Thank you, Bernadette, and thank you for joining the call today. I am presenting the first half FY 2021 results for MA Financial Group. This half has been a continuation of the strong momentum we delivered in the second half of last financial year. Today, we report a record result, and Chris and I agree that we have never felt more comfortable with the direction of our strategy and the strength of the company in its 12-year history. The investment strategies continue to gain scale as positive investment performance supports greater inflows from a broader diversity of investors. There are exciting new businesses within the group, such as lending, that we look forward to scaling over the coming years and continuing to demonstrate to investors that we have significant new growth opportunities within the diversified business of MA Financial Group.
As previously mentioned, operational expertise in those areas of specialization is key to delivering results, and we are pleased that our conscious investment in capability is delivering. Being direct managers of our assets makes a difference. The company's new name and logo has been received very well, both internally and externally, and we are excited about MA Financial being the name of the company for the future. With that background, let's turn to Slide five and run through the record result. Our FY 2021 underlying earnings of AUD 0.163 per share is up 92% compared to the prior period. All business divisions contributed to the result, with corporate advisory up 16% and asset management up 94% on a revenue basis. In asset management, AUM is up 21% over the last 12 months, or AUD 1.2 billion, to be in excess of AUD 6.1 billion at 30 June.
This excludes AUD 275 million of assets that we've contracted to acquire late in the half, which will settle in the second half of FY 2021 and add to second-half AUM growth. The growth was underpinned by over AUD 500 million of net inflows over the last six months across both foreign and domestic channels, as momentum continued to build following a strong second half of FY 2020. As indicated at the Investor Day in May, we've split the lending division out for the first time, as it has become a more meaningful contributor to the result and is a significant opportunity for future growth. The strong balance sheet remains an important asset for the group, and we moved to utilize it over the period to help launch new funds and make strategic acquisitions such as RetPro.
Today, the board has declared and made an interim fully franked dividend of AUD 0.05 per share, which reflects the confidence in the business and the increasing proportion of revenue that is predictable and recurring in nature. This all supports a high level of confidence in MA Financial Group. We've increased our underlying earnings guidance to a range of 20%-30% growth over FY 2020 versus our prior guidance of 10%-20% growth. The business is in great shape, we are executing on our strategy and delivering results across the whole platform. If we turn to the next slide and the financial highlights of the year, the underlying revenue growth of 52% underpinned a 92% increase in underlying earnings. This evidences the operating leverage in the business. EBITDA margin and return on equity bounced back as more normalized conditions prevailed and performance and transaction fees were earned.
Depletion in cash represents the first half of 2020, that's June 30 last year, being a high point given our cautious position relating to COVID and the subsequent deployment of capital to grow our business, whether underwriting new funds or to make strategic acquisitions such as RetPro or our initial interest in MKM. The balance sheet remains in a strong position to support new funds, as we have several assets worth in excess of AUD 60 million that are expected to convert back into cash in the second half of this year. The tables on Slide seven highlight a continuation of the momentum from the second half of FY 2020 results in the first half of this year. The comparative period, the first half of FY 2020, was impacted by COVID, and clearly that impacted the result in that period.
We aim to remain a growth company through scaling our existing investment strategies and continuing to invest in new initiatives as well. Given the shape of these charts, it's working well. On the following Slide eight, we talk to divisional performance. As previously mentioned, the numbers here are slightly different from last year, with lending being broken out for the first time, and that has the impact of reducing the asset management contribution to 71% from 79% previously. Asset management had a very strong period, with both AUM and net inflow growth underpinning a 28% increase in base management fees over the period. Transaction performance fees also returned with the launch of new funds and the strong underlying performance of the investment strategies.
Today, lending represents around 14% of the group's EBITDA and is experiencing strong growth, with the size of the loan book and EBITDA increasing 160% and 33%, respectively, over the period. In building our lending division, we do so with a focus on building long-term distribution channels through technology and aligned relationships, coupled with sticky capital sources. Consistent with our broader approach, we still seek to build predictable and growing cash flows. Corporate advisory also had a very good period with a record result, which benefited from some M&A activity that rolled over from last year and a broad contribution from the various teams in advisory. If we turn to Slide nine, comparing the performance against our strategic priorities, we believe that we continue to deliver on our stated objective of scaling our investment strategies and diversifying our capital sources.
In regard to growing recurring income. If you annualize our June month base management fees, we're generating AUD 77 million of base management fees per annum, which is up 28% on the prior period. During the period, we also opened two existing credit strategies to retail investors, which have had a positive start in terms of sorry, both advisor and platform interest. The strength of the domestic inflows is really positive, given the investment we made over the last couple of years, and demonstrates that we're delivering on the stated strategy of diversifying our capital sources. Operational expertise is at the heart of what we do, and we continue to invest in operational expertise, which is consistent with our objective of delivering better returns for investors and having direct drive into the management of our assets.
We consider both new hires and strategic acquisitions as ways to enhance our operational expertise. MA Financial has a very robust balance sheet. We've utilized it over the period to seed and underwrite funds in addition to strategic acquisitions like RetPro. We continue to strengthen the bench with senior hires and focus on executive talent with programs centered around the MA Academy. Developing and retaining our talent is a very high priority for the business. In this regard, we are working to further enhance the equity alignment of executives through long-term incentive plans and look forward to providing more details at the annual results. On Slide 11, we turn to key activity post the results. In asset management, the inflows have remained consistently strong, with AUD 185 million of inflows over the last six weeks alone. This has been from a combination of both domestic and foreign investors.
In VC, we contracted to sell one of our investments, which will deliver an AUD 4 million performance fee to the group in the second half. This highlights the diversity in our business and the ability to earn performance-based fees from a number of different strategies. In corporate advisory, there has been a lot of activity since 30 June, with a number of larger deals completing, in addition to a number of transactions being substantially completed. At this point, we have around AUD 18 million of fees that are highly probable or already earned, which is a great way to start the half. Despite the recent COVID lockdown disruptions, the business continues to experience similar momentum to that experienced over the last 12 months. Turning to the delisting proposal for Redcape Hotel Group.
As we have said before, we've been disappointed with the share price performance of RDC since listing in 2018, as it has predominantly traded at a discount to NAV, and sometimes that discount has been material. We're strong believers in the underlying fundamentals of our hospitality assets, including those in the Redcape Hotel Group portfolio. Since acquiring Redcape, the MA Hospitality management team has delivered outstanding results at the asset performance level, and this is even more impressive given the significant headwinds of COVID. MA, its funds and executives own in excess of 40%, or sorry, 44% of Redcape and are long-term owners of the asset class. Over the last few months, we've worked with the independent directors of RDC and their advisors on strategic options for the group, with the objective of finding a way to materially close the gap NAV.
Today, the RBC have announced that they'll put forward and recommend a delisting proposal to RDC security holders. The delisting proposal will essentially take RDC back to being an open-ended, unlisted fund and provide investors with a quarterly liquidity mechanism more closely aligned with directors' NAV. We believe that the structure of the proposal provides choice to RDC security holders. Those who want to retain their exposure to the high-quality Redcape assets can stay invested. Those that would like to increase their interest in the unlisted fund can do so either on market or through the rights issue at AUD 1.15. Those who want to exit at the time of delisting can at AUD 1.15, representing a 22% premium to the last close. The proposal is subject to a security holder vote, and we will not be voting our interest in this vote.
This means that all non-associated security holders will decide the future of Redcape. We are confident that the vote will be approved. Many investors in Redcape were invested in the unlisted structure prior to the IPO. We believe that they will support the unlisted structure going forward. In many cases, they'll prefer the unlisted structure. On Slide 13, we move to our guidance. We're upgrading our guidance for the outlook for FY 2021 from 20%- 30% growth from 10%- 20% growth at the May AGM. The strength of the first half and the momentum in the business provides us with the confidence to upgrade at this point. We look forward to delivering a strong FY 2021 result for all MA shareholders. The guidance is based on a number of assumptions that are outlined on this slide.
We turn to asset management on Slide 15. As a reminder, this division was established in 2013 with one retail shopping center asset in {audio distortion} Victoria, as a standalone syndicate. Over eight years, we've grown AUM from AUD 30 million to be AUD 6.1 billion today, diversified across a number of specialized investment strategies, all driven by the constant pursuit of strong, risk-adjusted returns for investors. The divisional result today demonstrates that the focus strategy is working. We believe that the business is in great shape to continue its growth trajectory and also incubate more businesses like the lending division over time. Focusing on the divisional results. Over the half, asset management revenue was up 94% versus PCP, underlying EBITDA was up 19%, sorry, on the same basis.
The result was underpinned by strong inflows and a return of transactional and performance fee revenue across a number of investment strategies, with the performance fees primarily being attributable to hospitality and equity. This is the first period that RetPro has been included in the numbers, as we settled in early April 2021, and it contributed AUD 2.5 million to the base management fee account. The Redcape mark to market of AUD 7.6 million is a significant item in terms of both first half 2021 contribution and also in the comparative year, as the first half of FY 2020 included a negative movement due to the initial onset and uncertainty surrounding the global pandemic. As part of the delisting proposal, the Redcape independent directors have had the entire RDC portfolio independently valued.
This resulted in the directors' NAV increasing from AUD 1.22- AUD 1.31, which was the main driver of the mark-to-market result in asset management. If we turn forward to Slide 16, this chart demonstrates both consistent growth in AUM and increased diversity in AUM over time. It's great to see credit growing quickly, as it was a conscious decision to build this business three-four years ago with the objective of diversifying into what we considered could be a very large, multi-decade opportunity for growth. It is also great to see equity starting to be a meaningful contributor to the business with 695 million of AUM compared to 30th June last year when it was 310 million of AUM. The opportunity in both strategies is very significant. Slide 17 is a new slide, which looks to provide greater transparency in our fund flows.
Gross flows over the last 12 months were AUD 1.1 billion. We had broad support for all of our investment strategies, which is reflective of our strategies having longer-term track records of performance and our distribution teams building deeper relationships with more investors. The foreign distribution channel continued to grow strongly, raising 1.5x the money in this half compared to the last. Pleasingly, both SIV and non-SIV flows are growing strongly. As mentioned earlier, our significant investment in our domestic distribution team is paying dividends with a very material step-up in net flows from this market across a number of our investment strategies. Diversifying our capital sources continues to be a top priority for the group, which takes us to the following slide, which reinforces the diversification of our investor base across retail, high net worth, and institutional capital.
In regards to the SIV program, it was pleasing to see the federal government confirm its support for the program this half, including the introduction of new rules which will be implemented from 1st of July 2021. We're confident that the new rules will support our professional approach and future growth in inflows. Slide 19 talks to the various investment strategies and some of the drivers for the half. I won't dwell on this slide, although I'd call out a few highlights. The credit strategies we've opened up to retail investors are gaining positive momentum on the larger platforms, which bodes well for future inflows. The real estate credit AUM grew by 50% over the period to AUD 480 million of AUM, with strong interest also continuing into the last six weeks. The fund has an impeccable track record and is gaining very broad acceptance amongst investors.
During the half, we contracted to acquire the Bundaberg shopping centre for AUD 140 million. This asset will settle in the second half and represents our first standalone retail offering for some time. We are encouraged by investor interest in the high-yield offering. We have high conviction for strong sub-regional shopping centers that dominate their local markets, especially in the large regional cities. Our equity fund continues to perform well. AUM under that strategy reached AUD 695 million in the half, up 124%, underpinned by strong performance at the fund level. The PE VC strategy commenced in 2015. We are now into our third vintage fund. Overall, we've invested in around 20 growth companies across the three funds, with eight made during this half.
17 of these investments remain in the fund today. Given the maturity of some of the earlier funds, we expect to see additional realizations in the coming years, which should deliver more consistent performance fees to the group from this investment strategy. All in all, the four investment strategies on this page have been performing exceptionally well. We expect that to continue in the future. We turn forward now to slide 21. This is where we split out lending for the first time. This really reflects two aspects of that division. The nature of the lending business, being a NIM-based model, is quite different to asset management and corporate advisory and equities.
The lending business is also gaining scale today, where it is becoming more meaningful to the group, and the massive opportunity that we see ahead for the division means that we think this will continue to grow. On results, strong growth across the key indicators with revenue or NIM up 32% and underlying EBITDA up in the 30% range. In relation to NIM, it was 5.8% in the half, and whilst this was down from the prior period, it also reflects our conscious decision to grow our loan book in the largest addressable market being home loans, which will benefit volume, although reduce NIM over time. The loan book grew 160% over the period, with AUD 70 million being attributable to the acquisition of MKM and the remainder being organic growth.
One of our key measures is return on investor capital, and that came in at 16.5% for the period, which is above our targeted return. On Slide 22, we walk through some of the highlights in lending, which include the disbursements business continues to be a great business for MA Financial, and we've further strengthened our dominant position in that market with the addition of new channel partners. We've made some early progress with MKM across people and technology, which should also support much stronger growth in that loan book. Finally, the flagship MA Priority Income Fund continues to grow in line with our expectations and was opened up for retail investors in the half. We continue to implement our strategy of scaling the lending division in a prudent and measured way with a focus on very large addressable markets.
On Slide 24, we touch on corporate advisory, which had a record half with a significant skew to M&A engagement, including a couple of large transactions that rolled over from the second half of FY 2021. We've seen ECM pick up in the second half with three capital raisings already undertaken in the last six-seven weeks. Since the end of June, we've de-risked around AUD 18 million of revenue, which, when added to the AUD 24.8 million recorded in the first half, takes us to around AUD 43 million of revenue year- to- date. This represents around 70% of our targeted AUD 1.1 million-AUD 1.3 million per executive and bodes well for the year. The pipeline remains very deep and that also gives us confidence around being able to achieve our targeted revenue per executive of AUD 1.1 million-AUD 1.3 million.
On Slide 25, it's mapped out the revenue seasonality in corporate advisory and equity and has been consistent over the years on that sort of 40/60 split first half, second half. We really see no difference in this period. Commissions have been a bit stronger this year versus last year, although that is largely reflective of the significant increase in volume in the June quarter, as in the June quarter of last year, as COVID uncertainty peaked and volumes peaked as well. I'd now like to pass over to Graham Lello, our CFO, to run through some of the financial numbers.
Great. Thanks, Julian. Good afternoon, everyone. If we start on Slide 27, we've talked a fair bit about revenue today, so I thought we'd touch on the expense side of the equation and, in particular, our continuing investment in platform and talent. As we mentioned at the full-year results, we expected a higher-than-average increase in compensation in the first half of 2021, and this is exactly how it turned out, with the increase split evenly between fixed and variable comp. Some factors impact both components of comp, with headcount being the most material driver. Excluding the impact of RetPro, headcount grew 20% in the first six months, and on a year-on-year basis, that increased to 36%. A significant driver of our variable comp is also increased revenue performance, which has obviously been strong in the first half.
Most importantly, though, is that we have maintained our comp ratio at around our target of 50%. The combination of increased earnings and our strong cash conversion has resulted in us in declaring our maiden interim dividend. While we expect to be at the upper end of our dividend policy payout range of 25%-50% for the full year, this will still mean that we will continue to retain good levels of operating cash for future investing. On the topic of cash and investing, if we move to Slide 28, we'll quickly run through our operating balance sheet. As a quick reminder, we present an operating balance sheet because we think it gives a simpler view of both our economic exposures and the capital available to us to allocate.
It's worth pointing out that typically in the first half, we have a cyclical low point in our working capital, when in March we pay our annual dividend and our annual bonuses. This, coupled with a continued focus on growth investing in the half, has reduced our cash balance, which, despite this, remains pleasingly strong. As part of our consistent approach to capital, cash will always be an important component of our net assets. With the 5% NTA increase, that adds further strength to our asset backing per share. Borrowings remain unchanged in the period, and we're comfortable with the current levels of debt and the balance maturity profile. Looking forward, I don't see us changing our approach of maintaining a dynamic but prudently capitalized balance sheet.
It certainly stood us in good stead and allows us to not only invest in existing platform growth, but also explore new opportunities. Over the page on Slide 29, I'll touch on some of the investment highlights. We were particularly active in the period, which was a continuation of the momentum coming out of the second half of 2020. On the slide, you can see that we continued to support the ongoing growth of the lending business in the period. Whilst as it may seem we did not do much with our co-investments, this actually belies how we approach the growth and seed funding of our funds. As a demonstration of this, we sold down close on AUD 30 million of seed investments that were on our balance sheet at 31 December.
These proceeds were rotated into both short-term seed capital initiatives in the first half and over AUD 20 million in longer-term strategic assets, including the acquisition of RetPro and the closure of our major bank funding partnership. This dynamism talks to how we think about and position our balance sheet for growth. The recycling of capital, to me, is a clear focus, and in this regard, I believe a real strength of ours. To highlight this point, we have over AUD 60 million of capital we expect to realize in the second half, with some AUD 20 million already banked as of today's date. Importantly, an emerging feature of our capital recycling is the maturity profile of our longer-term investments.
With the return of this longer dated capital, making up a large part of the AUD 60 million of realizations expected. This only comes about with time in the game, and it gives us additional confidence and firepower to continue to look at new opportunities. With some great earnings momentum and a strong balance sheet behind us, I'll now hand back to Julian to talk you through our strategic outlook.
Thank you, Graham. I think you mentioned time in the game. Slide 31 talks to this, I guess. The slide looks back at some of our track record in building businesses within the group and looks to show the benefit of delivering or developing deep financial and operational expertise in the businesses we choose to scale. The value of time and investment in capability delivers strong investment performance over time, which in turn provides investors with confidence to keep investing in our products and gaining access to our operating capabilities. It's a virtuous cycle, although at the core of it is investment performance over extended periods of time. We firmly believe you need deep operational expertise to deliver on this front. The growth rates and our success at building business in the past speak for themselves. We'll now turn forward to the final slide on Slide 32.
This really provides a bit of a view on how we think about the business and delivering medium-term growth. We are a builder of valuable businesses in large addressable markets. We have access to unique distribution channels that support scaling. We have access to diversified sources of capital, and we have a strong balance sheet to support growth. We have specialized advisory capability aligned with a leading global firm, and we are an aligned and experienced executive management team. In closing, we are very pleased that executing our clear and consistent strategy is delivering strong results for all MA shareholders, and we look forward to continuing to execute this strategy in the future. I'd now like to pass back to Bernadette to moderate the Q&A.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. To allow time for all questioners, there is a limit of two questions per person. If you wish to ask further questions, please rejoin the queue. Your first question comes from Glen Wellham of MST Financial. Please go ahead.
Yeah. Good day, guys. Well done on another great result. Just a question around, I suppose one area that hasn't grown so much over time in asset management is the PE VC fund. Is there a reason for that, and do you expect that to grow over time?
Yeah. It's a good question, Glen. I guess VC PE has really been an allocation that's come out of the Significant Investor Visa program over the journey. That's been a mandated approach, and I guess we've been very careful around VC PE because a lot of our investors have a, I guess, a wealth preservation frame of mind as opposed to a multiples of money frame of mind, and that's the way we've really managed the account. I think there's a massive opportunity in VC PE. The government increased the allocation through the recent review of the SIV program. I think we see that being more prominent in the future.
The other thing I'd say is, this comment around the sort of vintages of our funds and that we'll see more investment portfolios realized over the coming years is not an unimportant one in terms of how we think about performance fees in the future as well. It's a massive opportunity for us. It probably hasn't grown as quick as the other areas, but that doesn't mean that we're not focused on it.
Is that because some of the investments have taken longer to realize, or is there a reason?
I think that's a fair comment. When you think about PE VC, you buy a company and then four-five years down the track, you might realize it, right? The vintage of the first fund in VC was 2015, and we're just starting to cycle through some of those realizations. I think you'll see the number of investment companies or the number of companies we invest in increase as the mandates have increased the allocation from 10% of the SIV's investment mandate to 20%. You'll see us buy more. We'll have to invest more money in more companies, and you also see the velocity of realizations pick up. It's a very strong focus for us in terms of how we think about VC PE in the next couple of years and using that money to or investing that money well.
I was just wondering if you could help me out forecast performance fees also within asset management. You had AUD 6 million in hospitality and AUD 6.4 million in equities. Then you'd have to say that, obviously, hospitality is going to be affected by the current lockdown, which looks much worse than last year. Also, is there any color or disclosure around your performance fees for equities, and the performance in detail?
Yeah, we've disclosed that. The rough break is about AUD 6 million in hospitality and AUD 6.3, I think, in equities this period. Your comments around the lockdown, I think we still see very strong appetite for the real estate in terms of hospitality. Obviously, the lockdown impacts cash flow and just cash burn at this point, and we do believe that this half is materially impacted. In terms of, I guess, looking forward, I think, and this goes to the PE comment as well, we see a lot more diversity in the maturity of our funds. You're going to see performance fees being contributed in some periods out of hospitality, some periods out of real estate, some out of PE VC, and some out of equities, right? I think equities is a more consistent strategy. We see the level.
I think this period was slightly above sort of our three-year run rate in terms of its percentage of AUM. It's not that far, so it's not too far from a normalized period.
Yeah. Just one final question, if I may. Just on the lending and the mortgages. Are you finding that more competitive than when you would've thought or is that a case of you still getting your systems up to date, and we expect faster growth going forward, or just conservative to start with?
Yeah. It's Chris here in relation to the lending. After completing the transaction on the MKM venture, we have been very busy in looking at the systems and the operations and positioning for growth. We didn't immediately go straight into the market to get growth because we needed to put through some changes to cater for that. We were never really forecasting a meaningful contribution coming from that, a meaningful growth coming from that, really within the first sort of year and change of the business. It's something that we would anticipate to ramp up as we've literally just coming to the conclusion of the systems upgrade and some key hires. I think it's something to watch out for coming into the close of the full financial year, of course and then really next year.
Right.
The competitive landscape has not been something that we're butting up against.
Okay. Thanks.
Thanks, Glen.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Nic Burgess of Ord Minnett. Please go ahead.
Yeah. Good afternoon, gentlemen. Just a question on the lending business. You mentioned a couple of times the investment and targeting of certain verticals. Just a brief conversation around how you see, well, a little bit of an explanation as to exactly what those verticals are, and then the mix of the business, say over the next two or three years, how you see the shape of that business developing across those verticals.
Yeah. Firstly, in relation to the verticals, the way in which we look at our lending business is higher margin specialty verticals, with, for example, the disbursement platform that we're in. We also deploy capital into, and make NIM in other platforms that operate in the market that are in the more specialty place. That's typically a smaller size, but higher margin, smaller addressable markets. We talk addressable markets against the backdrop of the trillion-dollar residential market. Our focus is really around risk and the return there for the specialty lending product, looking at where we can really dig into data and risk pricing to grow that.
However, the loan book size, the majority of the loan book size growth over the medium term, I would expect to come from the residential lending market because it's the largest addressable market, and that does come with lower NIMs. You would expect the trend of the loan book portfolio to be more heavily skewed towards growth in residential and lowering the NIM, but being far larger in size to grow the profitability.
Okay, that makes sense. Just my second question, a broader question, just for the business as a whole. You've mentioned capital and potential acquisition opportunities. Are there any particular priorities or gaps across the suite of businesses where you see opportunities to deploy capital and add value to the business at the moment through acquisition?
Yeah, sure. It's a good question. I think we're constantly looking at sort of gaps, and I think when you look at, say, a RetPro or you look at an MKM, they're sort of things that are accelerating our growth. We're not shy of acquisitions, but we are very prudent around equity and sort of cash, I guess. We're pretty well capitalized. The short answer is yes. I couldn't tell you what we're looking at. Yeah, across all of the verticals where we have gaps, we do consider acquisitions at all times.
Fair enough. Thanks very much.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We will now pause for a moment to allow for question registration. There are no further questions at this time. I'll now hand back to Mr. Biggins for closing remarks.
Okay. Well, thank you, Bernadette. Yeah, we're obviously very excited about the company, and we thank you for your time today, and we look forward to catching up as we can in the short term. Thank you for your time.