MA Financial Group Limited

Thank you for standing by and welcome to the MA Financial Group first half 23 financial result. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to begin the conference.

Good morning and welcome to the first half FY23 financial result call for MA Financial Group. My name is Julian Biggins and I'm joint CEO along with Chris Wyke, who will present the result with me today. We are also joined by Giles Boddy, Chief Financial Officer, and Michael Leonard, Head of Investor Relations. I'd like to begin by respectfully acknowledging the traditional owners of the lands across Australia and pay our respects to their elders past, present and emerging. I also offer a welcome to any first Australians that are present on the call today. Pleasingly, the execution of our consistent strategy is delivering with a strong operating result announced today and a very positive medium-term outlook with significant embedded revenue growth building long-term value for our fellow shareholders. I'll start on slide seven, which talks to some of the key themes for the half. Record first half fund inflows was a standout for the group, with gross flows up 66% compared to the first half, 22. Post record date, we've processed a further 308 million of applications, taking year-to-date gross inflows to 1.26 billion. This is 36% higher than at the same time last year. Asset management contributed approximately 80% of the group's EBITDA. Consistent flows into our funds significantly offset a lower contribution from performance fees in the period. Earnings quality will be a strong theme of this result as our annualised recurring revenue run rate increased 22% over the prior period. Corporate advisory and particularly ECM revenue was impacted by the volatile equity market conditions, which is an industry-wide headwind. Having launched our residential lending brand, MA Money, earlier this year, our investment in building this new business is showing great promise. Despite the competitive residential mortgage market, we're extremely pleased with the strong growth in the size and quality of our loan book. Overall, the result is very pleasing, with strong operating and financial momentum, across most of our businesses. As we previously referred to, the elevated $29 million performance fee contribution in first half 2022 was always going to create a high hurdle in the subsequent year, and we are very pleased with how quickly recurring revenue is growing to replace it. FY23 was always going to be a year of consolidation after growing underlying earnings per share so strongly in recent years, and we believe that the group is poised for strong growth in FY24 and beyond. which takes me to some medium-term targets for the group on the following slide. When we talk about what drives the team, we often talk about building long-term, sustainable value for investors, clients and shareholders. The tables on slide eight outlines how we think about medium-term management targets for MA Financial, which underpins the value equation for investors. As you can see, the implied growth embedded in the FY26 targets is very much in line with what we have achieved in the past and therefore we believe these are measured targets. Importantly, we have based these targets on the infrastructure in place today as we have built the business to scale. Our FY26 target for AUM is $15 billion versus nearly $9 billion today. Over the last 12 months we have increased AUM by nearly $2 billion and our flow run rates continue to grow. In regard to gross margin on AUM, we believe that the current margin of approximately 200 basis points is sustainable. This has been demonstrated over recent years, even with a significant change in our product suite, distribution channels and market conditions. In lending, we have talked about MA Money and its target to deliver 15 to 20 million of NPAT in FY26, and the $4 billion loan book reconciles with that target. MA Money has made a lot of progress over the last 12 months, and we're very pleased with the accelerating settlement volumes as we progress through the year. For Finsure, the bulk today is just north of $100 billion with 2,850 brokers. The growth in Finsure's platform has been phenomenal since we acquired it early last year when the line book was approximately $60 billion and we expect this to continue as more brokers join the technology-based platform. Corporate advisory is part of the DNA of our business and we have a demonstrated track record of delivering consistent revenue per executive over this journey. We'll continue to look at selective growth opportunities as they present themselves. We expect the group EBITDA margin to expand as scale delivers benefits. So to summarise this page, we're very excited about the growth embedded in the group and the strategic investments we have made. We believe that there is a strong track record that underpins the outlined targets and significant embedded growth in the business. Now turning to some of the highlights of the first half FY23 result on slide nine. The group delivered 15.2 cents underlying earnings per share in first half FY23. Whilst this was down 13.6% on first half 22, the result was impacted by cyclical factors impacting our transactional revenues in addition to our planned strategic investment in MA money. Importantly, our recurring annuity revenue run rate was $178 million at the end of June, which was up 22% on first half 22. The Board has declared a $0.06 per share fully franked interim dividend for the six-month period, representing a payout ratio of less than 40%. Assets under management grew by 20% over the last 12 months, which is a fantastic result. This growth reflects our prior investment in our sales and distribution team and the attractiveness of many of our funds. AOM growth was underpinned by record strong gross flows of $953 million. Loan bulk growth was 59% over the last 12 months, taking the bulk to $564 million. Ventures managed loans were almost $100 billion at 30 June, up 18% on the prior period. Corporate advisory fees were down 30% compared to the prior year, which reflects the uncertain macro environment with all industry participants facing the same challenges. Now turning to slide 10 and the group financial results. As you would expect, our earnings metrics are lower than the prior period first half 22 as a consequence of lapping the elevated performance fees in that period. However, the composition of revenue is much improved. The percentage of recurring revenue as a proportion of total revenue increased over the period to 65% compared to 47% in first half 22. Our strategic investment in MA money and the market-related volatility impacting both performance fees and corporate advisory activity impacted the headline results. On the expense management side, we've been focused on optimising the operational structure and this has cushioned the impact of the reduced transactional income. The balance sheet was actively utilised over the period to underpin growth strategies and we established a program to recycle some of the balance sheet assets which delivered a further $17 million in cash to the group post balance date. Turning forward to slide 11 and our five-year financial track record. This slide demonstrates that we've grown earnings significantly over the last five years and whilst FY23 represents a year of consolidation, it also represents a year of significantly improved earnings composition and a strong foundation for future growth. Turning forward to slide 12 now and business unit highlights. In regards to asset management, which represents 80% of the group EBITDA, the results are very pleasing across the division. Record first half gross and net flows were underpinned by strong interest in our private credit funds. Recurring revenue margin was maintained at nearly 170 basis points, despite the change in product demand and distribution channels. We typically aim for 200 basis points gross margin, including all fees, and to generate 85% of this target in recurring revenue was pleasing. In simple math, we're currently raising between $100 and $150 million per month, and for every $1 billion of additional AUM, we generate $17 million of recurring revenue. In lending, the loan book increased 59% underpinned by MA money and accelerating settlements relating to the launch of its product suite. Brokers on the Finsure platform increased 18% to 2,846, reflecting a strong interest in its technology offering, and its leading market position. Finshawe's managed loans also increased 18% to $99 billion over the 12 months to June. Corporate advisory experienced difficult market conditions along with the whole industry. Despite this, the result was robust with timing of transaction closure always being more difficult to predict or execute in uncertain conditions. Now turning forward to slide 13 and a review of how we delivered against our strategic priorities. As I've already mentioned, our recurring revenue base has grown 22% over the prior comparable period, underpinned by consistent inflows into our funds and growth in Finshawe's fee-based revenue. Gross fund inflows are up 66% compared to first half 22, and this is despite migration flows only representing 4% of gross flows. Executing on our strategy to scale, as evidenced by the acquisition of Blue Elephant Capital Management and investment in MA Money, Both are expected to be future growth engines for the group. We aim to be a capital light business. Over the last six months we've recycled a number of balance sheet assets and believe that we have a sustainable balance sheet to fund the embedded growth options in front of us. Finally, on people. Investment in people is an ongoing imperative and the new offices across Sydney, Melbourne and Hong Kong all encourage an active participation in building MA Financial. We value our people in training them and are constantly refining how we provide the best environment for our people to thrive. So turning to slide 15 and the key activity post-balance date. We've continued to see strong momentum in the business in the seven weeks post-balance date. Gross flows of in excess of 300 million take our year-to-date gross flows to 1.26 billion. Net flows are in excess of 900 million year-to-date. The priority income fund exceeded $1 billion in August, which is up $360 million year-to-date. We made two senior appointments in asset management, with one focused on deepening our institutional relationships and one focused on the hotel accommodation industry. In lending and technology, Finsure delivered a record July with $3.8 billion of settlements, and the loan book now exceeds $100 billion. Whilst there is a strong tailwind in refinancing volumes from the roll-off of fixed-rate mortgages, We see tremendous growth in Finshaw as secondary residential volumes normalise. MA money volumes have continued to build over the year, with the first seven weeks of second half 23 delivering 132 million of loan settlements. As discussed, we are not immune from the challenging corporate advisory market. However, despite this, the deal pipeline remains robust and we are seeing an increasing pipeline, albeit deal timing and execution uncertainty remains variable. This takes us to the outlook on slide 16. This slide outlines a continuation of the positive momentum in the business. In asset management we see the embedded benefit of AUM that has been with us for less than 12 months providing growth in the coming period alongside new net flows. We see a subdued environment for transaction and performance fees similar to the first half and remain focused on managing costs to ensure that scale benefits become tangible. In lending and technology, the residential market will remain skewed to the refinance market until the interest rate market stabilises, which we believe is close. Investment in MA money is expected to peak at a $7 to $8 million loss in FY23 before hitting a break-even run rate in early second half 24. Our medium-term outlook for MA money is for the investment to yield $15 to $20 million of NPAT in FY26. In corporate advisory, we're targeting to deliver around the lower end of our 1.1 to 1.3 million per executive range, reflecting general market conditions. Headcount has reduced over FY23, and we currently sit at 48 executives. This will probably move up slightly by the end of the year, although not materially so. So in summary, we expect to see a continuation of the strong growth in high-quality recurring fees underpinned by growing inflows into our asset management product. We anticipate the variable market for transactional based revenue to remain challenging, although that will subside as the cycle moves to a new phase. Despite the challenges presented in the current economic climate, we're extremely excited about the future prospects for MA Financial. Turning to the divisional updates where I will start with asset management on slide 18 before handing over to Chris. Slide 18 captures our asset management business on a page. We originate and actively manage alternative assets across three key asset classes, being private credit, real estate and hospitality. We have operating platforms and capabilities across several platforms that ensures we are directly originating and actively managing our assets on behalf of our investors. We believe this provides the best outcome for our investors. We are a capital light asset manager with access to diversified and unique sources of funding, ranging from equity investors to banks, our balance sheets, and co-investment capital. We believe we have a unique platform capable of materially scaling our assets under management whilst delivering strong risk-adjusted returns to investors. Turning to slide 19 and the divisional financial result. The strength of this result is the significant increase in recurring revenue and the maintenance of a strong recurring revenue margin. Transaction fees were up on the prior period reflective of the establishment of the MA Marina Fund and the sale of Warrnambool Shopping Centre. As previously discussed, the elevated performance fee in first half 22 resulted in a $21.5 million lower performance fee being recorded in this period. Overall, and taking into account the prior period $29 million performance fee, we believe a less than $4 million reduction in asset management EBITDA is a very strong result underpinned by a significant increase in recurring revenue. To this point, recurring revenue represented 83% of revenue in first half 23. compared to 64% in the prior period. Turning forward to slide 20, which illustrates the compound growth of 24% per annum in recurring revenue over the last three years. Since 2020, recurring revenue has nearly doubled from 79 million to 148 million today, based on the annualized run rate at the end of first half 23. The large majority of this growth has been organic, and in recent years, the growth rate has accelerated. Turning to slide 21 now, and AUM growth. The benefit of being diversified is clear on this slide with different asset classes offering greater appeal in different parts of the cycle. Over the last five years, CAF AUM growth is 18% despite the market volatility. Turning to slide 22 in flows. It's probably where we should start the presentation given the focus and how positive the result is. Gross flows at 953 million for the period is a record result for the first half and up 66% on the prior period. Net flows are up 60% reflecting the strength of the gross flows and retention of existing investors. Importantly, of those investors redeeming over the period, nearly 20% reinvested their proceeds into another MA financial fund. Private credit was the main beneficiary of gross inflows attracting $776 million over the period. We see demand for private credit continuing to accelerate as many investors seek income generating investments and we are well placed to be a beneficiary. For the other asset classes, the increasing interest rate environment and market volatility has meant capital raising efforts have been more subdued, although we had very strong interest in the MA Marina Fund and the Sustainable Future Fund is gaining momentum. Our international non-migration flows increased 62% over the prior period as we continue to strengthen our relationships with our private clients and their networks. The institutional mandates were secured as part of the credit program with a large domestic super fund and an international institution investing in our real estate credit fund. The federal government review of immigration continues, and we're hoping of gaining further insights as the year progresses. This slide demonstrates our strategy to diversify the distribution channels and develop scalable products that appeals to both domestic and international market is working. We continue to see opportunities to grow our market share in the markets we're in, and we selectively expand into new markets over time, such as Singapore and the US. Turning forward to slide 23, which is a new slide for our presentation and shows historical flows. The charts clearly show how MA Financial's distribution channels have diversified over time and continue to grow despite a decreasing contribution from migration product. The slide also shows the growth of domestic flows which follows the development of our alternative asset strategies. On the right-hand side, the graph shows the growth in flows by channel over the last four years. We can continue to deliver strong growth in flows from both the domestic and international markets. Turning to slide 24, which shows the change in our investor base over time and a more diversified wagon wheel than the prior year. Turning to slide 25 and some specific commentary around the asset classes. I'll leave most of this commentary for you to read and spend a moment on hospitality. As most of you know, the responsible entity of Red Cape Hotel Group was the liquidity feature for investors due to general market uncertainty. Since establishing Red Cape, it has delivered a 16.1% return to investors over a six-year period net. Over the last 12 months, the directors of Red Cape have expanded cap rates with the current valuations reflecting a 7% cap rate based on venue maintainable earnings. Whilst operating conditions are variable, The operating performance of the pubs over the longer term have proved resilient and trade above pre-COVID levels today. Over the last couple of weeks, Red Cape has contracted to sell two smaller venues in Queensland, totalling nearly $30 million, both at a premium to book value, which underscores the private interest in community pubs. All real estate assets are going through a period of consolidation and the pubs are no different. We continue to be high conviction community pubs as they generate strong cash flows backed by strong fundamentals and a large land bank in metropolitan locations. Turning to the final slide of asset management section before I hand over to Chris. Slide 26 illustrates the significant growth we're experiencing in private credit. This slide captures the breadth of our business and the unique capability we have in-house that underpins the attractiveness of the platform. It's how the entire platform comes together that creates the real opportunity and value. I won't dwell on this slide, although clearly the AUM growth provides evidence that the funds are appealing to the investor base and our track record is impeccable at delivering targeted returns. I will now pass over to Chris to talk through lending and technology.

Thanks Julian, and turning to slide 28 on lending and technology. The development of our lending and technology business is consistent with our strategy of being a builder of valuable businesses in large addressable markets which are very scalable. The financial technology platform that we have generates fees and commissions. It also provides considerable data and insight and is very complementary with the growth and development of our lending business in both specialty finance and residential lending through MA Money. This lending business not only generates spread income earnings, but it is also a primary generation engine of investment product for our managed credit funds. The underlying financials of our lending and technology division are broken out on slide 29. Financial technology experienced strong growth in revenue of 27% over the prior comparable period. As FinShores managed loans and broker numbers increased over the last 12 months, I'm really pleased with the FinShore acquisition and how the business is growing. Lending platform revenue declined over the last 12 months. Now this is a result of a credit asset being recycled out of our lending business and into managed funds within our asset management division, as well as higher interest costs stemming from the increases in variable interest rates throughout the year. The expenses of the lending and technology division increased over the last 12 months as a result of the investments that we have made in building the MA Money residential lending platform and taking on more staff into Finsure in order to deliver the strong growth that it's experiencing. As such, the overall EBITDA declined 15% over the last year from 8 million to 6.8 million. A more detailed breakdown of the technology business is shown on slide 30. It's pleasing to note that the Finsure loans managed on its platform have now reached over 100 billion. That's a great result. And broker numbers increased 18% to approximately 2,850. Fees and commissions are therefore expected to increase as these new brokers mature and generate loan book growth on the platform. Slide 31 graphically represents the growth that Finsure has enjoyed over the past six and a half years. This is market leading growth and it demonstrates the value proposition that Finsure adds to the brokers and lenders on its platform. Finsure now has around a 15% broker market share. Moving on to slide 32 which sets out more details on specialty finance and residential lending business and as mentioned before this business is in ramp up with planned investment to deliver growth. The key performance drivers on the bottom of the page clearly demonstrate the investment that we are making into OMA money and we've made a deliberate decision to compete with pricing and terms in this competitive market in order to grow our loan book and it is working. In addition we have sourced considerable funding capacity to meet this growth. Slide 33 shows the growth that we're experiencing in the MA Money Loan book on the left-hand side and the more efficient utilisation of balance sheet capital in funding that growth on the right-hand side. As an update, as Julian mentioned as well, I reiterate that we have settled on approximately 130-odd million of loans within the first seven weeks of this current half. And finally, I'll move on to corporate advisory and equities. Slide 35. You can see the segmental financials that reflect the challenging environment for closing deals within the first half of 2023. M&A as well as ECM activity has been subdued in the first half, and predicting when deals will close has been a challenge. By way of example and update, work largely completed in the first half of the year will deliver about $5 million of transaction fees rolling into the second half of 2023. And we are seeing early signs of improving market conditions in this second half, with considerable momentum in building our pipeline with more mandates continuing to be won. However, deal closure and success does remain uncertain. You'll also notice a small decline in our average headcount compared to last year. This has resulted from a degree of natural attrition and a disciplined approach to managing the platform and costs in this current environment. At present, there are 48 executives within corporate advisory, and we are looking at continued incremental investment in teams and new hires. but we will be disciplined in our approach to growth. On slide 36, you can see the seasonality in revenue that we typically experience within corporate advisory and equities, with a 60% skew to revenue in the second half. As our pipeline continues to build, we expect a similar skew for the second half this year. On that, I'll now hand over to Giles Boddy, our CFO, to take you through some more details on the financials.

Thanks Chris for that and good morning everyone. Turning to the financials and starting with the group underlying profit and loss on slide 38. The group had a strong first half performance with underlying NPAT of $24.4 million and underlying EPS of 15.2 cents. Whilst there is strong underlying momentum in the business, the headline result was down 13% on the first half 22 due to the impact of elevated performance fees in first half 22 and weaker market activity and advisory. Pleasingly, the group's recurring revenue for the half of $83 million was up over 20% on the prior comparative period, and this recurring revenue now comprises just over 65% of underlying revenue, highlighting the strong composition of earnings across the group. Expenses of $83 million were down 14% in first half 23, reflecting tight cost management and the timing of revenue-related compensation in both first half 23 and first half 22. The group's compensation ratio for the half was in line with FY22 at 49.8%. The combination of strong earnings and strong cash conversion sees us maintaining our interim dividend of $0.06 per share. Turning to the operating balance sheet on slide 39. Our operating balance sheet aims to present a simpler view of both our invested capital and true economic exposures, a detailed reconciliation between our statutory balance sheet and our operating balance sheet is included in the pack on slide 48. The balance sheet's strength has really facilitated the exceptional growth in our asset management and lending businesses that was outlined by Chris and Julian. The group's cash position of $56 million at 30 June 23 was lower than 31 December 22 due to the seasonality of payments following the payment of a final dividend for FY22 and full year 22 bonuses, as well as the acquisition of Blue Elephant, and increased funding of our MA money business. Our $40 million revolving corporate credit facility really enhances the balance sheet flexibility and means we can support continued growth across the business whilst running cash at lower and more efficient levels. The facility was drawn by $25 million at 30 June 2023 and was fully repaid in July. Finally, turning to our investment breakdown on slide 40. Our focus in the half was on the ongoing support investment in key lending and asset management strategies. We continue to recycle our seed and co-investment capital. During the six months to 30 June we recycled and reinvested over $100 million into new and existing strategies. In the investment table you can see a net increase in lending as we increased our investment capital in MA money, to establish a number of new warehouses which give the MA business capacity of over $1.7 billion. An increase in our investment in private credit funds to support growth as well as the acquisition of Blue Elephant on the previous slide. This dynamic nature of our balance sheet and our focus on capital efficiency will continue to underwrite our future growth. I'll now hand back to Julian.

Thanks Giles. Many of you have seen this slide before, although our simple strategy is applied across our businesses and is summarised on this slide. We're builders of valuable businesses in large addressable markets and we look to scale businesses with unique distribution capabilities. We have access to diversified capital sources and client bases and a strong balance sheet to support growth initiatives. We have a specialised advisory capability aligned with a leading independent global platform and our experienced management team strongly aligned with investors. With that, I'd like to close out by reiterating the strength of the operating result as demonstrated by our growth in recurring revenue and the embedded future growth in MA Financial. We've always talked about having a focus on creating long-term value for shareholders, and we're pleased to be able to provide some medium-term management targets to better frame the opportunity for all. With that, I'd like to hand back to the operator for Q&A.

Thank you, all the speakers. And as a reminder, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. Again, to ask a question, press star 1 on your telephone keypad. And your first question comes from the line of Apoorv Sehgal from UBS. Your line is open.

Good morning, all. I'm just subbing in for Tim Piper. Three questions from me, please. The first one, just on the recurring revenue streams, obviously they're increasing. Any rough targets or guidance around share of recurring revenue as a percentage of total under the FY26 medium term targets, please?

I think when you think about what, sorry, it's Julian here, but when you think about recurring revenue and where we generate it from, currently we record the monthly fees that we get from FinShore. and the base and credit income fees that we get on an annuity basis from the asset management funds business. Over the last couple of periods, that's been growing at sort of 35% per annum. And as those flows come in, we expect that to continue. So the thing about the other fees, the more cyclical fees, I think they bounce around a bit. We've had as high as 100 points of performance and transaction fees in a period. This period's about 30 points. If you look through cycle, I think you can look at that composition of 200 points with 85% coming from recurring is not a bad proxy.

Got it. Okay, next question, just on revaluations, sort of looking across hospitality and real estate and noting that real estate is mostly the closed end funds. How should we think about revaluation movements over the next 12 months, please?

I think the good thing for us around real estate is we're sort of focused on high-yielding assets over the journey. So when you think about the shopping centres, which is about $1.9 billion of the real estate portfolio, they were acquired on higher yields than some of the tighter yields that were paid at the top of the cycle for other asset classes. So we think we see some easing in that, but it's not hundreds of points. It's sort of 25 points or 50 points here or there. And so therefore, when you think about it in the composition of the whole AUM, it's probably not going to move the dollar heaps. In terms of the hospitality, again, they're sort of in the books at about 7% cap rate. The directors of the Red Cape Hotel Group have been easing cap rates for the last 12 months. We don't think there's a long way to go there, and we've actually sold some assets at around value. So we don't see it as being a material impact in the business. We're not blind to the cap rates moving up slightly at this point in the cycle, but we think our assets are pretty defensive in that sense that they're high-yielding assets, which gives us a bit more cover on a rising bond.

Understood. And just a final question from me, just on the asset management OPEX, it was down about 16% year on year. How much of that would be driven by variable compensation versus like just efforts to reduce costs?

Hi, it's Giles here. So look, yeah, talking about those costs in asset management, but also across the group as well, there's a couple of timing items that are coming through. So there's a number of one-off items in first half 22, as well as revenue-related compensation that we had, and that was in the timing in first half 22 and how that relates to the elevated performance fees we had in last year, and then also in the first half of this year as well. But overall comp ratio, all the half is running at 49.8, and that sort of aligns with what we did last year for the full year.

I think you'd think that stays pretty consistent for the full year, so more timing than cost being materially down. We are very cognizant of building the business to scale, So coming out of a sort of half-year result last year, we did have a very close look at the business in terms of optimizing the platform and reducing growth in headcount. But that comp ratio should provide you with a guiding light at 50%.

Yeah, perfect. Thanks, guys. Appreciate it. Thank you.

Your next question comes from the line of Glenn Wellam from MST Financial. Your line is open.

G'day guys, well done on the result and also in particular well done on all the disclosure within this document. Fantastic, particularly the medium term outlook. This question on your growth ambitions in lending, you've disclosed you've got a roughly 15% market share for Finsure, so just sort of trying to work back to that $4 billion growth target in the loan book. What sort of market share is MA money getting from Finshaw currently? Where does the market share for Finshaw need to get to? And I suppose implied for MA money as well, market share of Finshaw to get to that sort of figure, just in rough terms.

Yeah, I think it's important to note Finshaw and MA money's vital statistics, for want of a better phrase, are distinct and very separate. The FinShore business model is about the fee for service and platform for brokers and being an integrated piece of the home loan volume market, which is, I think, now in excess of 70% brokers. So FinShore has a fee for service provision, which sees a huge amount of volume running through its platform. MA Money is separate and distinct to FinShore and its out there in the market competing with other non-bank lenders. Its products are indeed on FinShore platforms, but they're also on other aggregator platforms. And it is coming from a standing start, MA Money is, really from launching properly in February this year. So it is experiencing quite nice growth as it has been a new entry to the market. The residential lending market is growing I think the largest capital market in the country, or one of the largest capital markets in the country, so its market share is absolutely minuscule. And really it's a question about getting good products on shelf and building a processing engine to tap into what is a growth in non-bank lenders in this country and to see that ramp up over time. you know, to get to that 4 billion settlements per month of say 100, 100 and change million dollars, get you there on that trajectory. There is not a really, that's not a really meaningful market share number that you can have when you'll see the market settling tens of billions of dollars of loans per month. And I don't quite know what the industry number is, but it would be a sheer fraction of that. So we don't really look at the MA money comps and market shares and compare them to Finshaw. It's part of the same ecosystem being business units that generate income from the residential lending market, but they're very different in nature and they both compete very separately in the marketplace for the business that they do. So there's not really a meaningful tie between well, this is what Finshaw is doing, so therefore this is what MA money should be doing. MA money has to stand on its own two feet. I think the acceleration we're seeing in the brand rate of settlement is giving us the confidence that it's going towards the $4 billion.

Yes.

I mean, the MA money products that are out there in the market for borrowers to consume stand on their own two feet and are getting traction because we think they're good products and well positioned in the market.

Great, thanks for that. And just any quick comment on, is there any pickup in the restructuring work within corporate advisory?

With restructuring, someone somewhere always gets something wrong, so there will be things to do. Looking at the macro and where the economy is, are we seeing a general groundswell in activity? Not a huge amount at the moment.

Great. Thanks, guys. No further questions.

Before we proceed on to the next question, just a reminder, if you would like to go into the queue to ask a question, please press star 1 on your telephone keypad. And your next question comes from the line of Nick Burgess from Ordmanet. Your line is open.

Yeah, thank you. Good morning, gentlemen. Echo previous statements around the helpfulness of the FY26 targets. Just a couple of follow-up questions on those pieces. Firstly, in asset management, are you able to help us out with what your broad assumptions are for capital appreciation versus flow for the AUM target in 26?

Yeah, sure. I think we've been very focused on net flows down the rise of $15 billion of AUM. We haven't built in a massive assumption around any valuation of this, to be honest.

Okay. Okay. Is there an underlying assumption in that $15 billion of a return to normal in the migration channel?

No, there's limited assumptions around the migration channel.

Right. So that remains reasonably subdued in those forecasts.

It would be as subdued as it is this year, yeah. Really what we use is the FY23 year as a base year and then think about our growth rates from there in a measured way.

Okay. Okay. That's helpful. Thank you. And just a similar question with MA money. Chris, I'll take some of your points from the previous question. Is there an assumption you can help us out with in terms of that $4 billion target, how much in terms of distribution channel that's going to be delivered by FinShore versus how much is going to be delivered by other platforms in the market?

Look, the... Not really. The volume flows that we're getting are quite diverse. Okay. So we don't necessarily... We're really basing that of the volume ramp-up that we're experiencing now from other platforms, from Focus Direct and Fincher as well. So it's really across the board.

Okay. A... A couple of questions. Just on the cost base, given your guidance comments around the investment in MA money in the second half, the overall group EBITDA margin improved, and obviously given the environment, that's a pretty impressive result. How should we be thinking about the group EBITDA margin in the second half or for the full year, given all of the guidance points that you've given us?

Yeah, I think in terms of the group EBITDA margin, you'll see it sort of normalised back to sort of all consistent with last year, I think. But, you know, it's really timing differences around some of the revenue recognitions and variable compensation that's driving a little bit of that. But I would have thought that the FY, so the financial year 22 numbers there or thereabouts, not the half of the full year.

Yeah, and what was the full year EBITDA number again? Just remind me, sorry, I don't have that in front of me.

So we're saying that'll... Let us come back to you. It's a little bit higher than the 33, but let us come back to you.

Yeah, okay. And lastly, I'm not sure whether you're able to say, but is there a broadly planned time for red capers when the restrictions will lift on that fund at this point?

I think it's a good question. It's one, you know, we've spent a lot of time with the investor base of red capers coming to this position. So it's an aligned position with the investor base. In terms of timing, I think we really need to see a bit more out of the macro environment to come out of that. And it's really a decision for the RE of the board. The liquidity is showing, demonstrating the last couple of weeks that we've sold two assets at or around book value. The assets are warm okay in this market. So we've just got to wait and see. And I think the investor base is very much of the view that you have a stable capital structure from which to participate in the future growth of the asset as opposed to put it under pressure. Most of the investors have been with this fund for a long period of time and have done very well. They're largely supportive of the long-term for the asset class.

And the asset sales that have been announced so far, broadly, when do they settle?

They're Queensland, so they're subject to regulatory approvals at the minute, but they'll take three to six months to settle, right? But it's up to the New South Wales, the ILGR, but that's the process we'd go through with the regulators. If we have another for the three or four assets, and the market one's been announced around Shamrock, which is up in Queensland as well, it's quite healthy conversations going on around some of the smaller assets.

Yeah, okay, that's helpful. Thanks very much. Thanks, Nick.

Your next question comes from the line of Andrew King from Perennial. Your line is open.

Yeah, g'day, guys. Just a quick one on the 26 targets. How much capital do you think you need to invest to hit those targets from a MA financial balance sheet point of view?

From my notes, basically we've said that we think we've got enough capital in the business to run this sustainably. As you know, we seed assets, we seed investments, we take the capital back and we go and grow other initiatives. Again, we've had some other capital recycling that's gone on through the balance sheet in the last six months around some of our co-investments, etc., So that's an ongoing theme for the business and we think we're well capitalised to achieve these sort of targets.

Okay, so pretty capital light to hit those targets.

Yes.

So rising ROAs in the future? I'd hope so, yes. Okay. Okay, that was it. Thanks, guys. Thanks, Andrew.

Your next question comes from the line of Mark Scothick from Kinetic Investment Partners. Your line is open.

Hi guys, I can ask one of my questions. So the second question is actually probably more for you, Chris. Given the US is significantly larger than Australia, can you just give us a bit of a flavor for the size of the credit opportunity there with Blue Elephant versus Australia?

For sure. I mean, there's really three things to mention about the US market and the credit piece. One, as you highlight, is the size. It is infinitely larger. So when you look at the amount of credit that we manage in Australia right now, it's around that $3.3 billion mark. For the investment strategies that have proved very popular here in the private credit space in the States, it is multiples the size. You could just invest in one specific idiosyncratic type of credit and easily get to $3.3 billion in that in and of itself. And that's the second point about the US market, that the nature and sophistication of the credit and how deep certain areas of specialty run within the state, it means that you can have real points of differentiation, asset selection, and origination. So it's hundreds of billions of dollars in some very niche and bespoke areas of credit and multiples of that more broadly. And private credit generally is having a bit of an awakening as an asset class, I would say, globally with a lot of a lot of managers seeing this space as a space that we've been operational in in Australia since 2017 or 18, and hence I'll move into the States. And the third piece that moves into is the investor base and pool of capital in the States, which is very attractive to us. So not only do we think we can manufacture good risk-adjusted return credit product to are Australian and international investors on both an Australian dollar and a US dollar basis hedging in the Aussie dollar. We also think with the aging demographic and the thirst for income and with yields moving and the macro with the banks in the states retreating from certain credit markets, we think there's really good risk adjusted return and piercing into distribution more into the states and the pool of capital managed in the US is obviously vast. Through that lens of private credit, we see massive upside in terms of total market size, sophistication of product and points of differentiation, and the ability to source capital in that market. Now, obviously, we only closed on the Blue Elephant transaction this year. We're moving some staff over to the States for better and more efficient integration, and so we're going to really seek to ramp that up more next year.

That's good. And just a second one, Chris, do you reckon in like three, four, five years' time, the U.S. credit opportunity could be larger? Obviously, the technological market is larger, but do you think the business in the U.S. could be larger than Australia, purely from the slides at the end market?

I'd like there to be growth everywhere, obviously, but we're starting from a small nucleus in the U.S., but it has got a long track record, which is additive to... leverage off to grow. But I really hope we get the US right. The opportunity is vast.

Okay. Thanks, guys. Well done. Cheers.

And that does bring our Q&A session to a close. I would like to hand over to our speakers for any closing remarks.

I appreciate your interest in the call today, and we look forward to catching up with many of you on the road in the next week or so. So thank you for your interest.

This concludes today's conference call. Please enjoy the rest of your day. You may now disconnect.