Good day, and thank you for standing by. Welcome to Insignia Financial's full year 2024 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, General Manager of Capital Markets, Andrew Ehlich. Please go ahead.
Thank you. Good morning, everyone. Welcome to Insignia Financial's FY24 results announcement for the 12 months ended 30 June 2024. My name is Andrew Ehlich, General Manager of Capital Markets. I'd like to begin this morning by acknowledging the traditional custodians on the lands of which we meet. In the spirit of reconciliation, Insignia Financial acknowledges the traditional custodians of the country throughout Australia and their connections to land, sea, and community. We pay our respects to the elders, past and present, and extend that respect to all Aboriginal and Torres Strait Islander peoples today. Presenting today's results are Scott Hartley, Chief Executive Officer, and David Chalmers, Chief Financial Officer. There will be an opportunity to ask questions at the end of the presentation. I'll now hand over to Scott to begin. Thank you.
Thank you, Andrew, and good morning, everyone. I'm pleased to present our full-year results for FY 2024, which saw strong growth in UNPAT, up 13.6%, driven by a net reduction in operating costs of AUD 24 million as we pursue our strategy to simplify our business and reduce costs. Just unpacking the headline a little, net revenue was up slightly by around 1%, driven by markets, offsetting a small decline in revenue margins and the impact of divestments. Our cost-to-income ratio improved from 75% to under 73%. While this is still too high, we do have a strategy underway to reduce costs and will today be announcing an acceleration and increase of our cost out target.
Net profit after tax was, of course, adversely affected by previously announced transformation costs and provisions related to remediation of legacy issues acquired largely with the acquisition of ANZ Wealth. As you all noted, we did not pay a final dividend this year. The IFL board acknowledges that the dividend pause will be disappointing for some of our shareholders, but it is prudent for us to strengthen our balance sheet to enhance strategic and capital flexibility. In terms of deliverables this year, when I joined in March, it was important for the business to continue delivering its FY 24-26 strategic initiatives that are critical to our future. I'm pleased to report the successful completion of several of these key strategic initiatives. Firstly, optimization.
We exceeded our FY 2024 target cost optimization, delivering optimization benefits of AUD 71 million, resulting in a net cost reduction of AUD 74 million. Secondly, simplification. We successfully completed the largest single wrap migration in the Australian platform industry, and we migrated over AUD 38 billion from MLC Wrap to the Expand platform. We have already started to see the benefits of this migration in the scale efficiencies it has delivered. In terms of our portfolio, we have successfully completed a multi-year restructure advice from loss-making to EBITDA positive. This position will be further enhanced in our FY 2025 results, given the separation of our licensee business, Rhombus Advisory. Separation of Rhombus Advisory has created a unique and liquid and innovative partnership model.
Our relationship with Rhombus Advisory and Godfrey Pembroke has strengthened- has been strengthened by a strong support in their successful separations to advisor-owned and -led businesses, which I strongly believe is the right model for furthering the professionalism of the advice industry. Insignia has a significant opportunity not only to retain but grow platform fund under administration within these two advisory businesses, in addition to growing FUA from the broader high-growth market. I personally remain close to both CEOs and their boards and have joined the Rhombus board, given we retain 37%, to remain connected and supportive of the success of Rhombus Advisory business moving forward. With the completion of our advisory structure, including these separations, we will focus on building stronger relationships with Godfrey Pembroke and Rhombus Advisory, and growing the profitability of our wholly owned and operated advice businesses, Shadforth and Bridges.
Our other 2024/2026 strategic priorities remain on track for completion in this financial year, ahead of schedule, creating space for our 2030 vision and strategy that we presented earlier this year. In addition to 2024/2026 initiatives already announced, we will also be accelerating cost optimization. We are extending our cost optimization program, and David will talk through the increase to the cost reduction target, which we aim to achieve ahead of schedule. In July, I announced my new executive team. These experienced executives bring a deep industry knowledge, experience, and strong track record in growing world businesses and in leveraging technology to transform customer experience and business models. We are now in the process of cascading and embedding the new operating structure to further drive accountability and efficiency. Also, simplifying our Master Trust platforms is critical, as it represents half of our revenue and costs.
We have commenced review of the Master Trust target end state, and we'll communicate the outcome of this review later in the year. This review will not slow the pace of Master Trust simplification, as we have to complete successful separation from that before we can simplify and transform. In terms of flows, platforms flows, during the year, we saw successful migration of MLC Wrap to Expand, as I mentioned. Ahead of this migration, we saw disruption in our flows to MLC Wrap, as some advisers lost patience with the delayed migration. While it's pleasing to see the improved flow since migration, we remain cautious in the medium term and trajectory of advice flows due to the expected one-off loss of a small super fund admin agreement and FUA related to an historic divestment. Workplace flows remained resilient during the year, delivering positive net flows.
While we didn't win any new corporate mandates, we did see consistent inflows from the existing book, pointing to sustainable organic growth. In terms of our management, the large outflows from direct capability were almost entirely driven by institutional investors rebalancing fixed income and global equities. But it's pleasing to see strong performance of our default MySuper options. Three of our MySuper default options achieved top ten performance over one year in the SuperRatings SR50 MySuper survey. Insignia's largest MySuper option, the MLC MySuper Growth, has delivered performance in the top quartile over one, three, and five years. Also important to note, the recent placement of AUD 1.2 billion of MLC Private Equity via new U.S. secondary points to the attractiveness of MLC's alternative asset management capabilities to the institutional market. In terms of advisers, this slide talks purely to Shadforth and Bridges.
We have seen strong year-on-year growth across advisor and client metrics, including an increase in revenue per advisor due to strong new client growth and higher fee income. This growth has occurred despite right-sizing advisor numbers and rationalizing unprofitable clients, predominantly in the Bridges business. I'd now like to hand over to David, who will take us through the detail of the financial results.
Thanks, Scott, and good morning to everyone on this morning's call. I'd like to start the review of financial performance with a summary of the group's results for the twelve months ended 30 June 2024. Starting with group revenue at AUD 1.39 billion, a 0.9% increase on FY 2023 revenue. To understand the drivers of this uplift, we need to look at the performance of each of our segments. So firstly, platforms, where revenue was up 0.9%, with the increase in average funds under administration of 4.9%, offsetting margin decline from the planned strategic repricing that occurred both in FY 2023, therefore, having a flow-on impact into 2024, and new pricing changes made in the FY 2024 financial year.
Asset Management saw a decline in revenue of 6.1% or AUD 13.7 million. The main driver of which was a decrease in the revenue associated with the divestments of JANA and the restructuring of that relationship in FY 2023, and IOOF Limited in early FY 2024, plus the impact of reduced private equity investment fees to new lists, also executed inside FY 2024. Our advice business had flat revenue year on year, but with a significant change in composition, with a number of divestments throughout FY 2024 to realign our advice business around our professional services businesses, Shadforth and Bridges. The Rhombus Advisory business, which was our advice licensee business, was partially divested on the first of July 2024, and deconsolidated from that point, but its results are included in the FY 2024 results for advice.
Finally, the corporate segment contributed AUD 17 million more revenue than FY 2024, the majority of which was due to in one-off gains from the divestment of IOOF Ltd and several smaller businesses as part of the restructuring of advice. Moving now to operating expenses, which were 2.3% lower than FY 2023, representing a net reduction in OpEx of AUD 24 million from the optimization program commenced in early FY 2024. As indicated in the first half results, the realization of these savings were back-ended to the second half of this year, with first half OpEx being essentially flat on pcp.
As a result of the revenue uplift and cost decreases, FY 2024 EBITDA was up 13.8% to AUD 381.3 million, and underlying net profit after tax up 13.6% to AUD 216.6 million. And while speaking of taxes, it should be noted that the underlying effective tax rate, which was just over 31% in the first half of 2024, has normalized for the full year at just over 28%, which is more representative of what we would expect in the future. However, while underlying increased, it's important to acknowledge that statutory losses were -AUD 185.3 million, as against the FY 2023 statutory profit of AUD 51.2 million, with the FY 2023 outcome helped by a AUD 43 million gain on sale related to Australian Executor Trustees.
There are two key drivers of these statutory losses. Firstly, remediation expenses of AUD 232 million, and secondly, transformation and separation expenses of AUD 243 million. A reconciliation of the adjustments between UNPAT and NPAT are in the appendix of today's presentation. Turning over to the next slide now, let's take a look at the drivers of the improvement in the full year UNPAT, with this slide showing a bridge from FY 2023 to FY 2024. As I covered when talking about segment performance, net gain on divested businesses from a revenue perspective was 10.3 million higher than FY 2024, albeit the after-tax contribution from these divestments for the full year was only AUD 2.2 million, thanks to the CGT payable on the proceeds of the IOOF Ltd divestment in the first half of 2024.
This benefit was offset by the loss of AUD 19.3 million of ongoing revenue from the divestments made across each of those periods. Our margin reduced by AUD 32.7 million, mainly due to three planned product repricings in the platform segment. The first being the flow-through Expand repricing and rate card alignment from early FY 2023. The second being pricing changes as a result of the transition of MLC Wrap to Expand, completed at Easter this year. And the third being the impact of legacy trade ups from closed products in OPC, that were migrated to contemporary products at a lower margin from the first of July 2023. Offsetting these declines were increases in revenue, driven by higher funds under management administration.
Our average FUM grew by 3.2% during FY 2024, with market returns more than compensating for net outflows of AUD 3.4 billion, plus pension payments of a further AUD 3.7 billion. The last round I call out on this page is the net OpEx change of AUD 24.2 million, which I'll now step through on the following slide. So the AUD 24.2 million is made up of the net result being an increase in salaries of AUD 24 million, consistent with our sort of typical annual salary increases. And these were offset by gross savings of AUD 68 million in optimization savings, knowing that while total cost savings were AUD 71 million, there is AUD 3 million of procurement savings recognized in net revenue.
The other costs increased by AUD 19.8 million, mainly driven by the investment in cyber and governance expenses, consistent with the FY 2024 guidance given twelve months ago. Turning to the next slide, stepping through now the progress on the strategic initiatives announced in July 2023. These initiatives, which include separation from that, the restructuring of our advice business, the transition of MLC Wrap to Expand, and funding for cost savings, was originally forecast to cost AUD 265-285 million over the FY 2024 to 2026 period, and generate gross cost savings of AUD 175-190 billion.
Having delivered the first year of that plan as forecast, we've now decided to accelerate the delivery of that program from spanning two years, FY 2025 and 2026, to being fully complete in FY 2025, which has the effect of bringing forward both costs and benefits. In addition, we've identified an additional AUD 30 million of cost out benefits, which will require an increase of spend of AUD 35 million to cover additional costs associated with realizing those savings. Importantly, on the right-hand side, we will now track this program on net OpEx reduction basis, rather than talking about gross savings. On the right, you see how the gross savings in FY 2025 will translate to a AUD 60 million-AUD 65 million dollar decline in net expenses, which forms part of our guidance for FY 2025, as I'll cover shortly.
Importantly, the FY 2025 plan allows for additional ongoing investment in our proprietary Wrap platform and additional marketing spend to support the MLC brand. The next slide gives an overview of corporate cash and debt facilities, with net debt of AUD 371 million as at 30 June, and available funding of AUD 599 million dollars from corporate cash and undrawn facilities as at the same date. Senior leverage was 1.1 times net debt to EBITDA, consistent with our comments back in February about leveraging declining in the second part of the year, as second half free cash flow improved.
Also set out here are the expected pre-tax funding requirements for FY 2025 and 2026, which includes remediation, the net cash investment spend required to execute the strategic initiatives in 2025, that I outlined on the previous slide, and the refinancing of the subordinated loan notes, which mature in May 2026. Moving on to the next slide to focus on free cash flow. There was a significant improvement in free cash flow in the second half of FY 2024, with free cash flow of AUD 112 million in the half, representing a AUD 193 million improvement from the first half, which was negative 81. For the full year, free cash flow stood at, at an increase of AUD 32 billion.
Having generated AUD 351 million of cash inflow, the main users of that cash, as I outlined earlier, were the strategic initiative programs and the cash costs associated with remediation in FY 2024. Importantly, despite the significant cash spend on remediation and the strategic initiatives, there was minimal change in debt across the year, with the spend being financed by operating cash and corporate cash on the balance sheet. Turning to the next slide, as Scott mentioned earlier on dividends, the board has elected to pause the payment of dividends and declared no final FY 2024 dividends. As a result, total FY 2024 dividends are AUD 0.093, being the amount declared at the first half of 2024 results. As Scott covered, the rationale for this approach is primarily to strengthen the balance sheet.
Our senior leverage is the lowest it's been for some time, at one point one times net debt to EBITDA, and being towards the bottom end of our target range makes sense given both the opportunities we see, the cash required to complete remediation, and potentially downside risk in equity markets. We'll be providing a capital management update at the Investor Strategy Day in late calendar 2024, where we'll give more detail around future capital management strategy. The next slide is a quick check on FY 2024 guidance, and where we landed relative to the four aspects of guidance we gave last year. We met or exceeded guidance on both net revenue margin and group EBITDA margin. Our spend on strategic investment was in line with guidance, as well as the delivery of in-year gross benefits of AUD 60 billion-AUD 70 billion.
The next slide sets out some information on revisions we're making to our reporting segments for FY 2025 to align reporting with the new operating model. So moving forward, in FY 2025, we'll report five segments: Master Trust, Wrap, Asset Management, Advice, and Corporate. Master Trust and Wrap are a split of the current platform segment, while the composition of the Advice segment will change significantly following the deconsolidation of Rhombus Advisory from the first of July this year. We provide a split in the tables on the page of pro forma FY 2024 revenue for Wrap and Master Trust, showing revenue, FUA, and net flows.
For the Advice segment, we will report both the professional services revenue, principally Shadforth and Bridges, which makes up AUD 146.7 million of revenue in FY 2024, and other Advice revenue, AUD 28.2 million, which is made up of paraplanning, self-license, and other ancillary services. There's still work going on the allocation of overheads across all segments, and how we will allocate the former platform segment cost base between Master Trust and Wrap. So we'll provide an update to the market ahead of the first half 2025 results once these allocations have been finalized. Moving on to the next slide. Finally, to FY 2025 guidance. Starting with net revenue margin, we expect that to decline from 46.2 basis points in FY 2024 to between 42.5 to 43.3 basis points.
While over recent years, the declining group net revenue margins has been primarily driven by product repricing, in FY twenty-five, the changes relate more to the reshaping of our portfolio, with the deconsolidation of Rhombus Advisory and the loss of one-off revenue from divestments, contributing a significant amount in terms of that top-line revenue decline. To highlight this, and in light of the new reporting segments, we're providing a more granular view of guidance for FY twenty-five. We expect Master Trust net revenue margin to decline from 54.5 basis points from 56.3 basis points to between 54.5 to 55.2. Wrap net revenue margin from 29.6 to 28 to 28.7, and Asset Management from 24 to between 23 and 23.5.
The best way to think about the Advice business for 2025 is to look at expectations relative to the performance of the continuing business, which excludes Rhombus Advisory and other divested assets. We do expect to see a decline in legacy ancillary revenue, but growth in the underlying professional services side of the business, again, being Shadforth and Bridges. Finally, on the corporate side, we expect to see a decline of the one-off revenue associated with the gains in FY 2024. Turning now to expenses, as on an earlier slide, we expect group OpEx to fall from AUD 1.11 billion to between AUD 947 million-AUD 952 million, a decline of between AUD 60 million-AUD 65 million. With guidance covered, that covers the inclusive financial section, so back to you, Scott.
Thanks, David. So when I joined six months ago, I took time to meet with and listen to our stakeholders, including our boards, team members, shareholders, market analysts, regulators, and key customer groups on where the opportunities lie for our business, what we're doing well, and what we could be doing better. I believe we have solid foundations upon which to build and deliver sustainable future profit growth and competitive, compelling propositions for clients and our members. As a diversified wealth management business, we have a unique combination of capabilities across the wealth management value chain, which provides us with competitive advantage and economies of scope, and which position us to deliver to a broad range of customers.
Our proprietary Wrap technology is built on contemporary technology, where we can control our priorities, enjoy low cost of change, and speed to market, instead of having to wait in a SaaS provider's queue. Also, our Wrap client first service model, which is anchored on single-point resolution, is industry-leading and a game changer for advisors who use the Expand platform. We have strong multi-manager investment capability, which has delivered competitive returns. Our employed advice business, Shadforth and Bridges, are a point of differentiation and revenue diversification. These businesses will enjoy strong tailwinds from demand for advice and any changes to any of the government's proposed QAR changes. In terms of brands, there is strength and recognition in MLC, our primary consumer brand that will benefit from investment to further build awareness in both the advice and direct customer channels.
In terms of opportunities, while the business has strong foundations and capabilities, there's also room for improvement, which presents significant opportunities. While we have a strong, sustainable positions across the value chain, but what we are yet to realize, the scale benefits of these positions due to our complexity, which leads to duplications and a high cost base. There remains significant opportunities to reduce our unsustainable and uncompetitive cost base. The new operating model, centered around four dedicated business lines, are led by executives focused on specific customer segments and competitive landscapes, allowing for tailored strategies to drive profitable growth and enhance customer satisfaction. This new structure provides clear lines of accountability, enabling more effective and timely decision-making to achieve greater efficiency and cost effectiveness, and improved risk governance maturity.
With two employed advice businesses and a large superannuation business, we are looking forward to the opportunity to do more to meet the advice needs of our clients. Our capability across the value chain and the government's response to the Quality of Advice Review should enable us to improve engagement, drive improved retention, and enhance our proposition to attract new clients. There is also the potential for it to improve advisor efficiency and allow us to serve a greater number of clients. We understand that we should be seeing more details on tranche two of QAR towards in coming weeks. If delivered, if delivered well, it should make advice more accessible for all Australians. There's been a lot of work done at Insignia to bring three cultures together, and I've found it to be a very welcoming and inclusive culture.
As we continue to simplify the business, we will free people up to focus on delivering what matters. What we want to build, we want to build an environment that supports our people to be as effective as possible in supporting our business goals. So to finish this presentation, we now want to turn to our 25, full year 25 priorities. Remain committed to completing our FY24/26 strategy in 2025, and accelerate new initiatives, which I previously outlined and which I want to reiterate. Firstly, onboarding our new executive team and embedding the new operating model by December 2025. Net cost reduction of AUD 60-65 million, which represents a 35 million increase above the top end of our savings range presented last July. NAB separation program is tracking on plan and green.
Our Master Trust target end state review has been underway since May and making rapid progress. We're continuing to enhance Wrap functionality with AUD 90 million of development costs baked into Wrap operating costs, which was previously below the line. MLC is the go-forward brand for Insignia products and services, other than professional advice, that is provided under the brands of Shadforth and Bridges. We will refresh, reposition, and invest significantly to promote the MLC brand. A significant uplift in our data and digital marketing capabilities will enable us to significantly improve customer experience and engagement. And finally, we will provide more detail on some of the more meaty topics above and our strategy more broadly to achieve our 2030 vision at our Investor Strategy Day later this year. On that note, I'll hand back to Andrew. Thanks.
Thank you, Scott. We'll now hand over to our operator to take calls on the line.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please limit to three questions per person. If you have more questions, please re-queue. Stand by while we compile the Q&A roster. Our first question comes from the line of Andrei Stadnik from Morgan Stanley. Please go ahead.
Good morning. Can I ask a couple of questions, maybe three if there is the time? But, okay, can I firstly ask just around the below-the-line items, the FY 2025 commentaries is very clear, but how should we think about FY 2026? Should we be thinking that, you know, there should be very little, if anything, below the line in FY 2026?
Andrei, it's Andrew here. Look, I think based on the plan that we're working to at the moment, which is that FY 2024, 2025, 2026 plan moving through, that would be right. So based on what we know today, I think that's a reasonable expectation. We expect, you know, we've talked about remediation, of which the provision we hope and expect will be the final one. So that's a reasonable assumption for 2026, based on what we know today.
Thanks, team.
Thank you. We'll come back to Andrei. We'll do the next question. Next question comes from Nigel Pittaway from Citi. Please go ahead.
Morning. Afternoon, guys, just about, so first of all, just the 60-65 net decline in costs that you're expecting in FY 2025, how much of that does relate to Rhombus and the disposed businesses? And I appreciate you've said you've not done the cost allocation yet, but it's a pretty important piece of information, so can you just sort of give us a bit of help with that, please?
... Sure, Nigel. So based on what we have today, and you're right to, with you know, with the caveat around cost allocation and those sorts of things. I think about the cost out, if I think about the current segments as being roughly sort of 60% for advice, now that is split between the consolidation of Rhombus, in addition to cost savings associated with the retained business. 30% in platforms and the balance in asset management, based on the current segments, is how I think about it.
Right. Okay. So that's the way to split the 60-65 mil across, like that? Yeah. Okay, very good. Secondly, then, I mean, obviously the dividend cut has, seems to have surprised a few people. I mean, and again, noting that you said you'll give us updates on capital management strategy later, but, I mean, do you think this is a one-off cut, or do you think there's gonna be a requirement to sort of continue this into next year?
Oh, look, I think it's too early to say at the moment. We've purposely called it a pause and made reference to the fact that, you know, we haven't changed our dividend policy. But I think if you look at particularly the timing of what we expect from some of the spend in FY 2025, you know, we expect a significant amount of remediation to fall in the first part of 2025. Likewise, the bulk of our strategic spend in the first part, and typically, just as this year, the benefits of the cost out tend to be weighted into the second half. So you know, I think what that would have done, if left unaddressed, is potentially seen leverage increase in the first half beyond our sort of appetite.
You know, I spoke to the fact that we're, you know, we're thinking about the markets as well. But importantly, because there are further cost out opportunities, we wanna be able to execute on those. And to execute on those also takes funds. So, it's too early to really give you a view as to how long our pause will be. But that's a bit, I guess, of the rationale for what we saw in twenty-five cash requirements.
Okay, thanks for that. And then, maybe finally, I mean, you did flag that you were cautious about flows and advice. Are you therefore reasonably confident that you've stemmed the outflows in platforms? I mean, obviously, the fourth quarter seemed to suggest that, but, you know, in terms of that move to the MLC wrap, are you pretty confident that those outflows are now over, or would you expect sort of further outflows as time moves on?
So Nigel, Scott here. I did talk to this in my opening remarks. We remain cautious on platform flows because we have some known one-offs that are ahead of us. So there was the super fund admin arrangement, which we expect will terminate in the coming twelve months. But I would say that we're continuing to see positive underlying flows, and that's encouraging, but we just remain cautious at this point.
So, sorry, that comment was more platforms than advice then, did it?
That was a platforms comment, not an advice comment.
Yeah. Yeah, yeah. Okay. All right. Very good. Thank you.
Thank you. Just a moment for our next question, please. Next, we have Anthony Yoo from CLSA. Please go ahead.
Hi, thank you. My first question, just picking up on the earlier question around the dividend cut. Can you tell us more around the reasoning? Because, you know, if I look at your normal operating cash flow, looking at your undrawn debt facility, you would have, you know, on the face of it, looks like you would have had enough to cover the known outflows in terms of remediation and also the cost of your program. You know, can you tell us, is it really just about, you know, you want to pay down debt, or are there any other cash requirements that are coming up, that you see coming ahead?
Anthony, it's Toby here. I mean, what I would say is that, you know, going to my early comments around the timing of spend, so a lot of the spend, as I said, is weighted to the front part of the year, benefits to the back. And so while certainly the facilities are there to do that, we are mindful around leverage. And now we understand that different investors take a different view in terms of leverage. But I think we've been consistent that, you know, we're pleased with where we are at the moment in terms of, as I said, it's the lowest it's been in some time. So I'd seen it as being firstly, a more prudent approach.
Secondly, we need to have the flexibility there, so that, again, if there are future opportunities that come up and we need to be able to execute on those without putting further pressure on the balance sheet. So, that's the way I sort of think about the dividend decision.
Okay, thank you. And my second question was on the advice business. You know, did this business saw a small loss in the second half of the year? Previously, you talked about a target for a AUD 10 million unmet run rate. Can you tell us where you're up to on that, and then also give us a split between Rhombus and your retained business in the second half in terms of profitability?
So I think to get onto your first question, look, it came in around about ten. So 10 was the number we were guiding to on an annualized basis. I think to be fair, it came in maybe a little bit less, at something like eight. One thing to note when we talk about divestments, the one-off gains of any divestments are captured in corporate, but the reduction in revenue, it sits in the segments. And so that's one of the reasons why at the first half of the year, I guided that we expected there to be a decline in the second half of the advice business. As we sort of executed through, there, there's been a lot of movement in that business as we've really been setting it up.
So, I would say a little under the ten million, but probably circa eight or something, or about sort of order of magnitude. The split in the second half, I don't have a split for you in terms of Rhombus versus the other parts of the business, not on a half and half view. But as I said, it's Rhombus, a lot of those savings were also back-ended, as I sort of noted earlier, so that's probably the best I can give you on that one.
I guess I was just more wondering about, you know, going forward into next year, because once Rhombus is, you know, split out or, or-
Yeah.
-spun off, you know, how do we think about the underlying profitability of the ongoing business?
Yeah, so I would think about it as being, if we look at the cost base for advice in FY24, which is AUD 202 million, about 75% of that we expect to remain in the advice business going forward.
Okay. And on the revenue side?
We've given the revenue. So the revenue with the go forward business is 146.
Okay, slide 18.
Services.
Yeah, slide 18.
And then plus the 28. Yeah.
Yeah, got it. All right. Thank you.
Thank you. Our next question comes from the line of Andrei Stadnik from Morgan Stanley. Please go ahead.
Can't hear anything.
Hello, Andrei?
Apologies, I was on mute earlier. Can you hear me okay?
We can...
Oh, thank you. Sorry. Look, can I just ask a question around the current position in terms of product and fund numbers? So I think, you know, back in end of FY 2022, start of FY 2023, I think you showed that there were at that time, you know, six platforms, nine funds and four RSE licensees. You know, can you give us a comment on where those numbers stand today?
Yeah. So at the moment, the only change to that, the most recent numbers we gave, is really the consolidation on the Wrap platform. So the number of RSEs has not changed. I don't have an update for you on the number of products, but the key simplification since the date you mentioned is really the migration of MLC Wrap into Expand. So there's a single Wrap platform. There hasn't been any further consolidation on the Master Trust side of things, so that's the remaining opportunity on Master Trust.
Okay, so in other words, there's potentially, at the moment, around five platforms still being used across Wrap and Mastertrust?
That'd be about right. Yeah. Yeah.
Good. Okay, okay. And so that's a big opportunity-
As David said, Wrap is being consolidated, other than a couple of white label arrangements that we have. The opportunity for further consolidation is in Master Trust.
Thank you. And what's your approach on, you know, kind of owning versus renting? You know, is there an opportunity to, you know, rent more in external technology to, you know, expedite the process and lighten the CapEx spend? Or, you know, do you think it is very important you own everything?
No, I think it's what's the right answer, depending on the business. Obviously, with Wrap, we have proprietary technology, which we're very happy with. It's contemporary, arguably the leading most modern technology in the country, so very comfortable with that. Master Trust, quite happy to rent and we're exploring those options as we speak, to firm up the end state for that platform.
Thank you.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. Just a moment for our next question, please. Next, we have Lafitani Sotiriou from MST Financial. Please go ahead.
Good afternoon, guys. Why don't I kick off with the one-off expenses, or one-off items going through? Can you just remind me on the definition of what is your hurdle for what's included and what's excluded? So, you know, I would have thought gain on sale would have been excluded from UNPAT, yet there's over AUD 400 million in one-off costs that's being included. And could I just follow up on one of your earlier answers? Is it expected that in financial year sixteen, financial year twenty-six onwards, that any one-off project spend will be included in UNPAT? So some of the projects that you're exploring at the moment around Mastertrust, will you be including that additional spend in the UNPAT line?
... Yeah. Like I started here, so let's take those in order. So we work on a AUD 10 million threshold in terms of UNPAT. So there's a couple of ways of looking at it. The divestments this year were a bit unusual in that they were reasonably small in nature, spread across several divestments, and there was a large one-off tax loss in the first half associated with those divestments. So at an UNPAT level, when you put them all together, there's only a AUD 2.2 million UNPAT benefit in year. And that's the reason we've given all that information, because you know, we respect that there's always an element of judgment with UNPAT adjustments. So we provide the numbers, but that's the approach we've taken.
As I said, it's because the cumulative impact was only AUD 2 million of UNPAT that we've used the treatment the way we have. To your second point around FY 2026, look, the answer, I think, is it depends. So what we said twelve months ago was that the strategic program that we set out, being the three-year program of spend, 2024, 2025, 2026, now condensed is 2024 and 2025. But as far as we knew, that was the extent of adjustments below the line. What is too early to say, given we're still doing the work and ahead of Investor Day, is what would be the treatment for any, you know, should there be any larger project going forward? How would that be treated?
It's too early to know what that would be yet. Certainly, we are working towards the same commitment we had twelve months ago, which is to absolutely minimize the number of below-the-line adjustments and get back to a much closer alignment between NPAT and UNPAT.
Got it. All right, just moving to my second question. I just wanted to better understand, the margin decline guidance within the platform business and also funds management for FY twenty-five. I guess there's two components, right? There's some one-off shifts, changes that have occurred that are resulting in lower margin, and there's also mix shift change. If we sort of think ahead to financial year twenty-six onwards, would you anticipate both of those dynamics, flowing through? Or would you just suggest there's just some mix shift changes that will impact margin from FY twenty-six onwards?
Based on what we know today, it's more mix shift. So, that's what we would expect going forward, again, from twenty-six onwards.
Okay, got it, and just wanted to clarify two things. One is on the net flows in the fourth quarter. And, you know, based on your previous guidance, you said about a year ago, it was expected that net flows would be worse in the June quarter than what they came through, and they weren't. Can I just check, were there any sort of phasing of redemptions as you worked through the migration, so, was that a sort of an artificial number for us to understand? Or was it all still open for people to redeem and make changes as they typically would?
So there was a blackout period during the migration. I can't remember how long that was.
I think it was in weeks.
It was, I think it was weeks, not months. That was lifted, obviously, post-migration. To be frank, I was expecting further redemptions post-migration, and that was very much muted, as you can see in our fourth quarter flows. Yeah, there hasn't. We're not sort of backing up on any redemptions or, you know, holding off any of that. It is what it is now. It's flowing normally.
Got it. And can I just clarify, earlier on, you said there was a super fund admin arrangement that's terminating, termination coming in within twelve months. What is that, and how much, how much of—what's the quantum of that?
So it's a small super fund. It's between AUD 1 billion-AUD 2 billion, so it's quite a small one.
Okay, excellent. Thank you.
Thank you. I see no further questions at this time. I will now pass the conference back to Scott.
Really? Okay. So I guess I'd just say thank you. Thank you for your time today, and we look forward to catching up around the grounds over coming days. We'll close the conference there. Thanks very much.
This concludes today's conference call. Thank you all for participating. You may now disconnect.