Good day, ladies and gentlemen, and welcome to XPS Pensions Group PLC Interim Results Presentation. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a Q&A session. If you wish to ask a question, we ask that you please use the raise hand function at the bottom of your screen. Participants can also submit questions through the webcast page using the ask a question button. Instructions will also follow at the time of the Q&A. I would like to remind all participants that this call is being recorded. I will now hand over to Paul Cuff to start the presentation.
Good morning, everybody, and welcome to this presentation of our results for the half year ending on the 30th of September, 2024. We're going to run through a quick presentation of a few slides covering the results, and then there's plenty of time for Q&A as well. Now, in terms of the results, we're delighted to be reporting on another really strong half year. We, of course, have already reported our revenue growth, which was 23%, and we've been delighted that we're continuing to deliver positive operational gearing, with adjusted EBITDA being up 37% versus the same period last year. Now, adjusted EPS growth is even stronger at 53% because we're now carrying lower debt following the sale of NPT last year. Now, this performance has been driven by the same themes that we've spoken about before.
We're experiencing very high client demand because of big changes in financial markets in recent years, and these changes have opened up new options for clients, and they've needed lots of support in thinking about how their strategies might need to change. Now, there's also been lots of regulatory changes, and we've been really busy on rectification projects, still doing lots of work on GMP, and in the public sector, we've done lots of work on the McCloud Remedy project. Now, there's more regulatory change happening. At the end of the half year, we finally got the new Funding Code, which our clients are going to need lots of help with over the next few years.
Of course, there's the wider government agenda on pensions as well, as per the Mansion House Speech last week, and that's likely to keep driving more change in our industry, which in turn is likely to keep us really busy. Now, the margin expansion that we've achieved comes from a mix of business effect as we've grown in areas where we make higher margins, such as in risk transfer work, and it also comes from efficiencies in the business, and there'll be more to come on that front, especially as we transition administration clients onto our new platform called Aurora, and we made really good progress on that in the half year as well. Now, we've done all of this the right way.
We won Firm of the Year again at the Professional Pensions Awards, so our brand is really strong, and we also won awards again for our culture. We won three awards even just in the last couple of weeks on that front, and of course, we were delighted to achieve entry to the FTSE 250 during the summer. Now, getting into the FTSE 250 is very good for our brand. It's going to help us in many ways, including in attracting talent and on new business opportunities. Now, what's got us there is a really strong four years of trading. You can see our revenue is now up 66% over that period, and we've done it with operational gearing coming through as well, with Adjusted EBITDA of 83% over the period and profit before tax of 88%.
Now, it is important to acknowledge that higher inflation than perhaps we were all used to in the past has played a part in that growth, but as you can see, we've achieved really healthy growth, quite materially even above that level of inflation. Now, we've also been returning cash to shareholders, paying a very healthy dividend as we've gone, and it's also worth highlighting that along the way, we've slashed our debt, which is down from around two times leverage four years ago, getting pretty close to debt-free by the end of this year. Now, we've done this even with adverse tax changes along the way and the cost of three acquisitions thrown in as well.
Now, of course, what is on the slide only takes us up to March 2024, and what we're reporting on today is a strong continuation of these trends, which has really helped to build momentum as we enter the FTSE 250, and we've done this sustainably as well. We have happy, motivated people, and we do things the right way. We've been carbon neutral for years now, and we're a signatory to the Stewardship Code and a lot more besides.
Another strong half year, as Paul said, with record revenue growth of 23%, all organic, and we're continuing to grow profitability. Adjusted EBITDA margin has improved by 2.8 percentage points to 27.2%, and we expect further improvement in H2 and beyond on a like-for-like basis. Strong operational performance, as well as lower interest costs, has driven adjusted diluted EPS of 8.9p, up 53% year on year.
The first half is cash outflow heavy with the payment of full year bonuses and the final dividend from the prior year. Despite that, leverage is reduced from 1.55 times a year ago to 0.37 times, and absent any M&A or other business initiatives, we remain on track to be cash positive by the end of FY26. In line with our progressive dividend policy, the board has declared an interim dividend of GBP 0.037, which is up 23% year on year, underscoring our continued confidence in the business model and growth prospects. I won't go through all the numbers here, but let me give you the highlights. Impact of inflation, demand for our services, especially higher margin services such as risk transfer, project work, and new wins have driven the strong growth across the board. Paul and Ben will go through each of the divisional highlights.
On costs, which I'll cover more in the next slide, have grown 18%, which importantly is below revenue growth despite inflationary pressures. Net finance costs have reduced significantly, reflecting the reduction in our bank debt following the sale of NPT last year. Adjusted profit after tax has therefore grown 52% year on year. On the non-trading and exceptional items, which are all consistent with previous treatment and largely non-cash, higher share-based payments reflect the higher expected vesting on the back of EPS growth and improvement in TSR, and exceptional costs of GBP 1.1 million in respect of the deferred consideration for the Penfida acquisition. Total operating costs are up 18%, below the 23% growth in revenues. Additionally, costs as a percentage of revenue have dropped from 76% to 73%. Within that, staff costs are up 20%.
Off that 20, 11 is driven by higher headcount and the rest due to inflationary and promotional increases and a higher accrued bonus, which is commensurate with the financial performance. Increase in IT costs reflect our continued investment in tech, particularly cybersecurity. Other costs have increased primarily due to more T&E, as well as client disbursement costs, which has an equal and opposite within revenues. Adjusted operating cash inflow of GBP 26.1 million equates to an 84% OCF conversion, an improvement on the 70% last year. Now, this is flattened by project work with cash received in advance, but on a like-for-like basis, the conversion was 72%. Guidance for the full year and future years remains conversion of between 90%-95% as we continue to grow. We've spent GBP 7.3 million during the half year to buy back shares, which have been used to satisfy vesting of share awards.
CapEx of just over GBP 4 million includes GBP 2 million on the continued development of Aurora and a further GBP 2 million on leasehold improvements, and the remainder on BAU IT spend. For the full year, our CapEx guidance is between GBP 8 million and GBP 9 million. Net debt at 30th September was GBP 22.4 million, and the covenant leverage of 0.37 times. Currently, we have GBP 68 million of undrawn facility from the GBP 100 million available until October 26. Now, just to remind you of our capital allocation priorities, which remain unchanged. As far as M&A is concerned, it absolutely remains a part of our strategy, particularly as we expand our reach beyond the traditional pensions market. We have a methodical approach to M&A, which we have applied successfully to six earnings-enhancing transactions so far.
Now, before we get into the strategic and operational review, a quick reminder of what we're aiming to do as a firm.
Now, in a nutshell, our ambition is to be the best provider in our market, and that means being a high-quality and relationship-led firm, and crucially, one with a broad range of services so we can help clients with everything they need when it comes to pensions. We organize ourselves into three main business lines. So actuarial and consulting, where we look at things like pension scheme funding and broader pensions advice. Investment consulting, where we provide advice on how assets are invested. And administration, which is where we do all the record keeping and the day-to-day interactions with the members themselves. Now, at the moment, the vast majority of work we do relates to pension schemes. However, as we'll touch on a little bit later, we're doing an increasing amount of work for insurers as well.
From an XPS perspective, any change in the pensions landscape is generally good for us, as it provides an opportunity for us to support our clients and then help them deal with it, and these changes can be due to changes in market conditions, which impact the financial position of the pension schemes, or they can be driven by a change in legislation or regulatory guidance. Now, there are lots of changes that have already happened that are keeping us busy, so the large rise in gilt yields over the last couple of years has led to a big improvement in the funding level of most pension schemes, and that gives them more flexibility. The option of running on pension schemes to enable the sponsor or members to benefit from the surplus is also gaining traction.
So we're doing a lot of work with clients to help them understand the different options on what's best for them. Now, where clients choose to pursue an insurance transaction, it typically creates a huge amount of work across each of our business lines, ranging from things like data cleansing all the way through to broking the transactions themselves. There's also a lot of work going on around benefit rectification projects. So we're still very busy with GMP-related projects for private sector clients, and McCloud is a big rectification project for public sector schemes. Looking ahead, we expect things to remain busy as we continue to support our clients in these areas. We also have the new pension scheme funding regime, which came into force in September, and that means the three yearly actual valuations for schemes will now be a little bit more complicated.
The schemes will have to properly articulate their longer-term strategy and submit this to the Pensions Regulator. So turning briefly to each of our business lines and starting with actuarial consulting, where revenues grew at 17%. Now, this strong growth in revenues was driven by a lot of demand for services generally, but particularly in two areas. The first, risk transfer, where we help clients with buy-in transactions, and whilst a lot of work is required around the actual broking of the transactions themselves, often the bigger part is the preparatory and post-transaction work, which can run for many years. And what's been really pleasing here is that over the last few years, we've been working with clients on more and more transactions. Now, our experience and credentials mean that we're now being invited to opportunities to do this work on non-XPS clients as well.
The second area we've been really busy is around GMP projects, where we're making good progress, having now completed this for around 14% of our clients. However, clearly, there's still a long way to go. Now, efficiency has also been a big focus, and in particular, at the start of the year, we put through significant increases in our chargeout rates, reflecting the prevailing rate of inflation at the time. However, we also slightly changed the shape of our resourcing pool, so we've been getting more work done at more junior grades, and that's been really positive for our clients as it's helped manage the headline rate increases. It's also been positive for our margin.
Looking ahead, we expect much of the same, plus an even bigger focus on growing our market share by winning new logo clients, expanding what we do for our clients, and we'll also be focusing on growing our insurance revenues, which Paul will come on to shortly. Investment consulting was broadly flat over the period, and this was perhaps not surprising as it grew by almost 50% over the previous two years as clients spent a huge amount of time on investment issues following the LDI crisis. So what we're seeing is really just the impact of activity levels reverting to normal. Having said that, the fallout of the LDI crisis continues, and there's an increasing focus on the performance of fiduciary managers, many of whom have been struggling with their performance recently.
And in fact, many clients who use a fiduciary management solution are taking a fresh look at their governance model, as in many cases, the reasons they appointed a fiduciary manager no longer apply. So as we look ahead, whilst we expect demand to remain at more normal levels, we are starting to see more and more opportunities to help clients review their investment governance model and fiduciary manager. We're also seeing a growing demand to help clients around illiquid assets. So where clients are moving towards an insurance transaction, they're often looking to sell illiquids. Equally, where clients are looking to run on, they're often looking to buy illiquid assets. So there's a need for someone to join all of this up.
Finally, at the bottom of the slide, we're doing more work around defined contribution schemes, where we've been bringing a lot more sophistication around the design of default strategies and post-retirement investment solutions. Administration had a very good year, posting an eye-catching 40% growth. Now, this is in part driven by higher inflation in the recent past. As we've explained before, there's a bit of a lag for this to work its way through the system. And so even though inflation has now come down, we've still been lapping comparators where our fees have increased at the prevailing inflation rate of a few months before. Now, growth has also come from onboarding new clients. A lot of growth has come from project work as well, and we've been especially busy on the McCloud remedy work.
Now, as a reminder, this is work implementing changes to public sector pension schemes following a court judgment a few years ago that ruled that changes the government's made to these pension schemes have been done so unlawfully. Now, we've got lots of police and fire service clients, and we've been doing a lot of work to help them to meet a deadline next year to get most of the rectification work done by then. Now, we should stress that this is work that boosts this year. It is one-off, and it won't repeat. However, we still have a really positive outlook. Inflation is lower, and that will work its way through the system, and the McCloud work will finish. But we have new schemes going live, including, of course, our new biggest client, which is John Lewis, which we expect to go live next April.
Now, McCloud also creates wider opportunities for us because where we've been brought in specifically for this work, if we do a really good job, we may well be able to win more long-term work as well. We're also going to see increasing efficiencies in administration as we keep moving clients onto our Aurora platform. And momentum on that is really growing. We've now moved around 150,000 lives across. Our SIP business also had a good half year. They've had continued new business success, and they also benefited from higher bank interest versus prior comparators. Now, in this business, we achieved a big milestone on technology, successfully bringing together the systems from the Michael J Field deal we did a few years ago onto one common platform. We also moved Michael J Field staff into a larger combined XPS Manchester office, and thus we really have now completed that integration.
The future looks bright in SIP. It's another area where we win awards for what we do, and we've continued good new business volumes as well. Now, we've spoken a little bit about growth into tangential markets before. There's quite a large overlap between pensions and insurance, especially with the growing volumes of business in the buy-in market. It's already the case that one of our biggest clients is an insurance company rather than a pension scheme. Now, insurers need help in lots of areas, and we've got skills and resources that are highly transferable, and we've got a brand and relationships that give us a really good head start into this market. Now, we made progress on this in this half with the hiring of David Honour to lead our practice and really professionalize what we do in this space.
David joined us from PwC, where he was a senior partner in their insurance consulting business. Now, this is an area where we expect a period of investment. It'll be slow and steady, but we hope to see some good growth coming through over time. So it's been another successful six months. The revenue growth of 23% is really strong, and while it's been supported by the fee increases on the April 1st , the growth is predominantly from us providing more services to our clients, particularly in areas where we've invested to expand our capability. We've continued to focus on our delivery model, getting work done at the right level and using technology whenever we can, which has been really positive for our margin.
Now, looking ahead, with so much going on in the industry, we're optimistic that we'll continue to see strong demand for our services, both from our existing clients and through winning new ones. And we're continuing to invest, both in technology to improve what we do and our efficiency, and in our services, particularly building out our broader insurance consulting capability. So that's all we wanted to cover. Thank you very much for listening. We'll now go to Q&A.
We will now begin the Q&A session. If you wish to ask a question, please use the raise hand function at the bottom of your screen. Participants can also submit questions through the webcast page using the ask a question button. We will pause for a moment to assemble the queue. We will take our first question from Steve Woolf of Deutsche Bank. Please go ahead.
Hi Steve. [crosstalk]There we go.
There we go. That would help if I was muted. It's taken a few years. Firstly, if you could give us the proportion of work that typically is time and materials versus the recurring work where you might have put through the annual sort of CPI changes, just thinking of what you can do straight away for inflation versus where the CPI is. Secondly, the proportion of clients transferred over to Aurora at this point. And then thirdly, any indication of sort of the amount of junior staff that you're hiring now, whether that's school leavers proportionally to what you might have been doing, say, two, three years ago. Thanks.
Thanks, Steve. So if I take the first one on the proportion of the work, time and materials versus fixed fee. So there is an element of fixed fee with all of our clients.
So the repeat recurring work will be subject to a fixed fee contract, which will just automatically go up by the rate of inflation. And then on top of that, we've put up our chargeout rates on the 1st of April at a rate usually higher than inflation. And we use that for project work, et cetera. For example, risk transfer, that would be all project work. And this year, primarily, most of the growth has come from doing a lot more project work on our existing clients. In terms of the exact split between what's time and materials and fixed fee, that can fluctuate. This year, it clearly would have been more in time and materials bucket. Ben, take the Aurora.
Yeah. Sure. So the question, Steve, I think was roughly what proportion of our clients have now moved over to Aurora.
In terms of member numbers, the figure we've put in the pack is about 150,000 members have moved across. We administer the benefits for just over a million. You can see we're about 15% moved across. In terms of number of schemes, it's probably a little bit more than 15% because some of the smaller ones kind of went first, but it gives you a sense of where we are in that. That's a project that will keep us busy probably until FY27, when we'd hope to have everything across the whole system.
In terms of recruitment, Steve, yeah, we've just accelerated recruitment of junior staff. It is our model that we take talented youngsters in, school leavers, and graduates. A few years ago, we pivoted a little bit more towards school leavers, and we found that to be extremely successful.
It's improved the diversity of people that we take into the organization, and we've got some really talented, highly motivated people coming in. We still take a lot of people from Russell Group universities and so on as well, but that is our model. We train and develop people, and we turn them into the actuaries, consultants, administrators of tomorrow, and everybody moves up through the pyramid as we go. In terms of numbers of hires, we take of the order of 50 new joiners directly from higher education into the business, and that's probably increased roughly proportionally with the size of the revenues of the group as a whole, the staff numbers of the group as a whole, as the entire pyramid has sort of grown as we've grown our revenues. That's an exciting time for them to join because there's an awful lot going on in the industry.
We offer an awful lot of training and development, professional qualifications, and so on. And we work really hard to be a very attractive and good employer.
That's great. Thanks.
Our next question comes from Justin Bates of Canaccord Genuity. Please go ahead.
Thank you. Good morning, gents. It'll be great to hear a bit more about the insurance work, excuse me, that you're referencing and any differences between that and the nature of the clients that you have today and the type of work. Anything you can provide would be really helpful. Thank you.
So I guess there's two elements to that. The first is a lot of the work we already do for pension schemes is directly applicable to insurers. So things like administration, when an insurer underwrites a pension scheme, they need those same benefits administered for those same members.
And so we are growing our work to do the administration for insurers. Equally, some of the cash flow work, et cetera, and demographic analysis and data cleansing is directly relevant as well for insurers. So that's something that we've already been growing. More generally, insurers also need services to support them on finance transformations, accounting work, all the capital requirements. And so that's the area that we're gradually kind of moving towards. But primarily, at the moment, we're doing the first one, but our ambition is to keep going and also move into the second.
Okay. Thank you. And the scale of the opportunity, if we look sort of three to five years down the line, possible to quantify?
Yeah, it's quite a big market. It is a big market.
I mean, there's roughly as many actuaries working in life insurance as there are in pensions, albeit a lot of them do work in-house for the insurers. But there's a big consulting and contracting market out there that's probably north of GBP 1 billion worth of fees. So comparable to the advisory market in pensions is just that little bit smaller. To gain some market share in there, of course, is going to be a slow and steady process. We are building from a place where we've got a strong brand and strong relationships with insurers because our world and those do increasingly overlap. But organically, to grow a business that's meaningful in the scale of XPS will take a little bit of time, but it's certainly something worth investing in. We've got such transferable skills, high brand, great relationships already to move from.
It is a possibility that we'll grow inorganically in that space to accelerate. There are possible opportunities there. But of course, as usual, we've got a huge amount of discipline around M&A and only if something would really work and fit with us culturally and help us to move it forward because we think there's very strong organic opportunities at the same time. A little difficult to put a precise figure on where we'll be in five years' time, but suffice to say, our ambition is certainly that it's a meaningful proportion of the group's revenues, which we do expect to continue to grow more widely between here and there. Hopefully, that gives you a bit of an indication of our ambitions there.
Yeah. Thank you. That's very helpful. Thanks very much.
Our next question comes from Jacob Armstrong of Stifel. Please go ahead.
Yeah. Morning, guys.
Just two questions from me. Firstly, we saw the acquisition of Redington by Gallagher last month. Obviously, you've seen a lot of consolidation in the space. Can you talk about kind of what you've seen in terms of consolidation and the competitiveness of your peers there and whether any integration disruption at Redington would be a benefit to you? Appreciate they're probably more focused on the investment consulting side, but any input would be interesting. And then related to acquisitions, given the consolidation trend, how are the multiples for deals trending at the moment? Where's your focus given you've got the full service offering, you've got good scale? Would it be on accelerating the insurance offering? Thank you.
Yeah, sure. So there is quite a lot of M&A activity in our industry. Absolutely right. Redington is a direct competitor of our investment consulting business, and that recently changed ownership.
Buck is another organization that's bought by Gallagher, large US broking and advisory firm as well, and a change of ownership recently in the private equity space where Isio, one of our competitors, was sold by one private equity firm to another, but otherwise continues along on its path, so quite a lot of interest, quite a lot of activity. Of course, most of those deals are private. I don't think on any of them the underlying multiples have actually been disclosed, but I think their market gossip is certainly that they're expected to be healthy double-digit multiples, probably a little bit above 10 times, and probably broadly similar ultimately to the trading multiples of XPS at the moment. I think it's quite a strong validation of long-term confidence in the industry as a whole that businesses are trading for such healthy multiples at the moment.
In terms of what it means to us, an organization like Redington and so on changing hands, if there's a bit of disruption around M&A, that does give us the potential to compete for their clients to have an advantage in competitive processes we're against them in. But I must say that's generally a little bit second order. These things can transition reasonably smoothly. There's a couple more transactions in administration, for example, Aptia coming out of Mercer. Neglected to mention that one. Sometimes you'll see a little bit more disruption where there's a carve-out of an organization from part of a bigger group. I'm sure if you were to speak to the people involved, they'd say everything is going absolutely swimmingly and really well. That might be the case.
But of course, it does create the potential, a little bit of noise in the industry that there's the opportunity where organizations are going through big changes internally that they might take their eye off the ball a little bit, and certainly, we're on hand if that were to happen to try to exploit that. In terms of our focus, it is absolutely on organic growth in our own industry. There are two opportunities, though, potentially for M&A to help. We put them into two broad buckets. Number one, would we be interested in consolidating with another firm that's comparable to us or similar to us in what it does in our own market? The answer to that is a maybe. That would probably be a synergies-driven play as we do genuinely feel that at XPS, we've got really, really strong capabilities across everything our clients need.
So we wouldn't be doing it so much to boost a capability, if you like, but rather more the synergies and the benefits you could get from that. And there are some additional benefits of still further scale potentially. I have to say we'd be very, very cautious indeed about such a transaction given we're just doing so well in our own market at the moment. And now, as you saw in our presentation, we have a four-year track record of really good growth, really good operational gearing. So rocking the boat on that is something we'd only do for a deal that we were convinced was absolutely certainly going to be really, really beneficial for shareholders, our people, and our clients for the long term.
Perhaps another focus that might be a little more likely is, as I alluded to a moment ago, of M&A to help us grow in an area that we don't currently have the scale in, or that could boost our capabilities. And the most obvious place is into the wider financial services consulting, particularly, obviously, we're signaling potentially into the insurance space. But again, as I said a moment ago, we'd always be extremely careful about such things. We think there's pretty good organic opportunities at the moment in any case. But watch this space. Great.
Thanks a lot, guys.
Our next question comes from [audio distortion] of Canaccord. Please go ahead.
Morning. Can you hear me? Yes, we can. Okay. Great. Thank you. Thanks for taking my question. I just wanted to ask you about trends in client numbers, if that's okay.
Looking at the advisory KPIs, just noticed here that the number of active clients has gone down year on year, but your revenue's obviously gone up 13%. Wondered if that's a continued concerted effort by yourselves to focus on the larger value clients. I think you've talked in the past about moving away from some of those lower value clients. Just some color on the dynamic there would be useful. And on a similar note, new logo wins have held up comparably to the last six-month period, but you've noted here that there have been less tender opportunities this year. Also just some color on why that's been the case and whether you expect that to pick up going forward would be helpful.
Thanks, [audio distortion]. In terms of your first question, the client numbers, I'm looking at the advisory and consulting business.
So just to be very clear about what that number is, that's the number of clients where over a six-month period, we build the annual equivalent of GBP 10,000. And what drives that number, probably more than anything else, is where you have a blanket change or shock in our industry, all clients will need a bit of extra help, and it will take some of our smaller clients above the GBP 10,000 level. So September 2023, March 2023, obviously, was when the LDI crisis was happening. So pretty much all of our clients would have needed a little bit extra support, and it will therefore push some over the GBP 10,000 limit. So that's what's really going on there. And if you look at the September 2024 figures, they compare quite well to September 2022 and September 2021, for example.
So what's really driving our growth is doing more work and more projects, particularly with transfer and GMP, on clients that would probably already be noted in that KPI. It's just when you get something that affects the industry so significantly, you see smaller clients actually then just get over that hurdle. So that's what's going on.
In terms of new business opportunities, we've got a pretty healthy pipeline. There's different dynamics in different bits of the group, but dealing with each. In actuarial, the big opportunities are in project work and in risk transfer. And where we've grown our team so successfully in recent years, we're beginning to make progress in winning risk transfer projects, not just on our own clients, but externally in the market. And that's a real focus for us going forward. I think we're highly credible.
We did our biggest transaction, and at the time, just a few weeks ago, it was the biggest transaction that had been announced in the market when we helped the trustees of the Michelin pension scheme, which is over £1.5 billion in size, to complete a full insurance transaction. It's a fantastic credential for us in the market, and the opportunities to build on that are quite real for us. In administration, we are, of course, onboarding our biggest ever win in John Lewis, and the market there is healthy for further first-time outsourcings like that, but sometimes the market looks at you and says, "We need you to do sort of one at a time." We've experienced this over many years within the past at Aviva, with IBM, with many others.
So you onboard one safely and securely and are in the market for the next one and so on and beyond. Actually, in terms of how we run our business, safe and securely doing that is absolutely the way that we like to do things. But there's plenty of opportunities. I should say also in the McCloud, in administration, we have generally stood up very well to pretty tough challenges of delivering the McCloud remedy work. And we think that we might be doing a little bit better than one or two of our competitors in that space. And that does give us the opportunity to pick up more work as the deadline looms.
And equally, if you shine like that on a project, you've got a great opportunity to potentially broaden what you do and get more long-term and utility income type work if you become the administrator afterwards. In investment, it's quite interesting. We've highlighted that the investment performance this year has been very creditable to actually hang on to the revenue after 50% growth in the last two years. But now the market is beginning to shift. And I think people are realizing that there's potentially a shift in the governance model, the requirement for slightly more expensive approaches with fiduciary managers and so on in the past to try to drive improvements in funding levels. Might not be needed anymore quite so much now that funding levels have got a lot better. That would be very favorable to us because we're not a fiduciary provider.
We provide more traditional investment consulting work. And actually, the value add from that now really might come into its own. So we expect to see quite a few opportunities in the investment consulting space emerging over the next 6, 12 months and beyond. So yeah, different dynamics in different places, but it's a lively market and plenty of opportunities for us to continue to take a little bit of market share as we look forward.
Great. Thank you. That's very useful context.
Our next question comes from Vivek Raja of Shore Capital. Please go ahead.
Thanks. Good morning, guys. Can you hear me? Just check.
Yes, Raja there.
It's Vivek, by the way, but thank you. So I just wanted to, I think that the first question was about revenue growth and just drilling into that a bit. And so now you hopefully answered that semantically.
I just wondered if I could push you for some of the sort of numerical splits there. So of the revenue growth you did in the first half, can you just give a sense of how much of that was price rises and how much of that was volume? And I'm keen to hear how that sort of shook out in a competitive context. What are you seeing in terms of the competitive environment of pricing? How hot is, how intense is competition there? And how do you fare against that? So yeah, that was my question. Thanks.
Sure. So I'll cover the price versus volume question. And versus sort of previously, this year, the price and volume dynamics are different in different divisions. So within pensions and advisory, for example, the 17% growth, about three of that was price, and the rest would have been volume.
So we've been doing a lot more with our existing clients as well as some of the new wins, especially things like the risk transfer projects, continuing to do GMP work that has accelerated. So volume plays a bigger part this year. And in administration, within the 40%, probably closer to 9% - 10% would have been inflation. And this is because there's a lagged impact of the higher inflationary chargeout rates that we, sorry, not chargeout rates, higher inflationary fees that we put through last year and sort of in the second half of last year, especially. So that is the nuance. And obviously, within administration, the big part of the volume work is the McCloud remedy project. And GMP also has an impact within that sort of the remainder 30%.
Yeah, in terms of your question, Vivek, on how competitive that we sort of have been or any impacts there. So I guess across the industry, it is market standard for people to put up their contracts by an inflationary measure and to put chargeout rates up by inflation, or often for individuals, significantly more to reflect their own kind of promotional and experience growth. So we've been doing very much the same as that, and we expect that's in line with other people. I think where we've done really well is on our resourcing. We've got a slightly more weighting towards more junior people, particularly within the advisory business. And therefore, that's meant that work has been done for clients at a slightly cheaper level.
And so they've seen a much lower level of increases in fees than I think people have in the industry managed to realize those efficiencies. That's been good for us too because generally, the margins are very positive as well under that model. So I think we've managed the increases well, and I expect over the year we've become probably even more competitive than we were at the start of it versus competitors. But I've probably just flagged we've just seen the results of our latest client survey, which are really positive, I think marginally more positive than a couple of years ago, despite the fact that we have more than doubled, I think, in terms of size. And again, within that, there is no real kind of feedback that we're not offering really good value for money. So that's really positive as well there.
Thank you, gents. That's really helpful, color. Thank you.
Thanks, Vivek.
We will now move on to written questions submitted via the Spark Live webcasting page. Our first question comes from Thomas Rands of Davy. Three questions, please. One, please could you expand on your comments around capital allocation policy and M&A focus? Which areas are higher priority, and how does the pipeline currently look like? Two, within the risk transfer business, do you have the right level of resources, and how do you see the growth outlook for this part of the business? Three, could you give us a little more detail on the timing of how the Aurora platform will be rolled out and longer-term potential for the platform? Thank you.
Thanks. I'll take the capital allocation, risk transfer. Paul, if you could take that one, Ben or Aurora.
So in capital allocation priority, so first and foremost is realizing the organic growth opportunity that we have in front of us, whether it be in advisory or in administration. Secondly, it is to continue to invest in tech, and I mean the Aurora platform, completing the rollout of that. And I think the Aurora platform, which Ben will touch on later, does have further potential, and we will be looking at that as well. And it's also about more generally in the business, wider rollout of tech, whether it be AI or the Radar platform within advisory. Thirdly, we'll continue with our progressive dividend policy. And then obviously looking at M&A as a core part of our strategy.
And as Paul alluded to earlier, M&A, it is a sort of broader field for us now that we've entered the insurance consulting market, but we remain disciplined on that M&A front. We won't engage in sort of the race on the price just to be able to get another M&A under our belt, but we are very focused on returns. And we've had a very good track record in terms of the last five bolt-on M&As that we did, about GBP 25 - GBP 30 million of Capex, sorry, capital deployed with a return in excess of 20% on that. But the M&A pipeline is strong, as Paul said earlier. There's lots of activity going on, and clearly, we'll be looking at opportunities on that one. On risk transfer, yeah, it's a hot area in the market.
We have grown our team through a few external hires over the last few years. In particular, the very senior leadership of the team was bolstered a few years ago, which has proved to be extremely successful because the individuals who've come in have really gripped it and driven a lot of growth. Of course, we have a lot of resource internally where we can retrain actuaries and other skilled professionals to get involved in these projects. Very similar skills to their day jobs are required to go and learn a little bit more about the transaction world, specifically in insurance. But clearly, within the space of a few weeks, a few months, a few deals of experience, more junior people can become really quite senior experienced practitioners quite quickly. So that works for us extremely well. We expect that we will continue to make a few more senior hires.
I do think it's a place where our culture has proved to be extremely important. We managed, as I say, when we bolstered the senior team, we had the leader of that join us from one of the big three firms. Working for a global multinational broking firm like that is a different experience to working directly with the senior leadership team at XPS on fulfilling a vision and getting on with it and doing it and frankly having some fun, an underrated word, in going after some of these bigger firms. And that's really resonated. And when people join us and they enjoy what they do and they get what they were promised before they've joined the firm, they then are quite evangelical in talking to other people in our industry about potentially joining. And we have found that sort of snowball effect.
We hope to hire some really good people to keep us going on our journey in addition to the, yeah, the retraining and reskilling of some of our people internally as well.
Thanks, Paul. The third question is about Aurora, kind of the platform rollout and broader opportunity. I think we've touched on this, but just to kind of recap and add a bit more context. We currently have a number of platforms that we use to do administration. And so all of those will end up being consolidated onto Aurora. And we're doing it effectively one platform at a time. And so we should come off one platform in each of the next three financial year ends, actually. Therefore, we'll be fully onto Aurora by the end of FY27. In terms of, I guess, the benefits, firstly, it's been really powerful in new business.
It's a real kind of USP when we're going out to market with new administration clients. As we bring existing clients across to it, there's a benefit in terms of not paying license fees to external providers and getting to one way of working across the whole business, which brings simplicity and more efficiency. It's also effectively built on the latest technology, so easier to put in place more automation and use some of the latest AI and that sort of technology, so there's big potential efficiency gains, and it's obviously at the heart of the service that we'll be providing to insurers as well as we start doing more work there, so they're the kind of key areas we've got as focuses at the moment.
We do talk about other ways that we could potentially leverage the platform, but it's probably a little bit early to be talking about those in this forum.
We have another question via Zoom from Derald Goh of RBC. Please go ahead.
Morning, everyone. I hope you can hear me. Just one question, please. So if you look at a margin that improved really strongly on your 280 basis points, how should we think about the evolution, say, for the next 12 months? What are the pluses and minuses? And I guess within that, could you also talk about the impact of the National Insurance change that will come in next year, please? Thanks.
Good question. So in terms of the margin this year, clearly, there are a number of one-offs that are contributing towards that. Some of those will persist, will continue.
The risk transfer markets are doing more of the higher margin work. And if you look at the consensus that has margin improving into the future, this is prior to, obviously, the National Insurance increase that came through on the October 30th. We've quantified the impact to be around about GBP 2.5 million of additional cost per annum from FY26. And we are currently looking at how we can obviously mitigate some of that through various measures like price, looking at our recruitment model, the pay increases, etc. But we obviously cannot offset all of that, and I think that is common with lots of other businesses as well. But so absent that, there is a margin improvement.
Then obviously, beyond that, in FY27, once we've rolled out the Aurora platform in full and we start to drop away the legacy suppliers in that area, we'll start to realize more operational efficiencies. So you can see within the consensus, margin starts to improve by at least 0.5 percentage point each year from there on.
Got it. I guess the point around AI that you spoke about, Ben, is that also sort of a longer-term thing, those efficiency gains from AI and RPAs within your operation?
Yeah. So I mean, that's sort of an ongoing focus to look at the technology available and how we can use it.
But definitely within certain parts of our business where there's a lot of repeat kind of process-driven tasks, there's potentially an opportunity there to be able to drive efficiency and fundamentally do more work with kind of the same or any slight increases in the numbers of people. So that's definitely our ambition. And it's certainly a big focus as we start embedding Aurora on sort of one way of working in that part of our business.
Got it. Thank you.
We have another written question from James Fletcher of Berenberg. Could you give your first thoughts as to whether the proposed budget changes regarding unused pensions being brought into estates for inheritance tax might affect them? Do you think it will have any meaningful impact for XPS?
Probably, honestly, no.
That is something that's a little bit at the edges and might change certain member behaviors and decisions and so on within the pension schemes that we run and administer. But it isn't a particularly seismic change in terms of the advice that we give. I think what we're really interested in, though, is the government's sort of wider agenda. There are certain things in the Mansion House Speech that will drive the need for a lot more advice, particularly around what might happen with consolidation of defined contribution schemes into these potential mega funds and so on. A lot of our clients are a little bit anxious about what that might all mean for them, and a lot of advice is going to be needed.
The glaring omission, though, in the Mansion House speech was that it didn't really say anything at all about the future of defined benefit schemes.
And in particular, this really quite hot topic in the industry of where the pension schemes might be able to access their surpluses that they're now building up more easily, which we are quite passionate about. We think it could make a very significant difference to both the members of the pension schemes. We might be able to access higher, better benefits to the employers. We may in turn be able to offer higher defined contribution pensions to their members. And that ultimately would also likely to have the government's primary objective of boosting growth in the U.K. economy because it could push a lot of assets out of low-risk defined benefit schemes, washing out of them as they're not needed in those schemes anymore into higher returning assets, potentially to the boost of the U.K. equity market and all sorts of things.
We didn't get that in the Mansion House Speech, but we believe the government is thinking very, very hard about it, and we may hear something a little separately about how all of that might unfold, so yes, in the answer to the question, not a lot of change for that specific item that you identified, but an awful lot of other things coming down the pipeline that we are really excited about and that could ultimately drive a lot of demand for services in the business.
There are no further questions. I will now hand over to XPS team.
Well, thank you very much indeed, everybody, and thank you to all of those of you who submitted a question. We've enjoyed answering them this morning. Hopefully, the presentation was really informative. We've enjoyed producing another great set of results that we're really, really proud of.
We're looking forward to a strong H2, and for many of you, we look forward to seeing you in six months and reporting on hopefully a great full year for the fund. Thanks a lot.