry, HUB24, SMSF Access, which we're very excited about. There's some acquisition amortization out of that, which is the difference between statutory and underlying NPAT. Great, stats there.
Our dividend, we're really pleased to be increasing the dividend. It was AUD 0.125 last half, and I think AUD 0.075 prior corresponding period. We're up 87% at AUD 0.14, fully franked, with a diluted EPS of AUD 0.009 per share. Great results. We'll move along. Kitrina Shanahan, our CFO, will talk through the detail of this a bit later on in the pack. Some of the other key metrics here, our total FUA, AUD 73 billion. FUA having finished at 31/12 at 55.8, now up at 58.5. Of course, there's some market movement there. We've tracked just below market movement in that first few weeks of the year. That will help everyone think about the flow patterns to date.
Our past FUA pretty stable at 17.2. All in all, a very solid result. It's great to be able to say that once again, that's consistent with our track record. I move on to the next slide, we've got the 5-year picture there, in terms of our funds under admin, being a core revenue and profit driver of the business. That's got a 5-year CAGR of 60%, which is we're very, very proud about. The chart there has the Portfolio Administration and Reporting Service or non-custody admin there, as well as the core platform. On the right-hand side, we've broken down the revenue so you can see it a bit differently to our normal presentation of the slide. You can see Tech Solutions and platform revenue and corporate and licensee.
That's in the bars on that particular chart. Of course, licensee, we sold Paragem to Diverger at the end of 1H 2021. You see that dropping off there. That's the blue that disappears. You also see the yellow coming in at the end of the chart, which is the acquisition of Class. Giving you a picture of the revenue change in the book mix or the footprint, but clearly you can see the continuity of the trend in platform revenue being the dark blue and how that is driving results and coming through consistently in the business. With about AUD 138 million in revenue altogether and the EBITDA line, the group EBITDA line there just shy of AUD 50 million, as I said earlier, for 1H FY23.
You can see the trend back there five years. Great growth over five years. We hope to continue doing that. Certainly our focus on our strategy, our execution, our client service is intending to keep delivering in that way. We have a look at the actual market share and growth in market share for the HUB24 platform business and also for Class. The growth in the platform custody market, we've gone up from 4.6% market share 12 months ago or as at September, that's the latest data available, does lag 3 months. In the 12-month period to September 2022, data which came out in early January, it's up 1.1%- 5.7%. Consistently increasing market share in that quarter every year.
We are the seventh-largest platform provider by market share. Certainly, we're delighted to be the fastest-growing in percentage terms in our net inflows as a percentage of our FUA is the fastest-growing in the market, punching above our weight. Ranked number one now for two quarters in a row for net inflows into the business. Still ranked number two on an annual basis, for the last two quarters, we've had the highest inflows of any other platform in Australia, at rank number one for that. Again, the CAGR there is there. The platform custody FUA is 52% over five years. The earlier slide was that including Class, so 52% for the platform over five years. In the Class space, Class has a market share of 30%. That's been fairly stable.
The business is ticking along and growing, up, there's been some growth since the start of the year as well. Ranked number two in market share, so a really strong market position. Since 1H18, there's been 26% growth in Class. Talk a bit more about Class later on, but in terms of being a very welcome and complementary business in HUB24, very strategic for us. Absolutely delighted with the business, and what we're seeing happen there in our plans for the future. Okay, turning onto the next slide.
We're really, really pleased we've been able to announce this morning, I think we've got it in line with the release from Investment Trends, that we are rated Australia's best platform overall, having achieved the number one position that was announced, well, this week from the recent survey from Investment Trends. You know, we are Australia's best platform as rated by them, and we certainly believe we're well-positioned for future growth. I said earlier, we've been first for quarterly net inflows for two quarters in a row. Interestingly, we're the first for net inflows into superannuation on platforms, i.e. we have the highest level of inflows of any platform in our superannuation product set, which is a subset of the overall. We've been first there on a quarterly and an annual basis. That's been fairly consistent.
We do have a large superannuation footprint, and we're growing very steadily. If I expanded that out, if you look at the whole superannuation industry beyond just platforms, you consider industry funds and public sector, we are 3rd in Australia for net inflows in superannuation behind AustralianSuper and Australian Retirement Trust. A great result for HUB24 there. With the other number ones there on the slide, as I said, best overall platform, best managed accounts or managed portfolio and product offer. Number one for advice, and that's from Investment Trends. Also from Investment Trends, number one for reporting and online business management. They're the result out this week. In that particular research from Investment Trends, we are first in 22 of 46 categories.
You know, obviously the platform with the most number 1s in that particular research. Number one there for those. In terms of the Investment Trends Tech Report, still number one value for money, that's a different report. For Adviser Ratings, best investment options and advisor experience, and best investment SMSF investment platform, try saying that fast, from CoreData. Great accolades there. Well-positioned for growth given that positioning. It means we're doing something right. We work very hard to do that, and we know we need to keep working to maintain those ratings. Certainly, in terms of thinking about the future, we are leveraging the combined capabilities or together HUB24, Class, NowInfinity, are working together to expand the SMSF market with the launch of SMSF Access.
We are actually launching it in a more broader launch this week at the SMSF conference. Our team are up there, launching it to a whole lot of SMSF advocates, being advisors and accountants. We're going full swing with that product now. We really do hope to create another choice and expand the market, i.e. this will create opportunities for advisors to advise clients they didn't have solutions for previously, as well as, provide a lower cost, simpler solution to the marketplace. Again, talking about how we work together in our group to reduce friction, innovate, and create new opportunities. We are obviously continuing to invest in the platform with enhancements of efficiency and choice and flexibility. You may be aware that in December, January, we launched our ESG ratings capability on the platform.
Advisors can actually look at the investments for their clients and get rankings and ratings on how those rate in terms of ESG categories to help support choice for consumers who are looking at utilizing their preferences and their investment capability. Enhanced model portfolio capability, and we've got ongoing enhancements to HUB24 Present, which I'll talk about a little bit later in the pack. Of course, we continue to progress the Xplore Wealth migrations, including the discontinuation of the superannuation administration business, which was non-core to us when we purchased Xplore. That's substantively complete. We've been doing SFT migrations onto Hub, and we've done quite a bit in the first half of 23, and we've got some more to do this half as well. That's progressing really, really well. Positioning us for the future.
If we go to the next slide, what we'd like to do is talk about our pipeline and how our advisor base is working to help us harvest the opportunity for that future growth. We've presented here in the slide some analysis of our half-yearly FUAR net inflows from 1H 2021 through to 1H 2023. To demonstrate that, you know, roughly, we're getting recurring flows from existing relationships in that bar chart each year. HUB24 has reliable recurring flows from advisors who use the platform because of our great service and product features. It's reliable. In fact, advisors generally transition their clients over roughly a six-year period to the platform, so you get ongoing growth for a long period of time with relationships you win. On top of that, flow s from existing relationships.
We've highlighted the flows coming from existing licensees. We might have a agreement with a national licensee, but we may not have actually had flows coming from some of the advisors in that group. There might be 200-300 advisors in that group, and not all of them are using HUB. You can see every year in that middle blue color, we are actually leveraging those relationships and getting a percentage of flows from advisors from which we have relationships with their licensee that have yet to use the platform. We're reliably and consistently getting growth there from those relationships. That's why we invest in our key accounts process. We work strategically with licensees. We're building licensee tools like HUBconnect Licensee, which I'll touch on a bit later as well, to help with advocacy in that space.
The dark blue is new licensee relationships. You would have noticed in our release, I think we had 57, if I'm wrong, I apologize, 57 new licensees in that order, signed up with HUB24 in the first half of this year and over 200 advisors, which is our ongoing trend for a half. So there's some analysis on our recurring flows from existing relationships and showing how well we're doing with growing new relationships from existing licensees and new ones. On the right-hand side of the slide, to color that in a bit further, there's about 15,500 licensed functional advisors currently in the Australian market. We have access to or relationships with 71% of that market. When you consider that, there's about 7,500 advisors, that's the bottom half of that donut.
7,500 advisors who are covered by a licensee agreement that HUB24 has with their licensee, who are not yet using our platform, which speaks to the chart on the left about our success in actually growing or building relationships with those advisors. We've got access to another 7,500, but currently, we have 3,600 or 3,700 active advisors using the platform. That's about 23% of the market. Ranked one on many measures, but only accessing 23% of the advice market with the ability to access more than 71% in total of the overall advice market. A great opportunity for us to keep working hard on. Also the average number of advisors is growing consist ently.
It does move around, if you look at the long-term trend, and it's in our analyst pack, we're still on track. We're getting about 200 advisors each half. That hasn't slowed. That all goes well for actually getting new advisors on the platform and getting new flows on top of the recurring annual flows we get from existing relationships. As testament to how well we're doing with those relationships, though, in the last two years, the average advisor funds under admin on the platform has grown from AUD 10 million-AUD 15 million in funds under administration. Not only are we adding new advisors and seeing that work for us, we're actually seeing the average FUAR per advisor increasing.
We're doing better at working more strongly with those advisors and picking up more of their book of business over time. Having said that, there's a long way to go and a large opportunity because if the industry average is roughly AUD 50 million-AUD 60 million per advisor, we put AUD 50 here on our analysis, but I actually think it's potentially higher than that. The industry average FUAR per advisor is in that order, and we've got AUD 15 million as a market leader. You can do the mathematics, I'm sure, to think about, well, what would happen if you got to 50% of that market or even higher? What is the latent opportunity there with the relationships we've got? We're doing well growing our share of wallet from existing advisors. We're doing well growing advisors. We've got these relationships.
There's a great opportunity and pipeline for us. Of course, the demand for advisors continuing to grow. That's creating demand for advisors and demand for our products and solutions. We operate very strongly in the superannuation segment, which is systematically mandated by the Australian Government and underpinned by SGC increases, which will go up as well. Really well-positioned with our relationships and our strategy and the latent opportunity and the market environment for ongoing growth. Moving on to Class. I'll quickly touch on Class, which as you know, we've had for the whole half. We bought in February 2022, and we've had it in these results for the whole half. Absolutely, going through a process of consolidation and setting up for growth and looking at innovation.
On the consolidation front, we have a new experienced leadership team in Class. We have actually had more change than we expected when we purchased the business, but that's great. We've got a great experienced team in the business. Now we've got a CEO and a good stronger team focused on different business lines in Class. We've strengthened our customer engagement greatly in terms of the way we engage with customers and the service and education, we've enhanced that, and we're delivering product enhancements to improve experience and drive efficiencies. We're going through a period of time where we're consolidating the position and setting the foundations for growth. We have a whole new realigned sales team that went live in January as a result of actually putting in a new sales head or distribution head inside Class.
That sales team is now coming online, so we have an enhanced focus on sales and growth than the previous ownership in the business with that realigned distribution team. We've seen some uptick in the first few weeks of this year as well, in terms of accounts on Class. We're certainly working on, as I said earlier, working together in the market. We're certainly enhancing strategic partnerships. It's who HUB is, it's who Class is. We're looking at strategic relationships with Class and how we can work better together to create better solutions for customers. I think that's really sensible to work with industry leaders, and build the solutions for the future and grow business.
We're enabling innovation by leveraging the Class and NowInfinity capability with HUB24 as one of our first group-wide initiatives to launch SMSF Access, which I mentioned earlier is being publicly launched to a broader launch this week at the SMSF conference. Innovation would be the third phase there. We are continuing to leverage Class capabilities to build our platform of the future and a single view of wealth on HUB24. Very, very key to our strategy in acquiring Class, given the amount of data that Class has to produce SMSF accounts and lodge with the ATO. There's gold in that data in terms of thinking about providing whole-of-world solutions for consumers and making the world a far better place in terms of people being able to think about their retirement.
That's feeding more and more into HUB24's single view of wealth portal. Collaborating with industry participants, working across the industry to deliver education, insights, and best practice. Taking a leaf out of HUB24's book with Class, working that way more and more in the future as well. Delighted with how the business is going. More to do, and we're really excited about SMSF Access and the future of that. Course, I'm gonna turn to people for a second. It's great to be able to talk about the wonderful team that I work with and we work with here at HUB24. We couldn't be successful and be focused on customers if we didn't have great people. We have certainly focused on attracting and retaining talented people.
We do that through our flexible workplace practices and policies, prioritizing employee wellbeing and support and online tools. We've relaunched some online support tools and services for employees that really are cutting-edge and you know, state-of-the-market in terms of giving them access to third-party help and wellbeing and all sorts of other great resources in the community. We invest in leadership and so forth and working on talent and graduate programs. We actually have a STEM returners program, which is seeking to look at returning people who might have left us in the past and wanna come back to our great business in terms of that, and that's having some great success as well. We invest in our people and community very much so.
We wanna create the right environment for our people to thrive as we have, and it's really vital to move ahead. Can't underestimate that. We've hired Amy Rixon, and publicly welcome Amy here to the business. Amy is our new Chief People Officer. Great to have Amy on board to help work with me, the team, and the rest of the HUB business to build on our great foundations of culture and help us continue to grow. Over 700 employees, 736 now. 65% dedicated to innovation, product, and customer service, which is key to us, and our employee engagement at 72%. Our values are there again, and we really do believe in that strongly.
Doing the right thing, working together, having a great client focus, innovating, certainly passionate, and certainly wanting to deliver excellence and go above and beyond. Of course, we are supporting the community more actively. You would've seen in our results for the full year 2022, our statement about ESG and the activities we've got there. We have a sustainability council up and running. We're certainly working through corporate giving partnerships, employee voluntary programs, and so forth, and making great strides there on a number of ESG fronts and focus areas. I.e., the example of us actually having launched ESG ratings on the platform to help advisors is a great example of us leading in that space. Certainly working through cyber and other areas, diversity, inclusion, and environmental areas in our ESG focus areas.
Great to be able to talk to you about that today and how important that is to HUB24 today and our ongoing success. I'd like to hand over to Kitrina Shanahan, our Chief Financial Officer, who's going to give us a run through our financial results. Good morning, Kitrina.
Sure. Thank you, Andrew. I'm gonna start off with a quick snapshot of the group revenue and underlying EBIT, which is calling out the platform and tech solutions segment contributions. You can see from the data in the middle that the platform segment remains the main driver with 75% of the group revenue driven by the platform segment and 25% from the tech solutions segment, which now includes the acquisition of Class. The platform underlying EBITDA was AUD 41.4 million and tech solutions was AUD ten and a half million dollars. The slight difference between the totals for the group and the platform and tech solutions is the corporate segment, which includes interest income offset by group overheads and the underlying EBITDA for the group. The corporate segment was negative AUD 2 million.
You can see in the donut, in the charts that the platform segment, 97% of the revenue is driven by custody and 3% is driven by non-custody. On the tech solutions side, you can see 80% is driven by the software subscriptions and 10% by document sales and 6% by HUBconnect, et cetera. Moving on to the next slide. We have the group financial results, and you can see the strong growth metrics, the strong growth across all the metrics. Operating revenue and expenses are both up 69%, with group revenue being AUD 138 million, operating expenses being AUD 88 million. Underlying EBITDA has improved to AUD 50 million, AUD 49.9 million for the half, which is up 68% on first half of last year.
The underlying EBITDA margin and the cost to income ratios have remained relatively stable, with the underlying EBITDA margin being 36.2%. You can see in the graph on the bottom right-hand side that when you look at first half 2022, the underlying EBITDA margin was 36.4%. The core businesses have delivered, platform has delivered AUD 11.4 million of underlying EBITDA, and tech solutions have delivered AUD 12.7 million. The corporate area, a negative, you know, AUD 900K for costs.
That would take the underlying EBITDA margin for the group from 36.4%- 38.4% prior to the alignment of the Class capitalization policy, which is the AUD 3 million on the right-hand side of that graph, which is at the upper end of the disclosures that we put in the Q2 market update. Still in line with those disclosures. You can see the group underlying EBITDA of AUD 49.9 million in that graph on the right. The fully franked dividend, as Andrew mentioned, was AUD 0.14 for the half, which is up 87% on the prior period on the first half last year. The earnings per share of AUD 0.1889 per share is up 59% on the same period.
If we just move to the next slide, we've got the platform segment results. You can see that the total FUA has grown to AUD 73 billion, with AUD 55.8 billion at the 31st of December for custody FUA and AUD 17.2 billion for the non-custody FUA. The platform revenue is up 33% to AUD 103 million. Operating expenses in the platform segment up slightly less than the revenue, which is up 30%, delivering a strong growth in the underlying EBITDA of 38% to AUD 41.4 million for the half. The underlying EBITDA margin in the platform segment has improved 1.5% on PCP, up to 40.3% this half. In the graph on the right-hand side, you can see the walk of the various movements for the FUA.
You can see that we had the AUD 5.8 billion for the underlying continuing business. We had the AUD 1 billion, circa AUD 1 billion for the Xplore Super Admin business, which is largely discontinued now. There was some positive market movement of AUD 1.3 billion in the platform and in the non-custody segments. When we move to the next slide, we're continuing with the platform segment results, and you can see the last five halves, the underlying EBITDA margin, the underlying EBITDA in AUD, revenue, and expenses.
You can see at the bottom of the graph in the bullet points underneath the platform underlying EBITDA from a dollar perspective, has continued to grow every half over the last five halves, growing from AUD 17.4 million in 1H 2021, growing to the AUD 41.4 million this half, which is a 53% 5-year CAGR across that part of the business. The underlying EBITDA margin improving from 39.7% 1H 2021, growing to 40.3%. The drop in the 2H 2021 reflects the low interest rate environment at that point in time. You can see the RBA rate increases since then has strengthened the underlying EBITDA margin and driven the revenues in that area.
We move on to the next slide, we're continuing in the platform segment, we've got the composition of the platform custody FUA. You can see in the donuts on the right-hand side, this is where the Xplore Super Admin business has largely been completed. With, on the custody FUA side, 85% is now retail clients, 15% is institutional clients. You can see, the revenue for the first half does still include 1% from the Xplore Super Admin business as some of the SFTs were in December. You'll see that reduced down to zero in the second half of this year. You look at the revenue margin, the composition in the bottom graph, you can see that the revenue margin has improved from 32 basis points at full year 2022 to 37 basis points this half.
I'll talk a bit more about that on the next slide. But you can basically see that the institutional margin is slightly lower. It's lower than the retail margin, so institutional is 16 bps this half with retail at 41 bps. From an underlying EBITDA contribution, they broadly deliver the same underlying EBITDA contribution as the servicing levels for institutional clients and the average balances are different to the retail part. If we move on to the next slide, this is where we're talking about the platform revenue. You can see the bottom right graph, we've got the walk for the platform revenue margin. Second half 2021 was 34 bps, coming down to 32 bps in, across the whole of full year 2022, which reflected the Xplore part of the portfolio coming in.
This half we've got the five bps increase from the higher RBA rate, which, as we've talked about before, mean that we're at the upper end of our cash management fee and driving the 37 bps in the platform revenue margin. We've had very little admin fee margin compression this half, which has also contributed to a strong revenue margin, and we've had very stable trading volumes and no movement in the revenue margin for trading or admin fees. When we move to the next slide, we have the tech solution segment. We have a quick snapshot of the tech solutions. As Andrew mentioned earlier, Class was acquired in February 22. When you look at first half 22, we've only got the HUBconnect part of the business in there.
Most of the growth in this part of the business is driven by Class. In the chart on the right-hand side, you can see that the normal part of the Class business contributed AUD 12 million of underlying EBITDA. There was AUD 2 million of cost synergies following the acquisition of Class, which included the removal of listed entity costs, and we did a restructure of the Class business in second half 2022. You'll see the fee for AUD 2 million incremental cost synergies there. You'll see a bit of an uptick in that as we head into the second half and get another six months worth of cost synergies coming through. We've also got AUD 1.3 million that we've called out for HUBconnect uplift.
This is an investment in the HUBconnect infrastructure and technology that's been booked through expenses, not capitalized on the balance sheet. Examples of these costs include the pre-Present feature that Andrew will talk about a bit more when we get to the later slides. We've got the Present feature, which is built on the HUBconnect data and technology stack, and it supports the advisors that are using the HUB24 platform, so very complementary services there. We've also scaled the HUB24 licensee reporting and dashboards for licensees to use. Again, that's building on the HUBconnect data and tech stack, but again, is supporting the flows that we're seeing come through on the platform side of the business.
Just to round out the graph on the right-hand side, you can see again the AUD 3 million of Class capitalization policy alignment there. The pre the CapEx change, the underlying EBITDA margin in this segment was 46.6, coming down to 31.4% after the AUD 3 million of capitalized software change. If we move to the next slide, here we have the group expenses of AUD 114.5 million, which is the total statutory group expenses included in the P&L. This includes AUD 88 million of operating expenses that you would have seen in the group's underlying EBITDA presentation. The AUD 88 million of operating expenses is up 69% on first half 2022 that you would have seen in the earlier slides, and it's up 25% on second half 2022.
The main driver of that is employment-related expenses, with employee expenses growing AUD 25 million, up with, as Andrew mentioned, FTE growing 36 FTE from second half last year growing to 736. Also included in the AUD 114 million of expenses is AUD 4.4 million of share-based, share-based payments related to the employee, share schemes. We've got the AUD 3.3 million of impairment in Diverger and AUD 15.8 million of notable items, including strategic transaction costs of AUD 4 million, acquisition amortization of AUD eight and a half million, which includes both Xplore and Class acquisition amortization. That's it on the expenses. I'm sure there'll be some questions on that when we move to Q&A.
Moving to the final finance section of the slide, we've got the increased profitability, where we have a walk of underlying EBITDA to underlying NPAT. The group's EBITDA of AUD 49.4 million includes the AUD 4.4 million of share-based payments, which is slightly down on first half 2022. It's about AUD 1.5 million-AUD 2 million down on first half 2022 because we have the catch up of SPAS. In the prior period, we've got the normal depreciation and amortization of AUD 5.6 million, we've got the underlying NPAT of AUD 26.6 million after tax effect. We've got a walk from underlying NPAT to statutory NPAT, which includes the AUD 4 million for strategic transaction and project costs, which is largely Xplore integration and the launch of the SMSF Access product that Andrew mentioned earlier.
Then we've got AUD 8.5 million of acquisition amortization relating to Xplore and Class. The AUD 3.3 million for the impairment of the Diverger carrying value. That takes us to a 15.5 statutory NPAT, which is up 35% on first half 2022. With that, I will hand to Andrew to run through strategy and outlook.
Thank you, Katrina. If we move on to the first slide here, we've sort of merged our footprint picture and our strategic pillars. I wanted to really give the market and shareholders a view of how our three pillar strategy is working together with our portfolio of businesses to create value for customers and shareholders today and moving forward. On the right-hand side of the slide, as you can see, the portfolio of business is there with HUB24, the platform, both custodial and non-custodial, asset administration. You've got HUBconnect, Class, and NowInfinity, which are really technology and software businesses and product solutions and services in our stable altoge ther.
All underpinned by HUBconnect technology infrastructure, which is an ongoing investment in growing, and being built out in terms of building that platform of the future, but also creating optionality for integrating those components together. It's key to leveraging those businesses together. It's key to building advocacy in the marketplace. Some of the initiatives we've got underway are being underpinned by the investment we've made over a few years now to build that technology infrastructure. In terms of that architecture diagram there, we're certainly working towards how we can integrate our businesses with other financial services and product providers across the industry to create great opportunities and utility for customers.
With this 300 integrations or data integrations across the HUB group with Class and HUBconnect that we are progressively leveraging to provide further, I suppose, great outcomes for clients in terms of single view of wealth and one way of doing business and so forth. Our goal there, if you look at this picture here and how it's wrapped together, we're looking at that portfolio of businesses and investment in infrastructure that will hopefully over time really change the way the platform industry works. Our goal is to build a single view of wealth for advisors and their clients, covering assets, not just that we administer, that are administered elsewhere in the marketplace.
One way of doing business, I think there's so much opportunity for technology to streamline and reduce costs in this industry, and it certainly drives us to deliver and innovate for our customers. Efficient access to IP, that's managed portfolios or investment access, and doing that across a range of solutions in the future. Flexibility and reporting and insights. There's a diagram of the, of the architecture of our business and how it fits together with some of those strategic goals, wrapping it up into our three pillars. Our first one is about our core products and services. We absolutely wanna continue delivering customer value and growth and shareholder outcomes with market-leading functionality, innovative solutions, and driving growth in our core products and services. That's the HUB24 platform, that's HUBconnect, and that's the Class products as well.
We're very focused on the core, and delivering growth there because that's key to our foundations for further growth again. If you add to that and you think about the other assets in our portfolio, there's more to do. There's things that we can use, components in our business to actually add value to that core business as well as grow those other businesses as well. We've got a range of complementary offerings that are designed strategically to build growth, not just in the short term, but in the long term, and underpin ongoing growth for HUB24. For example, the acquisition of Class, Xplore, the investment we're making in HUBconnect.
We believe those businesses in their own right will grow and provide solutions for customers that linked back to our overall strategy, will also continue to grow and increase the growth in the HUB24 platform. It's about continuing to lead in this industry and have market-leading net flows, not only today, but down the track in the future, continuing to disrupt, extend our lead, and have long-term sustainable growth for the business and for shareholders. We work very hard at that. There's a lot to do. We are building the platform of the future. Well, we continue to build what we call a platform of the future.
We've been doing that for many, many years now, but taking the acquired capabilities, and that's our second pillar there on the left-hand side, the acquired capabilities in our core businesses and bringing them together and how we can integrate non-custody with custody, how we can integrate data to provide insights and so forth. You know, create value, unlock value for shareholders and build a better ecosystem. The last strategy there about collaborating across the industry to change the shape of the industry, that's really working with licensees, it's working with regulators, it's working with software providers to build a future industry that's sustainable, that's got great foundations and delivers value to customers and even expands the marketplace. We do that with HUBconnect Licensee.
We're working in the digital space with a lot of other providers, integration across our business with others. We're working on what we call a data access portal, which is really to support open banking and permission-based sharing of client data to provide outcomes in a safe, robust, secure way as the backbone of HUBconnect for that future vision as well. A lot going on there. As I said, expected to drive growth, not only in those businesses, but to fuel the growth of the platform and to provide more flows than we would get if we weren't investing in these comple mentary businesses.
Really an integrated strategy to underpin growth, lead change in the short and the long term, and create strategic value across that portfolio of businesses and take the opportunity to grow that we have while we lead the market and continue to lead the market. To break that down a bit further, looking at one example on the next slide, to give an example of how HUBconnect is helping us do that. You may recall earlier in the presentation, we talked about the recurring flows from existing advisor relationships or how we get a large percentage of flows each year from advisors we've had a relationship with for more than a year. Then we outlined the percentage of flows we get from new advisor relationships in licensees that we already have a relationship with.
That's a key driver of us investing in what we call HUBconnect Licensee, which is one example of leveraging the HUBconnect infrastructure and the investment we make that Kitrina's talked about in our financials to continue to extend our market lead. HUBconnect Licensee is about providing licensees access to integrated quality data, which is critical for their efficiency, critical to do the role that they have to do to maintain and manage compliance, critical to ensuring that Australia has a sustainable advice business that provides outcomes for consumers. We're providing solutions there by producing integrated data sets for licensees, gathering data from multiple sources, taking unstructured data, i.e.
documents, categorizing it using machine learning to create data insights and databases for licensees to make them more efficient, but also to help support us in our strategic relationship with that group and hence continue to achieve that growth in advisors from those licensees that use HUB24 today and in the future. That's the essence of the strategy there, that we can actually change the industry and provide infrastructure that lowers the cost of advice and makes advice more accessible, but also grows our core business by building advocacy.
HUBconnect Licensee on this slide, in the case of the licensees who are currently using the product, and we've done some surveys with them, they're reporting reduction in manual tasks or a 40% efficiency over 12 months on key compliance and practice management activities. Not only is that actually speeding up processes and saving them time and money, it's actually detecting risk before and preventing risk before afterwards and building a more sustainable industry and moving forward from some of the issues we've had as an industry in the past. This is infrastructure that will support an ongoing rebuilding of foundations in the industry using data in the way that it can be. There's two more licensees in discussion with us now about implementing that will hopefully build bigger and stronger relationships with the HUB platform overall.
HUBconnect licensees working, it's providing insights for licensees and efficiencies for advisers. The slide there talks about how we're taking data, we're extracting it, we're cleansing it, we're producing dashboards and alerts and reports and letting licensees know when things are going outside parameters so they can take action rather than having to do a whole lot of manual work to do that. We've only just started there. There's more to do in that space in how we can integrate that technology with the platform. An example about how our strategy in the data and tech space, combined with our deep financial services expertise with the core platform, are coming together to create opportunity and growth for shareholders and customers.
The next example I've got there, and I know I have to move quickly because we want some Q&A, is on HUBconnect or which is HUBconnect technology, and the data also enabling platform growth and advocacy with our market-leading reporting service. You'll notice that we achieved first place for reporting in the Investment Trends report. HUB24 Present. We're continually updating that. We're working very rapidly towards adding off-platform cash accounts and off-platform assets or non-custody assets to it as a reporting tool. We've been updating it since we launched it around about June last year, and it really is helping advisors look after customers and reducing report preparation time for review meetings for those advisors who choose to use the tool by up to 95%.
Quite simply, it's allowing advisors to talk to customers in their language. You might use certain strategies or languages in your statement of advice. You might call certain investment strategies, you might have different names and labels for them. We're allowing licensees and advisors to tailor this system so they can report to clients in the same language they use in the SOA rather than having to build reports and edit them. For example, you might have a what we call a bucketing strategy for those who are approaching retirement or in retirement, where they have a group of investments set aside to create income and a group investment set aside to create capital growth. The licensee may refer to them with different names.
We can report on those buckets and segments with this tool, which is ultimately flexible and dynamic for advisers to change on the platform. Just two examples of how we're using the technology investment to grow the core platform and create outcomes for customers. I'll move on to our outlook slide here. Once again, fairly consistent statements here about our belief in the future in maintaining our leadership position. We are gonna continue to invest and leverage the investment we've made to build future scale. We're investing in ops and technology to build that scale and future customer service excellence, and certainly wanna keep taking advantage of the superannuation opportunity we have in the marketplace to create growth.
We're certainly going to leverage the acquired capabilities of the group, not only to grow the businesses we've purchased, but also to grow the bigger pool and the platform itself and create new markets to innovate as well. We're gonna continue as always, to evaluate strategic opportunities that create value. We're very discerning in that space, we certainly keep looking if there's a way of actually building out that ecosystem to deliver more value. Ongoing innovation, single view of wealth, we talked about that as well. Continuing growth and shareholder value, we absolutely expect to keep delivering that. Our, our platform FUAT target for FY 2024, we're reaffirming that at AUD 80 billion-AUD 89 billion for the end of financial year 2024. That's platform custodial FUAT, excluding the PARS and non-custody FUAT.
Once again, a great result from our perspective. We always work very hard, and we'll continue to work hard. Very pleased to deliver that to the market and, happy to open up for questions and answers in the time we have remaining. Thank you.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speaker phone, please pick up the handset to ask your question. Your first question comes from James Bisinella from Shaw and Partners. Please go ahead.
Congrats on the result firstly, Andrew and Kitrina. Just in terms of that FUAT update at the 16th of February, just interested in the broad makeup of market movements versus net flows from that $2.7 billion uplift. Thank you.
I think I said earlier, James, we tracked just probably under market movement from the start of the year. You know, if you do the math, you know, roughly, you know, you'll do the math, you look at the market movement back at that, you'll get a number around about, you know, 9, 950 or something like that is how you'd probably analyze that. That's to give you a view of that. Interestingly, in that growth for the first six weeks or so of the year, certainly had the seasonally slower January. I think a lot of people went on leave, and so forth. What we're seeing is that our superannuation flows are very, very strong, in that as well.
The mix of that's a bit different with the IDPS and non-super flows, being a bit less than normal but a great result so far. That's to give you a bit of an outline there, but strong pipeline and great rationale for ongoing growth moving ahead.
Great. Thanks. I'll jump back in queue just given time. Thank you.
Thanks, James.
Thank you. Your next question comes from Siraj Ahmed from Citigroup. Please go ahead.
Hi, Andrew. Hi, Katrina. just first, just a follow-up on that. Can I just confirm, did you say AUD 900 million-AUD 950 million in flows, Andrew, in the make up?
Siraj, I actually predicted that you'd actually pin me down on the number. I look around about that. It's in that order. If you take... We don't normally disclose that till the end of the quarter, but if you back out market movement since 1 January, we've tracked a bit behind market movement. Normally, we correlate a bit differently, but that's a good proxy. So a good result.
Perfect. Thanks. Then just thinking of the FY 2024 guidance, reiterated. Can you just help us break down that into market movement that you assumed and flows? The low end of the guidance still assumes around AUD 14 billion in flows next year. That's pretty strong. Just keen to understand the drivers there.
Do you wanna take that, Katrina, or happy to-
Yeah, I'm happy to take that one. There's obviously a range. We've talked before about there's a range in net inflows and a range of market movements, and then there's the potential for large transitions. The combination of those three things is what gives us the confidence that we're reiterating the market guidance of 80-89. You're spot on, Siraj. The net inflows, when you do the sensitivity, could be anywhere from AUD 10 billion-AUD 14 billion over the next sort of 18 months or so, depending on how, you know, how that net flow trajectory goes. The sensitivity that we put on the markets is, you know, the standard is 5% market movement, could be up to 7%-8%, could be down to 2%. There's an assumption around some large transitions.
Andrew's talked before, we've talked before about, there's a number of conversations and work in progress as and when, any of those come to fruition, we'll absolutely update the market. Too early to say at the moment.
I'll just ask two more. The second one, just under the revenue margin, pretty strong outcome, Katrina. Can you just talk, give us the exit margin that was there out of the half? Because your cash margin would have gone down with the new deal. Just keen to understand what the exit margin was then.
Yeah. I won't give you the exact exit margin, but you're spot on that the 37 bps for the average across the first half. The cash management fee was at the upper end of the disclosures until the 1st of December, when we changed our banking arrangement. You know, just to give you some guidance, you know, yes, it could come down anywhere between one to two bps following that change in the ADI provider.
That's just using the standard percentage range of cash on the platform, the disclosure we made previously about the spread difference.
Yeah, that's assuming all things remain equal.
Okay. It sounds like you haven't seen a big difference in cash balances in that, in that number.
Correct.
Last thing, just under the cost growth quickly, I mean, platform costs up 30%. I know your capitalization's gone down, but seems like a stepped up hiring in the core business. Is there any seasonality in the hiring? Should we think the number of hires comes down in second half or cost growth slows? Any insights there would be great.
I might jump in with the what's happened, what's been going on in the business. Katrina might talk about the future. We certainly have invested for growth, Siraj, again in the half. We saw a spike in superannuation inflows in the business. We absolutely wanna make sure we nail servicing. That's a great thing because superannuation for us is sticky. It's generally of, you know, sometimes it's of a balance where there's more revenue growth as customers grow, it's there for the long term. It is a more expensive operating model for superannuation in terms of the rules and compliance and so forth. We certainly resourced up in our superannuation admin space in the half to support ongoing service leadership and the fact that we've been growing there very strongly.
But at the same time, we're also investing in process automation and streamlining some of those processes and tech integration for some of the super stuff moving forward. We expect the ratio and cost to serve to drop down over time as well. Yes, there's been some spend in tech and ops as usual because of the growth. Again, we expect that to be leveraged over future periods. And it's for us to make sure we're building a scalable business model, as we always do just in time to support ongoing growth. We're fairly bullish about growth. We've invested for that. That's the call-out in the outlook slide at the back there saying we intend to leverage that in future periods.
A bit of a lift up there, certainly, I think it'll pay us back in the future. Katrina, I don't know if you wanna add to that.
no. Just in the interest of time for Q&A, I'll leave it there.
There is also some investment in HUBconnect there in the expense base as well, Siraj.
Got it. Thanks.
Thank you. Your next question comes from Simon Fitzgerald from Jefferies. Please go ahead.
Hi there. Just given the time, I'll ask only one question. Just with regard to the LTI scheme, I understand that the PC1 hurdle, Andrew, is based on a stretched hurdle for the full year reaching, I think 100-114 by FY 2024. I think that also includes the non-custody, I believe. Maybe you can break that down in terms of what the full year stretch target would be for the LTI scheme in FY 2024, based on or, you know, compared to the AUD 80 billion-AUD 89 billion in the full guidance, please.
I can't go beyond what's disclosed in the market. I might take that offline because I need to check what's been disclosed. You're certainly correct. In that particular tranche of LTI, it is a hybrid or a composite full year target for custody and non-custody. There is a weighting system in terms of value where the relative revenue and profit value per AUD 1 billion plays that out. Certainly custodial full year has a higher weighting, but I don't know I can break that down any further.
Yeah.
Yeah.
Okay. Well, maybe you would take it. I've just got one more if I could ask, please. just on the-
Yeah.
PARS business, I'm wondering whether that's lived up to your expectations. I mean, AUD 2.7 million in revenue. I get it that there's some other elements to it as well, but, like, that's gonna really require a serious increase in accounts to be a meaningful contributor to earnings.
look, I absolutely agree with you that in terms of the looking at turning the dial, absolutely. In terms of thinking about the strat egy in the
Yeah
Having a hybrid platform offer across both, and we're certainly not done yet with integrating those data feeds with others. Yes, we acquired Class a year after starting PARS, and we focused on another acquisition, but we have a lot in the can ready to go for that. It wasn't about, and we've always said it isn't about growing. Certainly it's about growing our share of that market, but that market's very small. It's about creating the future operating model that will leverage and provide custodial flows that are far more valuable. That's our view, is you link non-custody with managed funds and cash accounts and other products in hybrid solutions. Those relationships with PARS are very, very valuable. They're also using the custodial platform.
It's a strategic adjacency play rather than a business unit on its own in terms of turning the dial.
That makes sense. Thank you.
Thank you. Your next question comes from Kiran Singha from Jarden. Please go ahead.
Morning, Andrew and Catriona. Andrew, I just wanted to follow up on a few of your comments around the great success you're having on the super flows. Just keen to sort of get your thoughts on what's differentiating you there. Is it sort of the particular adviser groups, sort of who are utilizing your platform? Or is it also a function of sort of the design, you know, and pricing of your pro duct there?
It's certainly going to be a combination. Certainly our business has had great Super flows since 2012, 2013 when the product was initially launched into that part of the market. Our focus has been the core ground of the market although we are moving up into high net wealth and we've also got some simpler products. Traditionally, that's been our heartland in terms of the advisors we have worked with traditionally, although we are extending beyond that. It'll be the product design. It's the number of investment options in Super that's greater than others, the ability to make it simple and easy for managed portfolios to be used inside Super. It's a whole range of things, products, features, functionality and the advisor relationships, something we're certainly focused on.
Look, others in the market have had a different focus on more high net wealth. It's a different market segment. We're investing in Super, as you know, with some core products as well, and SMSF Access.
Just sort of the second part of the question was on SMSF Access. Can you just sort of give us a bit of an update on the progress there?
Yeah. It's being launched broadly this week. It's being piloted with a few firms. It is something that does take time. There is an accreditation process, a different agreement, some training. It is about helping advisers find customers they wouldn't normally service. We're really, really excited about it. We've got interest from a number of large licensing groups across the country, and we're doing a targeted rollout and training piece. The products are live. We have got customers on it at this stage, and tend it to grow. I think it's the type of solution that you look back in a couple of years time and go, "Wow, that was amazing." It will take time to educate the market and move through. It's about us leveraging our capabilities to build a bigger and stronger market moving ahead.
Going well, we're actually enhancing it, now and putting in the features to deal with pension and drawdown schemes and so forth. It is fully featured for all the range of services an SMSF would need, within the confines of our IDPS product.
Great. Thank you. I'll leave it there.
Thank you. Your next question comes from Nick McGarrigle from Barrenjoey. Please go ahead.
Good day, team. Thanks. Just in terms of obviously cash spreads were a big driver of revenue margin being up year-on-year. I think you'd mentioned 1-2 bps of compression next half on the new deal. Can you give us an update on where the Xplore cash sits in terms of the spread that it earns and what the potential is to renegotiate that deal?
Nick, I'll take that one. Obviously we're in the process of doing the Xplore migrations onto the HUB24 platform, there will be an element of grandfathering for the rate cards that the Xplore advisors and licensees are on. The, obviously, the back book therefore won't be moving to HUB24 rates in most cases. Then on the go forward, there's clearly individual discussions and negotiations that occur. Yes, there will be some alignment to the HUB24 arrangements. No, when you're looking at it, I wouldn't be looking at the Xplore platform and saying as soon as we've finished the migrations it will be moving to the HUB24 arrangement.
I think you should take it as the grandfather rates and any upside that comes through once we've finished the migrations, you'll see come through as and when.
Is it a matter of eventually the migration will happen, but it's maybe on a 2-3-year view, but the spread difference there, I'd mind getting is Xplore's circa 70 basis points. Hub at the moment may be circa 150 basis points, so there's quite a gap there. Is it something that will close over time?
It may, depending on the utility in the product. In some cases, people are moving to more functional products and the rate cards are different. In other cases, they're grandfathered in. It's not a answer for the whole rump of the business. There is nine different migrations in that and 9 different product definitions. It depends, and it depends on what's been disclosed in consumer contracts. However, I would think that the fully featured HUB products moving forward. There might be a rationale for some customers to migrate to them on their own. There could be a shift towards it, but it is a mixed bag. It's not they just say, "Move it all over," and all of a sudden you get the other rate. There is, you know, there is disclosure in the contracts and, obviously regulations around this.
Can't give you a definitive answer on how the consumer and the advisor behavior will play out. That depends on the particular client needs.
Sure. Maybe just I'll ask one more question. The just the flow outlook, can you give us an update on transitions in the market or large books of business that might be internally managed or managed on Iress or, you know, similarly, not on platform, but potential. What the RFP pipeline looks like? In the same context of flows for the second half, are there any potential implications from some of the super cap changes that are coming in at 30 June? I guess last time that happened, we saw some interesting adviser activity.
I think that was three questions, but well done.
Two.
Well, one subset on Iress. You mean Iress IPS, I presume, so people who are doing reporting, using Iress portfolio service. Look, I think technology, and that's our strategy, is continuing to create new opportunities and value for customers. That means that this is never a steady state. If you can innovate and create utility, then you expand the contestable market. That's certainly what we're about. Over time, I expect that some of those non-custody admin services and others that are using Iress IPS, there'll be opportunities to leverage managed portfolios and different things moving ahead. Certainly, there's an active marketplace with large opportunities. We're active in those. It does come in waves. They do take a long time to gestate.
You do have a market that's shifting and a best interest duty and a market-leading platform that can produce efficiency for advisors and better outcomes for clients. You know, we're active in having those discussions. It's not, you know. There are real live opportunities out there to do that. Quite frankly, as we move ahead in terms of functionality, the gap between some of the other platforms that are yet to retool or innovate, makes that value proposition more compelling. It's the best I can say. It's active, but, you know, it's not done till it's done. We're fairly confident there's some opportunities out there that we'd like to leverage.
Just on the super caps.
Super caps, I don't know that it's actually gonna have that much of an impact for our core business. We are typically at a lower average balance than that level. Yes, it may have an impact on certain parts of the business, but I think generally not really. I think we've got a lot of potential growth where our average balances are and so forth. I think if anything, it's gonna create demand for advice if people need to think about that differently, and demand for advice will create demand for the platform regardless of those rules. Yes, it might soften the amount of money invested in super in the bigger picture, but from our point of view, there's a huge opportunity set. We're not up at that level.
Thank you.
Thank you.
Thank you.
Your next question comes from Olivier Coulon from E&P Financial Group. Please go ahead.
Yeah. Hi, guys. Sorry to go over old ground a little bit here. Just on the cash margin, Phil, I mean, that seemed like the preponderance of, you know, the divergence between consensus numbers and, you know, the very strong result that you printed. Can you just comment on where the cash levels are for the half, as a percentage of STWR and, you know, where that is relative to kinda historical trends? Then, I think you mentioned to Siraj that it hadn't changed much since the half. Is that right?
We, we normally say that the range is between 8% and 12%. Generally, when interest rates are low, you tend to see low balance, you know, lower average balances, so it'll tend towards the 8% of the range. As interest rates increase, people leave more of their cash in, so it will trend up. Since the RBA rate increases in, you know, May, June 2022, it has ticked up a bit. We were obviously down at that, more at that 8% when it was lower. Yes, we've seen it tick up. We don't give the absolute number out. We don't disclose that number.
it would be fair to say that, look, if it's ticked up from the 8%, then you can assume that it's been sitting, you know, sort of, you know, let's call it anywhere between 8.5%-9.5% over the, you know, since those May/June RBA rate increases.
It's getting up to the middle of the range. Well, we don't disclose for a number of reasons. to be fair, with market movement, it changes every day based on equity market movement. if equity markets go up, the cash balance goes down, and so it's not helpful to be publishing that because of how it works.
The beauty of our business model is that there's, you know, countercyclical protections for up and down markets in the different revenue streams that balance each other out.
Yeah. No, that's handy. Thanks. Just on the employee costs. You know, fair in platforms in particular, AUD 7.9 million from second half 2022 to first half 2023. You know, I appreciate it sounds like you did a lot of hiring for super admin, you know, presumably through the second half of 2022 and through first half of 2023. You know, the cadence of the increase half and half that we should be kind of expecting for the second half, because I suppose that's quite a large uplift. Do you expect something similar or less in dollar terms in the second half of 2023?
Yeah. We're absolutely we've done the hiring in the first half, you would have seen it. We've sort of talked about our FTE went from 700- 736. A large part of it goes into the platform segment. Class didn't increase its headcount because we did the restructure and we have synergies coming through the Class piece. Absolutely, operations would have been the large part of that with sales and tech there behind them. In the second half, look, we don't give expense guidance, but we do sort of give a range when we're talking with people and the FTE increase in the second half could be anywhere between 20 and 40 FTE increase in the second half, depending on vacancies, phasing, hiring needs, etc .
Yeah. Okay. Sorry, that's not, that's excluding Class. Class sounds like it's pretty flat, is it?
Correct.
The whole back growth would be, yeah. Okay. Thanks.
Yeah. Correct. Yeah.
That's great. Thanks. Appreciate it.
Thank you. Your next question comes from Dylan Jones from Ord Minnett. Please go ahead.
Afternoon. Thanks for taking my question. I think you just touched on it there at the back end of that question. Just looking around your strategy, around Class to consolidate and position for growth. What level of investment is required, I guess, to execute on this? Are you expecting any meaningful investment in Class during the second half? I guess, to what degree might this impact operating margins, in the tech segment over the second half and beyond?
I might start. We've actually delivered synergies as per our acquisition rationale. In fact, probably doing better than that. From that certain Class has a lot of investment in the business, and it is being getting back to focusing on its core. Previously under the previous ownership and structure, it was branching out into more of a FinTech space and even looking at different geographies. I don't expect a large CapEx or capital investment in Class at all. If anything, I think that we'd like to get more efficiency out of the business as we build some belts and braces for that foundation to consolidate and grow. That's our goal. Of course, if there's a value proposition or a business case to invest, we would.
I don't think there'll be anything affecting earnings in terms of extra investment in Class. We're getting back to basics and being really focused on nailing the core of that business. I don't think there's any surprises there.
Great. No, thank you for that. Just lastly, on the HUBconnect uplifting expenses of, I think, AUD 1.3 million, should we expect a similar amount to reoccur in the second half?
There is an ongoing investment. Some of it will be some CapEx. I might hand over to Katrina. We certainly are investing in that space for very deliberate reasons. It is yielding results. We are winning new advisor relationships on the back of HUBconnect Present, which I talked about earlier. They're valuable relationships. Kit, how do you think that will play out in half two?
Yeah. I think it's a good question. We've called it out specifically in that area so that just to help with the unpicking of the Class, the CapEx change and the HUBconnect, you know, core part of the business that was in there previously. We called it out that half specifically to help with that understanding. Given what Andrew said and the value that the HUBconnect data and the technology platforms provide into the custody platform, absolutely, we would expect to continue that type of investment. Like Andrew said, there will be a mix of expenses and capitalization. The mix of, you know, how much do you capitalize in that area and how much do you expense. At the moment, I wouldn't expect to see a particularly large shift in that.
You assume that that's your run rate and that that will continue given the benefits it drives.
To be clear, some of it really is investment in the platform. This, the present stuff single view of what's running the HUBconnect data. It's an investment in platform reporting, which is winning awards and creating sales.
Great. Thank you very much for that. I'll leave it there.
No problem.
Thank you. Your next question comes from James Cordukes from Credit Suisse. Please go ahead.
Good afternoon, Andrew Alcock, Kitrina Shanahan. Just a question. Looking at slide seven, you talk about the 7,500 advisers who have access to HUB24 but aren't using it. Can you just talk about what strategies you're employing to try and build relationships with those advisers? Do you get access to them? Are you doing teach-ins? That'd be helpful. Thank you.
Look, it would be the normal activity that you would think. I don't wanna give too much away because we're very good at working with strategic relationships. We have an investment in a key accounts relationship team who work strategically at the licensee level to look for opportunities to create value for the licensee and their advisors, whether it be looking at opportunities to help them implement their portfolios or their chosen portfolios with asset managers. We do look across the group and work closely with the licensee for the. We might look at the different opportunities with different practices in the group, and they help us work with those who are looking for a change.
We do a, what I call like a top-down strategic relationship approach and obviously, a on the ground approach with BDMs to do that. There's you know, we look at it, we target where we think we can add value for that particular advisor and their customers, and we focus in there, and we've been doing that for some time, and we do that through participating in their strategy days, through running education sessions, through generating leads in the business. There's a variety of strategies, but it is something we're very, very good at and focused on.
All right. Thank you.
Thank you. Your next question comes from Siddharth Parameswaran from J.P. Morgan. Please go ahead.
I think that will have to be our last one, folks, but thank you very much for staying over and asking questions. Off you go, Bob.
No, all good. Just a quick one on the cost base. Obviously, a fair bit of reinvestment this year. I mean, in terms of the composition, like how much of that was, you know, for future growth versus, sort of maintenance, investment back into the business?
Yeah, it's a good question. It's hard to unpick as well because we invest in obviously the FUA and the net inflows that are coming in this half. We're constantly improving the processes, particularly in, and scalability, particularly in operations, technology, and obviously the sales team. Bob, I can't give you a split to say, you know, of that 36 FTE increase. How many of them, you know, if you didn't add any more FUA, how many would you have, you know, if related to that new FUA in the future? Because we're basically just constantly investing in the growth that we can see coming.
Okay, great. Thanks, guys.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Alcock for closing remarks.
Thank you everyone for dialing in today. Look forward to seeing as many of you as possible in the next week or two. Thank you for a great set of questions and for your support and interest in HUB24. As I said earlier, it's always a delight to present this business. We work very, very hard for our shareholders and customers and very pleased with the result. Wish you all well, and hopefully we'll catch up soon. Thank you very much.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.