HUB24 Limited

Thank you for standing by and welcome to the Hub 24 Limited FY22 results. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you have been provided with the question link and wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Andrew Alcock, Managing Director. Please go ahead.

Good morning and welcome everyone to our financial year 2022 results presentation. Absolutely pleased to be delivering another set of really strong results for HUB24 for the year with some headlines that have underlined year to start 92%, underlined our profit after tax up 133% and of course our dividend year-on-year up 100%. From the customer front I'd like to talk about a couple of the points we've got. One is value for money with investment trends and once again retaining our managed portfolios award. With me today is Katrina Shanahan, our Chief Financial Officer. Katrina will be presenting our results as I did through some of the earlier slides and certainly be able to answer questions as we move towards the end of the presentation. Before we jump into the results, I'd like to put some context around the role we play in the market and just move into the next slide. Our group has expanded in FY22. We've certainly added to our purpose of empowering better financial futures together with now over 300,000 customers accessing wealth-related products from HUB24 and group members. So that's the HUB24 platform, the Explore platform and the CLAS, SMSS, Portfolio and Trust products, 300,000 Australians that we're helping actively to meet their investment and retirement goals together with others in the industry. And by together, we mean with our customers, with advisors, professional advisors, accountants, financial planners, investment managers, technology providers, bringing together the best capabilities and the best choices and creating opportunities using technology for a better future for our customers. We have a large footprint now which is deliver and grow and moving forward with plenty of room to grow and lots of market share for us to hopefully capture as we move ahead. So in terms of our purpose, we've certainly delivered on that year with the acquisition of clients and delighted that we've got that footprint to move forward. Turning to the next page or moving to the next page and looking at our results highlights, we're very, very proud of such strong growth in dollar terms and centric terms for FY22 with our total group revenue up 76% to $192.5 million and underlying the direct group level up 92% to over $70.4 million. Unpacking that a little bit, the platform segment contributed $160 million of that revenue at $62.3 million of the underlying impact, a good result. Looking at the profit and earnings numbers, statutory impact up 50% and that includes $18 million of strategic transaction and project costs. So looking at an underlying level, it's up 133% at $35.9 million. A fully dividend adding the $0.125 dividend we've determined for this half comes to $0.20 per share and that's up 100% on FY21 with earnings per share also up and that's delivered at 37% to $0.195. We absolutely finished the year with a good floor balance regardless of market earnings of $65.6 billion for combined sewer at a custody or a platform at an intensity of 49.7, just shy of $50 billion. That's at the 18th of August due to good positive flows for the first couple of months here today and some market recovery back at $64.1 billion with the past sewer at $15.9 billion at 30 June. Turning to the next slide, if I could put the group into context with our operating segments, just a bit of a footprint for which we intend to grow. The HUP24 group is there with the platform segment on the left-hand side with a bit more breakdown of some of the stats I've already mentioned, the number of advisors and the non-custody PAS accounts. On the right-hand side we've got HUP Connect now joined by CLAS in our tech solutions segment, really building out that segment with a combined footprint and a far more meaningful contribution to business moving ahead both strategically and financially. noting that we've got 92 Bites of Services clients buying tech and data services and products from HubConnect. And we'll talk a bit more about that later on in the presentation. And classed with 7,000 unique clients, 200,000 accounts across the world for admin products, and 170,000 document orders across the now affinity business as well. So a much broader footprint and two operating segments alongside our corporate segment moving forward, which we'll be reporting in that way. Turn to the next slide. I look at our track record and it's absolutely continued. We continue to build on a consistent track record of funds under administration growth, revenue and underlying EBITDA growth and we'll certainly be working very hard to build on this moving forward. We aim to manage the business to deliver rival growth and as you can see we've done that from FY18 to FY22 consistently and if you go back further it's been consistent since earlier years. We do that while balancing investments for future growth trying to put in place the right building blocks and foundations to support ongoing growth but also deliver consistent and reliable returns to shareholders. On the left-hand side we've got the funds of administration graph there and at a group level that's a four-year compound annual growth rate of 68%, a really great growth statistic for our custodial and non-custodial FUA over that period of time. On the right-hand side our revenue CAGR over the four-year period is 41% and underlying EBITDA 56%. That includes on the right-hand side in the yellow the contribution for class which we acquired in February for four months of this year and also in FY22 there's a full year run rate of Explore in that expansion there of revenue and underlying EBITDA for the group. We head over to the next slide. We've wanted to look at it from a market share perspective and the same sewer chart is there on the left-hand side but you've also got the net inflow line there which is the yellow dotted line showing the net inflows into the business from a platform perspective. The CAGR there is slightly different. It's a four-year CAGR for the custodial or platform organic growth, a platform growth of 56% over the four years. Interestingly, we're still ranked number two for annual net flows. a really, really large established set of institutional competitors. Our market share has grown from 3.9% up to 5.1% in the space of 12 months. We've gone from eighth largest to seventh largest, but we are certainly the fastest growing platform provider in percentage terms, in fact, based on our current market share and the growth we achieved in the preceding 12 months. Great results for the platform part of the business. In the class business as part of Tech Solutions, Equally from June 18 to June 22, Class Super has grown its market share from 24% to 30% albeit we've owned the business for less than six months. But it did have the strongest quarter four since 2019 in FY22 with the strongest growth there and you can see the number of accounts there for Class, the total accounts and the Class Super accounts there on the slide. So doing well in terms of market share, lots of opportunity to continue to grow and great results when you look at them beside our financial results I'm not going to spend much time. We're going to move on to the next slide. I won't spend too much time on that. But if I put in summary financial year 2022 overall, we've talked about the financial results. We've had record annual platform net inflows. In fact, the net inflows for our business and for specialist platforms are at levels that this industry hasn't seen for many, many years, if at all, for institutional providers and ours being $11.7 billion. So a great result and a great level of growth. Our customer advocacy has grown substantially and I'll be showing you some awards in the next few slides in terms of what customers are saying about Hub24 and it's absolutely in our DNA to make sure we continue to deliver and delight our customers with great opportunities. We've completed the class acquisition, increased our profitability. We've continued with the integration of Explore which we acquired in FY21 and those things together all against the backdrop of a market that's been rattled with some uncertainty changes in inflation, interest rates, concerns about health, pandemics and international uncertainty. In the backdrop of that we've actually delivered on strategy, delivered great growth, delivered great outcomes financially and still working on innovating to enhance customer value. I'll talk a bit more about those three innovations there, HubPresent, HubConnect Licensee and HubConnect SMS and Access later on in the slide and of course we're playing our role of working with the industry to build foundations for strong and thriving wealth management industry in Australia. Turning on to the customer advocacy, we're moving to the next slide. In terms of the awards this year, there's six there for HUB that we've called out and two for CLAS across both our key business units. Interestingly, and the one I'd like to talk about as well, we recently have been awarded in the last couple of weeks number one value for money from investment trends. When you think about it, we talk quite often about value versus price and the levers for that. The market is shifting to a value driver. We haven't seen massive competitive pressure on price for the last couple of years. Advisors are understanding value and the sustainability of working with a great platform provider who's there for the future, who's building out for the future. Put it in the context of best interest duty for customers, value is a key driver for why a decision should be there to recommend a particular platform. So for the HUP platform, that's a great new award that speaks to us overall from the customer sentiment. Running through them, number one for managed portfolios for the six-year running. Another one for product outcomes and investment trends. And from advisor ratings we have the best advisor experience, the best platform and best investment options. Great awards to have. And looking at class, class has won the award for best SMSF software administration platform as well. The two awards there for provider as a platform. Moving forward, looking at those awards and the market share, I think we all agree we're very well-placed for more growth and more opportunity as we move ahead in FY23 and beyond. To do this, of course, and moving to the next slide, talking about our people, we have an exceptional team and we work very, very hard to build a great and talented team, build on the already high-performing culture that we have and look at how we attract, develop and retain talent in the business and creating the right environment for our people to thrive. I think that's a secret to our success is having a really capable team that are aligned and working very well together. In the group we now have 700 employees having had 200 employees join us from class and Hub24 hitting up to 500 employees over the last 12 months as well. Obviously we work very hard at that so we have a very, very strong and focused culture prioritising employee wellbeing. We're continuing support a diverse and inclusive workplace and investing in leadership. In fact, on the bottom half of the page, in terms of putting in place the foundations for future growth and operational certainty and scale, you can see we've recruited three new key executives for the business to support that growth and we're out in the market currently recruiting the chief people officer for the combined group. Employee engagement is 72% which is a great outcome but I want to talk about our values. and it really is in our DNA the advantage of what we have on the right-hand side of the slide about how we operate, about our integrity and we see these things as precious. Collaboration, acting as one team, really, really being focused on clients and easy to deal with, delivering excellent outcomes, going above and beyond. In fact, we often talk about being brave to do things and get things achieved that seem difficult in the context of how do you look after your customer and how do you progress the business. So we have passion and energy to make a difference and we certainly think big and outside the square. So a little bit more about our people there. We are continuing to invest and we're absolutely focused on maintaining the great culture we have as a foundation on which to build moving forward. Now I'm going to hand over to Katrina Shanahan to move to the next slide that will go on our final results and I'll be back a little bit later to talk more about the strategy and outlook.

Thank you Andrew, thanks for that. So if we could just move to the next slide for the finance section. Here we've got a snapshot of the combined total group, a breakdown for revenue, underlying EBITDA and customer numbers. So you can see here that business is included in the tech solution business for the consolidated group. On the right hand side however you've got the revenue contribution from CLAS for the four and a half months. of $23.9 million and an underlying EBITDA contribution of $9.5 million from CLAS and a customer base of over 7,000 customers. On the Hub24 side, where we have the Hub24 platform, the HubConnect and Agility and the Explore platform, we've got revenue of $168.6 million and underlying EBITDA of $60.9 million. and a customer base of advisors of just over 3,400, taking the total group revenue to $192.5 million and underlying EBITDA of $70.4 million. The platforms business contributes 83% of the revenue to the total group, and the tech solutions, including the class business, contributes 15% of the total revenue to the group. Corporate includes the investment that we have in Diverger and our share of profits from the Diverger investment. So just moving to the next slide, we have the group financial results. So this is the combined financial results of the whole group and you'll see the operating revenue is up 76% to $192 million and operating expenses are up 69% to $122 million. delivering positive jewels and an underlying EBITDA growth of 92% to $70.4 million. This is combined with underlying EBITDA margin and cost-to-income ratio improvements for both of those metrics of 2.9%, so delivering operating leverage across the whole group for the year. On the right-hand side, you can see the breakup and the contribution of the different segments to the operating revenue and the underlying EBITDA. So the platform segment is still the highest contributor, delivering $59 million uplift in revenue on full year 21 and $24.4 million uplift on underlying EBITDA to the group. Tech Solutions grew $22.4 million in revenue and grew $9.7 million in underlying EBITDA, both of those metrics largely being driven by the class acquisition that we did. Moving to the next slide, we've got the platform segment again delivering very strong results with a 20% growth in the custody platform growth, growing from $41.4 billion in school year 21 to $49.7 billion, just shy of $50 billion in school year 22. The non-custody past score went backwards or declined 8%, which was largely driven by the negative market impact. So it's now just under $16 billion. and total FOA growing 12% to $65.6 billion, up from $58.6 billion in full year 21. Platform net inflows have grown 32% to $11.7 billion, up to $8.9 billion in full year 21. Full year 21 also included $1.4 billion for the large transition of the clarity portfolio. So if you did a normal net inflow excluding large transitions, the platform net inflows is actually up 56% year-on-year. You can also see in the platform segment the underlying EBITDA margin improvement of 1.3%, so growing to 38.8% underlying EBITDA margin, up from 37.5% in full year 21, and underlying EBITDA itself in a dollar term growing 64% to $62.3 million. On the right-hand side, you can see the split and the growth in the funds under administration, growing to the $65.6 billion. You've got the half-on-half split in this metric. Net inflows in the first half, the strongest half, at $6.7 billion, adding the second half, $5 billion, getting you to the $11.7 billion for the year. The market movement on the custody portfolio was $1.9 billion in the first half, positive strong market movement, and then the negative market movement aligned broadly in line with the ASX 200 movement, negative market movement of $5.4 billion in the second half, netting to $3.5 billion over the whole year. And then you can see the non-custody part, the net impact of the net inflows and the market movement is the $1.2 billion over the year with a positive market movement of $1.1 billion in the first half and negative market movement of $2.3 billion in the second half. Moving to the next slide, we continue on with the platform segment results. Here we've got the five-year growth trend in revenue, expenses, underlying EBITDA and underlying EBITDA margin. So you can see each year delivering very strong growth in revenue and in underlying EBITDA with the full year 18 revenue back at $40 million growing to $160 million in full year 22 and expenses growing from $28 million to $98 million. Those metrics deliver a very strong $62.3 million platform underlying EBITDA in full year 22 with a full year CAGR growth So annual growth rate was 51% in the underlying EBITDA. The revenue margin for the platform segment remained stable over the year at 32 bits. I'll talk more about that as we get on to that if we can just move to the next slide. So on this slide we have the composition of the platform sewer and we break it out between retail, institutional and explore super admin. So there hasn't been a significant shift year on year in the spot sewer contribution from the different segments, with the retail segment contributing 81% of the platform sewer, approximately $40 billion, and the institutional, including the private labels and the private clients that we have, representing 16% of the total sewer, or approximately $8 billion. and the Explore Super Admin being a smaller portfolio contributing $1.5 billion. As we've announced in our quarterly results and the Analyst and Investor Pack, we're expecting the Explore Super Admin part of the portfolio to transition out towards the end of full year 23. So the revenue margin you can see in the graph on the bottom right-hand side. So the average for the custody revenue margin in full year 21 was 36 bits. And over full year 22, each half bit remained static at 32 bits. The reduction in the Explore Super Admin revenue margin, there was a one-off service being included in full year 21. So you can see the small drop there from 17 bits to 13 bits in full year 22. And then on the institutional revenue margin, you can see an increase from 9 bits to 14 bits. which represents a full year contribution from the private labels being Clearview and Insignia. Just moving on to the next slide. So here we have the 59% growth in the platform revenue up to $160 million with the admin fees delivering $12.4 million uplift on failure 21 and cash and trading delivering $13.5 million uplift on failure 21. So you can see in the graph on the right-hand side the split between the first half and second half of 2022, the contribution from admin fees and cash and other, which includes the trading. So the first half benefited from the net inflows, the strong $6 billion of net inflows in the first half. There was also the strong $1.9 billion of markets in the first half, and there was an extra two months of Explore. The Explore acquisition completed in March 2021. And so Moodle from second half 21 to third half 22, there's an extra two months for Explore in there. When you move from first half 22 to second half 22, there's not an uplift from Explore and it's all been accounted for in the previous periods. The second half admin fees and cash and other have been impacted by the negative market and the impact on the filler growth. So if you take the Explore extra two months in the first half and you take the impact of the negative market, that's the reason for the difference in the growth half on half. Then in the bottom right-hand side, you can see the platform revenue margin with Explore, 36 average on the custody portfolio in full year 21. and then normalising for a full year impact of the Explore portfolio which has slightly lower margins, bringing it down to 32 bits. The margin remains static half on half with the benefits from the RBA increases and the cash management fee broadly offset with the admin fee clearing in the second half, albeit that was lower than normal. It was still a small impact on the second half. Moving to the next slide, we have the group expenses. The total group expenses was $171 million which included $30.2 million for strategic transactions and acquisition amortization which I'll talk more about on the next slide. Excluding abnormal items or notable items, total operating expenses were $141.1 million. which included the class operating expenses for the four and a half months of $14.4 million, which gets you to a core business operating expenses pre the class acquisition of $126.7 million, which is up 46% on full year 21, and it included $10 million for the full annual impact of the Explore portfolio coming in. You can see in the graph on the bottom right-hand side that employee expenses is still the largest part of the expense base, being $80.3 million of the expenses incurred. FGE, as Andrew mentioned, grew to 700. with a class contributing about 211 extra FTE and the FTE growing for HUB24 up from 460 in the first half of 22 to about 490 in the second half of 22. And then just moving to the last finance slide, we have the increasing profitability across all the measures. We've got underlying EBITDA, which is up 92% on full year 21 for the continuing operations. And then after we take out the share-based payments, the normal run rate for the depreciation and amortization of $7.5 million, and then the tax, we get to our underlying NPAT of $35.9 million, which is up 133% on full year 21. The share-based payments of 10.8%, is higher than last year as it included a recognition of the special powers, special performance options and rights that were issued in full year 21. Given the strong growth in the net inflows this year, we recognised the share based payment for 18 months of that issuer of the And then moving on from the underlying MPAT of $35.9 million, we've got the notable items of $17.9 million, which includes transaction costs for the class acquisition. It includes $5 million for the Explore implementation-related costs and $1.9 million for other projects, including regulatory change, the joint FMSS products that we've been working on, and some small client transitions. And then we have the statutory MPAT of $14.7 million, which is up 50% on Tollio 21. So an excellent financial support. I'll turn back to Andrew.

Thank you, Katrina. You look quite pleased, particularly with that expanding margin there, which was difficult earlier in the year. So that's a great result. Well done. We'll now turn to change the pace back a bit. Look, we've spent some time this year. So under that corporate sustainability, We spent some time this year advancing or formalising our approach to corporate sustainability. It's something that as a business we're very, very keen to update the market on about how we do that and what we're doing in that space. So if we go onto the slide, it headed enhancing our approach to sustainability. During the elective and materiality assessment we took some external advice and we worked with key stakeholders, being shareholders, customers, are the service providers in the marketplace, business partners and so forth. We identified some key focus areas or materiality areas that we thought HUB should make a difference and would focus on. They're on the slide there. As a result of that piece of work, it includes customer experience, climate risk, diversity and inclusion, business ethics, data, privacy and security, very important for technology business and employee engagement and so forth. We're absolutely committed to managing the business considering the broader community, customer, environmental interest. We've been doing that for some time and we just released our first sustainability report early in FY23 or in this couple of months before our AGM certainly. And so we'll formalise that and go to market with our approach but we get asked quite often about what we've been doing but it's important to note that from our perspective With our customers and the offers we have on the platform, we have 150 industry-appropriate options on the platform for advisors and customers to give them choice and certainly lead the market in the capability of managed portfolios for advisors and clients to tailor or tweak, if you like, portfolios with their own preferences. So they might actually be following that particular investor manager's approach but they might actually want to put some tilts in there and actually rule out some stocks or substitute some stocks or some sectors based on their own preferences. So from the platform perspective we've long been thinking about how we provide choice and allow people to facilitate their own choices in thinking about their retirement and we lead the market in that regard. We've also from a platform perspective had a digital thirst approach. In fact Hub24 platform from inception has not produced paper based client materials In terms of output for customers, we have a digital-first approach. When we explore that, we'll be overlaid with that. But we don't produce marketing materials and reports in paper. It's all digital. Reducing our environmental impact is something we're committed to. So the slide there is outlining our approach. You'll hear more from us in the next few months. And also on the slide there is some community support we've done across a number of areas including the ProGylo Financial Advice Network where we help with advisors donating their time to those who need advice and can't afford it with some other charities there like the Red Cross and other children's charities as well. Cancer Council, Jail and Cake Milk. So they're there on the slide as well. So looking forward to updating the market on that moving forward and you'll see more about that as we approach LAGM time. Moving on to the next slide, if that might click over too, I've got a quick update on CLAS. So the slide here is CLAS progress update. Absolutely focused now on working on the foundations we've put in place and moving into a growth phase and consolidating the market leadership position of CLAS. Largely finished the transition phase although we've just made some appointments in terms of CEO and an executive team in class. The business is running under that executive team led by Tim Steele and putting in place the foundations for growth. We've certainly worked with the business to redesign the operating model around customer propositions and their core strengths. around the Class offering and the Now Infinity offering and also the Take to Market, which is one of our hub-connected data products, all going through that business model and tech solution segment led by Class. So we've got development underway, a majority SMSF initiative, which I'll talk about in a couple of moments, but heading into a growth phase with that focus on services, getting back to the basics in terms of delighting customers, market leadership, and Class certainly was, as its own entity, focused on pursuing other growth opportunities to increase its addressable market. Inside the Hub family and together with Hub, we believe there's significant upside for both businesses to work together and absolutely focus on the core businesses of class, being now Affinity and the class wealth administration capabilities. Absolutely going to deliver on our commitment to increase customer engagement, provide better service to customers and deliver new opportunities by leveraging the benefits and the capabilities of both Hub and class. So that's a bit of an update on Class. It's going well. We're delighted with the team and we're delighted with the focus and the reception we're getting from customers and the work that the team are doing in engaging with clients and talking about the future and thinking about how we address the market and of course the opportunities to continue to deliver or to empower better financial futures across the Hub group and across the Class clients together. Moving on to strategy and outlook. I might flip over two slides. to grow market share. We've included this slide just as a reminder of the size of the markets and we believe the market has actually brought in these opportunities to take technology and increase the size of the market because there's many, many trillions of dollars of assets in the Australian investment community that aren't administered through any vehicle. I believe technology has a role to play to make that easier and better. for customers. So certainly in the platform market as it's measured now, we saw the awards earlier, having 5.1% being the fastest growing in percentage terms, there's a lot of room for us to grow in that particular market. We have a lot of upside which we certainly are aiming to capture. The managed accounts market, we have 17% of that as of last January, so I think it was December last year. and certainly that market is growing very, very rapidly and is projected to grow as one of the fastest markets in terms of investment management within platforms. Port Malawi market 9.3% in class with 30% there. There's lots of room and a very good position to grow our market share given the awards, the accolades and our focus on delivery for our customers and certainly working with our talented team. Moving on to the next slide, we share quite often about strategic pillars. We certainly shared about our results on Investor Day back in June and our ambition to lead the wealth industry as the best provider of integrated and intentionally integrated platform technology and data solutions. So from that perspective there's three strategic pillars. The first one is about customer value and growth which is enhancing our current proposition, extending our competitive advantage, extending our need and growing and protecting that core part of our business. The second one is about building the platform of the future which is an aspirational, certainly it's a journey we're on and we've got all the ingredients. I'll talk about that on the next slide but positioning our business for growth and change and getting ahead of the curve and continuing to disrupt the market with even better integrated solutions. And the third one about playing our role in the industry and collaborating with the industry to build a strong Australian wealth management industry, a strong advice industry a strong technology background, a backed industry, a blueprint, if you like, for the future of this industry. Given the massive shifts and changes, we have a role to play and we believe that's great for customers and shareholders alike for us to play that role and we're certainly committed to that as one of our strategies moving forward. We turn to the next slide. We're building the platform of the future and unpacking that a little bit more. It's about bringing together the ingredients we've got to meet a customer need. And we have those ingredients in our stable delivery. We have the Hub platform, the Explore platform, the custom or hard services, our tech solution segment with Class and HubConnect and now Infinity, all underpinned by what we call HubConnect technology infrastructure. Our aim is to provide across those and across even broader integration with other vital services providers and software providers a single view of wealth to meet that holy grail where customers and advisors can see a complete picture of their wealth One way of doing business, making it easy to do business, there's friction in the system. There's a lot of effort to look at that one way of doing business as people do it for their customers. We're certainly heading in that direction and I think it actually helps us grow our business and retain our customers and also deliver and delight our customers. Efficient access to personal manager IP, that's managed portfolios, that's through mobile platforms and flexibility for advisors and of course recording and insights. So there's a lot of work underway. We keep doing that. There's an example on the next slide we might go to of the manifestation of that. If we move on to the next slide, Power Identifier Strategies for Innovation. Hub24 Present is a reporting and a client review tool we launched to market over the last few months. We're getting great feedback from It's actually running off that Half Connect technology infrastructure I pointed to on the previous slide which can take data from multiple places. We're building out the data into that. So an advisor can real-time dynamically show a client a review of the situation across more and more data moving forward. And it's actually saving time for advisors. It's currently inefficient and time-consuming for advisors to get all the up-to-date information they need for their clients. Hub24 Present is an example of a single view of wealth for assets on our HubConnect infrastructure which we're building out and advisors are really, really giving us great feedback and we're committed to enhancing that even further. The case studies are showing that advisors are saving time, we've got feedback that's one of the best things we've done in recent times, so really excited about how we're delivering on that goal to build that platform in the future. Hub24 SMSF Access, I talked about it a bit earlier, that's Hub24 launching a combined product called SMSF Access that's targeted to clients. It might have been cost prohibitive before. They might choose to have a simple self-managed superannuation solution. In recent years there's been views that you need to have half a million dollars of assets before it makes sense to have a self-managed super fund. We believe that's not the case and there's certainly great use cases for it at younger ages and younger balances with the benefits you can get from portability and having your own fund. So we're launching another choice for advisors called S-Message Access. It does leverage the class technology and the hub technology together in a bundled product offering. that will offer a lower cost solution and hopefully grow the market for SMSS and grow the platform as well. So it's a joint delivery from Hub24 powered by some of the class tech that we're taking to market in the next couple of months. And the third example of how we're delivering on our role and our vision to innovation, HubConnect Actually in market, probably on round one, we're in the process of signing up our clients to the production library that is happening and we're extending the capability there. It's aimed at helping licensees manage their compliance objectives, helping them get ahead of the curve detecting issues before they occur or preventing issues before they occur, but certainly allowing them to focus on their core business. And we'll certainly be delivering other versions of Hub Connect licensing with data insights for individual advice practices. It's using AI and machine learning to really gather multiple sources of data and revolutionise the way that licensees can manage and monitor their obligations and work with their advisors to really focus on customer outcomes aimed at making advice more affordable and accessible and aimed at helping Hub24 play that role in the industry and certainly good for customers and the overall business. So what does it all mean? If we move over to the next slide, the last slide we've got here in terms of an outlook HUP24 is going to continue to invest for ongoing success. We will continue to invest and lead in product and service innovation and customer service excellence. We're doing that from a great platform, from an expanded footprint with some great accolades of awards with an absolutely available market for us to keep growing in and so we'll continue doing that. We'll continue developing our platform in the future, completing the Explore product integration. whilst you work with the broader industry to find new opportunities and advocate for the industry and for building those foundations. We're going to pursue growth. We're looking forward to working with our existing customers and relationships to find professionals to provide better outcomes for them to grow their business and leverage those relationships to develop some new opportunities. That includes looking at expanded product features across We picked up from PaaS and Explore and sort of the product functionality there off here across the board of business. We've talked about that for some time and that's happening as we do that integration. For example, we introduced ChaiX, sort of a new name recently and some other investments on the menu. We'll keep doing that as we continue with that integration. Leveraging those, democratising high net wealth features for other clients as we build out the platform. Developing new market opportunities for looking at group capabilities and of course we'll continue to evaluate growth opportunities in the wealth industry to lead change beyond just organic opportunities as and if they make sense. It all adds up to continuing strong financial results. We absolutely hope to and are aiming to leverage our operating scale further as we did this year to drive shareholder value. We increased profitability and enhanced margins and strong cash flows. and under-delivered ascendancy benefits and EPS growth from the strategic transactions both Class and Explore. So we have updated our platform through our target. We've revised it. Unusual for us to do this but we did have an interesting year last year. So the statement is $80 to $89 billion for FY24. Remembering that in the second half, effectively the end of the first half of FY22 we were up $1.9 billion in terms of market growth and in the second half 5.4 of that went away. So we finished the year down and we started the season recovery. So we revised our target based on the market movement, not based on our view of the business or its growth or its pipeline. In fact the pipeline is incredibly strong and we're excited and investing in growth as appointed the Chief Growth Officer and looking at expanding the sales team as well. Revise the target to $80 to $89 billion at FY24 and as always, we always aim to do the very best we can and take the best opportunities we can and traditionally we've overshot but there's the revised target there and we're working very hard towards that. Okay, so thank you very much. I'm happy to move to questions with Katrina and I. We've got about 17 or 18 minutes left if you'd like to do that.

Thank you. May I remind participants, if you have been provided with the question link and wish to ask a question, please press star then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the star key then two. And if you are on a speakerphone, please pick up the handset to ask your question. Your first question is from J.P. Morgan. Go ahead, thank you.

Hey guys, just a couple of questions for me. Just looking at that update to the 18th of August of 54 Bill of 4, can you give a little bit of a breakdown on how much of that is driven by the markets versus the net employees? Just given that ASX is sort of up about 8% since the 30th of June, I just wanted to unpack how much is actually driven by the employees.

Do you want to go there, Katrina?

Yes, so broadly speaking, so we're generally about 50 to 70% correlated with the ASX 200. And so when you look at that, you can take the market growth that has occurred over the last six weeks. And broadly speaking, you'll end up at, you know, three quarters of it coming from the markets and roughly about a quarter of it coming from net inflows.

Great, thanks for that.

Flows have been healthy, Bob, just to answer that. And we're looking forward to seeing how that plays out. Obviously, everyone's interested in what the market sentiment is, but flows have been healthy in the first six weeks.

Great, thanks for that. And then just in terms of that pipeline for FY23, in terms of the mix of advisors coming on board, Mike, Is that starting to pick up only because it looks like they have slowed down a little bit in Q3 and Q4?

I think the interesting thing is you can always talk about the number of advisors or we can talk about the productivity of advisors. We're seeing the productivity of advisors or what I call that penetration with their kind of books increasing year on year. So they're more and more valuable advisors. The numbers are going up but that's in the context of other MACRO events. We do have access to the relationships with the licensees representing about 75% of the advice market. There's lots of room to move there. We're absolutely focused on leveraging the relationships we've got and the growth as well. So whilst that number is happening, it has shifted. We've had a large flurry of people join over the last couple of years with the shift towards unaligned advice orders. It's now about leveraging that. So the indicator would be the penetration and the throughput of that. And as you see, we mentioned that on our yesterday, we showed how the flow has come over the last few years. So that's how we'll bear out.

Okay, perfect. And just the final one. I mean, in terms of the cash margin, obviously being a big beneficiary of the recent interest rate increases. Any updates on how your discussions are going with your banking relationship for later this year?

Now Bob, you said two questions. That's three but that's okay. Hey, we are in the final stages of signing off on a particular direction there and so we expect to do that in the next few weeks. We're pleased with the outcome or the planned outcome but we'll update the market as appropriate probably now quarterly if that's done in the next few weeks. So we're pretty well settled on what we're going to do. The final stage has got to push through that and at the right time we'll So the conditions are better than we thought a year ago but we'll talk about that later.

No worries. Thanks.

Thank you. Your next question is from Scott Murdock from Morgans. Go ahead. Thank you.

Hi guys. Thanks for all the detail. Just ask two quick ones in the interest of time. Just on the headcount growth. There doesn't look to be a massive step up in the core business in the second half. Just interested in your thoughts, either Andrew or Katrina, of where you actually sit with Headcount. Have you now caught up to the investment you needed in the business or you're now ahead around Headcount Growth? Thanks.

I'll certainly start there. In terms of the executive table, I've got one last recruit to do in terms of Chief People Officer. In terms of the fixed cost of an executive team, I think we've got a great set there and so most of the cost growth is likely variable cost in terms of sales or customer service based on growth or scale of the business. So I think we've made a great investment. We did have a lesser increase and Katrina will unpack that because I think we talked about that a few months ago. So I think we're pretty well set other than variable cost spot or a change in strategy but it also depends on acceleration and pace of growth in the business but I think we're well positioned now.

Yes, so I think definitely we would have seen a higher growth in full year 22 as we mentioned than we would expect to see going forward as we're still expecting to deliver with all market conditions being favourable or normal, we're still expecting to be able to deliver operating leverage and improvements to the margins. So you'd expect to see, you know, there'll still be some headcount growth next year or this year for year 23 in line with the net inflows coming in, but it will be lower than you would have seen in 22. So if we're, you know, in the core business, if you're at the, you know, close to the 500 in the core business, you can probably expect to see anywhere around the, you know, 15% to 20% growth in headcount in 23.

OK, thank you. And just a quick one on class. I think you've given some early indications of what you want to do there, but just interested in that fourth quarter, obviously some initiatives that are probably put in place before your ownership. Just interested in that account uptake and growth system versus, you know, what is happening bottom up in class.

Oh, look, there's certainly system growth. I think, you know, I couldn't actually say because we acquired the business we could have done if their system growth. I certainly think our acquisition of the business has been well received by customers alike and there's an excitement out there about getting, you know, class focusing on what's called strength moving forward and so that will hold sort of steady. There has been system growth in the SMSF space. There is talk of, I'm not sure whether ASICs have done that and can't guarantee, but there was some statements about applicability of SMSFs that were restrictive that actually are looking at unwind or have unwound and we're seeing in the media a lot more younger people opening up self-managed super funds. So if we talk about that type of class, there's an understanding of the applicability of those solutions and certainly we intend to leverage that. You know, you're quite correct. It had a great quarter. I think that is impacted by our position, but it's really system growth and class being in a position to take that growth. That's what we intend to do moving forward. Thanks, Josh.

You've got lots of analysts, so I'll pass it on. Thanks. Thank you very much.

Thank you. Your next question is from Siraj Ahmed from Citi. Go ahead. Thank you.

Andrew, hi, Katrina. I'll ask two questions. I'll just first run in terms of the flows to date. So, Katrina, based on your disclosure, that sort of implies 1.1, 1.2 billion in net flows, which is, I think, same time last year, you had 1.8 billion. So, it seems to understand, are you still seeing, you said it's a healthy, but are you still seeing an impact from this whole market movement?

Should I say that last part of the question again, Suraj?

So it's 1.1 this year, which is 1.8, I think, in terms of last year. It's through down year and year, through scheme terms, and there are no use for this building impacted by any of the efficiency and things like that.

Yeah, thanks. So it's a little bit higher than what you've given us, than I've given you there for us. A bit more than a little bit higher, yeah. Yeah, so the net inflows for the first six weeks Just to get behind the character I've just given you, there's about a couple of hundred males. What we've done, we are seeing... The run rate that we're expecting for this year, and so clearly the second half of last year was slower than the first half, but if we assume that the second half was the normalised for that last quarter where there was a rush for the free consent, we're expecting the second half of last year to be quite a normal run rate, and when we look at that, that's on track for this year.

That's everything for now. Thank you. We've seen some signs of advisor activity. There was the flowering in June for feed consents. At the end of the quarter, we'll have a much better picture of what's happening. It was a stellar first half last year. That obviously has impacted. I think there's stability out there and it's always difficult for advisors to have conversations with customers about moving platforms when there's volatility in the market. But I hope that's settling down. That's the signs we're seeing. So we're comfortable with the start so far, Siraj. So in terms of the FUA guidance, Andrew, it's interesting that you've actually lowered it. I mean, clearly market movement was negative last year, but at the start of this year, you sort of recouped that $3 billion, right? Can you understand the underlying drivers? You previously mentioned 11 to 14 billion of floors. Is that still the expectation in terms of the guidance? Well, we've said how you can unpack and build up to a bottom-up field. So you could use those assumptions in terms of guidance. And it does depend on the floors you get from sales. Are there any large transitions as well? So we do think about... in several ways. Perhaps take a step back. The 3.5% negative market movements, if you think about FY22, normally we would have an assumption for 5% positive market growth. So add to the 3.5% the 5% you didn't get. and that might help explain. So we've just taken the range down by $3 billion and looking at our pipeline. So if anything, it's not as much of a downgrade as you might think when you think about real-time positives, 5% in that year as well. So in everything, if you think about it, if I cheaply use the word real-time, it's a better outlook. So that's why we've done that and consensus was at 18%. and so it made sense to us to do that now. We'd like to always overshoot and upgrade later on rather than anything else. So we thought it was sensible to say, hey, the market's been chopping. It's affected us by more than 3.5 billion if we weren't unpacked with the loss of the growth. You still could model it with flows of between 10 to 13 billion a year in terms of sales or 14 if you like. You'll get to different ends of the spectrum. You could add on some one-offs but we're comfortable that we can land within that range and of course we'll try and do the greatest we can to get the top of that. Thank you.

Thank you. The next question is from Karen Chintu from Jarden. Go ahead, thank you.

Good morning, guys. Can I just start on the platform revenue margins, just pick up on some of your commentary, Katrina, but focusing in on the retail margin, which I think was flat at 37 basis points, half on half. Just something you can explain with sort of a tailwind from RBA, albeit it was sort of later in the half, what would the thoughts of the tiering would have helped you, given the lower average balances in the period. Why sort of that hasn't ticked up a little bit more and whether or not, I don't know if you can give any commentary around sort of whether or not in the first half, 23, you're now seeing that move high with sort of more of that full RBO tailwind coming through?

Yeah, so I'll just cover off the 22 question part of that first. So the RPA rate increases came in sort of late in the past, so May and June when the RPA rate increases were announced. And then as we discussed when we did the 50th of June investor strategy update where we reached the maximum of the fee that's disclosed in our product disclosure statement. And so we're just below what's disclosed in the PDS because of the different mixing in the portfolio and the fee mix that people have collected. And so there was only like a month and a half impact of benefit from the RBA rate increase. And then the fee tiering is absolutely less than it would normally be over the 12 months and in particular over the six months. And absolutely that's because of the negative market impact. But because of the mix in the portfolio, there's still some fee tiering that's coming through as different clients will have a different strategy and their balance will move around. So it's definitely less than normal, but there is still an element of fee clearing in there. And then when we look out to full year 2023, so we're not giving guidance on where the revenue margin could look like in full year 2023, but absolutely, I think we talked about the cash arrangement that we have with our bank comes to an end on the 1st of December. And in line with everybody's expectations, the rate that we agree will definitely be below where it was set for the current contract because it was set three years ago and rates were significantly more favourable then. We're still very confident that we're going to land in a good position when we do negotiate that contract and we'll announce that sometime in the next couple of months. So there'll be a headwind coming because of that ADI contract renewal but again there'll be the benefit of where cash balances are at, lower admin fee tiering that we see coming through.

I think we have seen higher in new business, the balances coming in are generally higher than they have been. So once you've had some market movement, maybe pushing it back two or three years, the mix of new business is being higher quality with some of the customers as you said Katrina.

Okay, thanks. And a second question just on DNA. I sort of didn't step up, I think, as much as the market had anticipated in the second half with class coming in. Can you give any guidance as sort of to how we should think about that line in the 23 years?

Yeah, so in the total depreciation of AMOR for 22 was just under $20 million. It's $19.8 million. $12.3 million of that was acquisition AMOR for the Explore and the Class portfolios. And so the normal depreciation and amortization is $7.5 million. We're expecting that to remain. That's a normal run rate that you'll see. There will be a bit of an uptick because we'll have class in there for a full 12 months but class is depreciation. If you look at their history, their capitalisation policy was a little bit more aggressive than the HOP24 capitalisation policy so we're expecting to align those so you won't If you took the previous class, you won't see our figure up list if you might expect for that. So take the seven and a half that you saw for this year, add a little bit for class, and that would be a normal depreciation and a normal run rate. If there was a larger investment in something, i.e. our platform was a future strategy, then we'd absolutely be updating the market at that point, but there's nothing to update the market on at the moment.

Okay, thanks. And can I just clarify the exact timing of this for discontinuance?

So the explosive for APIC portfolio of about $1.5 billion, we're expecting that to be sometime towards the end of the second half of 2023.

There's three or four successful transfers out, but we are going to move on to one last question if that's all right. I'm sorry about that. I'm happy to see people on the road for APIC to be out and be available. So if there's time for one more, that's all right.

Thank you. The final question is from Nick McGarrigle from Barenjolly. Go ahead, thank you.

I was just hoping you could make sure, I think that people have asked this question in a way, but how are you finding advisor activities? I think you've indicated the size of that one and a half, which feels like a little bounce back from June, but are advisors talking less about fee concerns or is anything distracting them at the moment or do we feel like given the market is more supported, I've seen the last couple of days that advisors are back and getting their houses in order? I think you'll find there's far less seed consent activity at all. So sentiment is quite positive. It's different Nick. It seems to be settling down. I think it's six weeks, definitely seems to be looking forward to seeing how the quarter goes. So it seems to be far more stable than it has been. There's market quality there still and that may in fact consume sentiment but having said that, we're happy with the flow levels we've had for the first few weeks. very much and you know all signs are good but you know we were in a macro environment. I think the good thing about that is we're well placed regardless of whether those sort of issues. So to us it's just a time difference. You guys seem protracted but right now it's good. Thanks.

Thank you. I'm going to hand back to Mr Alcott for closing remarks.

Thank you very much. Thank you everyone for coming along today. I'm sorry that we did cut it fine in terms of questions. As I said, we will be doing a brochure over the next nine or so days and hopefully we'll catch up with a lot of you one-on-one or in some group settings. It's certainly valuable if you need anything else. But in summary, we think it's been a great year in a challenging or different market. We've executed Australia. We've acquired a business at the same time as having record levels of growth, organic growth and record levels of profitability and revenue and so forth but also increasing the accolades we're getting from our customers. find balancing acts and we need to continue to do that moving forward. We're actually focused on balancing the lives and the business to get that consistent outcome for shareholders, great results for customers and delivering on our purpose. So look forward to seeing people out in the next couple of weeks. Thank you very much and thank you for your support as always. Good morning, good afternoon. Cheers.

Thank you. That does conclude our conference for today. Thank you all for participating. You may now disconnect your lines.