Thank you, Bernadette, and thank you for joining the call today. I guess, presenting the first half FY twenty twenty one results for MA Financial Group. This half has been a continuation of the 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 strength of the company in its 12 year history. The investment strategy continues to gain scale as positive investment performance supports greater inflow from a diversity sorry, 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 it's 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 5 and run through the record results.
Our FY 2021 underlying earnings of $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 $1,200,000,000 to be in excess of $6,100,000,000 at 30 June. This excludes $275,000,000 of assets that we've contracted to acquire late in the half, which will settle in the second half of FY twenty twenty one and add to second half AUM growth. The growth was underpinned by over $500,000,000 of net inflows over the last 6 months across both foreign and domestic channels as momentum continues to build following a strong second half FY twenty twenty.
As indicated at the Investor Day in May, we've split the lending division out for the first time as it has become more meaningful contributors to the results it's 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 RegPrime. Today, the Board has declared and made an interim fully franked dividend of $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% to 30% growth over FY 2020 versus our prior guidance of 10% to 20% growth. The business is in great shape and we're 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, 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 performance and transaction fees were earned. Depletion in cash represents first half twenty twenty, 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 Repro 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 $60,000,000 that are expected to convert back into cash in the second half of this year.
The tables on Slide 7 highlight a continuation of the momentum from the second half FY 2020 results in the first half this year. The comparative period, FY first half FY twenty twenty was impacted by COVID and clearly that impacted the results of that period. We aim to remain a growth company through scaling our existing investment strategy and continuing to invest in new initiatives as well. And given the shape of these charts, it's working well. On the following slide, slide 8, 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 has also returned with the launch of new funds and strong underlying performance of the investment strategy. 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% 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 and A activity that rolled over from last year and a broad contribution from the various teams in advisory. If we turn to Slide 9, 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 regards to growing recurring income, if you annualize our June month base management fees, we're generating £77,000,000 of base management fees per annum, which is up 28% on the prior period. During the period, we also opened 2 existing credit strategies to retail investors, we just had a positive start in terms of both investor 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, it 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 their operational expertise. MA Financial has a very robust balance sheet and we've utilized over the period of seed and underwrite funds in addition to strategic acquisitions like RevPro. 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. And 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 I'm extremely strong with $185,000,000 inflows over the last 6 weeks alone, and this has been from a combination of both domestic and foreign investors. In BC, we contracted to sell one of our investments, which will deliver a $4,000,000 performance fee to the group in the second half.
And this highlights the diversity in our business and the ability to earn performance based fees from a number of direct sorry, 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 $18,000,000 of fees that are highly probable or already earned, which is a great way to start the half. So despite the recent private lockdown disruptions, the business continues to experience similar momentum that experienced over the last 12 months. Turning to the delisting proposal for Red Cap Hotel Group.
As we have said before, we've been disappointed with the share price performance of RDC since listing in 2018 has predominantly traded at the 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 Red Tape Hotel Group portfolio. Since acquiring Red Tape, 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% sorry, 44% of Red Tape 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 advisers on strategic options for the group with the objective of finding a way to materially close the gap for NAS and today the IBC have announced that they will put forward and recommend a delisting proposal to RDC Security Holders.
The delisting proposal will essentially take RDC back to be 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 Red Cap that we can stay invested. Those that would like to increase their interest in the unlisted fund can do so either on market throw the right issue at $1.15 and those who want to exit at the time of delisting can add $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 Redcap and we are confident that the vote will be approved.
Many investors in Red Capes were invested in the unlisted structure prior to the IPO, and we believe that they will support the unlisted structure going forward. In many cases, I'll refer the infrastructure. On Slide 13, we move to our guidance. We're upgrading our guidance for the outlook for FY 2021 from 20% to 30% growth from 10% to 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, and we look forward to delivering a strong FY 2021 result for all MH shareholders.
The guidance is based on a number of assumptions that are outlined on this slide. We turn to Asset Management now on Slide 15. And as a reminder, this division was established in 2013, with 1 retail shopping center asset in Hillsville, Victoria as a standalone syndicate. Over 8 years, we've grown AUM from 30,000,000 be $6,100,000,000 today diversified across a number of specialized investment strategies, all driven by the constant pursuit of strong risk adjusted returns for investors. The divisional results today demonstrate that the focused strategy is working, and 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.
By focusing on the divisional results. Over the half, Asset Management revenue was up 94% this is PCP and underlying EBITDA was up 190% 19% sorry on the same basis. The result was underpinned by strong inflows and the transactional and performance fee revenue across a number of investment strategies with the performance fee primarily being attributable to hospitality and equity. This is the first period that Recor has been included in the numbers as we settled in early April 2021 it contributed CAD 2,500,000 to the base management fee account. The Red Capes mark to market of CAD 7,600,000 a significant item in terms of both FY first half twenty twenty one contribution and also in the comparative year as the first half FY 2020 included a negative movement due to the initial onset and uncertainty surrounding the global pandemic.
As part of the delisting proposal, the Red Capes independent directors have had the entire RDC portfolio independently valued. This resulted in the directors' NAVs increasing from $1.22 to $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 an increased diversity in AUM over time. It's great to see credit growing quickly as it was a conscious decision to build this business 3 to 4 years ago with the objective of diversifying into what we consider 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 GBP 695,000,000 of AUM compared to 30 June last year when it was $310,000,000 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 $1,100,000,000 We have 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 1.5 times the money in this half compared to the last. Pleasingly, both SIB and non SIB flows are growing strongly.
As mentioned earlier, our significant investment in our distribution domestic distribution team is paying dividends with a very material step up in net flows from this market across a number of our investment strategy. 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 SIB program, 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 July 2021, we're confident that the new rules will the new rules 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, I'd like to 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 which bodes well for future inflows. The real estate credit AUM grew by 50% over the period to AUD 480,000,000 of AUM with strong interest also continuing into the next into the last 6 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 Center for $140,000,000 This asset will settle in the second half and represents our 1st standalone retail offering for some time and 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 $695,000,000 in the half, up 124%, underpinned by strong performance at the fund level. The PEBC strategy commenced in 2015, and we are now into our 3rd vintage fund. Overall, we've invested in around 20 growth companies across the 3 funds with 8 made during this half. 17 of these investments remain in the funds today.
And given the maturity of some of the earlier funds, we expect to see additional realizations in coming years, should deliver more consistent performance fees to the group from this investment strategy. All in all, the 4 investment strategies on this page have been performing exceptionally well, and we expect it to continue in the future. If we turn forward now to Slide 21, this is where we stood out lending for the first time, and this really reflects 2 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 Equity. 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 while 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 reduced NIM over time. The loan book grew 160% over the period with $70,000,000 being attributable to the acquisition of MKM and the remainder being organic growth. One of our key measures is return on invested 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, 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, we should also support much stronger growth in that loan book. And 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 SKU to M and A engagement, including a couple of large transactions that rolled over from the second half FY twenty twenty one.
We've seen ECM pick up in the second half with 3 capital raisings already undertaken in the last 6 to 7 weeks. Since the end of June, we have derisked around $18,000,000 of revenue, which when added to the $24,800,000 recorded in the first half, takes us to around $43,000,000 of revenue year to date. This represents around 70% of our target at $1,100,000 to $1,300,000 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 $1,100,000 to $1,300,000 On Slide 25, it maps out the revenue seasonality in Corporate Advisory and Equity and has been consistent over the years on that sort of forty-sixty 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 significant increase in volume in the June quarter as in the June quarter of last year, COVID uncertainty peaked and volumes peaked as well. I'd now like to pass over to Graeme to let our CFO run through some of the financial numbers.
Great. Thanks, Julian, and 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 twenty twenty one, 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 Repro, headcount grew 20% in the 1st 6 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. But 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.
And while we expect to be at the upper end of our dividend policy power range of 25% to 30% for the full year, this will still mean that we will continue to retain good levels of operating cash for future investing. And 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 load points in our working capital, when in March we pay our annual dividend And our annual bonuses. And 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. And 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.
It has stood us in good stead and allows us to not only invest in existing platform growth, but also explore new opportunities. And 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 twenty twenty. On the slide, you can see that we continue to The ongoing growth of the lending business in the period. And whilst 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 $30,000,000 of seed investments that were on our balance sheet at 31 December. These proceeds we then rotated into both short term seed capital initiatives in the first half and over $20,000,000 in longer term strategic assets, including The acquisition of Red Pro and the closure of our major bank funding partnership. And 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. And to highlight this point, we have over $60,000,000 of capital we expect to realize in the second half, with some $20,000,000 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 $60,000,000 of realizations expected. And this only comes about the time in the game. And it gives us additional confidence and firepower to continue to look at new opportunities. So 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, Graeme. I think you mentioned time and again. So 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 developing deep financial and operational expertise in the businesses we choose the 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 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. And we firmly believe you need deep operational expertise to deliver on this front. The growth rates and our success of 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. So 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 and A.
Thank you. Your first question comes from Glenn Wellum of MST Financial. Please go ahead.
Yes. Good day, guys. Well done on another great result. Just a question around, I One area that hasn't grown so much over time in Asset Management is the PEVT fund. Is there a reason for that?
And do you expect that to grow over
yes, it's a good question, Glenn. I guess, VCPE has really been an allocation that's come out as a significant investor visa program over the journey, so that's been a mandated approach. And I guess we've been very careful around BCPE 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 VCPE. The government's increased the allocation through the recent review of the SIV program. So I think we see that being more prominent in the future.
And the other thing I'd say is, this comment around the sort of vintages of our 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. So 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
Is that because some of the investments have taken longer to realize
or I think that's a fair comment. When you think about PEVC, you sort of you buy a company and then 4, 5 years down the track, you might realize it, right? So the vintage of the first fund in BC 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 fixed investment mandate to 20%. And so you'll see us buy more we'll have to invest more money in more companies, and you'll also see the velocity of realizations pick up.
So it's a very strong focus for us in terms of how we think about BCPE in the next couple of years and using that money to or we're investing that money well.
Right. I was just wondering if you could help me out on forecast performance fees also within Asset Management. You had $6,000,000 in hospitality and $6,400,000 in equities. And then you have to say that, obviously, The total is going to be affected by the current lockdown, which looks much worse than last year. And also, is there any color or Disclosure around your performance fees for equities and the performance in detail?
Yes, we've disclosed that. So the rough break is about $6,000,000 in hospitality and $6,300,000 I think in equities this period. I think your comments around the lockdown, 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. And so you're going to see performance fees being contributed in some periods out of hospitality, some that of real estate, some out of PEBC and some out of equities, right? And I think equities is a more consistent strategy. So we see the level. I think this period was slightly above sort of our 3 year run rate in terms of its percentage of AUM, but it's not that far.
So it's probably around it's not too far from a normalized period. Yes. And just one final question,
if I may. Just on the lending and the mortgages, is that you finding that more competitive than you would have thought? Or is that a case? Are you still getting your systems up to date and you expect faster growth going forward? Or just conservative to start with?
Yes, it's Chris here in relation to the lending. So 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. So we didn't immediately go straight into the market to get growth because we needed to put through some changes to cater for that. So we were never really forecast Meaningful contribution coming from that, meaningful growth coming from that really within the 1st year, year and change of the business, but It's something that we would anticipate to ramp up as we've literally just coming to the conclusion The systems upgrade and some key hires. So I think it's something to watch out for coming into the close The full financial year for us and then really next year.
So the competitive landscape there's not been something that we're butting up against.
Okay. Thanks.
Thanks, Glenn.
Thank you. Your next question comes from Nick Burgis of Ord Minett. Please go ahead.
Yes, good afternoon, gentlemen. Just a question on the lending business. So you mentioned a couple of times investment and targeting of certain verticals. Just a brief conversation around how you see well, a little bit of an explanation as exactly what those verticals are and then the mix of the business, say, over the next 2 or 3 years, how you see the shape of that business I'm developing across those verticals.
Yes. So 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. And we also deploy capital into and make NIM In other platforms that operate in the market that are in the more specialty place. So that's typically smaller size, but Higher margin, smaller addressable markets, but we talk addressable markets against the backdrop of the $1,000,000,000,000 residential Market, so we will our focus is really around risk and the return there for the specialty 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. So you would expect the trend of the loan book portfolio to be more heavily Towards growth in residential and lowering the NIM, but being far larger in size to grow the profitability. Okay.
That makes sense. And just my second question, a broader question, just for the business as a whole, you've mentioned capital and potential acquisition 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?
Yes, sure. It's a good question. I think we're constantly looking at sort of gaps. Sort of thing, when you look at, say, a Repro or you look at an MKM, there's sort of things that are accelerating our growth. So we're not shy of acquisitions, but we are very prudent around equity and sort of cash, I guess.
But we are we're pretty well capitalized. So the short answer is yes, I tell you what we're looking at. But across all of the verticals where we have gaps, we do consider acquisitions at all times.
Fair enough. Thanks very much.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Biggins for closing remarks.
Okay. Well, thank you, Bernadette. And 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. And thank you for your time.