Earnings Call: H2 2021

Aug 24, 2021

You for standing by, and welcome to the Hub 24 Limited FY 'twenty one Results. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Mr. Andrew Alcock, Managing Director. Please go ahead. Good morning, everyone, and welcome. Once again, thank you for your interest in HUB24. I'm very pleased to be able to present Such strong results today and outline our achievements for FY 2021 and talk about our efforts moving forward to ensure Our future continues to deliver great outcomes for customers, staff and shareholders and of course also assist the wealth management industry to build its future shape in Australia. With me today is Katrina Shanahan, our Chief Financial Officer, who will also be presenting our financial slides in the pack and be available for Q and A at the end of the presentation. Just turning to the next slide. Our business this year is very different to when we spoke to you last year at this time. In that, we're significantly larger and more diverse as a result of great organic growth during the year So in terms of an overview for Hub 24 at the end of FY 2021, We are a leading provider of Wealth Management Products and Services in Australia with superior functionality, market leading managed portfolio capability, a Comprehensive range of investment options for customers and advisors and also a data and technology solutions business that supports the financial services industry. Our platform business segment is composed of the HUB24 platform and the Explore platform as a result of that acquisition earlier in FY 2021. And our total custodial funds under administration as of 30 June was $41,400,000,000 Over 3,000 advisers using the platform and we had $18,000,000,000 in managed portfolio funds under administration. With that, our non custody or PARS portfolio admin reporting services to give you a snapshot at 30 June is $17,200,000,000 with over 7,500 accounts. In total, Hub24 has total funds under administration of $58,600,000,000 as at 30th June. And moving to our Technology Solutions segment also known as Hub Connect. We have 92 Financial Services clients or customers, Two ranges of products in there generally, Hub Connect Broker, which is supporting tools and customer management tools for Stockbrokers in the Australian marketplace and Hub Connect Insight, which provides services to licensees, advice licensees in terms of business management, Compliance and data insights and that being Hub Connect now being the rebranded version of our Agility business that provides data and integration to number of functional services providers across the industry. We move to the next slide. It's great to be able to talk about a business that's had a strong track record of sustainable growth. And this chart shows 5 years Of growth in terms of revenue with a CAGR of 5 years of 36% and underlying EBITDA CAGR of 57% at a group level for the business. Importantly, when you look at that track record, our core economic driver of the business being the custodial platform is Rated number 1 by Investment Trends and wins awards across the industry, GET only has a 3.9% market share. So with such a low market share comparatively being the top provider in the marketplace, there's a significant opportunity to grow further moving forward. And we look forward to doing that I'll update you again in the future about an even stronger track record of growth. And that's certainly our aim. Slide, Just some financial highlights for FY 2021, all of which are very healthy increases on the FY 2020 statistics. For example, our group revenue is up 34% at $110,000,000 or $111,000,000 and our group underlying EBITDA are up 47% at 36 point $2,000,000 Moving to platform. Platform revenue up 36%, and Katrina will explain some of the breakdown in The revenue margins and the components of that as we move through her slides later on. And that revenue is a great result, certainly given the current interest rate cycle and its impact on the business. And underlying EBITDA up 32% or $37,900,000 or just shy of $38,000,000 for platform. Our statutory NPAT underlying NPAT underlying NPAT's Up 53 percent at $15,000,000 Statutory obviously impacted by transaction costs, but also up 20% regardless of that at $9,800,000 Very pleased to announce a final dividend of 0 0 0 0.055 dollars taking our full year FY 2021 dividend up $0.10 per share, which is up 43% on last year. Back to the middle of the slide there. Our total FUWA at June, as I said earlier, was 58 point $6,000,000,000 made up of $41,400,000,000 for custody platform. That as at Friday evening, 20th August had risen to 44 point $2,000,000,000 which you may recall is ahead of the forecast we had previously for FY 'twenty two. We had a statement in the market We'll hit between $43,000,000,000 to $49,000,000,000 of custodial fuel by the end of FY 2022. We're there already 12 months ahead At the 44.2 at the moment, and that's at 20 August. So great results and that's Causing us to think very carefully about the future of the business, execution and investing to continue growth ahead of expectations moving forward. We turn to the next slide. At HUB24, we see our purpose and our role for the industry and our customers As empowering better financial futures together. And that resonates for advisers, for advice licensees, for customers, For managed portfolio or investment managers and fund managers and for market participants and also for technology providers in our space, It really is about Hub 24 continuing to collaborate to bring together the best of breed solutions, whether that be investment options or technology front ends, Features and benefits to bring together the best of breed solutions to deliver integrated outcomes for customers and advisors and market participants. It's about empowering, as I said, better financial futures together. We have 3 strategic pillars here on the slide to give you some color on our focus. The first one of that is about delivering customer value and growth, which is really about our core platform business and continuing to update and enhance that to extend our market leadership To meet the evolving customer needs and to continue to grow that business. The second pillar, to continue to build the platform of the future. We've always and long been focused on data and custody as the future of wealth management and building innovative solutions that bring those together. Our footprint in portfolio admin reporting service is effectively a non custodial admin service with our strong platform footprint. Over time, we'll be bringing that together to be an integrated platform solution. It is integrated in some ways already, but it is about us continuing to build the platform of the future. At Hub24, we don't want to be disruptive. We want to continue disrupting the industry and continuing to lead from a position of strength. And the 3rd pillar there is about us collaborating To shape the future of wealth management industry in Australia, I think that there's a gap. There's certainly a shift in what's available in this industry in terms of data and infrastructure. As traditional participants leave the industry, there's a lack of investment in terms of how advice integrates with other solutions And certainly some gaps here that we intend to help fill by collaborating with the rest of the industry using our data and technology to build integration, to build insights That bring about efficiency, lowering the cost of advice and providing more access to advice for Australians, which is good for our business and good for the So those are our 3 strategic pillars and you'll see more of that as we get to the end of the pack about what we achieved in FY 2021 in relation to those and certainly Moving on to the next slide. Here's a summary of some of our highlights for FY 2021. It has been a very successful year. It's been a year of growth and innovation and certainly delivering on strategy. We had record platform net inflows of $8,900,000,000 We established the PARS business or Portfolio Admin Reporting Service with $17,200,000,000 as I mentioned. And in terms of advisor numbers across the Hub 24 group in terms of custodial platforms, it's up 997 or 1,000 advisors, 48% On this time last year, that includes advisers using the Hub 24 platform and advisers also using the Explore platform. During the year, we completed 3 strategic transactions. The acquisition of Explore Wealth, the AlbaNet PARS business, We have both delivered fewer growth and allowed us to access high net worth segments with different capabilities. We also divested our licensee business, Paragen, And took us to Eastern Wealth and took a strategic investment in Eastern Wealth, which will allow us to collaborate on technology solutions to benefit Eastern and the broader marketplace in general. Of course, all licensees as well across the industry is certainly our goal. We also continue to enhance our offer, delivering enhancements to our platform. We increased the range of investment options. We've put in features and functionality to support advisers dealing with regulatory change And a whole list of enhancements there as well. We certainly streamlined our managed portfolio Offering and we do lead the market in that space into an MIS scheme to build the future foundations for further innovation. And we intend to keep leading in that space as well. And we collaborated with licensees to pilot some Hub Connect insight features using artificial intelligence and so forth, which I'll touch on a little bit later. All of that occurred at the same time as completing a bulk transition of $1,400,000,000 to the platform, launching 2 private labels, one of those being So having institutional offers in the marketplace where we outsource or we're the outsource provider for other people's product, It's the core of it or powered by Hub 24. And of course, we strengthened our financial position and have had really positive underlying operating cash And increase our dividend. So all in all, a year of growth innovation delivering on strategy with great seamless execution. And it's great to be able to deliver that. And as we turn to the next slide, to do that in the context of being recognized by the industry and our customers On the next slide, as Australia's best overall platform and voted number won by advisers for customer service. If we can move to that next slide please. So in summary, we are rated by Investment Trends Competitive Analysis and Benchmarking report as the best overall platform. We have the best platform service as voted by advisors in Wealth Insights. And we're first again for the 5th year running in managed accounts again from the Investment Trends Competitive Analysis and Benchmarking report. Great to be talking to you today having those accolades in the context of all of that delivery and growth. Interestingly, if you look at the right hand side of that slide, There's some lead indicators for further growth. So in those surveys, HUB24 has the highest adviser consideration when choosing a new platform, I. E. If there were advisors in those surveys who are thinking of changing platforms, Hub has the highest level of consideration moving forward ahead of any other platform. We also in the 12 months achieved the highest increase of advisor number of advisor relationships. And the third point there, Advisers who use Hub 24 are the least likely to look for a replacement platform in the next 12 months. So we're bookended very nicely there as having the highest consideration For new users and having the lowest consideration for those to change platforms are great results and we look forward to working very hard to maintain those positions moving forward. Turning to the next slide. And before I pass the presentation over to Katrina Shanahan, I'd like to outline our market share and flows position As of the latest data from March 21 from Strategic Insights. So our market share has grown from 2.3% To 3.9% over 12 months March to March. It's actually tripled if you go back a year from that. So March 2019, we were at 1 point 3%. We're now at 3.9 percent in terms of platform market share. The chart on the left shows you the ratio of Net flows to underlying market share and Hub24 features very highly there on the chart as well in the 2nd position. Interestingly, there's only 4 platforms gaining in market share When you look at that ratio and the remainder are shrinking or going backwards. We are now the 8th largest platform by market share from 9th 12 months ago. We've maintained our number 2 position for annual net inflows and our CAGR for Fuwa over 5 years is at 66%. So I'd like to hand over to Katrina Shanahan, our Chief Financial Officer, who will take a walk through some of our financial results. And I'll return to talk a bit more about strategy and outlook before we get on to Q and A. Thanks, Katrina. Thank you, Andrew. If we can move on to the next slide, please. Okay. And then the next one again, please. That would be great. So here on this slide, we've got Group financial results. Group operating revenue is up 34 percent to $107,800,000 With direct and operating expenses, the total expenses up 29 percent to $72,400,000 so you can see positive jaws coming through at the group level. Platform revenue was up 36% on full year 2022, up $26,900,000 with Platform underlying EBITDA up 32 on full year 2022, up $9,300,000 You can see at the group level, the underlying EBITDA from Continuing operations is up 46 percent to $36,700,000 with the underlying EBITDA margin improving to 34.1%. We then added in the discontinued business being the licensee business, which is $500,000 worth of loss, which takes the total group underlying EBITDA month to $36,200,000 which is an increase of 47% on full year 2020. Statutory NPAT is up 20% on full year 2020, up to $9,800,000 Turning over to the next slide, we've got our Platform segment results. As Andrew has outlined, we've shown here the Platform FEWA being the So we have platform FEWR of 41 point €4,000,000,000 at the 30th June, and we have pass through of €17,200,000,000 with a total FUR of €58,600,000,000 up from SEK 17,400,000,000 in full year 2020. You can see in the graph on the bottom right hand side, the SEK €1,400,000,000 large transition that we had in the second half of the year. And you can also see the average monthly net inflows have increased from just over €400,000,000 in Total expenses up 39 percent to $63,000,000 This is largely to do with an increase in sales and distribution and Tekken ops The underlying EBITDA for the platform business is $37,900,000 up 30 2% on full year 2020 with the profit before tax at $23,100,000 up 5% on full year 2020. Then turning to the next slide. We have the Platform segment continuing. We've got the revenue and expenses. If we could just turn to the next slide, that would be great. We've got the Platform segment. Here we've got a 5 year trend for the Platform revenue and expenses, Overlaid with the group cost to income ratio. Here you can see that the revenue continues to be strong, driven by the net flows With the expenses growing at a slightly lower rate and their cost to income ratio coming down year by year, we've got a 5 year platform underlying CAGR of 65%. Underlying CAGR of 65%. Revenue this year has been impacted by the RBA rate cuts, which you can see a slightly reduced withdrawals coming through in full year 2021. Moving to the next slide. Yes. On the next slide, we've broken out the composition of the platform Custody Fluor. So here with the acquisition of the Explore portfolio, we've acquired Private Wealth and High Net Worth segments. So we've broken out the platform into 3 segments being Retail, Institutional and Explore Super Admin with the core retail book representing 81% of the FUWA this year, 100% last year. Underneath on the right hand side, you can see the revenue margin by the customer segments with the Total over the whole portfolio at 36 bps compared to 49 bps in full year 2020. I'll talk more about that when we get to the next slide. Explore transaction was completed in March 2021, so you can only see 4 months worth of the revenue margin compression in full year 2021. The Institutional segment includes the private labels and the private clients, combined for Hub and for Explore. Moving to the next slide, we've got the platform revenue. Here again on the next slide, you can see the platform revenue is up 36% to $101,000,000 with the admin fees up 11 $700,000 year on year and the cash and trading up $6,400,000 year on year. On the bottom right hand side, you can see the walk for the platform revenue margin. When we did the first half result, we did a walk from 49 bps at 30th June, 20 full year 2020. And then we walked down to 44 bps at the first half. With 1 bps coming from admin and 2 bps coming from the RBA rate cuts, you can see that the admin fees have continued to reduce as the store lines we're borrowing and tearing from the rate cuts And you can see a full second half impact of the RBA rate cuts of 2 bps coming in, in the second half. Trading volumes were down on full year 2020 as they normalize back to pre COVID levels, which takes the pre Explore revenue margin to 37 bps. And with the Explore competition, as I talked about on the previous slide, having a 3 bps drag on the margin, with the margin for full year 2021 closing at 36 bps. The RBA rate cuts had about a $9,000,000 impact on the revenue and a 4 bps impact Moving to the next slide being the group expenses. As Andrew mentioned, we're ahead of plan for the FIRL. We had a guidance statement of $43,000,000,000 to $49,000,000,000 And as of 20th August, we're at $44,200,000,000 So given this, the momentum that we've seen to come through, we've continued to invest and you can see that coming through in technology operations and sales. So expenses from continuing operations was up 26 percent to $87,400,000 And then we've got abnormal items of $8,100,000 increasing the total expenses to 95,500,000 The graph on the bottom right hand side shows the breakup of the expenses with employment expenses being the largest increase up to $57,200,000 With headcount increasing to 391, up 49% on last year with 85 of those coming through from Explore and the AUGMENT Net Thanks, Christian. Then moving to the next slide, which is a walk of our underlying EBITDA to our NPAT. A few moving pieces in here. You can see the underlying EBITDA from the continuing operations of $36,700,000 on the bottom left Once you add in the Powergen discontinued operations, that takes the underlying EBITDA down to 36,200,000 Depreciation and amortization has slightly increased this year up to $7,000,000 That's seen previous year's capitalization on the balance sheet coming through The NPAT this year, there's a slightly lower number capitalized onto the balance sheet, about $1,000,000 lower spend capitalized on the balance sheet this year that you'll see when you look through the annual report. We've also got share based payments coming through of $6,200,000 which recognize The increase in the funds under administration and the probability of the share based the employee share based plans Probability increasing of those vesting. This year, we paid tax to the ATO for the first time, and we have an income tax Strategic transactions for due diligence and implementation costs. And then we have the $1,400,000 gain on file from the Paragem licensee business. And we have $1,500,000 offset for the tax for the transaction costs. And with that, I'll hand back to Andrew. Okay. Talking about strategy and outlook, if we can flip forward a couple of slides, please. Quick look at our core market segments on the next slide there. So, I thought we'd outline the size of the market and to mention our share of the market And Jason Kaczas, the superannuation market, which is largely fueling wealth management in Australia, is growing at 11.3% Per annum, on a CAGR basis over the last 20 years, I think that's status. As part of that market in the white on that donor, if you like, the SMSF and the retail and corporate It's really where Hub 24 participates as addressable market in superannuation. It's a $1,500,000,000,000 market. And that market in itself is fueling our core segments to the right of that. Just before I jump onto those, there is also a non super personal That's another couple of $1,000,000,000,000 which is relevant for half twenty twenty four as well. But if we move to the second slice of the second part of the slide there, The Australian investment platform market has a total market of about $915,000,000,000 as at end of March 2021, and we have a 3.9 Market share there, it is a core marketplace for Hub and being the top rated platform, we certainly hope to extend or increase our penetration in that market and increase the market share. The managed account market, which is somewhat a subset of that market as well, is expected to grow at a very high rate. In fact, 49% of advisers using managed accounts sorry, 49% of incoming flows is Expect to go into managed accounts for advisers that currently use managed accounts. And by 2025, 23% of all adviser flows Are expected to move into managed accounts moving ahead. So it is a rapidly growing marketplace. We are a market leader there, having 19% That market share when you add together Hub 24's leading footprint as well as explores. So with Our market position, we have 19 percent I think it's about $18,000,000,000 to $19,000,000,000 out of that marketplace, which as I said is expected to grow quite rapidly. And in the portfolio admin reporting service market, this is HUB24 data and our estimates of the size of that market. But again, I think as solutions arise in this You'll see that market grow as well. There are 1,000,000,000,000 of dollars of unportfolio or investments held by Australians that aren't in any portfolio service. And so we've estimated that market to be $149,000,000,000 and we have 12% market share of that. And we expect it to grow, as I said, as more and more Private clients and high net wealth individuals look at portfolio services moving ahead and as solutions emerge, and we certainly intend to keep building out our solutions for that marketplace as well. So all in all, we're very well positioned to capture future market opportunities, being a leader in managed accounts and having a small market share in the platform market yet with our rating And with our establishment of our PAS service as well. Moving to the next slide, I briefly touched on a couple of trends here. Some of these I've Talked about already, so I won't labor those points. But some key trends shaping the industry on that next slide. Privately owned licensee segment is growing We've now just under 70% of the adviser market either self licensed or in a private own licensee as opposed to the inverse of that. A few years ago, Before Hain and the Royal Commission, you saw most licensees either or most advisors aligned to an institutional licensee. That's also representing the trend and the growth in specialist platforms in that we have the best offer and we're on the APLs of those privately licensed Businesses. Compliance burden also continues to be a great challenge for advisers. At Hub 24, we absolutely build as much flexibility and much into our platform business to support advisers when regulations change, when that be through online consents or fee consents and so forth. And the demand for financial advice is expected to increase with 2,600,000 non advised Australians reported to be seeking financial advice in the future. That's very good news for a business like ours and we absolutely want to work with the industry to make advice affordable and accessible and there's some of the key trends driving growth for the platform industry. Moving to the next slide. I'll just touch on a couple of items in this slide. During FY 2021, we have continued to deliver on our strategy in these Three strategic pillars, in particular in terms of our core platform business and customer value growth in that we have launched And Managed Portfolio Academy to help educate and help advisors learn or work how to use Managed Portfolios given it's going to be such a high growth area. Also, continuing to enhance our brand awareness. The other items in that pillar I've talked about earlier. So I'll move to the next one. We've also in terms of building the platform for the future, we've done the acquisitions, we've done some transitioning and some integration work, but we've certainly also expanded our platform with options With other providers in the industry for retirement solutions, and we'll continue to do that. We think as the industry shifts, There'll be more and more demand for Retirement Solutions and we're certainly investing in that vein as well. And in terms of collaborating for the future of the industry, We have in the last 12 months developed some machine learning models that support licensee compliance. They're in pilot and rollout with over 4 licensees And really making a difference in those licensees in terms of them tracking compliance or key responsibility indicators such as fee disclosure statements and so forth. And we're using AI and machine learning to interrogate a whole lot of advice documents to provide those insights and really change the face of how licensees Advisors work, so they can get back to focusing on delivering outcomes for clients, whilst being comfortable their compliance obligations are being looked after. Moving to the next slide. In terms of moving forward, we'll continue to deliver on our strategy to underpin our growth. We certainly are prioritizing our future growth opportunities. And so as we flagged in our 4th quarter results And as Katrina and I mentioned, we're actually ahead of where we thought we'd be in terms of fuel and growth for the business. So we are investing in even creating a bigger business. I actually have Announced recently the recruitment of a Chief Product Officer and there'll be another executive team member that we recruit moving ahead. We're expanding our distribution team Again, to take advantage of sales opportunities and we're certainly going to continue to develop customer propositions and increase our brand awareness and recognition across the industry. We'll continue to build the platform for the future. We're going to continue to integrate the transactions that we've undertaken and invest in technology to build scale And absolutely committed to building the a fully integrated best of breed solution for custodiannoncastodal platform and power solutions moving ahead. And in terms of the 3rd pillar, we will expand our Hub Connect data sources during the year and we'll do that integration of Vistaprita. And we're going to We continue working on our single view of world capabilities that hopefully will create the drive for increased market across that past piece especially. All leading to us wanting to and being committed to leading the wealth industry as the best provider of integrated platform, technology and data services. So those investments will occur, but we will still expect to have our cost to income ratio improve in FY 'twenty two And our underlying EBITDA margin to increase as well in the context of that increased investment. And finally, on my last slide, the outlook for HUB24 is very positive. If we can move to the next slide, the outlook slide. We are positioned very well for ongoing success and we'll continue to position that business the business in that way through investment and integration And collaborating with the industry. We're going to pursue growth. We've got great pipeline and great current licensing and advisor relationships, and we'll absolutely be Moving to secure new relationships as we increase the number of headcount in our distribution function. And we're going to leverage the new product capability we've got with Combined HUB24, Orbitet PARS and Explore books to cross sell into each customer segment the different overall solutions that we'll bring to the table. We expect to have continuing strong financial results, leverage growth and business scalability to deliver shareholder value And increased profitability. So pleased today to be able to advise that our platform FEWA goal or FEWA target And we've got a target here for FY 2023, which is in just under 24 months. The current number, as I said earlier, was $44,200,000,000 We're aiming to get to between $63,000,000,000 $70,000,000,000 in platform FEWA target. That's custodial FEWA, not including The pass through in that and the reason we do that is that the custodial through is the economic driver of that part of the business. Parsfua is actually driven by accounts. So once again, a platform FUA target for FY 'twenty three of $63,000,000,000 to $70,000,000,000 excluding Parsfua, That's an uplift of that $20,000,000,000 based on the statement we have made for FY 2022. So we're taking the target out a year And we're adding $20,000,000,000 to that target in terms of putting that out there into the market. So once again, thank you very much for your attention and interest. I'll hand back to our facilitator and happy to take some questions. Thank Your first question comes from Nicholas McGarrigle with Ordmanett. Please go ahead. Thanks, team. Just a quick correction to that. It's Nicholas McGarrigle with Barrene Just a quick one on the FY 'twenty three fuel guidance. It's obviously a great target compared to, I think, where the market Was expecting you to be by then. Can you talk about the building blocks that get you from 44.2 today to that range? Sure. It's really quite simple, Nick, and thank you for the question. You might have registered your registration, I think says Albany, but we are where it's Barunjoey. Look, it's really quite simple. If you look at the flow rate that we had in FY 2021 And you think about some growth for that. If you think about like a $9,000,000,000 to $10,000,000,000 flow for 2022 and 2023 And some market movement with some sensitivity analysis. You can see that we land squarely in the middle of that range with hopefully some upside and some Protection there in terms of if we don't quite hit those lows. But we're very confident in that. As usual, we like to put a range out there. And we absolutely aspirationally Hope to achieve more than that, but in terms of the target, it's based on that sort of analysis, taking our current starting point for FY 2021 And adding in some assumed flow numbers, which we have the building blocks if you like or a bottom up build in terms of pipeline with our relationships And certainly with the investment in sales people to give us confidence in publishing that range. And just in terms of the component of that increase That is attributable to, say, large transition clients, and you've split up some of the thumb between institutional retail And others, but just the sort of assumed mix in that, just to give us a sense on what the revenue run rate might be by then? We don't have any identified significant transitions in that number. It's based on the bottom up build of organic growth. Bearing in mind, we do have a very new private label relationship with one of the largest advice providers in the country. We haven't assumed a lot of upside in that for any large transitions at this point in time. So if that was to occur, We hopefully outperformed that. It's based simply on the number of relationships, the advisers and the product range we've got today. Great. And then I think in the presentation, there was some separation between institutional retail and the 3rd category, I can't recall. Just in terms of if maybe Katrina can give us a better idea of what the exit rate on the margin on the revenue margin was Heading out of FY 2021, I think the second half was 34 bps, but I imagine the exit rate might have been a bit different. Yes. Hi, Nick. Yes, that's correct. So on one of the slides, there's competition of platform sewer. The bottom right, there was a graph that showed the bps per segment and call out that Explore was in there for 4 months given the Transaction completed in March. So you'll expect to see next year, there's no impact really. There's been no changes significantly to pricing of either Hub or Explore. And so the thing that will drop the margin in full year 2022 is just the 12 months' worth of consolidated group. If you take the composition on that slide and you apply it to the filler that we have today and then Slice it by the categories that we've given you, you could probably look you could do bucket math to get you to about a 30 bps margin in full year 2022. That's helpful. Thank you. And just while we're on the flows again, if you look at the market movement For the financial year to date, and we net that off against year $44,200,000,000 I'm sort of calculating almost $1,800,000,000 to $2,000,000,000 net inflow for those 1st 7 odd weeks, am I missing anything material there? No, that's correct. Roughly about that if you do the extrapolation of where we were in Just on the cost side, I think it's been you were signaled by the quarterly that there might be some additional costs going To Executive Sales and Tech, I just wanted to get a sense on the cost to serve reduction that we might expect into FY 'twenty two. You had a sort of 2.4 Percentage point improvement in 'twenty one, which is good. Just trying to get a sense on is it a reinvestment year where maybe that reduction in cost to serve is Not quite as material as that for a year or 2 and then we resume sort of natural state of affairs? Yes. So I think the way to think about it is that we the volume growth, you'll continue to see the same level of increases in the expenses around the volume. So there's no change to that and that will grow at the normal level. There's probably an additional somewhere around 20 to 20 5 FTE that we're expecting given the sales momentum that we're coming through we're seeing coming through. The increase in FTE and technology to support the scalability of the size of the food growing. And then there's a couple of group executive Raul's coming on board as well given the size of the company and the focus on specific areas. So it's roughly about 20 to 25 FTE increased over and above the normal cost ratio that you'd expect to see come through. And based on timing and recruitment, Nick, that will come through. You See more on that in the half when we have to talk about the uptake of that. Yes. And so we should still expect The reduction in cost to serve in 2022? Correct, yes. Cool. And then just in terms of the synergies because that's related, I guess, Just progress on actual realized synergies in 'twenty one and then maybe what the profile might be on, I think you put a chart in, just wanted to confirm that the numbers in that table were What you'd expect to realize in those given years or are they annualization increments? No, they're the ones that we expect. You're talking about the table that we Put in the analyst and investor pack, they're the numbers that we expect to see in those years. In terms of your realized savings within that year. So that will sort of act as a bit of an offset to that additional FTE going in? Correct. That's right. And one last one for me just on Josh, one last one for me. Yes, last one, I promise. I've only asked 3 broad questions. They're broad, very broad. Just the last one around I'm glad we can count. They're all sub questions as well. Just on the cash spread agreement, obviously, your largest specialist competitors had their termination or the agreements been triggered. What's the sort of current status of your renegotiation? And maybe what are some of the strategies to avoid further deterioration in the cash spread Yes, post the RBA move, but trying to avoid maybe the bank repricing as well. Just what kind of strategy are you pursuing there? I'll just start by saying the environment remains Fluid in terms of different providers and what they're willing to offer. And certainly, the view on interest rates Cycle and so forth does remain fluid. The market is well aware that our current arrangement with our major provider It completes in December 2022. So we still have some 15, 16 months before that might occur. And that fluidity is actually making it interesting in terms of crafting solutions. We've long been saying we absolutely think that this isn't about just replacing revenue or fees For shareholders, it's also about rethinking about the market and the product offer for consumers. If we are going to have a protracted low interest rate environment, what are the solutions that You can offer through a platform to make it easier for advisors and customers to maximize or get the best outcome possible. So we certainly are thinking about that in different ways To offer different cash style investments, Nick, and at this point unable to really put more color on the ovens and we're working through that as we have said. And so that in itself might either increase volume of investment on the platform in cash, you might correct different options. But certainly, we'll be changing the way that we approach things as opposed to just trying to ameliorate any concern that Bank spreads may change. I think that environment remains fluid as well and there's a bit of water to go on the bridge about that. So it's the best answer right now. We're absolutely aware that there might be some pressure with long term spreads from banks. At the same time, it does remain fluid and we've got some different ways of thinking about how we Mix up the product offering rather than just maintaining the status quo and changing the different spreads in there. So It's the best answer we can give. We've got a long runway to go. We focus and have got some tech being built And working with multiple providers as to different ways to approach the market in that regard. And we'll have more to say when we get closer to that time. Great. Thank you. And one last one actually. The percentage of that were in cash, because I guess that may have changed with the Explore combination. So I think it used to be sort of 10% to 11%. What would that be running out at the moment with that combination? I think we used to talk about a range of 8% to 13%, And it does bounce around in this climate where returns are not high or nothing in terms of cash on platform for Investors, it's at the lower end of that range. So round about the 8 percentage, not giving too much where we tend to publish it, but that's where you'd expect it to be. And it does move around based on flows into the business. So cash percentages for HUB24 increased when you put a large amount of inflows because transactional cash before it gets invested, but it's in that sort of range. I don't expect that would change in a low interest rate environment as advisors Seek to get the best margin increase they can for consumers. But thank you, Nick, very much. Hopefully that answers your questions and we'll move on. Great. Thank you. Thank you. Your next question comes from James Bissella with Shaw and Partners. Please go ahead. Congratulations on the results. Just on platform gross margins, it looks like they've risen From 75% in the first half to 78% in the second half. Can you give us a sense of the drivers of that increase and perhaps whether that 2nd half level is considered sustainable moving forward. Thanks. Thanks, James. So you're looking at the analyst and investor pack on that. So from the platform perspective, yes, we would expect To get some more leverage coming through, but it just won't be as large as you'd expect given the investment that we were talking about. But yes, that is a sustainable level. Okay, great. And one more for me, just around the LTI plan. Can you just confirm the performance period for the filler component? So does the 100 percent award of that incur $102,000,000,000 of fuel by FY 2024, just given that CAGR translates To an increase of 43 bill over the next 3 years. James, we might come back to you. There are multiple LTI plans with different dates and rates. If you're applying a CAGR to a current FEWA balance, it is based on custodial FEWA not total FEWA. I'm not sure What you're referring to, unless we can clarify it really quickly here, we might have to take that offline with you. Yes, no problem. I'll have to take it offline. Thanks very much. Congrats again. Thank you very much. Thank you. Your next question comes from Simon Fitzgerald with EMP. Please go ahead. Hi there. Thank you for taking my question. One of the trends we're seeing recently is probably a bit more sort of open architecture, but in a real genuine sense. And obviously, you've got the IAAF agreement as well, but I was interested to know some of the in ways you're making with aligned financial planning groups and Whether you really need to see financial planners actually leaving some of these groups in order to grow, I'm just interested in your comments around that. Look, we do have inflows with some aligned groups, and we have had for some time. In some cases, It's because advisors are looking at best interest duties for customers and asking the Alliance Group to allow them to deviate from what might be known as their approved product list. In other cases, the groups are actually encouraging or welcoming best of breed solutions to sit on the shelf alongside their own solutions And so forth. And in the Idoweth case, the actual product is actually Idoweth's product. They are the trustee and the operator, Trustee, the super fund, the operator of the IDPS, yet we do the administration using our market leading capabilities to build a tailored product for them. So there are inroads coming. To answer your question, I don't think that needs to have people leave, but that's happening regardless. And the last remaining groups in the marketplace with strong alignment are A and P and IWF. Iwerfer made it clear about their future strategy. A and P have a new leadership team, so I'm sure they'll keep considering that. But the trend is that people are leaving anyway. So we don't have to. We are making inroads and we look forward to Continuing to do that. And I think in the context of having a great product and a great solution and the community Test and the expectations and the regulator view that our clients are looked after properly, I think that puts us in Good stead regardless of the source of adviser relationship. Great. And then second question just relates to the PASCO. I Just wanted a little bit more explanation in terms of how I can sort of see the revenue line there. I mean, it's all sort of mixed up into the one sort of platform revenue. And I understand that Non custody pieces are charged a little bit differently, but I'm just wondering if you could sort of explain that in a little bit more detail on how we should be thinking it from a modeling perspective. Good question, Simon. So you're right that we haven't split it out separately. The only place we have put it on the presentation under the platform revenue, there is a call out that the combined Contributions from the Explore and the Orphanet acquisitions was €10,400,000 during free to 2021. And I know that includes the Explore Custodial Fluor. It's a little commercially sensitive at the moment, so we're not breaking it down lower than that. Okay. I'm asking a question maybe a slightly different way then. If that was to grow in excess or at a faster rate as the rest of it, there would obviously There's a drop in the overall sort of revenue margin. Would that be a fair call? So the revenue breakdown that we've given the platform revenue margin bps go of 34%, 36% at full year 2021, That purely relates to the custody portfolio. If you did a platform revenue margin at the total including Absolutely, it would be lower because the services were simpler on the path. My comment on that though, the costs and the expenses Backing that are far different. You're not paying a trustee. You're not paying custody costs. It's a much simpler thing. So you're getting still good margin Per account and the accounts are charged based on fee per account. So it's a different model altogether from revenue right through to EBITDA. So Yes, it might change a composite revenue margin, but certainly the upside will be there in the expense reduction as well. Okay. And then just a final question from me. I understand that you don't disclose this in terms of the mix of, say, fewer growth or fewer outcomes between existing financial But presumably, it takes time for financial planners to get all of their filler across once they've signed up. And that would give you, I would have thought, pretty good visibility of your future growth. But is there any sort of comments you could sort of touch on in terms of Anything like that in terms of Sure. It is spread across the book based on the age of the relationship. So you'll find that we have advisors who've been using Hub for a period of time. We'll have a greater level of usage of Hub comparatively to those who are recently using Hub. It does take some time. And actually, we don't want advisers to move every single dollar or every single customer over. It makes sense for the customer and they need to make sure that does make the best interest to us. So certainly we've got a great solution for a broad range of customers. We intend to keep increasing that out, But it does take time. So in looking at that, we know that around about 50% of inflows we had last year came in through transition arrangements where we're helping advisors to where it makes sense, help them move customers over. And 50% of the flows were coming off from different ways of doing business. There's a long runway to go. If you did the averages and so forth, you'd See that the penetration level across the book is not significantly high at all. So it does take time. The lead indicators for growth are there And that we will still have productivity from relationships for several years ahead of the existing relationships Some of the older relationships still generate positive net flows, absolutely generate positive net flows and some of them that mature you see a slowing down of that. But the beauty of this kind of business is it's not all overnight, it is compounding. So year on year, we pick up a higher level of book and high level of growth. There's a lot more that can happen with our existing customers. Great. Thank you for taking my questions. Thank you. Thank you. Your next question comes from Suraj Ahmed with Citi. Please go ahead. Andrew, hi, Katrina. Just three questions from me. This is the first one. Regarding the start to the first half The Q1, the $2,000,000,000 inflows that we spoke about, any can you just talk to the contribution from the new private label that you've launched With A double O? Not significant. So it's early days for that and that goes to my early appointment. It does take time. We've trained, We've worked with the issuer of that product to train about 60 or 65 people in their business who are BDMs who are out in the field and working with advisors. We're certainly aware that the product issuer has goals for what they want to achieve in the next 12 months, but it's early days In terms of fuel there, we do have fuel. We had fuel in the 1st day, but it's early days. It's not a large contribution. I think there's more upside to come from that relationship. The flows are generally coming from other customers. Great. Thanks. The second question, just on the revenue margin outlook looking 2 years out. So as Katrina, as you mentioned, next year, I think around 30 basis points As you include Explore. But Andrew, if you're saying that your full guidance for FY 'twenty three is primarily driven by retail and not really Should we then think that 30 basis points is sort of a trough and that should actually blend up if your retail goes up? Possibly, it will depend on the shape of the book. Part of the growth to be clear, part of the growth in that 2 year period will include Some institutional, we include the private label for either with as institutional. So once I said it's early days now, That will be in the mix. It will depend on the mix, Suraj. It's a question we'd have to model out. It's conceivable. But, Katrina, you're likely to comment. Certainly, the current margin state is impacted greatly by the cash Outcomes, if that were to change, it would tick up anyway as well. So there are drivers that could cause that composite margin to go up. Katrina, have I sort of nailed the question? 5 years, it covers everything. It's the cash and the mix of the book are the main things that we'll move in. Yes. Got it. And last one, just confirming just on the cost outlook Next year, is the understanding that you're adding 20 to 25 FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet Es in total next year or because I'm a bit confused as you said normal run rate plus 20 to 20 Look, it's hard to pin down. It is incremental on top of our normal run rate, but you'd say what is the normal run rate. Every year we talk about, Hey, we're ahead of plan. It will be 2nd year ago. Hey, I'm ahead of plan. So I've got to hire more people to put fuel in the tank. So it's really hard to get an online run rate when Our expectations of growth keep being exceeded, but it is incremental in that. So normally we hire 2 in a normal year we'd hire 2 to 3 sales people. For the last few years we ended up hiring 10 a year. So it's hard to bifurcate that Suraj, but it's generally supposed to be incremental. Certainly, the 2 execs are, yes. Yes. And we'll have more to say on that At the half, I know that's a long way away once we get our skates on with the recruitment and the timing of that. Yes, that's all good. Very helpful. Thanks, Andrew. Thanks Suraj. Thank you. Your next question comes from Nick Virges with Ord Minett. Please go ahead. Yes, morning or afternoon, Andrew, Katrina. Just 2 or 3 quick questions. So Just on the institutional margin, revenue margin at 9 basis points, is that a reasonable guide moving forward? I guess that's Pre IOS, so just looking at any guidance there in terms of how that moves. It's the real Nick from all of this. Yes, that's correct, Nick. Yes. So 9 basis points is a good base to work off. Okay. Just circling back to one of the previous questions on PAS revenue. So PAS is included in the platform revenue segment as it stands now? Revenue segment as it stands now? Correct. That's right. So would it have actually provided a boost To the platform revenue margin over the half, given that it's in the revenue, but clearly not in the denominator in terms of funds? I think I've had this question in the background by email through a few people, so it's probably worth clarifying that the revenue margin in the bits By customer segment and when we talk about the 36 bps for full year 2021, purely relates to the custodial business. It takes the custody revenue over the average FURA for custody FURA. It doesn't include the pass FURA or the pass revenue. Interesting. The reason it's in the same segment as platform is purely because We talk about the platform of the future and the blurring of custody and data platforms. That's what's going to happen. So we felt we should start there in terms of reporting the dollars there. It is sensitive to break that out given the relatively small number of clients in that mix. And as the book enhances, we might actually break it out further. But the Basis points margin is actually custodial only, but the dollars includes that business as part of platform because we see the 2 converging over time. Okay. That's clear. Thank you. And just lastly, Katrina, just circling back on operating costs. So gross profit margin should continue to improve, albeit not as Great, perhaps. It's the last 12 months. Just in terms of perhaps some comments on the shape of the EBITDA margin in that platform segment at sort of 30 or just below 36, taking everything into account that you've mentioned on operating costs, does that improve over the next 12 months or remain sort of stable at this point? So my expectation would be that, that remains stable over the next 12 months given the composition of the portfolio and the expenses that we're expecting to invest in. Okay. That's clear. Thanks very much. I think we'll take the next two questions and that will probably see us out of time. The next 2 participants with questions, yes. Thank you. Your next question comes from Brendan Carrig with Macquarie. Please go ahead. Good afternoon. I'll make it quick. Just on M and A and the Tintra for inorganic, given we've obviously covered all of the organic things pretty well. Now that Explore's More and more integrated, has the appetite now picked up again to look for inorganic opportunities and look to integrate those? And in looking for those opportunities, what are you looking for? Is it a synergy kind of an acquisition or is it more of a technology and product acquisition? Brennan, happy to take that. I don't think the answers change from what I would normally say. We're absolutely alive to opportunities and Want to be a participant in this marketplace and we're not shy in terms of undertaking transactions where they make sense, but they have to make sense in terms of shareholders. Generally, we don't look at buying books of business for consolidation or synergy benefits. We look for strategic benefits. Would that be intellectual property we can monetize or extend? So for example, with Explore, the ability to pick up some institutional clients, Some product features like bonds and international managed funds to create a stronger high net worth of private client segment was very attractive So what we've been looking for is either technology or product now that actually extends our offering or enables us To cross sell or increase the amount of services we offer to existing customers and pick up customers to which we could offer Hub 24. So if I say the upside synergies and product capabilities are very attractive to us, then it's something that we would certainly be looking at. Having said that, we're you asked the question do we have appetite. Well, our eyes are always open. We're also very focused on strategy and we won't deviate from that unless an opportunity makes sense. So yes, our program for integrating Explore is tracking well. It doesn't mean that we won't participate in other activity that made sense, but it has to make sense and we're absolutely focused on continuing to execute organically And also on our innovation strategy at the same time. So I hope that gives you sort of a well rounded answer. I can't say anything else Then the markets are live and we are a participant. Yes, please. I'll leave it there. Thanks. Thank you. Your next question comes from James Cordyce with Credit Suisse. Please go ahead. Good morning, guys. Just a question on Explore. It's now under your ownership. Can you give us an update on whether you plan to run that as 2 separate platforms or whether you plan to consolidate and how you intend to go about that if it's a successor fund transfer or you could do some kind of Private label structure of the Xplore platform? Sure. As it is evolving, there is probably 8 or 9 different product solutions in there for different customer groups. And we certainly have a target road map. Our goal is to bring the best solution to our combined clients And as well as part of integration. So in some cases, we might be stitching together capability that Explore had that we done on the Hub platform, but integrating it together. In other cases, we might be looking to build that in Hub. So there is a it is quite complicated when you break it down to the pay targets. But certainly, our goal is to have one set of integrated solutions being offered to the marketplace under different legal structures, IDPS super, possibly MDAs and so forth as well in different structures, even life insurance bonds potentially. So, look, there's work to be done. We don't intend to keep running the businesses separately. They're integrated in terms of reporting lines at this point in time. But there is a journey to move clients around and we'd like to do that respectfully with clients as and when we do that. But the aim of that is actually create better outcomes for customers And better upside opportunities for customers and for the shareholders. So it's a process we'll talk more about as we go through. Thank you. Can you just clarify, I mean, will that be a notification that might be required to a client or will they need To give approval for a transition? I guess we're just thinking about the level of the transition risk potentially. Yes. Look, conceptually, if there's superannuation fund consolidation that can be done with trustees signing off looking after members' interest and us providing notifications Otherwise, it might be depending on the particular contract. It will be different under each contract, James, certainly, so I don't see it being a consent based process where Client and adviser issues a statement of advice to move customers. That's quite inconvenient for customers. So we'll be working on the most streamlined way to do it and it's different of different legal structures. Can I add to my earlier answer though? We are already seeing the benefits of the acquisition in that we've had large inflows of Funds into the PARS business, and explore through our relationship with Evans from Dixons. We've got a white label in Evans. We've had increased inflows in key clients. We're already offering composite product mixes where you take a hub product and tack on a part of the Explore offering in the marketplace. So Our focus has been on actually increasing flows and actually offering products in that way in the marketplace, whilst behind the scenes we look at the integration. I'm sorry, I can't give you an expressed answer. It's different. There are different legal structures and different contractual structures across those 8 or 9 different product groups. It will Tax by case, but it's aimed to be as streamlined and as efficient as possible. And we're certainly looking to get the benefits of that in the shorter horizon rather than the longer. All right. Thanks very much. And just one final question. On Explore, obviously, they have pulled cash as well. Can you talk a bit more now again, that it's under your ownership, just around your options to maybe push that onto your existing Provided where the rates may be higher? Great question, Brandon. Okay, sorry. We're absolutely looking at when we have been looking at the total Hub 24 group. Explore does have its own contracts at the moment, so there is a little bit of an overlap between managing the different contracts, but certainly over time, we'd expect to leverage the scale of a larger group. And that would that's probably not included in your 30 basis point guidance The revenue margin? No, it would be included. So when we've modeled out the portfolio going forward, it's based on all the information that we have. So it's totally included. Okay. All right. Thank you. 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 your interest in Tietj. I know it's been a full hour now. So thank you very much for the great questions. Look forward to catching up with as many of you From the shareholder and the analyst point of view, over the next couple of weeks as we embark on a roadshow, sorry it's virtual, we'd love to be seeing you in person, But we've got a full schedule in the next couple of weeks. If you'd like some more information, please feel free to come back to us and make a request if we haven't got something scheduled and we'll see what we can do. Thank you again and enjoy the rest of your day. That does conclude our conference for today. Thank you for participating. You may now disconnect.