Earnings Call: H1 2021

Feb 23, 2021

Good morning, everyone, and thank you for joining us today for the half year results presentation for financial year 2021. My name is Andrew Alcock. I'm the Managing Director of HUB24. And with me today is Katrina Shanahan, our CFO, who will help me through the presentation. At Hub 24, we're about making a difference in our customers' lives by connecting them to innovative solutions that is about creating better outcomes for them. Following the divestment of our PowerGen business to Eastern, which we'll talk about and the repositioning of our technology businesses Hub Connect. You can see the 2 go forward brands there on that slide. We're absolutely committed to making that difference and continue to innovate in the marketplace. Today, we're proud to talk to you as Australia's best overall platform, which was announced by Investment Trends this week, where we moved up from 2nd place into 1st place. The key messages for today's presentation is really about talking about growth we've had continuing in our business. And as you can see from the charts there, we have the 5 year Net flow CAGR of 31%, and you can see average monthly net flows increased there on the left hand side chart. On the right hand side, You can see our FEWA balance growth over the last 5 years. And for the first time, we included the portfolio administration reporting service FEWA as a result of acquisition of that business from Orbanett. That's the yellow part on the right hand side of that chart. But that 5 year CAGR again is 56%. What we're saying is We're Australia's best platform. We've got consistent performance in our growth in net flows and fewer. It's a delight to talk to you about that and talk about how we're positioned for more scale and growth. We had record net flows for the half. We have a very strong pipeline and continued momentum moving ahead with the launch shortly of new institutional private labels for companies such as Itemweb and Clearview. We're finalizing the strategic transactions that we announced to the market in October and that will help us enter new segments in the marketplace as well. But we undertook some disciplined expense management in the first half of FY twenty twenty one. As we all know, the environment was difficult. We weren't sure what was happening at a macro level. And so we undertook disciplined expense management, which helped us offset the low interest rate environment also arising as a result of economic uncertainty and the pandemic. The result of that is we do have an EBITDA increase. We focus on shareholder results in a difficult environment. But our results and our growth during that environment are telling us it's time to prepare for even more growth as we move forward. Some highlights for the business in first half twenty twenty one. Our financial results highlights. Our platform revenue is up 25 percent to $43,800,000 The platform underlying EBITDA is also up about 25 percent at $17,400,000 Our underlying EBITDA margin has increased in the half from 37.9% last half to 39.7% this half, even in a difficult environment with some headwinds on those interest rates. And our underlying platform NPAT is up 39% to $7,500,000 All healthy increases in what you could argue has been a challenging environment for all businesses in the country. As at 131 December, our total FUWA is up 95 percent to $31,300,000,000 Now that includes platform FUWA, a historical business of $22,000,000,000 and includes the non custody or the portfolio administration reporting service FUWA that we purchased from Orbanet last year. The total FEWA now has increased to $33,000,000,000 with Platform FEWA up $2,000,000,000 to 24 $1,000,000,000 since we announced the February result in our quarterly. We're very pleased also today to announce a $0.045 dividend per share for the first half, which is fully franked and delighted to be able to provide that to shareholders. Our business continues to win awards and succeed. And not only are we talking to you today about our best overall platform. For the 5th year running, we've won the award for Managed Account Solution or having the best managed accounts functionality in Australia also from Investment Trends. We're very proud to win that award that many times. It is about exceeding in a growing market segment where we absolutely committed to continuing to lead. In that same survey, HUB24 was ranked in the top 2 for 30 out of 44 practice subcategories. And in the Wealth Insights survey. We're also 1st equal for platform services. In terms of summing up other highlights, As I said, we have record net inflows there at $3,100,000,000 for the first half of FY twenty twenty one and our advisor numbers are up 24% on the prior corresponding period to 2,280. We've also achieved some key milestones in our growth strategy with the finalization of the strategic transactions we announced in October. The acquisition of Ultimate NET has been completed. The team is now onboarded as part of the HUB24 team. The Eastern Proportional offer closed last night. I'll have more to talk about that shortly. And the approvals required for the scheme of arrangement for Explore I have also been approved and we're heading towards completion. We're also successful in our cap raising and the ANZ facility being there to provide us further flexibility for our growth. Some great highlights for the business for the year. Moving on, We continue to grow our FUWA and our market share. And based on the most recent data available as at 30 September 2019 from Strategic Insights. We've increased our position in the market up to 9th place from 11th place in terms of FEWA. I'd say whilst we're at 9th place, we're number 2 and we've maintained number 2 in terms of annual net inflows. So the chart on the left hand side shows you the ratio of our growth compared to our current market share. In other words, we're punching above our weight considerably being in 2nd place for new business, albeit in 9th place for market share at the moment. Our platform, FEWA CAGR, on the right hand side for the last 2 years is 48%. We've shown you the last 2 years figures there. The platform FLOWs and also the portfolio administration reporting service FLOWs are showing the growth that we've had and the continued increase in market I hand over to Katrina, who will now talk through our financial results. Thank you, Andrew. And so to run you through, this slide is on the group financial results. And so the group operating revenue is up 18% to $62,100,000 Direct expenses are up 4% to $26,000,000 on the first half twenty twenty And our operating expenses are up 22% on first half $20,000,000 to $20,000,000 however, held broadly flat to the 30th June second half twenty twenty result. The combination of this leading to an underlying EBITDA of $16,400,000 up $4,700,000 41 percent on first half twenty twenty and an underlying EBITDA margin of 26% compared to 22% in first half twenty twenty. Statutory NPAT It's $6,100,000 held broadly flat to the prior half to first half twenty twenty and underlying NPAT is $7,500,000 up 39% on the first half twenty twenty. On the right hand side, you can see the graph So the operating revenue and the underlying EBITDA with the platform segment driving the increases in the revenue and the underlying EBITDA. I'll talk more to that on the later slides. IT Services on the bottom graph at the right on the right hand side, These underlying EBITDA increased $1,500,000 from increased revenue from new clients in the pipeline and lower costs With the technology focus being on the platform. Again, I'll talk through that in more detail as we get to those pages. Turning to the next page, we have the platform segment results. So as previously mentioned, the strong net flows of $3,100,000,000 this half has seen the slower growth combined with the market movement of $1,700,000,000 So FUWA is up 25% on first half twenty twenty, driving the revenue of $43,800,000 up 25% on the first half twenty twenty. Direct costs for the platform segment are $10,800,000 an increase of 18% on first half twenty twenty With the gross profit margin of 75%, up 1% on first half twenty twenty. Operating expenses have increased to 15.6 $1,000,000 from the first half twenty twenty. However, again, how broadly flat to the second half twenty twenty of 15,000,000 On the right hand side, we have the platform funds under administration showing the platform flow of $22,000,000,000 And the breakout of the net flows of $3,100,000,000 growing 24% on the prior period and a market movement of 1.7. The average monthly net flows for the 6 months has been just above $500,000,000 compared to $400,000,000 for the full year 2020. There's been no new transitions this half. The net flows and the average monthly net inflows is continued momentum in the portfolio driving the growth. Moving to the platform revenue slide. Platform revenue increased 25 percent to $43,800,000 On the right hand side, you can see the makeup of The various fees driving the increase with the net flows in the FUWA leading to a $3,100,000 increase in fees. And then in other fees, we have the trading and the cash. Trading volumes have been high with average daily trading higher this half, offset slightly by the low interest rate mark and the cash margin. On the bottom right graph, you can see the Revenue margin has gone from 47 bps in the second half last year to 44 bps this half. Portfolio administration Fees are slightly down with the average account balances continuing to grow and the tiered rate cards reducing margins. However, Revenue continuing to grow off the back of the higher through on the average balances and the other fees is down largely again to do with the cash rate and the low interest rate environment. Moving to the next slide. So we have the summary for the platform segment on this slide. As demonstrated in the graph on the top left hand corner, The gap between the platform revenue and the expenses remain strong despite the low interest rate environment. Disciplined cost management this half has been maintained, holding the OpEx flat to the second half twenty twenty levels. Direct expenses have continued to grow in line with the volume increases. However, the strong net flow momentum and the confidence in the platform, we do expect to See operating expenses increase for technology and operations in the second half. The underlying EBITDA margin for the platform segment is 40 since this half, up from 38% in the second half of last year and 39% in the first half of last year. Moving to the operating expenses, we have a breakout here of the first half twenty twenty going into second half twenty twenty and first half 21. So as called out, the operating expenses for the total group have been held flat at $20,000,000 Compared to the $19,900,000 in the second half last year and then up from the $16,400,000 in the first half of last year, largely being employment costs related to technology and operations and growing with the size of the business. The headcount this half has increased to 281 with the increase being in direct expenses and 12 additional FTE onboarding into HUB24 following the acquisition of the Organet portfolio. And then moving to the final financial slide, the underlying impact of the underlying EBITDA to underlying impact statutory impact. So we have a walk in the graph at the bottom and the one off items called out at the top. So underlying EBITDA of $16,400,000 this half Walking down to an underlying NPAT of $7,500,000 with share based payments increasing Up to $3,000,000 which is largely to do with the special LTI in 2018 and recognizing the payroll tax for the specialized PI issued this half. Depreciation and amortization have been held broadly flat to last half, leading to an underlying EBITDA, NPAT, sorry, of $7,500,000 On the right hand side, during the walk from underlying NPAT to statutory NPAT, We have the Agility acquisition. With the new deed of amendments for the share sale for Agility, we have reversed The fair value gain of $1,600,000 and this has been offset by an increase of share based expense payments of 1,100,000 The difference of $500,000,000 expected to be booked in the second half twenty twenty. Transaction and due diligence costs of $1,700,000 related to the strategic transactions that we announced at the end of October has seen the statutory impact walk down to $6,100,000 And with that, I'll hand back to Andrew. Thank you, Katrina. In summary, we've had a very pleasing result with accelerating growth, increasing our net flows to record levels and delivering good positive outcomes and all our financial measures in the context of a challenged or difficult environment as a business we're positioned well to move forward. And as such, I'd like to take a deeper look at the strategic transactions we have underway, which we announced to the market in October and we'll be providing updates along the way. The first one of those is the acquisition of Explore Wealth via scheme of arrangement. And Explore has a total FEWA of $16,600,000,000 as at 31 in December and the acquisition is for $60,000,000 All necessary approvals have now been received from shareholders, option holders and the federal court and completion is on track for the 2nd March, which is next week. Some of the next steps underway there, we are engaging with the Explore team and so to think about the transition to HUB24. We're about to put in place an interim operating model to move forward with that business and certainly engaging with Explore customers moving ahead as well. Our approach to integration or our lens for integration is really about looking for growth opportunities and leveraging the enhanced capabilities of the group across both sets of clients as our lens to think about how we integrate the businesses. Absolutely being conscious of the fact that the capability that comes with Explore and the capability that comes with Hub 24 will resonate with our individual client bases and there's opportunities there for all those clients and for the group moving forward. The Ordman acquisition of PAS or Port Fire Administration Reporting Service completed last year. It had $9,100,000,000 of fuel and the acquisition price was $10,500,000 As we said, the transaction is completed, the team are on boarded. There's a little bit of work to do some system separation from Orbanet's technology systems. And we also as part of that intend to look at future product development to enhance that offering to the market in combination with the Portfolio Admin and Reporting Services. We will pick up with Explore bringing those together and investing in that with confidence given the size of the business and intending to be the market leader in that particular segment and grow that market share. Finally, the Eastern investment of up to 40% in Eastern. We can tell you that we've landed to that 31% with the offer having closed last night. So the offer closed on the 22nd February. And in that mix of transactions, we also completed the divestment of our licensing business, PARAGEM to Eastern, and the PARAGEM team has transferred over to Eastern. Moving ahead, we're going to be looking at the market opportunities that can come about through the technology and partnership technology partnership and distribution agreement that we have with Eastern. And we'll also be looking to finalize our second new director recommendation for Eastern as a result of our shareholding in that business. So what does this mean? Our business Profile, after the completion of Explore, will position us as the leading provider of integrated platform data and technology services in Australia. We'll have a total FEWA of $48,000,000,000 that includes custodian, non custodial FEWA, including the current HUB24 and numbers for Explore at 3,112. So looking at it from a platform point of view, that's $33,000,000,000 in platform for Hub 24, which we are the market leading platform number 1 overall, managed portfolio solution being the best. We've got broad choice and an innovative capability that unlocks value for clients. We intend to keep doing that with Explore and Hub 24 together moving forward. Our Technology Solutions and Services business will see us being a market leader with non custodial admin or Portfolio and Reporting Service admin. We're at about $15,000,000,000 of fuel that includes the Orbanet and the Explore portion of that and other services for data integration and technology solutions for stockbrokers, licensees, advisors and other market participants. As a result of these transactions, we are positioning HUB24 for ongoing success. We're strengthening our market leadership as a specialist platform provider. We're going to have capabilities for high net wealth client segment. We've got some new key strategic relationships with new clients. We're certainly extending our single view of wealth capabilities, leveraging non custody reporting services and the existing HUB Connect capability we have. We're creating a leadership position in that PaaS solution and the significant revenue and scale to support ongoing investment in that segment to secure even further growth. Of course, we're also investing in the evolution enablement of low cost financial advice, which is very important for this industry and very important for our so a base in Australia who are looking to secure their future for retirement. The future is very bright with some key trends being very We're seeing opportunities for us moving ahead. There's increasing demand for managed portfolio solutions of which we are the market leader and there is an ongoing shift to specialist platforms. Some are calling it WEX IT with the wealth exit from the major institutions. That is an opportunity for us to capitalize on and keep growing. There is growth in the high net worth affluent client segment, hence our acquisition of Explorer is helping us target more upside in that segment as well. And of course, in Australia, it's expected to be increasing retirement savings as the population thinks about retirement and we move into that cycle with the age of the population and the need to be self funded in retirement, representing opportunities for us to innovate, deliver our services and come up with new products as well. The cost of licensee functions is continuing to rise and the cost of advice is increasing. Hence, our investment in technology to help with that and the partnership with Eastern and the evolution of advisor licensee models, thinking about technology and thinking about hybrid and direct advice models as well are key trends that are presenting opportunities for us to grow and invest in growth and to continue leading change in this industry. We're focused on maximizing the opportunities and positioning for further growth. It's about us consolidating our market leading platform position and expanding into new segments. So we intend to continue growing platform market share by leveraging the current relationships we have in securing new clients and continuing to invest in platform capability in customer service excellence and also consolidating our managed portfolio market leadership position again through Continued Investment, but also through delivering client and advisor benefits and we're shortly about to launch our managed portfolio academy for advisors in the marketplace as well. We'll be expanding our offer and targeting new segments by investing in new product solutions for high net worth and the PaaS solution that I've already talked about. And of course, we're going to on the technology front continue to collaborate with the industry with licensees and advisors to deliver solutions that solve key advice delivery Challenges that make it easier to look after clients that actually make it easier to use Hub 24 and really bring about change for the future of this industry. So we're building integrated data and technology solutions, leveraging some artificial intelligence and machine learning. And we're also continuing to work on delivering an integrated view of wealth through seamless transaction reporting capability across both our platform and our PaaS services as well moving forward. In summary, what does it mean moving forward for HUB24? We absolutely intend to keep creating customer and shareholder value. We expect to continue to grow our market share in our fuel. We will be commencing the integration of the acquisitions and leveraging the new capabilities that those acquisitions bring us as we transition to our future business model. Positioning HUB24 for success through innovation and ongoing customer service excellence and growing financial results continue moving forward as well. As a result of this, we're pleased to increase our platform through our guidance for FY 2022, which was at $28,000,000,000 to $32,000,000,000 We're increasing it to 43 to $49,000,000,000 at the end of FY 2022. And that includes the Explore business also in that set of numbers there. So all in all, if you unpack that, that represents a level of confidence in the HUB24 business with about a $5,000,000,000 to $6,000,000,000 increase in our guidance for filling that business up from when we made that statement in August last year. Very pleased to be able to say that our growth is accelerating and we're very I don't know if we revised that number even though we only released it to the market in August. So we are positioning ourselves as a leader of a leading provider of integrated platform, data and technology services. We're very excited to have been awarded Australia's best overall platform and we're absolutely committed to creating value for shareholders and customers moving ahead as we execute on our strategy. I'll now hand over for some questions. Thank Our first question is from Siraj Ahmed of Citi. Please go ahead. Thanks. Thanks Andrew and Katrina. A few questions for me. First, just on the start to second half twenty twenty one. I mean, you've given the full update, seems like a pretty strong start. Can you just comment on that? I mean, it looks like It shows that $1,500,000,000 or something, which is equal to last quarter over Q3 overall last year. And Andrew, on the FY 2022 upgraded guidance, how do you think about phasing in FY 2021 versus 2022? And would it be fair to assume that The growth is not really coming from Explore given that you'll be integrating it? I might tackle that first, Suraj. We don't have a very clear line in terms of I'm hearing your question. But in terms of the fuel guidance, look, we've taken a blended approach. We're confident of the growth prospects of HUB24. We get to own or put our arms around the Explore business. So we do have a conservative number in there for Explore. So if that holds True that we can actually increase that. We'll do that moving down the track. We absolutely like to always outperform this guidance. But Largely, we've based the number on the business that we know well, which is the business we're operating today and included a conservative number for Explore in there. Could Could you repeat the other questions at the start? It was a little bit muffled, Suraj. Sorry. Yes. Just on the start for second half twenty twenty one, it looks like the net flows to date is around 1 point $1,000,000,000 seems pretty strong. Can you just give us some color on that? Okay. The flows for the second half have been very pleasing. Certainly, there's a bit of market movement in there. But the seasonality we normally experience in the business I sort of been thrown out the window this year. Normally, we have a dip December, January, February. We've had very strong January and February is still looking very strong. So results So far are very pleasing. We haven't seen the normal seasonal dip. And that I hope sets us up for even stronger flows as we move towards the end of the financial year where traditionally you do have increasing So you are correct, there's been a positive start to the second half. Andrew, just on that. So for the FY 2022 guidance, if you think about phasing End of June 2021 versus June 2022, it sounds like you're still assuming that flows will be I mean, we're not looking at peak flows in FY 2021. It will be FY 2022 will be pretty strong. Is that the way you're thinking about it? We're looking at strong flows to both 2021 and 2022. Absolutely. All right. I'll ask one more. We're expecting, Suraj, The market conditions given what's happened during COVID, the market conditions and WEXID and some of the pipeline, we're expecting growth to continue. As we said, we've got a target here, but we always like to overshoot it. But there's a target there that reflects our confidence. But as I said, our confidence changed from 6 months ago. We've increased it from 6 months ago. So we'll keep pedaling hard for our shareholders and doing the best we can. That's great. Just one more, Andrew. So on the just seeing your platform EBITDA margins, right, very good leverage this half and But you have stepped up hiring towards the end of the half. How do you think about margins both in the short term and in the second half? Do we still expect leverage half and half and also thinking in FY 2022 given this large opportunity that you're seeing? Suraj, I'll take that one. So yes, we're at 44 bps at the moment. We do expect there to continue to be some margin pressure. The last RBA rate cut was in November. So we will see a full 6 months of that roll through in the second half. And then we expect the margin to sort of stabilize from the second half levels going forward Depending on what happens with the low interest rate environment. And or the mix of book, but the margin impact is largely the interest rate environment. There's a little bit in that in terms of higher balances and so forth, but it's not because of revised terms of business. Thanks. Katrina, I was actually asking about the EBITDA margins, right, on the costs on the OpEx side. Do we expect similar trends on that? Yes. So, sorry Suraj, I thought you were talking about the 44 bps. We are at flags, we are going to be investing in the 2nd half to make sure that we're scaled up for the momentum that the business is seeing. And so we will that will It takes some time for the revenue to have a full year run rate. And again, in the second half, we will do the phasing. So there will be So phasing of the FTE coming in, but you won't necessarily see the corresponding full year run rate of the revenue until next year. So just clarifying, you're saying some operating deleverage in the second half, but that should come through next half next year when the revenue comes in? The other way to pick it? Correct. The headcount investment for this half is relatively a small number in total for the half It's a staged investment. And so we just thought outlining that we won't be holding Expenses flat as we have, we need to invest for the growth. The growth has been above expectation, but there's not a large amount of money in terms of coming through. And hopefully continuing growth in terms of revenue and fuel will continue. That's very helpful. I'll jump off the line back in the queue. Thanks, Andrew. Our next question is from Simon Fitzgerald of Evans and Partners. Please go ahead. Good morning. Thank you for taking my questions. I'll just ask 3 here. The first one relates to a comment in the analyst packet. There's a mention of a new special LTI that was issued in the first half twenty twenty one. I recall the previous special LTI in 2018 as a result of salary limits or at least came to salary limits and was purely FEWA based in terms of its hurdles. Just wondering if you could talk about this new grant in terms of any sort of hurdles and what the FUA targets might be if that's the targets that I'm thinking about? Sure. I can and outline referring you to the AGM notice of meeting the full details in there. This target, it is sorry, this LTI is about a 5 year performance period attempting to intending to lock in executives or provide a retention or reward mechanism for executives over a 5 year period. It does involve the extension of notice periods from executives to 12 month notice period to also create retention and hopefully keep the team together and protect shareholders from a market where there will be competition for good resources moving forward. And it also involves fewer targets ranging from $50,000,000,000 to $60,000,000,000 which can be adjusted and will be adjusted based on the acquisitions that we've made. So pre acquisition, there was fewer targets between $50,000,000,000 $70,000,000,000 over that 5 year period with the need for a 5 year performance period and exchanging that for longer notice periods for executives. Okay, very clear. The second question relates to the IOOF Private Label Agreement. I'm just trying to think about how we should think about this Agreement a little bit further just in terms of is this like a number of private label deals that IOOF look to put in place? Or is there something more we should think about here just given the sort of change in relationship with their previous provider Panorama? Well, we can't speak On behalf of Vital West apart from what's in the marketplace and I have decided to appoint HUB24 as a strategic partner moving ahead. It is their product. It's a private label, so they'll be operating as a product issuer. I'm not sure that they'll that seems to be a considerable investment and focus on wanting that to work if they're going to the trouble of actually being the trustee and the issuer. So look, From that perspective, I think Item 5 want to be an open architecture business. Renato talks about it all the time. And HUB24 is now able to participate in that. And I think it's a shift from their existing relationships to a going forward platform that provides great utility for advisors and customers. Sure. And just the final question in regards to Explore. This sort of comes off the first question that was asked. But if I look at the Hub business in terms of its growth over that 6 month profile from when we first talked about those strategic Transactions in the release versus where the Explore business has grown. Can you just talk about a little bit about the growth between the two businesses? I mean, Explore has obviously got a very higher institutional component, but it does look like a slower growing business in terms of I'm just wondering if you had any comments in regards to that. Look, I'm I don't I can't comment on Explore. That's for their Board and for them to comment on. And in a week's time, we'll hopefully sorry, in a week's time, we'll be taking the reins of that business. Look, You can see by unpicking the information that's released to market at September, I think Explore was at 14, sorry, Couture, it wasn't 16.5000000000 dollars And if you unpack that and unpack some of the pieces there, you can see that the business is growing slightly, but it's not growing in the trajectory of HUB24. Our acquisition is because of the key clients here and what we think we can take to those clients to get enhanced growth from that business and the capability we can leverage here. But Until we have our arms around the business, not really able to talk about that. Moving forward though, those products and services will blend. So we will be talking about it as combined entity over time as we integrate. And so the distinction will blur in any event. Okay. And then just one final question which comes off from that. Are you thinking about sort of enhancing your disclosures in any way in terms of maybe revenue from non custodial services versus custody? Look, absolutely, once we get on board with these acquisitions, we'll certainly be looking at how we disclose, how we report on our segments. We're Still to do that, we don't own Explore yet. And so for this half, we've gone with our traditional method. But as a business, we'll be looking at what's the right way flows and report that. And I think you'll see that sort of breakout. Excellent. Thank you. Our next question is from James Baccinello of Shaw and Partners. Please go ahead. Hi, Andrew and Katrina. Firstly, congrats To you and the team on your results. So just in terms of that updated sewer number in the middle of Feb of 24,000,000,000 Does any of that $2,000,000,000 increase come from the Clearview wealth transition of $1,000,000,000 that's expected over the second half? No, at this stage not. The Clearview transition will come in a large lump or a single transaction over the weekend. The project is tracking well. It's still on track to be done in the second half. So whilst ClearView are writing new business with HUB through the white labels they've launched. None of that is the transition. Great. Thank you. And just one more from me. Just around the competitive landscape. Just wondering how you're seeing that generally speaking and sort of where the customers are demanding sharper pricing as a result of some of your competitors sort of sharpening their And there's admin fees, especially across their back book? Look, I think that's a response to competitive tension that others have to deal with, not ourselves. We've not had a back book issue. We've not had to respond to competitive pricing. If anything, I think pricing has settled down. We've typically been a price leader in the marketplace. And even those institutions who have adjusted price, it hasn't changed their outcomes in terms of flows. I think advisors are thinking about value as much as about price and what you get for price. We're not seeing a lot of pressure there. Certainly, when you're talking about large opportunities, let's say, like a private label for an institution like I don't work, you're going to have a sharp rate card, But you also have better cost profiles for that sort of volume of business. So generally speaking, competition in the market isn't creating price pressure that we're experiencing to any large extent today in effect. And you can see that from our flows being up. In a marketplace, which should have had headwinds and challenges Because of COVID and so forth, we've had record flows above what we would have budgeted at the start of the year, ignoring COVID. So the results speak for themselves at this in time and we're not seeing that price pressure. Fantastic. Thank you. Our next question is from Brendan Carrig of Macquarie. Please go ahead. Good afternoon, Andrew and Katrina. Just a quick follow-up. Maybe on Explore, Andrew, you made comments about some of those clients That are there that you wanted to have access to. Have you had the opportunity to have any discussions with those clients? Or do you have to Wait till the completion before you can sort of sit down with them and talk about the approach going forward? Look, certainly we did. And as part of our announcement of the scheme in the first place, we did indicate we've spoken to the 2 key large clients. And so we have spoken to those. We've actually met with a couple of client groups several times. We've been involved in telephone hookups with the Explore Management and Large Clients to start to talk about who we are and what we're about. So yes, we've been engaging and so far those engagements have been very positive. Okay, excellent. And then most of my other ones are covered, but maybe just on CapEx. Obviously, there's been sort of seasonality in In terms of the platform CapEx, historically, it's a bit more of a skew to the second half. Is this something that we should this trend was something we should expect Going forward or will some of the CapEx budget be allocated more towards the new acquisitions? So will this absorb some of the CapEx budget? I'll take that one, Brendan. So the acquisitions, when we did the announcement back in October, We announced that there would be $10,000,000 for implementation costs related to all the strategic transactions. So from a BAU perspective, we're still expecting continued growth on the platform. And so you can expect the trend on the depreciation and amortization and the amount of spend for capitalization to continue. Okay. That's clear. And then just the last one, maybe just following on from Simon's question on ROSS relationship. Just thinking about how this impacts the ability for scalability in the core business, I guess, is it fair to assume that this is completely separate And given it's a bit more of a lower touch kind of a relationship and the white labeling and a lot of the I guess the effort comes from the IFF side of things That doesn't really impact your ability to scale the core? It certainly doesn't distract our sales team from looking for new opportunities in the marketplace because our work will be supporting and promoting this product to their channels. So our sales team looking for other opportunities. So from that point of view, it allows us to, I suppose, work with Itemwave and actually have a relationship with advisors that we couldn't before whilst not distracting some of our own growth opportunities. In In terms of the operating efficiency in the business, look, it's about us continually thinking about our staff in our call center and operations and our Technology Infrastructure for Growth. We're very confident that we'll invest at the right time to support that growth. And I don't think It'll get in the way of our organic growth. That's not our intent. Our track record says that. So we're absolutely delighted to be able to take this on at the same time as Clearview and to be thinking about strong organic growth. Okay. That's clear. Thanks very much. Our next question is from Nick Virges of Ordinance. Please go ahead. Yes. Good afternoon, Andrew and Katrina. Just a couple of questions. How should we Can you remind us what the custody and non custody split is for the Explore business? I can remind you, I think, as at what date have we got? 31st December. So when we went out with the Q2, ASX announcement, it was $15,000,000,000 for Explore and there was $9,000,000,000 of custody and $6,000,000,000 of non custody. Okay. Thank you. And just in terms of revenue margins, How should we on the platform, how should we think about regular margins versus private label margins, I guess in particular IOOF? Look, the item wave margin will be lower. At this point in time, we are yet to think about How we if we report that differently. So we're going through and thinking through that process, but it will be a lower margin. We'll have a lower expense base as well. So I think From an EBITDA perspective, it's absolutely consistent. It will depend on how much of or how much flow you get from idle with whether it changes the revenue margins in the short term. There's yet to be a dollar there. So I don't think it'll actually impact margins materially in the short term. And I think we'll have more to say about that in the future as we see how the rollout goes. Okay. Thank you. And then finally, I guess, how should we think about non custody Margins compared to custody margins? Well, non custody is driven by it's usually an account based fee. It's not driven by FUWA, it's not percentage based. It's an account based fee. And I think that if I would just think about it from a profitability point of view in terms of an EBITDA margin. And I think there'll be more to say about that once we get our The Explore business in the stable and we look at how we report that segment. Okay. Thanks very much. Thank you. Our next question comes from Ashita Bharadwaj of Citi. Please go ahead. Hi, Andrew and Cucina. Three quick ones for me. So first, maybe I'll follow-up on the non The EBITDA margins, looking at the annual stock, it looks like your current margins are about 66%. Is that representative of future margins or should we expect additional costs to come in? Non custody of 66%. Yes. So I think that's largely the Orb and Net portfolio at the moment. And I think What I would say to that is that similar to what Andrew said, when we get the Explore portfolio, we'll look at how we break that out and report that going forward. Okay. And then maybe just on the gross margin decline in the platform segment, that's declined half and half. How should we think about that going forward? So the platform margin, are Are you talking about the revenue or the underlying EBITDA? No, the gross margin. Gross margin. The gross margin. Yes. So it will be impacted by the revenue and the cash rate. So as we mentioned earlier, you'll see a full 6 months of the November cash rate in the second half and going forward. And then from a direct expenses perspective, it will increase in line with the volumes is our expectation. So we wouldn't other than the pressure on the cash margin, we wouldn't expect the gross profit margin to move other than that. Okay. Thanks. And then just maybe lastly, if you can give us an update on the Clearview transition and how you're expecting that to go forward? I think I mentioned that earlier. Look, it's on track for the second half. The project has a target date ready to go, which would see a transition in this half. It seems to be going well. It's in the order of $1,300,000,000 depending on market movement that we would expect to move over. And so our best information is on track and we'll deliver as planned. Okay. Thanks. That's very helpful. Thank you. We have a follow-up question from Suraj Ahmed of Citi. Please go ahead. A few quick ones. Andrew, just confirming. So the FY 'twenty two guidance that would include IWF Assumptions in there, wouldn't it? It's guidance for the combined business and all the current client relationships, yes. Okay. So at this point in time, that's based on us having confidence, having increased the platform target for HUB24 by $5,000,000,000 to $6,000,000,000 Got it. And on the admin pricing, I understand that you don't have a big back book and your pricing is lower. I think previously I'd sort of indicated, if you look at a retail rate card, your pricing is quite expensive, right? Is there a need for you to adjust a retail rate card? Can you explain that? Look, we keep looking at that and at some point we probably will republish that. What we've been focused on is growth and Strategy. It's known in the market. People understand how we work. We've always tailored a price based on opportunity. We will look at that moving forward, Suraj. And we'll do it as part of a larger product. Well, we wouldn't just do it on its own. It would It's efficient for us to do that with new products or features and do it all at once. Back to your guidance target, we absolutely believe that the opportunity we have could be greater than the target we've got. We don't want to forecast what either work may or may not deliver. I know people are excited about that. It's early days we get to launch a product, but it could be a great result across any of our clients. So if that changes, we'll let you know. Yes. So you're saying it's there, but you're not assuming big numbers from IWS per se. Just last thing, I mean one thing that surprised me on the negative is your revenue per Account for the platform actually declined half on half. I mean given higher transaction fees, etcetera, you would think the Revenue per account increases. Can you just touch on that? The revenue per account will be in our handover container affected by the cash margin. The higher transaction fees are in terms of dollar terms, not necessarily in proportion to the book. So you would have had A large amount of trading in second half twenty twenty through the volatility through COVID. So you had a whole lot of money moving around. So proportionally as a book, you had larger volume Trading. Even though in dollar terms, this half it's increased, proportionally, it's probably less of a result, which means on a percentage basis, it actually has a different result. Is that clear enough, Keturah? Yes, that's fair. There's nothing else to add to that. Okay. Thank you. Thank you. We have a follow-up question from Brendan Carrick of Macquarie. Please go ahead. Hi. Just one more from me. Just given the Excess of liquidity for the banks at the moment, have you had any discussions or do you think that there's potential risk of The potential for your deposit providers to potentially reprice lower in the current environment? We're always in discussion with all of our providers. The relationship we have with our deposit provider has a fair distance to run yet. It's in the marketplace. It's a long runway to finish. We're always having discussions. Look, We need to think about how to get the best outcome for our shareholders and how to get the best outcome for our customers and work we provide us to do that. We're committed to doing that. I I think we've got a lot of runway before our current arrangement ends. Absolutely, we think that there's an opportunity regardless of that to rethink how Cash products are invested and maybe come up with different opportunities for customers as well. So while discussions are underway, we don't think there's any short term impact. And if that changes, we'll let the market know that our view is to come up with different opportunities and innovate in this environment. Just on that, Andrew, maybe just to flesh that out a bit more to Innovate, does that mean that you want to potentially I'm trying to search for some higher yield in order to extract better benefits for those customers based on those deposits that are sitting on account. I think we as an industry need to think about retirees and to think about how we can get better outcomes. And we've got people plowing money into equities because of low interest rate returns. There are other ways to invest in cash related products that we think we should look at with business partners that provide choices to customers. So we may provide a choice of different opportunities. We're thinking through that at the moment, but it's early days. But our aim would be to try and help consumers at the same time as try and create some flexibility and I suppose ring fence the business for future changes, provides an upside. Okay. That's interesting. Thanks very much. Thank you. There are no further questions at this time. I'll hand the call back to Mr. Alcock for closing comments. Well, thank you again everyone. As I said, it's great to be here today as Australia's best overall platform. We look forward to seeing those of you on our rounds as our roadshow over the next couple of weeks. As always, thank you for your support and interest. And we'll talk to you again soon.