HUB24 Limited

Thank you for standing by and welcome to the Hub 24 limited FY21 results. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the start key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Andrew Alcock, Managing Director. Please go ahead.

Good morning everyone and welcome. Once again, thank you for your interest in Hub24. I'm very pleased to be able to present such strong results today and outline our achievements for FY21 and talk about our efforts moving forward to ensure our future continues to deliver great outcomes for customers, staff and shareholders and of course also assist the wealth management industry to build its future shape in Australia. With me today is Katrina Shanahan, our Chief Financial Officer. who will also be presenting our financial slides in the pack and be available for Q&A at the end of the presentation. Just turning to the next slide. Our business this year is very different to when we spoke to you last year at this time in that we're significantly larger and more diverse as a result of great organic growth during the year as well as some acquisitions and some innovation as well. for Hub24 at the end of FY21. We are a leading provider of wealth management products and services in Australia with superior functionality, market leading managed portfolio capability, a comprehensive range of investment options for customers and advisors and also a data and technology solutions business that supports the financial services industry. Our platform business segment is composed of the Hub24 platform and the Explore platform as a result of that acquisition earlier in FY21. and our total custodial funds under administration as at 30th of June was $41.4 billion, over 3,000 advisors using the platform and we had $18 billion in managed portfolio funds under administration. With that our non-custody or PARS portfolio admin reporting services to give you a snapshot at 30 June is $17.2 billion with over 7,500 accounts. In total Hub24 has total funds under administration at $58.6 billion at the 30th of June. And moving to our technology solutions segment, also known as HubConnect, we have 92 financial services clients or customers, two ranges of products in there generally, HubConnect Broker which is supporting tools and customer management tools for stockbrokers in the Australian marketplace and HubConnect Insight which provides services to licensees, advice to licensees in terms of business management, compliance and data insight, some and that being HubConnect now being the rebranded version of our agility business that provides data and integration to a number of financial services providers across the industry. If we move to the next slide, it's great to be able to talk about a business that's had a strong track record of sustainable growth and this chart shows five years of growth in terms of revenue with a CAGR of five years of 36% and then along here with CAGR of 57% at a group level for the business. Importantly when you look at that track record our core economic driver of the business being the custodial platform is rated number one by investment trends and wins awards across the industry yet only has a 3.9% market share. So with such a low market share comparatively being the top provider in the marketplace there's a significant opportunity to grow further moving forward and we look forward to doing that and updating you again in the future about an even stronger track record of growth and that's certainly our aim. Just some financial highlights for FY21 all of which are very healthy increases on the FY20 statistics. For example our group revenue is up 34% at $110 or $111 million and our group underlying EBITDA are up 47% at $36.2 million. Moving to platform, platform revenue up 36%. and Katrina will explain some of the breakdown in the revenue margins and the components of that as we move through her slides later on. That revenue is a great result, certainly given the current interest rate cycle and its impact on the business. An underlying EBITDA up 32% of 37.9% or just shy of $38 million per platform. Our statutory underlying impact is up 53% at $15 million. Statutory obviously impacted by transaction costs but also up 20% regardless of that. at $9.8 million. Very pleased to announce a final live at end of $0.055 taking our full year FY21 divino up to $0.10 per share which is up 43% on last year. Back to the middle of the slide there, our total FUA at June as I said earlier was $58.6 billion made up of $41.4 billion for custody platform. That as at Friday evening the 20th of August had risen to $44.2 billion. which you may recall is ahead of the forecast we had previously for FY22. We had a statement in the market saying we'd hit between $43 to $49 billion of custodial FUA by end of FY22. We're there already 12 months ahead at the 44.2 at the moment and that's at 20th of August. So great results and that's causing us to think very carefully about the future of the execution and investing to continue growth ahead of expectations moving forward. If we turn to the next slide, at Hub24 we see our purpose and our role for the industry and our customers as empowering better financial futures together and that resonates for advisors, for advice licensees, for customers, for managed portfolio or investment managers and fund managers, for market participants and also for technology providers in our space. It really is about Hub24 continuing to collaborate to bring together the best of breed solutions, whether that be investment options or technology front ends, features and benefits, to bring together the best of breed solutions to deliver integrated outcomes for customers and advisors and market participants. It's about empowering, as I said, better financial futures together. We have three strategic pillars there on the slide to give you some colour on our focus. The first one of that is about delivering customer value and growth, which is really about our core platform business and continuing to update and enhance that to extend our market leadership to meet evolving customer needs and to continue to grow that business. The second pillar, to continue to build the platform of the future. We've always and long been focused on data and custody as the future of warmth management and building innovative solutions that bring those together. Our footprint in Portfolio Admin Reporting Service is effectively a non-custodial admin service with our strong platform footprint Over time we'll be bringing that together to be an integrated platform solution. It is integrated in some ways already but it is about us continuing to build the platform of the future. At Hub24 we don't want to be disrupted, we want to continue disrupting the industry and continuing to lead from a position of strength. The third pillar there is about us collaborating to shape the future of the wealth management industry in Australia. I think that there's a gap, there's certainly a shift in what's available in this industry in terms of data and infrastructure. as traditional participants leave the industry. There's a lack of investment in terms of how advice integrates with other solutions and certainly some gaps here that we intend to help fill by collaborating with the rest of the industry using our data and technology to build integration, to build insights that bring about efficiency, lowering the cost of advice and providing more access to advice for Australians which is good for our business and good for the industry in which we operate. So those are our three strategic pillars and you'll see more of that as we get to the end of the pack about what we've achieved in FY21 in relation to those and certainly how we're focused moving ahead. Moving on to the next slide. Here's a summary of some of our highlights for FY21. It has been a very successful year. It's been a year of growth and innovation and certainly delivering on strategy. We had record platform net inflows of $8.9 billion. We established the PARS business or Portfolio Admin Reporting Service with $17.2 billion as I mentioned. And in terms of advisor numbers across the Hub24 group in terms of custodial platforms, it's up 997 or 1,000 advisors, 48% on this time last year. That includes advisors using the Hub24 platform and advisors also using the Explore platform. During the year, we completed three strategic transactions, the acquisition of Explore Wealth, the Ormanet Pars business, which have both delivered fewer growth and allowed us to access high net worth segments with different capabilities. We also divested our licensee business Paragen to Eastern Wealth and took a strategic investment in Eastern Wealth which will allow us to collaborate on technology solutions to benefit Eastern and the broader marketplace in general and of course all licensees as well across the industry. That's certainly our goal. We also continue to enhance our offer delivering enhancements to our platform. We increased the range of investment options. We put in features and functionality that support advisors dealing with regulatory change and a whole list of enhancements there as well. We certainly streamlined our managed portfolio offering and we do lead the market in that space into an MIS scheme to build the future foundations for further innovation and we intend to keep leading in that space as well and we collaborated with licensees to pilot some hub connect insight features using artificial intelligence and so forth, which I'll touch on a little bit later. All of that occurred at the same time as completing a bulk transition of $1.4 billion to the platform, launching two private labels, one of those being part of that $1.4 billion. So having institutional offers in the marketplace where we outsource or the outsource provider for other people's product but it's the core of it or powered by Hub24 and of course we strengthened our financial position and have had really positive underlying operating cash flows and increased their dividends. So all in all a year of growth, innovation, delivering on strategy with great seamless execution and it's great to be able to deliver that and as we turn to the next slide to do that in the context of being recognised by the industry and our customers on the next slide as Australia's best overall platform and voted number one by advisors for customer service. If we can move to that next slide please. So in summary we are rated by Investment Trends Competitive Analysis and Benchmarking Report as the best overall platform. We have the best platform services voted by advisors in Wealth Insights and we're first again for the fifth year running in managed accounts again from the Investment Trends Competitive Analysis and Benchmarking Report. Great to be talking to you today, having those accolades in the context of all of that delivery and growth. Interestingly, if you look at the right-hand side of that slide, there's some lead indicators for further growth. So in those surveys, Hub24 has the highest advisor consideration when choosing a new platform, i.e. if there are advisors in those surveys who are thinking of changing platforms, Hub has the highest level of consideration moving forward ahead of any other platform. We also in the 12 months achieved the highest increase of number of advisor relationships. And the third point there, advisors who use Hub24 are the least likely to look for a replacement platform in the next 12 months. So we're bookended very nicely there as having the highest consideration for new users and having the lowest consideration for those to change platforms. A great result and we look forward to working very hard to maintain those positions moving forward. Turning to the next slide. And before I pass the presentation over to Katrina Shanahan, I'd like to outline our market share and flows position as at the latest data from March 21 from Strategic Insights. So our market share has grown from 2.3% to 3.9% over 12 months March to March. It's actually tripled if you go back a year from that. So March 19 we were at 1.3%, we're now at 3.9% in terms of platform market share. The chart on the left shows you the ratio of net flows to underlying market share and Hub24 features very highly there on the chart as well in second position. Interestingly, there's only four platforms gaining in market share comparatively when you look at that ratio and the remainder are shrinking or going backwards. We are now the eighth largest platform by market share from 12 months ago. We've maintained our number two position for annual net inflows. and our KGAR for FUA over five years is at 66%. So I'd like to hand over to Katrina Shanahan, our Chief Financial Officer, who will take a walk through some of our financial results, and I'll return to talk a bit more about strategy and outlook before we get on to Q&A. Thanks, Katrina.

Thank you, Andrew. If we could move on to the next slide, please. Okay, and then the next one again, please. That would be great. So here on this slide, we've got the group financial results. Group operating revenue is up 34% to $107.8 million, with direct and operating expenses, the total expenses up 29% to $72.4 million. So you can see positive draws coming through at the group level. Platform revenue was up 36% on full year 22, up $26.9 million, with platform underlying EBITDA up 32% on full year 22, up $9.3 million. You can see at the group level the underlying EBITDA from continuing operations is up 46% to $36.7 million, with the underlying EBITDA margin improving to 34.1%. We then added in the discontinued business being the licensee business, which is half a million dollars worth of loss, which takes the total group underlying EBIT to $36.2 million, which is an increase of 47% on full year 20. Statutory NPAT is up 20% on full year 20, up to $9.8 million. Turning over to the next slide, we've got platform segment results. As Andrew's outlined, we've shown here the platform FUA being the custody FUA and the PAS FUA being the non-custody FUA. So we have platform FUA of $41.4 billion at the 30th of June, and we have PAS FUA of $17.2 billion, with a total FUA of $58.6 billion, up from $17.4 billion in full year 2020. You can see in the graph on the bottom right-hand side the 1.4 billion large transition that we had in the second half of the year. And you can also see the average monthly net inflows have increased from just over 400 million in full year 20 to 600 million per month in full year 21. The platform revenue is up 36%, up to $101 million, with the total expenses up 39% to $63 million. This is largely to do with an increase in sales and distribution and tech and ops to support the momentum and the volumes that we've seen coming through. The underlying EBITDA for the platform business is $37.9 million, up 32% on full year 20, with the profit before tax at $23.1 million, up 5% on full year 20. Then turning to the next slide. We have the platform segment continuing. We've got the revenue and expenses. If we could just turn to the next slide, that would be great. We've got the platform segment. Here we've got a five-year trend for the platform revenue and expenses, overlaid with the group cost-to-income ratio. Here you can see that the revenue continues to be strong, driven by the net flows, with the expenses growing at a slightly lower rate and their cost-to-income ratio coming down year by year. but a five-year platform underlying CAGR of 65%. Revenue this year has been impacted by the RBA rate cuts, which you can see has slightly reduced the jewels coming through in full year 21. Moving to the next slide. On the next slide, we've broken out the composition of the platform custody sewer. So here with the acquisition of the Explore portfolio, we've acquired private wealth and high net worth segments. So we've broken out the platform custody FUA into three segments being retail, institutional, and Explore super admin, with the core retail book representing 81% of the FUA this year, 100% last year. Underneath on the right-hand side, you can see the revenue margin by the customer segments. with the total over the whole portfolio at 36 bits compared to 49 bits in full year 20. I'll talk more about that when we get to the next slide. Explore transaction was completed in March 21, so you can only see four month worth of the revenue margin compression in full year 21. The institutional segment includes the private labels and the private clients combined for Hub and for Explore. Moving to the next slide, we've got the platform revenue. Here again on the next slide, you can see the platform revenue is up 36% to $101 million, with the admin fees up $11.7 million year-on-year and the cash and trading up $6.4 million year-on-year. On the bottom right-hand side, you can see the walk for the platform revenue margin. When we did the first half result, we did a walk from 49 BIPs at 30th of June 2020, and then we walked down to 44 BIPs at the first half. There's one BIP coming from admin and two BIPs coming from the RBA rate cuts. You can see that the admin fees have continued to reduce as the flow along with row and tiering from the rate cuts kicks in, and you can see a full second half impact of the RBA rate cuts of two BIPs coming in in the second half. Trading volumes were down on full year 20 as they normalise back to pre-COVID levels, which takes the pre-Explore revenue margin to 37 bps, and with the Explore composition, as I talked about on the previous slide, having a 3 bp drag on the margin, with the margin for full year 21 closing at 36 bps. The RBA rate cuts had about a $9 million impact on the revenue and a 4 bp impact on the margin. Moving to the next slide, being the group expenses. As Andrew mentioned, we're ahead of plan for the FUR. We had a guidance statement of 43 to 49 billion, and as of 20th of August, we're at 44.2 billion. So given this and the momentum that we've seen to come through, we've continued to invest, and you can see that coming through in technology, operations, and sales. So expenses from continuing operations is up 26% to $87.4 million. And then we've got abnormal items of $8.1 million, increasing the total expenses to $95.5 million. The graph on the bottom right-hand side shows the breakup of the expenses, with employment expenses being the largest increase, up to $57.2 million, with headcount increasing to 391, up 49% on last year, with 85 of those coming through from Explore and the augment net acquisitions. Then moving to the next slide, which is a walk of our underlying EBITDA to our MPAT. There's a few moving pieces in here. You can see the underlying EBITDA from the continuing operations at $36.7 million on the bottom left-hand side. Once you add in the power drum discontinued operations, that takes the underlying EBITDA down to $36.2 million. Depreciation and amortization has slightly increased this year, up to $7 million. That's seeing previous year's capitalisation on the balance sheet coming through the end part this year. There's a slightly lower number capitalised onto the balance sheet, about $1 million lower spend capitalised onto the balance sheet this year that you'll see when you look through the annual report. We've also got share-based payments coming through of $6.2 million, which recognise the increase in the funds under administration and the probability of the share-based the employee and share-based plans, probability increasing of those vesting. This year, we paid tax to the ATO for the first time, and we have an income tax expense of $8 million, taking the underlying impact to $15 million. That then reduces for the $7.5 million for the strategic transactions for due diligence and implementation costs, and then we have the $1.4 million gain on sale from the Paragem licensee business and we have $1.5 million offset for the tax for the transaction costs. And with that, I'll hand back to Andrew.