I would now like to hand the conference over to Lisa Newns-Smith, Investor Relations. Please go ahead.
Good morning, and thank you for joining us for PEXA's 2025 Full-Year Results Briefing. I'm joined today by PEXA's CEO and Group Managing Director, Russell Cohen, and Interim CFO, Liz Warrell, who will discuss the group's performance over the past financial year. Before we begin, we acknowledge the traditional custodians of the land and pay our respects to elders past and present. We honor their enduring connection to country, culture, and community. I'll hand over to Russell.
Good morning, everyone, and thank you for joining our FY 2025 earnings call. I'm very pleased to be with you here today to share my first set of PEXA results with you all. Joining me this morning is our Interim Chief Financial Officer, Liz Warrell. Turning now to page three, I'll give you a quick overview of our agenda. We'll start with some reflections and my initial assessment of the PEXA Group business. I'll take you through the operational performance and some highlights from FY 2025. I'll then hand over to Liz, who will walk you through the FY 2025 financial results, after which I'll provide an overview of our strategy and some focus areas for the coming year. I'll close with our outlook and guidance, and we'd be happy to take your questions at the end. Turning now to page four. When I joined PEXA, I was asked often, "Why PEXA?
Why did you leave Grab? Why did you leave Singapore? Why did you relocate home to lead PEXA?" I'll walk you through my process here and some of the learnings I've made. I went about answering that question methodically. My first month, I spent really getting to know the business, the team at PEXA, the technology, the partnerships, and really understanding the economics of the business and the history of how eConverts came about in Australia. Secondly, I traveled to the U.K., and I spent several weeks on the ground there with our teams who were driving our adoption in the U.K. market. I met with customers, I met with the Bank of England, I met with government, the Land Registry, and a range of other stakeholders.
I came away with strong conviction about the potential of PEXA to improve the experience for buyers and sellers of property across the U.K. Third, I returned to Australia, and I had a broad set of conversations with our external stakeholders. I met our regulators, I met government, I met business partners, I met many investors, and it helped me form an initial view of the business and where it stands today. A few key actions I wanted to summarize here on the page. PEXA and the whole group, we are incredibly privileged to operate a world-first piece of essential digital infrastructure. By world-first, it's worth pausing just to recognize that Australia is the only country to settle and load property digitally in real time. That's a real feature to be proud of in our ecosystem. I'm pleased for us to try and export that know-how and that IP internationally.
We also have national coverage. We've reached nationwide jurisdictional coverage, which I'll talk more about today. We serve about 90, and we have about 90% market coverage in terms of digitization. With this national coverage, it's done with a nationwide approach to access and pricing, very much aligned to our founding mission to be a platform for all Australians. Another exciting attribute is international opportunity. This is taking an Australian platform, homegrown IP, and exporting it to other markets, starting with the U.K. We've seen encouraging progress with NatWest. Their commitment was announced in July, which we'll talk more about today. Underpinning this is PEXA's strong financials. We have a strong balance sheet, steadily improving cash flows, and this gives us the flexibility to pursue attractive growth opportunities across both new and exciting products and markets.
Moving on to slide five, I'll show you a bit about the group financial snapshot. I'm pleased to share that PEXA delivered a solid uplift in operating performance for the year. Our revenue grew 16% with the prior period, with revenue growth across each of our segments. We saw good operating leverage across the group, resulting in our group EBITDA margin expanding by 1.3% on a reported basis, or almost 4% pro-forma. NPAT of $41.1 million was down about 6% year on year, and statutory NPAT and EPS fell to a loss of $76.43 per share, respectively. As previously announced, these metrics were affected by non-operating, non-recurring significant items, mainly related to taxation and impairments. Liz will share more on these details later on in her section.
As a group, we had this stronger operating performance and a lower CapEx spend across the business did result in a sharp lift in free cash flows. This in turn allowed us to repay about $53 million of net debt during the year, with our balance sheet continuing to de-lever. You can see here on this page our gearing improved year on year to about 1.8 x. We will, as a group, continue to pay down debt opportunistically and where it is the best use of our cash. Turning now to page six to give you a bit of an overview of the Australian Exchange, a business that was described to me as the jewel in the crown of PEXA Group. We operate national critical infrastructure. We're very proud of that designation and the accountability that that demonstrates. We continue to power millions of people on their home ownership journeys.
FY 2025 was a major focus where we tried to complete our national coverage. We expanded coverage in Western Australia, and we launched coverage in such states as Tasmania and in August in the Northern Territory. That completes full jurisdictional coverage for PEXA, which is pretty impressive after many years, and the founding mission to be a platform for all Australians. It puts us at about 90% market coverage in terms of digitization of the property ecosystem. We invested CapEx of about $34 million for the year in the Exchange, including important ongoing investments in cybersecurity and resiliency, which is a theme that you'll hear a number of times today. We delivered a number of new products and expanded existing offerings, including mobile signing for our practitioners and the expansion of digital lodgement capability, notably in Western Australia.
In FY25, we commenced our innovation and our investment into the area of anti-money laundering. The PEXA AML solution is in response to new AML requirements that the property sector will face, conveyancers, legal practitioners, and real estate agents from July 1st, 2026. We are readying our AML backbone and the partnerships needed to help those parties comply and support law enforcement. Just stepping back and taking a top-down look at the Exchange, we are the operators of a unique cash-generating business with healthy EBITDA margins. You can expect us to maintain those margins in the Australia Exchange around the same level as we invest in the platform to ensure it provides our customers with the highest possible levels of stability, security, and ease of use. Moving on to page seven, we'll talk about our International segment.
In FY25, it was very much a year of laying solid foundations in the U.K. as we finalized preparations for the launch of our broader U.K. product offering this year. We received FCA approval, which is an important requirement for the build of our sale and purchase product, and it enabled us to engage with lenders and conveyancers with credibility and with a more complete product offering. The build of the sale and purchase product on the PEXA platform progressed through the FY 2025 year, so the product suite is now launch-ready, and we couldn't be more excited. We were also proud to see the U.K.'s first fully digital property transaction using the platform successfully completed. At present, the PEXA product suite in the U.K. can service about 70% of transactions, and we continue to build with a target of about 80% in this coming year.
We completed the integration of Smoove, a business acquired in the prior year, during this year, and saw it move to operating profitability in the second half. Significant progress also occurred in Optima Legal due to the refocusing of business priorities and the streamlining of some back-office processes. The Optima Legal and the Smoove businesses were primarily purchased to provide us with a foothold into the lender and conveyancer market in the U.K. and to gain direct access to these customers for the eventual adoption of the PEXA platform. As we move towards the launch of our re-mortgage and our sale and purchase product suite in the next couple of months, we are leveraging our existing Optima Legal and Smoove relationships, and we can see a component of this go-to-market strategy coming to fruition, which is very pleasing.
Reflecting on PEXA's U.K. journey today, as some of you know, my background is in international expansion, notably platform growth and operations at Grab most recently. I feel quite confident to take these experiences of growth and expansion to help PEXA execute a winning adoption strategy in the U.K. One of my early impressions when I reviewed PEXA's U.K. investments to date is that the road has been long, and for many of you and many of our investors, it has felt arduous. We may have chosen a different framework at times to allocate capital. With all that said, and noting that we still have a long road ahead to complete the national transformation, this is a journey that I think will be very rewarding. I feel we're now at a pivotal point whereby we have a product suite and an infrastructure platform ready for market.
With NatWest, a Tier 1 lender in the U.K. who has committed to an implementation program, it's tremendously exciting. While the total CapEx for the U.K. market has peaked, we will need to continue to invest in the coming years in both CapEx and OpEx to expand our sales team, onboard lenders and conveyancers onto the platform, and complete elements of the product build. This is a similar journey that PEXA Australia went on to achieve national coverage and widespread adoption. While the construct and the regulatory environment is different between the two markets, a similar level of awareness and marketing is required by our customers. It's a long road to orchestrate a national transformation, but I'm pleased to share that we believe we are now making tangible progress. Moving on to page eight, our Digital Solutions segment.
I'm pleased to share that revenue growth grew during the year as the business scaled, primarily in our insights businesses, which is the collective name for two of our assets, .id and Value Australia. The management team in Digital Solutions focused on containing losses, and you can see an uptick in EBITDA margin through the year. Focusing now on the two insights businesses, I'm really happy to share that they demonstrated strong customer retention in FY 2025 with sticky annuity-style contracted revenue. They established numerous new and interesting strategic partnerships and expanded the automated valuation model with banks and financial institutions as sold by Value Australia. As we had announced earlier, we are conducting a strategic review of our Digital Solutions assets to assess the fit within the broader group. There are some excellent businesses here with strong leadership and compelling technology.
My job and my observation was to make sure that PEXA is the right custodian for these assets in the future such that they can thrive. We're considering a full range of options. We may consider divestment or, if necessary, further investment to maximize profitable long-term growth for shareholders. The process is underway, and we've engaged an external advisor to help us assess market views of these assets. As this strategic review has progressed, we've decided to withdraw from our majority investment in Land Insights. I'm now going to hand over to Liz, who will walk you through the financials in more detail.
Thanks, Russell. I'll start by turning to page 10 to discuss our core operating results. As we indicated in our recent ASX announcement, we have made some minor changes to the presentation of our financials. When we talk to our core operating results, this will exclude all significant items, which we've detailed on the following page. We will also only report end pattern on a core basis going forward to show a cleaner view of the group's underlying results. A full reconciliation of the changes can be found in the appendix. Consistent with prior periods, we are also showing our variances on a pro-forma basis, which assumes we own Smoove for all of FY 2024. As you can see from the page, the group delivered 16% revenue growth or 9% revenue growth on a pro-forma basis, reflecting strength in all three of our operating segments.
I will go into more detail in the revenue generated by our Exchange and International operating segments later in the presentation. Details on our Digital Solutions business can be found in the appendix, but I'm pleased to report that Digital Solutions delivered a 22% uplift in revenue. Our outlook for FY 2026 revenue is modest, in the range of $405 million- $430 million, representing growth of 3% - 9%. Now, moving to operating expenses, we maintained strong cost discipline through the year, with expenses rising just 2% on a pro-forma basis, reflecting ongoing productivity and efficiency initiatives across the group. Pleasingly, this delivered a group EBITDA before associates of $134.4 million, up 23% on a pro-forma basis, and a group EBITDA margin before associates of 34.1%, up 4% on a pro-forma basis.
This led to a $2.1 million net operating profit after tax, $2.6 million lower than in FY 2024 due to both higher amortization, which I'll take you through in subsequent pages, and a $12 million increase in tax. This was driven by more profits being generated in Australia. Moving to the next page, we've laid out a reconciliation of our core to statutory results. As we announced earlier this month, the group results were impacted by a number of impairments in the second half, in addition to those taken in the first half of FY 2025. Other significant items in a period included integration costs for Smoove, restructuring costs for productivity programs in both Australia and the U.K., M&A costs, and cost to pause the interoperability program. Lastly, we also incurred a $19 million charge related to the derecognition of deferred tax assets in Australia.
These items resulted in the group's statutory loss after tax increasing to $76.1 million in FY 2025, up from $18 million in FY 2024. In FY 2026, we expect core end pattern in the range of $5 million- $15 million. Going forward, we won't give guidance on significant items given their non-recurring nature. Moving to page 12, I'll talk you through some of the business highlights, starting with the Exchange revenue and volume. For those who would like to view the full P&L for each business segment, they can be detailed in the appendix. The Exchange delivered revenue growth of 7%, driven by our regulator-approved price increases, overall market growth of 2%, including 3% growth in transfers, and stronger product growth as we saw increased penetration during the period, particularly in WA and Queensland. We did see changing trends through the year.
After strong 7% year-over-year transfer market growth in the first half, the second half FY 2025 market was impacted by weather events in Queensland and New South Wales, as well as the May election, falling 1% year-over-year. Conversely, we saw the opposite effect in refinances, with second half market growth up 17% as the cash rate fell versus the first half, which had contracted by 9% year-over-year. Now, almost two months into FY 2026, we are seeing modest growth in transfers and continued refinance growth. Looking into the remainder of the year, we expect more people to enter the market as the cash rate falls. Until we see a material uplift in new housing stock hitting the market, you can expect transfer growth in Australia to remain low single digit. Turning to international revenue and volume on page 13, going forward, we will no longer report Optima and Smoove individually.
As the businesses are now fully integrated, their P&Ls are less meaningful, although for transparency, we have included further details in the appendix. Pleasingly, in the U.K., we are seeing the signs of the market recovering, with sale and purchase market up almost 16% and Smoove seeing the corresponding revenue growth. Unfortunately, the re-mortgage market in the U.K. remained at all-time lows in FY 2025, down a further 8% on FY24. That being said, we are pleased to see Optima Legal regain market share through the year, with completion growth of 8.5% and growth in the average fee per completion of 14% due to a change in mix towards more complex cases and favorable FX movements. Conversely, Smoove re-mortgage completions dropped 14.5% due to the loss of a loan margin mandate, which combined with favorable FX movements helped drive the average fee per completion up 9.4%.
While we won't report these businesses separately ongoing, I can confirm that Smoove broke even on an EBITDA basis in late FY 2025, and we continue to see reduced losses in Optima. As we look into FY 2026, we are, of course, excited to have agreed implementation with NatWest. While NatWest is anticipating to start transacting re-mortgages in the first half of calendar year 2026, this will start with the existing NatWest re-mortgage completions, which are processed through Optima, which represent approximately 8% of Optima's volumes. Once NatWest are comfortably settled on the PEXA U.K. platform, we expect these volumes to increase into FY 2027 and FY 2028. Now I'll move on to costs and margins on page 14. On a pro-forma basis, costs grew just 2%.
In FY 2025, we continue to invest to scale and develop both International and our Digital Solutions segments, with the U.K. receiving its FCA approval and now ready to launch our PEXA U.K. product suite in just a few weeks. Additionally, we continue to invest in cyber and resilience across all our segments, especially in the Exchange. Pleasingly, we were able to deliver $10.4 million in productivity and efficiency savings in the year. Approximately $6.4 million of this is from FY 2024 productivity programs, with a further $4 million from new FY 2025 initiatives, including creating synergies as we integrated Smoove into the PEXA U.K. group, some minor restructures in the Exchange, as well as optimization of cloud costs and other third-party spend. Our focus on productivity across the group will continue in FY 2026.
We have largely completed a restructure of our Australian operations, which is expected to deliver in-year benefits of circa $6 million. These benefits are critical to offsetting our cost headwinds in FY 2026. These results have delivered a 34.1% group EBITDA margin for the year, up 4% on a pro-forma basis. We also saw a 0.5% uplift in the Exchange margin to 55%. Our focus in FY 2026 will be maintaining our group and Australian margins while we make targeted investments for growth. Given the possibility of additional costs in the U.K., where other lenders start integration or onboarding, we have widened our guidance for our FY 2026 group EBITDA margin to between 32% - 35%. Now I'll turn to page 15 to discuss CapEx and depreciation and amortization. In the year, we saw CapEx fall from almost $69 million in FY 2024 to $58 million in FY 2025.
The main drivers were a $6.3 million reduction in CapEx in international as a result of the benefits of the FY 2024 productivity program, as well as the initial build of the PEXA U.K. platform largely completed in a prior period. The spend in international in the year was largely related to the sale and purchase build, with the product now live and ready for launch in just a few weeks. While the bulk of the product in the U.K. is now built, in FY 2026, we will continue to invest in the U.K. platform. As a result of our ongoing investment requirements, we expect operating cash outflows in FY 2026 for our international segment to be in the range of $59 million - $63 million.
If we were to invest at the high end of this range, we'd expect that would be in the result of additional costs where other lenders to start onboarding or integration. In the exchange, we saw CapEx fall $3.9 million, largely due to the pause of the interoperability program. In FY 2025, we continued to progress exchange enhancements, including the at-scale transition of our customers to mobile signing, as well as expanding our API offering. We also continued building out our product coverage, especially in Tasmania and the Northern Territory. In Digital Solutions, we saw a small reduction in CapEx to $3.4 million. The business invested in its leading automation valuation model for our customers, as well as building out industry offerings for .id.
As we look at our depreciation and amortization charges, these investments, combined with a four-year impact of last year's investments, as well as acceleration of amortization of some software assets, drove a 14% increase in our depreciation and amortization charges over the year, which is expected to moderate in FY 2026. We see ample opportunity to invest in each segment and will continue to do so in FY 2026 to drive profitable long-term growth. This includes investing in the Digital Solutions segment to drive maximum shareholder value. We expect CapEx in FY 2026 to be in the range of $60 million- $65 million, with lower CapEx in international but higher CapEx in the exchange. Now we'll look at our use of cash on page 16.
Through the year, cash generation was strong, enabling the group to repay a net $53 million in debt, as well as complete an $18.9 million share buyback, all while continuing to invest in the business. As many of you would be aware, the buyback has been paused since May. It will remain paused while Russell continues to fine-tune his long-term strategy for the group. In the interim period, the group will continue to repay debt. Now turning to page 17 and free cash flow generation, we saw free cash flow increase to $56 million, a 45.8% conversion, up from $38.5 million in FY 2024, driven by the strong operating results we saw across all the group segments. These results led to the group's leverage falling to 1.8 x and the group's times interest cover increasing to 6.7 x, as we continue to see the group's balance sheet strengthen.
Our target leverage ratio is less than 2.5 x net debt to EBITDA, and we anticipate staying comfortably within this range in FY 2026. With that, I'll now pass back to Russell to share more about our FY 2026 strategy and outlook.
Great, thank you, Liz. This page here serves to provide an overview of our short-term FY 2026 strategy. We call it the strategy on a page, and we thought we'd show it to you today. When I joined PEXA, I reviewed our previously stated purpose of connecting people to place that you can see there at the top part of this graphic. I felt it was meaningful and appropriate and motivating to all of the PEXA Group, and so we retained that. However, what I felt was missing from the previous strategy were action points which could make our daily activities more intentional, cohesive, and drive execution against our strategy. With that, our FY 2026 strategy centers on three objectives, which you can see here on the page. Firstly, to generate outstanding shareholder value. Secondly, to deliver consistently excellent customer experiences. Third, to facilitate fulfilling employee journeys.
As with any good strategy, we also have five strategic pillars to guide our vision, which I'll briefly touch on here and then go into more detail on the next page. We will invest to enhance the Exchange, as both Liz and I have shared. This platform is at the very heart of our business. We'll make it stronger, we'll make it more modern, and we'll help facilitate seamless transactions across the country. We will explore growth opportunities, such as the AML solution to drive value for our customers and shareholders. We are laser-focused on executing on our U.K. strategy. Our hard work from the past in the U.K. diminishes in value if we do not drive lender and conveyancer adoption, and we are, like I said, laser-focused on this.
We will focus on our core assets and avoid distractions, and as such, it was appropriate to conduct a strategic review of Digital Solutions, which I mentioned earlier. Our last pillar will drive the first four. This is about deploying a range of things, from new technology for employees to build their products faster, new frameworks for customer service, and automation across the group. Additionally, I made some changes to our leadership team to ensure we're working together on the same set of goals, focusing clearly on high-quality execution and leadership team cohesion. Krystle Kocik is now our Group Chief Product Officer, giving us a global platform strategy. Clare Gill is our Chief Regulatory and Corporate Affairs Officer, now combining our approach to regulations, government affairs, and communications into one portfolio.
Steve Braithwaite will lead our group strategy and new business team, aligning our group strategy with feasibility into new services and key partnerships to bring these to life. Kylie Waldock will join us next month as our Chief Customer and Commercial Officer for Australia, to strengthen our focus on critical customer and industry relationships in the Australian market, across financial services and the legal, property, and software industries. On the next page, I'll dig into what actions will be taken to achieve these objectives. Firstly, in the Exchange enhancement, to improve our customer experience and enhance and protect the Exchange, we have to invest in resilience and cybersecurity. Importantly, we've mentioned before that the U.K. platform build is a group asset for PEXA.
It's built using a more modern modular approach, and we'll be bringing elements of this modern platform back to the Australian Exchange to modernize, build more resilience, and have a unified platform strategy. I PART have commenced their review for the FY2026 pricing process. We are providing all necessary information to the IPART team to help them gain a thorough understanding of the way PEXA and our business works. We will continue to engage with them to drive a fair and reasonable outcome for our customers and shareholders. Next, on to growth. Keeping in mind one of our key growth objectives is to deliver outstanding shareholder value, I do see a number of opportunities to drive profitable growth over the coming years. We'll focus on AI adoption in select areas, including in the usage of software development, testing, prototyping, the way we do marketing for our customers, and customer service.
We'll deliver an AML backbone, as I mentioned earlier. We'll continue to investigate and study capital-light expansion into other international markets, where PEXA's technology and our industry know-how can improve the transfer and lodgement experience for customers globally. Any new market entry will aim to be de-risked with a series of partnerships set in place prior to any material investment from PEXA. Third, the U.K. platform adoption is top of mind for all of us. Our key focus is ensuring that the implementation of NatWest onto our platform goes smoothly to facilitate re-mortgage transactions in the first half of the 2026 calendar year and the sale and purchase transactions to the end of the 2026 calendar year. We're also working to bring on other lenders soon after NatWest goes live.
As mentioned previously, we're building out our sales and marketing team in the U.K. in order to drive customer growth. In addition, we'll be investing to further build the product as necessary. Lastly, on Digital Solutions, we expect the Digital Solutions strategic review to be completed by the end of this calendar year. The next slide is on our U.K. progress, and we received lots of feedback on what we like to call the traffic light page when it was in the H1 investor presentation back in February. We did want to share as much as we could to be transparent about our progress in the U.K. since that half-year update. As you are aware, NatWest formally committed to an implementation program, which we see as the most significant step in the engagement process, and we're really excited to get going.
With the key terms agreed, we're working through a long-form contract and the detailed technical project planning prior to NatWest going live on the platform. In the meantime, we're focused on onboarding as many conveyancers as possible to provide more avenues for NatWest and other future lenders to transact on the PEXA platform. While our engagement with tier-one lenders other than NatWest is now commercial and confidence, I can confirm we're continuing to progress our engagements with other lenders. One of the stages on this page is the Bank of England testing stage. Following the Bank of England's completion of its own RTGS system upgrade, our previous challenge of sequencing a Bank of England testing slot long in advance is no longer a constraint. It gives us more flexibility around testing windows closer to the time of lender onboarding.
Going forward, we'll actually conduct this Bank of England testing step after we receive written commitment from lenders, as it is a natural part of the implementation and testing process. We are launching the U.K. platform product suite in the market in the next few weeks to conveyancers, and we look forward to updating you on further progress at the half-year. Page 22 provides a view of the economic outlook in Australia and the U.K. This provides a view of our short-term expectations of the economy and the environments in which we operate and informs our modeling and our forecasts for both transfers and refinances. Onto page 23, here is our guidance for the FY 2026 year. Liz has touched on a number of guidance points in her earlier pages, and this page shows all the metrics we're guiding to in one place.
The guidance on this page excludes impacts from significant items which may arise in FY 2026, including outcomes from the strategic review of Digital Solutions. You'll note we are forecasting modest revenue growth as the U.K. comes on board. Looking at margins, we will be focused on maintaining margins in the Australia Exchange and the group in the FY 2026 year while our operating expenses tick up to support adoption in the U.K. While we have detailed budgets in place for our go-to-market teams in the U.K., if the returns make sense, we will invest where needed to accelerate U.K. adoption. We are driven to make the U.K. happen for PEXA. We'll do it in an efficient and intentional way. We expect these results to deliver a core operating end pattern for the group of between $5 million and $15 million in FY 2026.
Group CapEx is expected to be between $60 million and $65 million, up from the $58 million spent last year. We are guiding to a modest increase in cash outflows in the U.K. in the year. FY 2026 is a critical year for our U.K. business, and we are laser-focused on executing on our strategy. In all aspects of our business and in all markets, we'll take a thoughtful and intentional approach to capital allocation as we focus on delivering long-term value creation for our shareholders. With that, Liz and I would now be happy to take your questions.
Thank you. 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 then two. If you're using a speakerphone, please pick up the handset to ask your question. We ask that questions be limited to two per person. Please rejoin the question queue for any follow-up questions. The first question today comes from Ed Henning from CLSA. Please go ahead.
Hi, thank you for the presentation today. Quite detailed. I've got a couple of questions. Firstly, you said you're looking to bring on other lenders after NatWest goes live. I just wanted to clarify there, obviously you're still talking to other lenders and hopefully you get a commitment before that, but it just means when they actually start transacting. Is that what you were talking about after NatWest?
Yeah, thanks Ed. Yeah, that's pretty much it. Obviously, we engage with a range of lenders, big and small, and our goal is that they are a fast follower to the NatWest onboarding. Yeah, we remain engaged with many of them. I met some of them when I was there in May, and our teams are both engaged with bringing NatWest on Smoove next year and then talking to other lenders as a fast follower.
Just to follow on with that, obviously meeting with a number of the banks in the U.K. and figuring out the problems there, you talked earlier, you walked away with some confidence that PEXA can provide a solution. From when you first went in and initially saw the product and now going through it more, do you have more confidence that you can deliver that solution for the U.K. banks?
Yes, we do. Thanks, Ed. Yes, we do. Look, the home buying and selling process in the U.K. is notoriously broken. That hasn't changed. Our technology and the learnings we've had with both Optima and Smoove and engaging with the lenders, and in particular learning from NatWest and what they'd like to achieve to improve their customer experience, confirms for us that PEXA can add value, can have an impact, and at the end of the day, the lenders that sign up and onboard with PEXA will be able to offer their end customers a much better experience.
Just my second one, on the U.K. cost step up, which I understand around the engagement and getting onboard both lenders and conveyancers. If we think about it going forward, should it continue to step up even before revenue comes through in the outer years, or it'll more match, it's kind of stepped up now and then it'll more match as revenue comes through in the outer years?
Thanks, Ed. Absolutely, we'll have that. The cost will come before the revenue in FY 2026. I think as we look into FY 2027, we still will see the costs step up, probably slightly more ahead of the revenue. That's as we onboard, make sure we've got operations set up, and also continue to invest in that sales and marketing.
That's great. Thank you very much.
Thank you. The next question comes from Ann Lee from Goldman Sachs. Please go ahead.
Morning, Russell and Liz. Thanks for taking questions. Just two from me, please. First one on NatWest, with this coming to market soon, can you talk a bit about how you're thinking about monetization and how it compares to the domestic Exchange business?
Thanks for the question. When we think about monetization, as we've said, NatWest will start with their Optima flow. That is about 8% over Optima' s current volumes. It will be a transition over really FY 2026, FY 2027, and FY 2028 as we pick up more of their flows. Consistent, reasonably consistent, I think, with what you would have seen in the early days of PEXA in Australia.
Yeah, and just in terms of the monetization and pricing, how should we think about that compared to what you kind of charge in Australia?
Unfortunately, our pricing is still commercial in confidence at the moment. We'll look forward to being able to share that in due course. You can think of it as a similar structure as what we've got in Australia. It's reasonably aligned in how we'll think about it, and hopefully we'll be able to give more guidance once it's no longer commercially sensitive.
Perfect. Just my second question on Exchange margins. Can you talk a little bit more about what drove the sequential decline in the second half, just considering some of the productivity benefits that were put in place earlier in the year, and should we be taking that as the current 2026 run rate?
No, the decline in the second half is just due to the normal seasonality effect. You can really model that year- over- year. It's reasonably consistent.
Great, thank you.
Thank you. The next question comes from Josh Kannourakis from Barrenjoey.
My first one is just on the Australian exchange and platform. Russell, you mentioned talking about a modernization strategy and moving towards a broader unified platform strategy across the business. Can you just talk a little bit about both some of the required investment there, but also some of the maybe medium-term opportunity as you sort of unify into one single platform across the markets?
Yeah, great, thanks Josh. You're right. The Australian Exchange, which is going on 10 years now, is really a monolith of software code. It was modern at the time it was built, but over time, it's been a cliffbone of all modern software architectures, which is what PEXA in the U.K. was built on. We will bring back different components.
To bring that to life and what that might mean for customers in Australia is the product that we build for AML and some other future experiences for customers will be on the more modern architecture. It's modular, which means we can build it faster, we can test it faster, we can spot defects faster. It'll run on a similar kind of infrastructure and code base. We see a number of operating and software development efficiencies there. It also potentially could help streamline some of our vendor spend as well. We see a number of opportunities, both faster go-to-market and better cost efficiency, as well as greater resiliency just from being more modern architecture.
Got it. In terms of, I guess, the core Aussie Exchange, there's no plans to sort of refit that in the near future?
No, no, it'll be gradual. Different modules may become more modernized. You could imagine there's an identity module, there's a payment routing module. We are investing in new payment interfaces with a number of the banks to try and make those more real-time. We're going to go bit by bit, keeping in mind, obviously, the Australian exchange has to work like running water, being a piece of national critical infrastructure. Nothing we do will shake that resilience. My goal over the coming years is to modernize that Australian exchange such that we have one global platform.
Got it, that's great. My second question is just on the AML opportunity and how you see that. I know it's very early days, but obviously you guys are extremely well positioned to deliver on that.
Can we just talk a little bit, maybe a little bit more color about how you see the opportunity, what you know at the moment, how you'd frame that opportunity, and what we should expect in terms of news flow on that over the next 12-1 8 months?
Yeah, you're right, it is early. OZtrack, which is leading the country around its readiness for implementation in July 2025, has just recently released its final guidelines for lawyers, practitioners, the real estate industry. Those rules are still being absorbed. From PEXA's perspective, you're right, we think we're well positioned to guide our customers today in meeting their AML o bligations, but also providing them with a technology solution that helps them handle costs.
We saw and have observed and studied the implementation of AML in both the U.K. and New Zealand and noted that it was quite expensive on the legal and practitioner industry, the vast majority of which are small businesses. We think we can provide a very cost-effective and seamless technology solution to them. We're also working with a range of partners that have experience in high-quality international databases to meet AML compliance checks. We will share more with the market when we're ready, both in terms of product and pricing and how that experience will be used by our customers. We think we're well positioned to not only guide the industry, but provide our customers with a very cost-effective and easy solution.
Fantastic, thanks very much.
Thanks, Josh.
Thank you. The next question comes from Elizabeth Militis from Macquarie. Please go ahead.
Good morning, and thanks so much for taking my questions. The first one's just around conversations with tier-one lenders, and I'm conscious that they are commercial in confidence. Just broadly, on a pre-basis and a post-basis versus your NatWest announcement, how have those discussions evolved? Are they broadly the same, or are they a bit more keen to engage with you and working with you guys to get on the platform?
Thank you. They are commercial in confidence. We're very focused on an on-time and excellent implementation of NatWest. We still engage with a number of lenders. Some have reached out following the NatWest announcement, curious about timing and how they may work with PEXA. We're not in a position to give sort of definitive, like who's more excited and who's not. We'll share that with the market when we're ready. We're really focused on NatWest right now.
Okay, got it. Just around the PEXA Exchange margin, if you could just give some color on how that margin might evolve in the next maybe one, two, three years, as you know, you keep pushing up your market share and you have a bit more productivity benefits come through. Any color there would be great, thank you.
Yeah, thanks, Liz. As we said, next year we're targeting a 50, you know, a stable Exchange margin. That's really on the back of, you know, we've got a very stable market here in Australia. You know, we'll continue to eke up the penetration. As we've said previously, in the market penetration, we see capping out probably at about 94%. It'll just be a slow creep up over the next few years there. When we, you know, really beyond FY 2026 at the moment, probably too early to talk and guide to that margin, especially in light of the IPART pricing review. We'll wait and see what the results of that are.
Okay, got it. Thank you.
Thank you. The next question comes from Tharan Jeyathasan from JP Morgan. Please go ahead.
Thanks very much for taking my questions. My first question is just on your revenue guidance for 2026. I know that at the midpoint it's 5.5% revenue growth. I just want to understand what your assumptions are in that guidance. You already have about 2% contribution from your CPI increase this calendar year. If you could just provide some color, perhaps by division and, you know, various assumptions that are set up, that's underpinning that guidance, please.
Yeah, to give you a bit more color, as I said, we're really looking, we expect to see probably modest market growth in Australia, you know, reasonably kind of consistent with what we've seen this year. As we look to International as well, again, that market, you know, we've certainly seen improvements this year in the sale and purchase market, which is great. We're hoping that the re-mortgage market will start to strengthen. We have seen some early signs of some improvement in the re-mortgage market, but that re-mortgage market has been stubbornly low for a long time. We're certainly not, you know, counting on that at the moment. Really, you know, we'll have modest, you know, price increases with CPI across the business and modest market growth.
Are you assuming anything for benefits to transaction volumes from, you know, a declining interest rate environment in Australia? Or are you kind of assuming flat volumes from what you've seen this year?
No, we'll see some benefit from that, especially in our refinance volumes.
Okay. My second question is just around your engagement with conveyancers. Pleasing to see that you're in beta testing with conveyancers. One of the challenges that we've spoken about in the past is around what your kind of fee structure would be with these guys. Conveyancers make a lot of money on interest income on their cash held in trust. Just would be interested in any color you could provide on how you would, how you're thinking about the conversations with conveyancers.
Thank you for the question. It is certainly a key conversation that we are having with conveyancers. Unfortunately, at the moment, it is still commercial in confidence, those conversations. We can't share further details at this point in time.
Okay, thank you. Maybe just one last question. I think your predecessor noted the cash-only market as a key opportunity, and FCA approval was the kind of last hurdle before you were able to access that market. Given that you've now achieved FCA approval, do you have any updates on progressing with the cash-only market in the U.K.?
With that market, the key will be signing the conveyancers and getting them onboarded. That's certainly a market that we will be targeting as we onboard those conveyancers.
The launch of the sale and purchase product to the U.K. market next month is very much targeted at conveyancers to come onboard and begin transacting for the cash purchases, just to get familiar with the technology, to go through their onboarding due diligence. We are targeting that market. We think that will be really interesting and give people exposure to the PEXA technology and how it will improve their own conveyancing or property client service. They'll be able to focus on servicing their clients in a seamless process and also provide additional security in terms of funds transfer. That's kind of our value proposition right now to conveyancers. There's also potentially an insurance saving for them or a PI insurance saving that we're still working through.
Thank you. That's helpful. Could we expect any revenue from cash-only transactions in 2026 or 2027?
Look, when we're ready to give an update on that, we will. We're still testing a value prop with conveyancers, and the national roadshow begins next month.
Thank you.
Thank you.
Thank you. Once again, to ask a question, please press star one on your phone. The next question comes from Christian Waked from Jarden Group. Please go ahead.
Hi, thank you for taking my questions. The first question on CapEx, I understand that international CapEx will step down a little bit now that you've built up most of the sale and purchase product platform. I guess, how would it look after you scale the platform to 80%? Post that, what do you think the CapEx would be to scale up to 90%? When you onboard subsequent lenders as well?
Thanks for the question, Christian. As we haven't guided clearly past FY20 26 at this stage, certainly as you'd expect and consistent with what we've done in Australia, we continue to always invest in the platform both for product expansion as well as enhancements for our customers. We would expect that to continue for International. Of course, the International build is on much more modern technology, so it is quite efficient as we're building out there.
Okay, thank you. One more question, just to understand a bit more color on your go-to-market setup for sales to try and onboard conveyancers into 2026, how that looks like. Would you look to add sale and purchase product capabilities to Optima ?
Thanks, Sadash. S&P capabilities from Optima is something we look at later. Really, at the moment, the strategic rationale for us buying Optima was to get customers on by their re-mortgage existing capabilities. That's really playing out at the moment.
Thank you.
Thank you. The next question comes from Kieren Chidgey from UBS. Please go ahead.
Morning, Russell and Liz. Just maybe keen to get your views on sort of longer-term market share ambitions in the U.K. From previous management, we had sort of targets or ambitions, I should say, around both sale and purchase and re-mortgage market. You know, are they still valid? Just keen on your views now you're in the seat around achieving those goals.
Thank you, Kieren. We're aiming high. We're focused on a national transformation of the property market in the U.K., similar to the journey we've been on in Australia. We don't have a timeline for specific market share targets. I know some of those numbers have been thrown out in the past by prior management. My goal right now is a seamless implementation with NatWest to make sure they have a fantastic experience and they can pass that through to their customers and onboarding other lenders and conveyancers. We think naturally those network effects will build over time and the proposition will be really compelling like it has been in Australia.
Okay, just to be clear on the 2026 sort of outlook, particularly around the EBITDA margin and the cost step up you're talking about in the U.K., what is actually being baked in in terms of lender onboarding? Is it just NatWest or is there actually some allowance in there for other lenders coming on through the course of the year? If not, should we see a potential risk of higher costs if you're successful, which is long-term positive in attracting other tier-one lenders through the course of the year?
Yeah, look, as we said, if we did end up at the high end of that cash outflow range for International, that would be on the back of us signing or implementing and onboarding other lenders. We are certainly confident at the moment that we will end up within that range we've advised.
Okay, thanks. Final question, just on the conveyancers, can you give us a broader update on where you are with engagement, how many conveyancers have signed up already, and also what's baked in in 2026 in terms of MOBX spend in terms of attracting and marketing to conveyancers?
Yeah, Kieran, it's pretty early. We're beginning the roadshow, like I said, next month to go national in a number of cities across the U.K. to take our value prop to conveyancers. It's a bit early for us to give numbers. We have put in sale and marketing spend, obviously, for these events and the training and the onboarding and all the processes we need to get through to make sure that the conveyancers can get onboard and begin using the technology. When we have some more news and some metrics and some numbers on that, we'll share probably the half-year.
Is there any wire back into technology costs to pivot more into sort of the marketing and sales side of things in 2026, or would that more likely come in 2027, just given you're saying NatWest won't really go live till towards the end of 2026 on sale and purchase?
Yeah, so when we think about our technology costs, as we said, we still continue to invest in the platform in the U.K., both for future expansion, enhancements for our customers and the like. As we said, that platform, we are also bringing back modules of that back into the Australian business as well. We will continue to invest there. It will decrease, but we will continue to invest.
Right, thank you.
Thank you. That does conclude the time for today's Q&A session. I'll now hand the conference back to Russell for any closing remarks.
Thank you. We appreciate your attendance today and for all your questions and your engagement. A special thanks to our shareholders, customers, and all my fellow PEXA-ians around the world, without whom we would not have been able to generate such solid operating results over the last year. It's been a pleasure to discuss our FY 2025 results with you, share our FY 2026 plans, and we look forward to engaging with you all in the future. Thank you so much for joining.