Good day, and thank you for standing by. Welcome to Insignia Financial Full Year 2023 Results Conference Call. At this time, all parties will start in the listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You'll then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the call over to your host today, Mr. Andrew Ehlich. Please go ahead.
Thank you. Good afternoon, everyone. Welcome to Insignia Financial Limited's FY 23 results presentation for the year ended 30 June 2023. I'm Andrew Ehlich, General Manager of Capital Markets. Presenting our results today are Renato Mota, Chief Executive Officer, and David Chalmers, Chief Financial Officer. As mentioned, there will be an opportunity to ask questions at the end of today's presentation. I'll now hand you over to Renato.
Thanks, Andrew, and welcome everyone to our full year results for 2023. Over the next hour or so, David and myself will step you through the performance of the business for the year just gone. We'll also spend some time today providing further insights into how we're approaching the next phase of growth for Insignia Financial. Starting with the FY 2023 highlights, and for the year, we reported a net profit after tax of AUD 51 million, which was up 39% on the prior year, and this was underpinned by the AUD 191 million underlying net profit after tax, which was down 15% on prior year. Largely off the back of investment markets, as well as the divestment of JANA. The delivery of synergies drove our cost base 5% lower.
And pleasingly, we were able to meet our commitment of a net funds flow positive outcome, reporting net funds flow of AUD 666 million for the period. I think it's also worth highlighting that over the past two years since the acquisition of MLC, net funds flow have improved by AUD 5 billion on an annualized basis, and we're, we think that's a terrific achievement. Finally, we're declaring a final dividend of AUD 0.093 per share for the half. Beyond the financial outcomes, clearly there's been quite a considerable number of milestones also achieved throughout the year, which we see as evidence of our disciplined strategic execution.
Starting with synergies and integration, pleasing to have completed our synergy program that was targeting AUD 218 million. And also, equally pleasing, is the completion of the separation of the P&I, Pensions and Investments business, from ANZ, and glad to be reporting that we're halfway through the separation of the MLC business. Alongside that, we've also made a number of small divestments, which not only provides for strategic clarity and focus, but also go to reinforce our balance sheet. Finally, picking up on last month's quarterly business update, we've made three key announcements as part of a strategic refresh.
Having delivered on the priorities and commitments of the first two years of the acquisition, we felt now was the right time to look beyond the acquisition timeline and really focus on unlocking the growth potential beyond 2024. Which really leads us to our refresh strategy. You see there on slide 4. As we've mentioned previously, 2024 represents the last of that three-year integration window post MLC, and while we remain committed to ensuring we continue to successfully execute on combining our businesses into one Insignia Financial, our focus has really sharpened and culminated in this new three-year strategy, which drives our prioritization and action. We believe that action is really pursuit of unlocking the growth potential beyond this initial phase.
At the same time, it's important to acknowledge that the ambitions and strategic intent of the business remains unchanged. We continue to firmly believe we can create Australia's leading financial well-being business, and in turn, help create financial well-being for all Australians. And what we've identified are four key pillars in achieving that. And starting from left to right, firstly, improving our clients' financial well-being, which is really the creation of a specialist focus around business to consumer energies and strategy, with an aim of expanding our existing capabilities in this. So that is clearly a new and clear focus for the business.
Alongside this, we have deepening our partnerships with advisers and employers, and this has really been the traditional bedrock of this organization, working with our intermediary partners to ensure that we're supporting their propositions. Thirdly, we have simplifying our business, which for, I think, most on this call will not be a surprise. It's certainly been a key focus of this organization over the past two years. And finally, the fourth pillar being building a safe and trusted business together, which really goes to the heart of being a trusted organization, and the importance of governance also. We'll spend a bit more time later in today's presentation focusing on each of these, but it's worth making a couple of points in relation to these four areas.
Firstly, we're doubling down on existing core areas of focus, such as partnerships with advisers, as well as simplification, and I continue to believe that these remain key tenets of our future success. But in addition to this, we're also now emphasizing greater focus and strategic value in the areas of engagement with end clients and investors and members, as well as ensuring we're applying a strategic lens to governance and risk management. If I turn to each of our segments, and starting with platforms, it's pleasing to see the positive momentum continuing in the platform segment, both in terms of funds flow, but also the execution of simplification. Workplace really stands out as a key highlight with respect to fund flow, having delivered in excess of AUD 2 billion in net flow.
We're also being rewarded for the continued improvement in the Expand platform, both in terms of rankings in adviser surveys, but also in awards and in advisers supporting themselves, with now over 3,000 advisers supporting the Expand platform. Also worth highlighting, our growth in managed accounts, both across the MDAs and SMAs, with now AUD 6 billion in these structures. Turning to advice, and the announcements last month about the creation of an independent advice services partnership model has really set the scene for a new phase of growth for our advice division. Not only does the new model align better align ourselves with the needs of advisers, we're also confident that it improves the growth prospects of our self-employed business in a sustainable way, and in support of high quality advice, businesses, and partners.
This separation also allows for greater focus for our professional services business in Shadforth and Bridges, delivering growth through improved client engagement, and importantly, also improved efficiency. It also allows us to explore new opportunities that are expected to emerge and are emerging from the recent Quality of Advice Review, and subsequent reforms that we're now engaging in. And finally, to our third business in asset management. There's a lot to like in the performance of our asset management business, but it's also important to remind ourselves that these businesses live and die by their ability to deliver superior investment outcomes after fees to members. So in that context, I think that's the most important, performance has been the investment performance over long time frames.
Alongside that, the teams also delivered significant product simplification and consolidation in OAs, which I think bodes well for continued strong performance and delivered in an efficient manner. We're also excited by the growth prospects in the retail sector, driven by some relatively unique capability, and specifically, the private equity capability is one that I think continues to grow momentum, which is pleasing, as does the SMA offer, that we're now also distributing, in support of our asset management capabilities. The resetting of the relationship with JANA during the year certainly simplifies our operating environment and goes to the heart of ensuring we're placing maximum effort on our most valuable opportunities as a business.
Turning to flows, and specifically platforms, it's been terrific to see our emphasis on client relationships and, and being responsive to feedback, really translating to net flow outcomes. I think there is a tendency to try and assess flows on a quarter by quarter or half by half, but we all know that momentum is really important in flows, and that momentum's built off the back of strong partnerships. So if I reflect on our flows momentum over the last two years, having produced an AUD 3 billion improvement in net fund flow per platform, I think is as we've touched on. I think particularly strong is the workplace performance, which, while not surprising, it is pleasing to see.
We know that in MLC we've got a market-leading offer, and I think that's recognized by appropriate gatekeepers and tender operators as one of the leading offers in market. I think our commitment to continue to grow this and ensure that we really crystallize that position as a market leader will serve us well into the future. And actually reinforces, I think, one of the thematics that we'll touch on today, which is, it's this workplace business that actually allows us to have a relatively younger tilt in our demographic, and I think that younger tilt will actually continue to support the ongoing growth of the business. The advice business momentum has suffered, I think, certainly in the last half, from the upcoming transition and the expectation of the transition of MLC Wrap to the Evolve technology.
And these disruptions are always a consideration when we're undertaking significant change management exercises, but we do see it as a temporary dynamic and one that will re-baseline once the transition is complete. And finally, touching on asset management flow before handing it to David. I mentioned on the back of strong investment performance, it's pleased to see this translate into positive momentum on flow. With particularly good prospect in our high margin sets around retail and private equity. Our institutional flows, which are the driving force behind some of the direct capabilities, continue to be an important driver. But as we've discussed here before, we know they tend to be lumpier in nature, both in and out. But again, positive to see a trajectory that reflects certainly our intent in the growth of the business.
And certainly I think Intermed's been a key contributor there. And again, just to kick off and handing it over, just to reiterate that between the asset and the platform segments, the business has delivered over the last two years, a AUD 5 billion improvement in net FUM, which I think is a really important first step to rebuilding the growth momentum in this business. So with that, I'll hand over to David.
Thanks, Renato, and good afternoon to everyone on the call. I will start today with a summary of the financial results for the 12 months ending 30 June 2023. Where FY 2023 net revenue was AUD 1.379 billion, a fall of 7% from FY 2022, and driven by two key factors. The first of these was the lower average FUMA from a combination of first half 2023 investment market declines and the divestment and restructuring of our relationships with JANA and Presima. The second of these was a reduction in margin from pricing changes implemented throughout the year, mainly in our platform segment. It should be noted that consistent with the first half of 2023, the only other divestments categorized as a discontinued operation is AET, the sale of which was completed in November 2022. Moving now to operating expenses.
These fell by 5.5%, thanks to the delivery of acquisition synergies, being the product of, and with the resulting product of both the revenue decline and OpEx improvement, generated EBITDA of AUD 344 million on a continuing basis, a fall of 11.5% from FY 2022. As Renato mentioned, FY 2023 underlying NPAT on a continuing basis was AUD 190.7 million, a 14.9% decline from FY 2022, and in line with Visible Alpha broker consensus. Turning now to the key metrics, net revenue margin held up well to decline by 0.5 basis points. That was at the low end of our guidance for decline. We were expecting between 0.5 and 1.5 basis points decline throughout the year.
We obviously came in, as I said, at the lower end of that. Despite the full year cost declining, our cost to income ratio, however, did increase, given cost reduced by 5.5%, less than the revenue decline of 7%. Finally, average FUMA across the year fell by 6%, with the strong investment market performances in the final quarter of FY 2023, not making up enough ground to cover the sharp decline in first half 2023 markets. Looking now at segment contribution, we see differences in the drivers of the results between the two of our segments, where income is directly related to the performance of investment markets, being asset management platforms, and our advice segment, which is less exposed to investment market volatility, other than in the Shadforth advice business.
Platforms saw a 14.7% fall in FUA, with falls in gross margin, partially offset by OpEx reduction. The driver of gross margin decline in platforms was the impact of lower FUA, again, relating back to those investment market declines, as well as the contribution from the price reductions we flagged in our full year results last August, and again in February. The impact of which continues to be offset by some of the costs and fees that sit between the gross and net margin line, and the impact of provision releases that benefited first half 2023. OpEx for the platform segment fell by more than AUD 4.4 million, thanks to synergy benefits.
Although, it should be noted that costs in the second half were higher than first half, due to some one-off costs in terms of investment in marketing, and also some governance and legal costs, that impacted the platform segment in the second half of FY 2023. Advice grew UNPAT by 38%, despite a AUD 17.8 million fall in net revenue, largely caused by the integration of MLC Advice into Bridges. The trajectory of these declines pleasingly slowed in the second half, with Bridges seeing encouraging growth in the final quarter of FY 2023.
Offsetting this fall, was an AUD 42.8 million reduction in OpEx, with the advice business continuing to make progress towards the elimination of losses from the acquired MLC Advice businesses, with full year UNPAT loss of AUD 34 million, compared to AUD 55 million in FY 2023. And so from a first, second half split, approximately AUD 22 million of UNPAT in the first half, and AUD 12 million in the second half. Asset Management UNPAT was down 1% year-on-year, albeit with, quite strong underlying performance, given that most of the AUD 20 million net revenue decrease can be attributed to the revenue loss through the divestment of Presima and JANA, as well as a reduction in private equity performance fees during FY 2023.
Delivering this flat underlying revenue, despite lower FUM, was a result of improved FUM mix, with outflows from lower margin products and inflows into those with high margins. And then lastly, on the corporate segment, quite a significant move into UNPAT, mainly due to increased interest costs in that segment of AUD 18.8 million. This cost was offset at a consolidated level by interest income. That interest income, though, is recognized in the platform segment below the EBITDA line. Turning back to the group result on the next slide. This shows the bridge from FY 2022 UNPAT to FY 2023, and highlights the impact of the lower FUMA that we've spoken about.
You can see there also the 67.9 million dollar net revenue decline relating to lower FUMA, and the impact of reduced pricing, adding a further AUD 41.5 million reduction. Offsetting these declines was a net OpEx improvement of AUD 59.9 million, in addition to the revenue synergies of AUD 5 million. And it's important to note there, again, the discontinued operation is the contribution of AET in the first half of 2023. And moving through to take a bit of a closer look at the expense base. As mentioned on the last slide, one of the highlights of FY 2023 was the improvement in OpEx.
Overall costs down by AUD 59.9 million, and that, that is the net result of salaries increasing by AUD 25.2 million, and other costs of AUD 15.2 million. Some of these other costs are ones I mentioned earlier. Some of them are one-off in nature, in terms of increasing marketing costs for the relaunch of the Evolve product. There are some provisions in there for some of the regulatory issues and license conditions, but we have also seen a return to what we'd think would be a more normal level of travel costs following COVID and starting to move around our offices more in line with what we have done in the past.
So as mentioned, the largest percent of these costs in the other segment that fit within the other segment are borne by the platform segment, and again, it goes back to that increase in second half cost base in platforms, relative to first half. Moving on to the outlook for platform margin. So if we go back to the Q4 business and strategy update, one of our key objectives in setting out that new strategy was to provide certainty, or at least more direction on some of the key strategies and drivers of future profitability. So, for example, the Master Trust platform, the cost and benefits, the pathway to actually restructuring our advice services channel, and how we're going to deliver on the profitability commitments on advice, and the strategy to lower costs across the business through additional synergies and optimization.
The one key driver of future profits that we chose to leave for, for today, rather than talk about at the time, was a view on, on where we see future platform net revenue margins. And as we've repriced a number of products over the last three years, you can see the material impact there falling from around 50 basis points in the first half 2021, to around 47 in FY 2023. When we look across to next year, we, we do see still, a decline in platform margin to somewhere in the range of 44-45 basis points. But we think when we look at the remainder of the three-year strategic period, that those declines would moderate substantially. And, and you can see there, we're expecting, those declines to certainly moderate.
The drivers of the decline in 2024, firstly, is new pricing changes that have been made in FY 2024, mainly relating to the Evolve 2023 migration. We've also recently transitioned about 38,000 OnePath clients to contemporary pricing. That change was made at the end of FY 2023, so that will flow through. We also have other pricing changes made in FY 2023 that have not yet had a full year impact, so that will impact 2024. And the third area is we do think that there'll be a normalization or reversal of some of the benefits to net margin that we have seen in FY 2023. You know, particularly the release of provisions in first half 2023, normalizing as we sort of move into 2024.
Thinking about what happens beyond 2024, as we flagged there, while there's certainly been more sort of tactical repricing and positioning going forward, we think that's quite different to the significant book repricings we've seen over the last three years. Turning me now to our two structural remediation programs. FY 2023 was a year of significant progress, with provisions reducing from AUD 191.8 million to AUD 68.9 million for advice, and from AUD 148.2 million to AUD 80.5 million for product remediation. More than AUD 120 million of remediation across both programs was paid to clients in full year 2023, with the second half of the year focused more on the analytical work on remaining issues.
So we expect those cash payments to step up again in the first half of 2024. We expect both programs to be materially complete this financial year, but it's likely that some of the timing of payments would continue into FY 2025. Importantly, there was no net movement in either the advice or product remediation programs in the second half of FY 2023. A quick look at corporate cash and debt. As at 30 June, we had AUD 679 million of cash in undrawn facilities. Senior leverage, as at 30 June, came in at 1.2 net debt to EBITDA, 1.2 times, at the same ratio as we had for the first half of 2023.
We've also set out here the three main forward-looking financial commitments, being the balance of remediation, the AUD 260-285 million three-year investment slate that we set out at the Q4 business update, and we've also included there the face value of the subordinated loan notes, which mature in FY 2026. Continuing on the theme of debt and funding, we've included this year a cash flow perspective on FY 2023, highlighting the significant cash generated by the business with cash UNPAT of AUD 349 million, up on last year's AUD 339 million. The three main items to adjust to get from cash UNPAT to free cash flow are the asset sales and purchases, being AET and JANA, transformation and separation costs, and also remediation.
FY 2023 asset sales totaled AUD 163 million, and then as we move from free cash flow to dividends, which is a cash view rather than an accounting view of dividends, and those dividends are shown net of the DRP. The slide highlights the importance of finishing both remediation in FY 2024, and also in finalizing the amount required for transformation and separation, as we look at a pathway to increase free cash flow over the coming years. The next slide is a summary that we put up at the Q4 business update, but wanted to make sure we just went through this again.
So this is not a new slide, but it sets out the AUD 260 million-AUD 285 million of net spend between FY 2024 and FY 2026, and the gross annualized benefits of AUD 175 million-AUD 190 million over the same period. The program of spend we've set out here contains all the spend necessary to finalize the separation from NAB, to establish and stand up the new ASC advice business, and also to deliver the OpEx savings that we've committed to here. From a reporting point of view, while we've broken down the components of the individual costs and benefits, these will be reported on a consolidated basis moving forward.
Turning to dividends, directors have declared a final FY 2023 dividend of AUD 0.093 per share, which represents a payout ratio of 64% of UNPAT. Again, there will be a DRP offered at a 1.5% discount. In line with guidance given at the first half results, the final FY 2023 dividend is unfranked, and we continue to expect FY 2024 dividends to also be unfranked. Finally, moving on to guidance for FY 2024. We continue to give guidance for group net revenue margin and group EBITDA margin, but we've replaced the guidance on net flows instead with guidance on the spend profile and benefit realization profile of the strategic program that I just talked about on the previous page....
Starting with net revenue margin, we expect to see this decline by 1.5-2.5 basis points from 47.3, due to the impact of pricing changes and platforms that I've just talked about earlier, where we expect to see that net revenue margin of 44-45 basis points. Also the margin loss in asset management through the divestments of JANA and IOOF Limited. Group EBITDA margins are expected to stay reasonably flat, with a decline of 0-0.5 basis points, noting that in addition to the usual annual cost increases, there's also an AUD 20 million investment in FY 2024 in cyber and governance spend.
Finally, from a strategic investment point of view, of the 3-year net investment slate of AUD 260 million-AUD 285 million, we expect to invest AUD 150 million-AUD 160 million of that in FY 2024. Likewise, of the total benefits of AUD 175 million-AUD 190 million, we expect to realize AUD 60 million-AUD 70 million in FY 2024, noting that the net P&L benefit of these savings will be reduced by the cyber and governance costs mentioned earlier, and also the usual annual cost increases, the largest of which is salaries. Back to you, Renato.
Thanks, David. Just turning to our outlook now, and having successfully completed the last two years of integration work post the acquisition, the foundation now can provide the opportunity to sharpen our focus as we look to unlock the inherent value in the franchise. In the context of what continues to be an industry with really positive macro factors, there are some undeniable truths about our industry which give us confidence about the next three years, and whether it's the growth of superannuation over the next few decades from AUD 3.5 trillion to AUD 9 trillion, the disproportionate concentration of these assets towards the larger funds in the sector, or more recently, the reforms proposed under the Better Financial Outcomes package, which supports improving the accessibility and affordability of financial advice.
The opportunities that are ahead over the next three years is probably the most promising in a generation, and I think it supports the creation of greater financial wellbeing in, in our communities more broadly. And I think Insignia Financial finds itself at the epicenter of a lot of these opportunities, and the decisions taken over the past two years will really provide the opportunity to capitalize on these over the next three. Just reflecting on the growth of super, it's worth understanding the demographic exposure Insignia Financial has in this space and provides. You'll see on the chart that the distribution of our assets under administration, as well as our member numbers.
I think what this reinforces, certainly relative to others and specifically relative to specialist platform providers, is that Insignia Financial has an overweight position to the accumulation phase of the superannuation sector, with the 35- to 44-year-old cohort actually being the largest by way of member numbers. While these members clearly will have a lower average balance, they also represent the largest embedded value by way of future prospects in asset accumulation. So to put this into numbers, if the 35- to 44-year-old cohorts were retained through to the pre-retiree phase, all else being equal, the AUD 23 billion in assets would increase to over AUD 60 billion in assets.
It also reinforces the embedded value in our focus and our new focus in direct client engagement, that in the retention of our existing younger cohort, underwrites our asset accumulation, and underwrites our net funds flow growth, before we even address the prospects of acquiring new clients. In other words, the demographic profile of Insignia Financial actually has a greater exposure to the tailwinds of the continued growth in accumulation in superannuation. Conversely, our business lines that are targeting the advisory segment also capture the pre-retiree and retiree segments, which continue to be a really strong source and important source of higher balance relationships. Again, reinforcing the diverse nature of Insignia Financial's model, and the benefit of a strategy that capitalizes on both.
So having reflected on the tailwinds in the industry, the favorable position in the Insignia Financial franchise, and our execution track record over the past two years, we believe that the potential of this next phase is very clear and very specific to the organization. Importantly, I think it's also a strategy that very few others can replicate in the current market, which is why we see the next three years as presenting a particularly important opportunity from a competitive positioning perspective. And the reason I believe this is, firstly, we're one of the country's largest super funds with circa AUD 150 billion-AUD 170 billion in funds under administration. We have one of the broadest and largest set of advice capabilities to serve the community, and particularly emphasize the opportunity and the retiree needs.
And we have further benefits to extract from scale and simplification with core capabilities in administration and technology. So by any measure, I think it's a, it's a relatively unique capability set that we think our refreshed strategy really looks to exploit over the next three years. While we've spent a few moments on each of these four key pillars, it's important to reinforce that our strategy combines growth opportunities, both from direct client engagement, as well as excelling in servicing key intermediary channels. And all of this is underpinned by investment that comes from the benefits of scale, as well as a mindset to risk and governance that is embedded in decision-making and system design.
Turning to our first pillar of improving our clients' financial well-being, this opportunity is made particularly valuable to Insignia Financial, given our starting point is serving nearly 2 million members, and currently attracts approximately 250,000 new members each year. I think what currently disguises this opportunity is the AUD 9 billion in outflows that we currently experience today from what is a relatively contemporary client engagement model for the industry and arguably a leading engagement model. However, clearly, it still leaves an unmet need and opportunity that we'll look to explore going forward. In terms of this area of focus, we've announced the creation of a new business unit that will be establishing a client well-being division within Insignia Financial and will be appointing our first Chief Client Officer.
This unit will house our existing client engagement capabilities, including our professional service advice businesses, with the aim of creating a single continuum across our client segments, creating a more holistic set of client value propositions. As we sit here today, there's already a significant capability and effort in this space, which in part has already supported improved net funds flow over the past 12 months, as we've seen through workplace. However, increasing our focus, and strategic intent, and leadership will only serve to improve this and unlock the opportunity. And as I said, creating a seamless continuum across help, guidance, and advice for our membership, as well as looking to attract new members in time.
And again, all of this just goes to, to complement our, our competitive net return offer to, to our members today. In addition, this division will also continue to pursue the further improvement in growth and efficiency in the professional services businesses, so specifically being Shadforth and Bridges. It's worth we recapping briefly on the announcement last month around the intention to create an ASC, an independent, adviser-owned, self-employed licensing model, which since announcement, has been really well received, both from existing advisers as well as prospective new advisers to the group. I think it's also a good example of our determination to, to seek to create value from our business by doing things differently.
I think we're very much focused on making sure that we now establish the new model and bed it down successfully over the next 6-12 months. Turning to our strategic intent in deepening our partnerships with advisers and employers, this is really leveraging off the traditional strengths in the B2B space and supporting these well-established channels. Particularly in the workplace and advisory channels, our intent is to be a market leader. I think we're certainly there with respect to workplace and on track to do the same with our advisory platform offer. I think that's evidenced by our ongoing improvement in rankings and community standing with Expand.
We've got a really clear set of priorities across these channels, and the teams are really excited by the clarity and the execution focus this brings. The institutional space is one where we see client needs bifurcating. We believe we continue to have a really compelling set of propositions for sophisticated buyers of investment performance, be they research houses, consultants, super funds, or platforms. I think it's worth considering that we're increasingly in a world where people are questioning the true diversification that comes from listed markets. You know, we've seen commentary talking about the fact that 35% of the value of the S&P 500 sits in the top 10 stocks. I think the same dynamic is experienced here in Australia.
And for us, having a private equity capability with a track record of over 25 years, with stellar performance, and is able of offering true diversification across geography, across sector, across vintage, with thousands of diversified investments in it, is one that is in appeal, is growing in appeal. And I think leaves us in a position that really we've got a capability that is unmatched in the Australian market, and one we'll look to to exploit more broadly over the coming years. The emphasis on simplifying the business is not new. And again, we're getting more specific about how we define this and how we look to execute this going forward.
It's worth calling out that within this strategic pillar, we're deliberately emphasizing the building of enterprise foundations, that really represent the foundation of a modern, more uniform set of technologies that will help us unlock the agility, the insights, and the scale of the business. So whether it's new data management platforms or protocols, whether it's management information systems, it's rare that an organization gets the opportunity to entirely rewire these aspects of their business, and it's certainly an opportunity we're planning on taking advantage of. In addition, off the back of some strong planning, we're clearly executing on the separation of MLC. And as we said earlier, we're halfway through, and we've got a good operating rhythm and process around this, so it clearly remains a key business imperative going forward.
And finally, turning to building a safe and trusted business, in many ways, I, I consider this the most enduring strategic advantage that we have, building and delivering to a trusted reputation. For the organization right now, that revolves around uplifting our governance, including responding to license conditions, as well as building a culture and capability set that are able to continue to adapt to the changing sets of risks and challenges and expectations that undoubtedly we'll face going forward. As part of this process, we've appointed a new Chief Risk Officer earlier in the year in Anvijit Saxena , and we're working through the requirements of the license conditions alongside the superannuation boards. So finally, before opening to questions, it's pleasing to see that we've delivered a strong 2023 set of outcomes in terms of growth, efficiency, and strategic execution.
I think it's this track record of strategic execution that gives us confidence into this next phase, and creating a business with a unique competitive advantage that will deliver sustainable growth, scale-driven, efficient business, and a competitive advantage through the quality of our outcomes to clients.
... With that, I'll thank you for your time in advance, and happy to open up to questions.
Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for a name to be announced. To withdraw your questions, please press star one one again. Kindly limit your request to no more than three questions at each time. Please stand by while we compile the Q&A roster. Our first question comes from the line of Anthony Hu from CLSA. Please go ahead.
Hi, thank you. My first question, just around costs. Looking at the different components of the guidance for next year, it looks like it's implying quite reasonable cost growth into next year. So, you know, if we exclude the cost savings targets, and then if we also exclude the AUD 20 million that you flagged in terms of cybersecurity and governance, can you talk about where the rest of the cost pressures are coming from? Are you reinvesting into other parts of the business?
Anthony, it's over here. No, it's mainly from those ones that you mentioned. So the way I think about it is, at a gross number of, you know, as we said there, sort of, you know, 60-75, you've then got your normal salary inflation, which we do see being more normalized, 2023-2024, than it was 2022-2023. And then it's really the AUD 20 million that you mentioned earlier. So those are the main components of cost that we see for 2024.
Okay. Thanks. Second question, just around the platforms and the pricing. You've given us a bit of detail around your expected short-term change in the pricing. Can you tell us how much of your FUA is still on legacy pricing structures? For example, how much of your FUA you think could be transitioning to Evolve, to the Evolve platform, for example?
Yeah. So, as we've said there, we think that if you look over the last three years, it's certainly been a period where there's been significant repricing of products, you know, as we've sort of set out. What we're saying is that post 2024, we think that's gonna moderate significantly. So you know, that doesn't mean there won't be any pricing movements. There's always taxable pricing, there's heat maps, things like that. But those are typically much smaller repricings than what we've seen in the past. So you can take from that, that we don't see there being a significant amount of back book that needs to be repriced post 2024.
But does that, your assumption, does that assume that there's no further significant impact from migration of clients onto more contemporary structures?
Yeah, correct. Not, certainly not on the scale we've seen, as I said, over the last few years. So that's not to say there won't be any, but we see it moderating, certainly moderating in 2025 and, and even more so in 2026. So yeah, you're, you're correct.
Okay. All right, I'll leave it there. Thank you.
Other questions? One moment for the next question. Next question comes from the line of Kieran Chidgey from Jarden Group. Please go ahead.
Morning, guys. Just a couple of questions, maybe starting on this AUD 20 million cost savings left. Can you just confirm, is that a recurring number? And then I'm just interested in exactly what, what's incorporated in that, given how material it is to the group's bottom line.
Yeah. So, so yes, I, I, I expect it would be recurring. On the cyber side, which is the majority, I probably won't go into too much detail on that, other than to say it's a combination of some internal staff, and also some use of external, expertise to help both in forward identification of potential threats, and, and making sure that also, we're able to respond quickly should, should there be any sort of issues that are there. So broadly speaking, that's the main, that's, that's the largest component of the 20, is, is, it sits in, sits in that cyber area.
Okay. And I meant, just from a timing point of view, I'm just surprised that wasn't outlined in July when you rolled out sort of the medium-term enhanced cost programs.
Yeah, look, I think it's always a challenge coming up with a commentary on costs in a month ahead of results. So what we decided to do was to limit what we said at the Q4 update. We did say that there'd be more information coming. So I take your point, but I think with a month out to go, it did leave us in a difficult place from the point of view of how much commentary to give on 2024 guidance before we'd even spoken about 2023 actuals.
Okay. Just a second question, a follow-up question on the platform margin numbers you put up. I thought, sort of... or just remind me, there was a significant repricing around cash margins-
Correct.
-that I thought came through late 2023. So presumably, notwithstanding that, we're still looking at 5%, reduction into 2024. So that's, that's allowed for that as well?
Yeah, correct, Kieran. So, so that pricing changed April 1, so there's a little bit of that benefit in 2023, but you're right, that most of it is in 2024.
Okay. And the dotted line drawn on the chart, can we just get a feel for what you're actually suggesting in basis point ranges for 2025, 2026?
... Ah, look, I think other than saying we expect it to moderate, probably in line, I think a picture tells a thousand words there. That's what we're expecting visually. I think we'd be reluctant to, two years out, to give sort of specific numbers on that.
You're saying it's in line with the FY24 exit rate, but not the 24 average?
Yeah, and there's obviously a lot of factors that go into that. I mean, one of the obvious ones is that it is as a proportion of FUMA. So what markets do over the next couple of years will also have an impact on that number. So it's not one that from a... You know, we've obviously even if we knew with certainty all the pricing changes, you still have to factor in a view of what markets are gonna do to get to the overall basis points number.
Okay. Maybe I can ask it another way. Do you have a view on, taking that caveat into account, on what, what your current expectation is for the 2024 exit rate?
I guess what I'd say is that we think that there's some new pricing, which we've talked about in 2024. Beyond that, and some of that will certainly have a run rate impact into 2025. So, for example, take the Evolve 2023 pricing, but at this stage, there's nothing more that we've got in 2025 or 2026 that's been approved.
All right. And just my last question, so question on the EBITDA guidance. I presume that still accounts for the advice business as 100%, and we get a non-controlling interest further down the P&L. Like, how should we be thinking about ASC from an accounting-
Yeah
... or P&L impact in 2024?
Yeah. So for 2024, I would consider it as nothing changes. So, I consider that we will still consolidate that all the way through FY 2024. As we sort of move to deconsolidate, that's likely to be towards the tail end or early in FY 2025. So for 2024, I think the easiest assumption is that it continues to be 100% consolidated.
All right. Thank you.
Thank you for the questions. Next question comes from the line of Nigel Pittaway from Citi. Please go ahead.
Afternoon, guys. Just first of all, the SMA capability that's meant to be on the Evolve platform by thirty-first of December, is that on track?
So I'm not gonna comment on commitment for thirty-first of December. So we certainly are committed to ensuring that the SMA capabilities are there, prior to migration of MLC Wrap, and that's currently on track.
All right. Okay. I thought it was originally. Well, on, you've got a number of charts that show it done by thirty-first of December, so presumably, that's been delayed.
We, we did not—sorry, Nigel, so you—we did, in the Q4 business update, talk that we'd move the Evolve 2023 migration date to
Yeah.
out to 2024. So
All right, so that's delayed with it. All right. Secondly, just to clarify that, the cost savings you did in that, so before Q, I mean, were any of the— To what extent are those cost savings actually related to the separation and Master Trust?
There's a variety of different drivers. Master Trust is not one of the larger ones. I mean, it does play a role. We've rolled into that, as you can see, the Evolve 2023 migration. But I wouldn't call out master. The Master Trust strategy that we've used is one that, in terms of that sort of potential revenue drop-off, it certainly minimizes on that side of things. It's a contributing factor for cost, but it's not the main driver.
Okay, fine. And then, I mean, you did sort of at that time, reiterate this low- to mid-60s cost-to-income ratio, and just the rate at which, you know, you've obviously got an extra AUD 20 million of cost today.
Yeah.
You know, the synergies do seem to be getting offset a bit when they flow through the actual OpEx number. I mean, that has to surely materially change for you to have any chance at all of reaching that cost to income guidance. So can you just talk us through that, and what happens in order for you to start to achieve that?
Yeah. So, so a couple of areas. The execution of the cost program is, is clearly very important in terms of delivery of that, ensuring that it does drop through to the bottom line. The second area, obviously, is in terms of continuing to have growth, in, in our net revenue. So, so if you look at this year, where we've seen the cost to income ratio move the, the wrong way, a big part of that has been the fall in, in, in revenue at the same time. So as I said earlier, 7% fall in, in, in revenue, 5% fall in costs, it's, it's moving the wrong way.
So, as we hopefully get to more normalized growth, from the point of view of investment markets, and also from the perspective of that normalization of decline in terms of net operating margin on platforms, a combination of that, plus the execution of the program, is what we're looking to do over the next couple of years.
Okay, thank you.
... The questions. One moment for the next question. Next question comes from the line of Siddharth Parameswaran from J.P. Morgan. Please go ahead. Siddharth, your line is open. Please go ahead with your question.
Oh, sorry. Sorry, I was on mute. So just a couple of high-level questions, if I can. Firstly, Renato, a year ago, I think you mentioned that you were expecting the EBITDA, the group EBITDA margin, to be flat. And I think you're basically implying that, you know, I think, you know, you've seen the bottom in terms of underlying declines in UNPAT. We're seeing obviously guidance for FY 2024 now, to show further declines from a decline in actual 2023. I'm just wondering, is 2024 what you regard as the base from here? Or, you know, I mean, should we think that that's the base, or... Do you think that there is actually room for that to pick up from here?
Sorry, so the base in terms of?
Well, I mean, just that, that group EBITDA margin was 12.455 basis points in FY 2022, and I think you were guiding to that, you know, starting to improve from there. But obviously, it declined this 2023, and you're guiding to declining again in 2024. Do you think that-
So we'd certainly expect that to improve over the outer years. Given, as I said, those sort of cost savings profiles we talked about before. You're right in terms of, if I go back to what we saw in the second half, particularly in platforms, I called out that increase in OpEx in the platform segment. So that certainly didn't help in terms of... Now, again, we understand why those costs were there. Not all of those are recurring costs, but nevertheless, that's partly why there was the, from an EBITDA point of view, there was that decline in the second half of 2023.
Okay. So sorry, just to be completely clear, saying FY 25, you think that the group margins will start picking up?
Yeah, well, that's right. I mean, if you look at, at what we've talked about in terms of the, the amount of the gross savings that we've talked about arriving in 2024, it's about 35% of that overall target. I'd expect FY 2026 to be a bit of a tailwind year from the point of view of realization of synergies. So 2025, we would see as being the largest year of the three in terms of those, those synergies benefiting the bottom line.
Okay. Okay, thank you for that. Maybe just a question about just the adviser reception for your new advice model. Just keen to get some more clarity on what the feedback has been, whether they're accepting of it, whether maybe if you could just, you know, help us understand what the feedback has been.
Yeah, no, just, happy to, Steven. I'll probably point you to the slide that, in the sort of back section, slide 27, actually, which in the sort of right-hand box there, you'll see some commentary from some survey work we've done, which demonstrates it's overwhelmingly positive. And to be, to be fair, there's a degree of neutrality in there as well, which is they are curious and optimistic, but are clearly detailed people and would want to understand the detail. So, but it is overwhelmingly positive. Importantly, both from existing advisers, but also from those that are looking at this model with interest from outside our existing network. So, there has been no sort of unexpected negativity or any unexpected sort of lines of question.
I think all the, all the conversations have been on the positive side to possibly our expectations. But there's a, there's an onus now on us to provide, provide the adviser with, with more detail and a, and a more detailed understanding of what exactly the model entails, which is absolutely our, our key area of focus at the moment.
Okay. Thank you.
Thank you for the questions. One moment for the next question. Next questions we have on the line from Lafitani Sotiriou from MST Financial. Please go ahead.
Good afternoon, and thank you for the questions. I've got two. The first is in relation to the advice model reset, and it's more one of clarification. And I'm not sure if you have the detail yet, but I think there was a-- there was an earlier question on it. But from for the next few years, are we looking for the new entity to be fully consolidated? Or... And I think you mentioned previously, you would start off with a majority stake. Is there a rough idea as to how long you'll step down your investment in it? And if it is loss-making and it doesn't hit its breakeven level, like, are you guys still gonna fund it, or how should we think about it?
Laf, it's David here. So, yeah, the way I think about consolidation is consolidated for 2024, and our base case assumption is, at the moment, is that it will be deconsolidated for 2025. So in other words, we expect to be bringing on onboard a new equity in the second part of FY 2024. From a loss-making, profit-making point of view, look, we've spent a fair bit of time working through it to make sure that the model is profitable. So we've tried to set it up that way to make sure that it is not gonna be a continual, you know, cash drain on the business or that that's not something we've got to sort of ask ourselves. But look, we'll just have to play that as it sort of rolls out.
But certainly, you know, the understanding and the objective in setting it up has been that it is self-funding after the initial sort of setup in FY 2024.
Okay, got it. And then just the second question is in relation to the one-off spend, and I'm just trying to reconcile a few things here. So it currently on the table, and as per your previous disclosure, is the cash investment required for the next two years, and I think net of the capital release, it's AUD 260 million-AUD 285 million. I just want to first check that that is a pre-tax number. And then secondly, how does this reconcile with the current half? There's a material step up in one-off expense, going to just over AUD 90 million for the half. And it was some of the notes that you put in there attributed to this particular program, but this program still has the same remaining spend.
So can you just talk us through the step up in one-off costs in the second half and just the numbers around the next two years?
Yeah, sure. Yes, those are the pre-tax numbers that you sort of see there. In terms of what we expect to see, the profile of that, we've given you the profile of what we expect from an FY 2024 point of view. Again, as a % of that sort of 265 number. So FY 2024 is the largest year of spend of that program. FY 2025 will be less, but you know, around the same sort of ballpark, with really the tail end coming through in FY 2026. So what we've said is that from a one-off cost point of view, these initiatives, the ones that we sort of set out at that Q4 update, those are ones that will continue to be UNPAT, adjusted.
But that moving forward, what we would be looking to do would be accommodate any sort of future initiatives or ideas we work on inside the OpEx space. So that's the way that I'd expect those below-the-line costs to sort of move the next couple of years. We want to get the business back to, you know, UNPAT being something that is not the main metric going forward, and much more where that gap between UNPAT and NPAT significantly narrows.
Well, just to follow up. So the explanation for why there was a material step up in the last half, because the run rate, and based on previous expectations, was never that it would be over AUD 90 million in second half 2023, as you know, project costs. So can you just talk us through what the step up was? And I understand the comments that you'd like to get to that, but for the foreseeable future, the next two years, that's a long time of material one-off costs still flowing through. But if you could just clarify why there was a material step up in the last half, that would be great.
Yeah. So the, so the step up was related to both, the work that's being done around, around Evolve 2023, and also the preparation work around Master Trust strategy. So there's a step up in spend now, and the reason that you're seeing that in second half 2023 and in 2024, is really to get that work done ahead of the exit from the NAB TSA. So that's why there, there's a larger profile spend, as I said, second half 2023, first half 2024.
So that implies that the actual spend to get those synergies that you've indicated were actually more than what you've put in your presentation and at the quarterly update. Is that right?
No, I don't follow that. Just go back over that.
So if you've already spent money in the last financial year, and it's. You've still got AUD 260 million-AUD 285 million left in the next few years, there's actually more spend that you've needed to do in order to complete the separation and Master Trust piece than what was previously on the table. So there's a circa AUD 40 million that's been sort of pushed through in the last half as one-off cost, that we weren't aware of previously, and it isn't detailed in your cash investment spend requirement.
So, there's no change from what we talked about four weeks ago in terms of the profile that's there. These numbers are based on a view that's changing from FY23. Happy to pick it up when we have our one-on-one, but there's no change beyond what we talked about four weeks ago.
Sure, got it.
Thank you for the questions. There are no more further questions at this time. I'd like to hand the call back to the management for closing remarks.
Thank you, everyone, for your attendance today. Appreciate the support, and I look forward to speaking to you later. Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect.