MA Financial Group Limited

Good morning and welcome to the FY23 full year results presentation for MA Financial Group. My name is Julian Biggins and I'm here with my fellow joint CEO, Chris White. We also have Giles Boddy, the Group CFO, and Michael Leonard, our Head of Investor Relations in the room. We're very pleased to announce another strong operating result for the business, with our strategic initiatives progressing well and recurring revenue continuing to grow strongly. Let's start on slide eight and the highlights for FY23. Momentum remains with the business. Gross fund inflows reached nearly $2 billion in FY23, a record result that was up 27% on the prior year. Our assets under management finished the year at $9.2 billion, up 18% on the prior year. To put in context, when MA Financial listed in 2017, we had $1.1 billion in assets under management and therefore have grown it eightfold in just over six years. Our gross flows last year were nearly doubled in total AUM when we IPO'd. This very strong growth has only been achieved due to our focus on investing strategically. We believe in investing today for tomorrow. In addition to record inflows, we've seen meaningful change in our distribution channels over this time. In 2023, inflows from domestic sources continue to grow rapidly, as did investment from foreign high net worth investors into non-migration funds. Recurring revenue, one of our most important metrics, was up 23% over the period, reflecting strong growth in asset management and the Finshaw platform. This resulted in a materially stronger earnings composition, with recurring revenue growth partly offsetting the expected lower performance day revenue. Our residential mortgage marketplace is working, with Finshaw's loans on platform reaching $110 billion, up 20% over the year. and MA Money's loan book close to $1 billion. We're also very pleased to see MA Money undertake its maiden securitisation in the year, highlighting its ability to deliver capital-efficient growth. Our balance sheet remains strong, and we have focused on running a capital-efficient business. This has allowed us to hold our full-year dividend in line with FY22 at 20 cents per share, fully frank. Finally, we have always spoken about balancing short-term earnings with longer-term growth. Investment in growth strategies has an impact on short-term earnings. In 2023, we invested in a number of initiatives, including expanding our distribution channels into Singapore, Japan, and the US, MA money, middle, senior highs in corporate advisory and equities, and importantly, growing our brand awareness, which on a combined basis impacted our underlying earnings per share by approximately 5 cents. As significant owners alongside our fellow shareholders, we're confident that this investment will be rewarded in future years. This willingness to invest in growth is a major reason we've been able to grow our underlying revenue from $107 million in 2017 to $270 million last year. MA Financial is in great shape. It has a very diversified and robust foundation, and operating metrics are growing strongly, and we continue to invest to drive growth in the future. Turning to slide nine and our 2026 targets. We first published these targets last August with the objective of elevating the view to the medium and longer-term growth opportunities, which is how we think about the business. This is how we build the business and have demonstrated a track record of investing in strategies that deliver substantial growth over time. All of our targets remain unchanged, and the run rate over the last six months keeps us on track to deliver on those targets. Corporate advisory has been impacted by volatile equity market conditions and the EBITDA margin is impacted by both cyclically low earnings in our transactional revenue streams and our strategic investments. We believe that these targets are achievable and are excited about what this holds for the future. Now turning forward to slide 10. Pleasingly, recurring revenue was up 23% on the prior year, underpinned by nearly $2 billion of gross inflows and a 21% increase in Finshawe's Loans on Platform. The residential and specialty loan book also grew strongly, nearing $1 billion at year end, and has continued to grow post. As we have previously explained, underlying earnings per share was expected to be softer due to both corporate advisory and performance fee revenue being impacted by rising interest rates and uncertain market conditions. Neither of these areas of softness were unique to MA Financial in FY23. And when you consider that we've added over 25 million of recurring revenue in the year, replacing a fair bit of the outside performance fee of the prior year, you start to sense the real strength of the result. Now turning to slide 11. This slide demonstrates our ability to materially grow and diversify our business over time. In FY17, we listed MA Financial and forecast to have $73 million of underlying revenue of which only $17 million was attributable to recurring revenue streams. Only six years later, we're generating $270 million of underlying revenue with nearly $180 million of that being recurring in nature. That is 10 times the amount of recurring revenue that we had at the time of the IPO. We have grown significantly over the last six years and we continue to invest to deliver strong growth in the future. Today we have operations in six countries and employ over 600 people directly. in addition to many thousands more employed within our various portfolio companies. Recurring revenues are the foundations of a strong and resilient business. We see our FY26 targets align strategically with the objective of continuing to build recurring revenue base. With a history of delivering in areas that we invest in, such as the migration product, domestic distribution capability, our hospitality business, to lead and innovate into the next frontier. Now turning to slide 12 and our financial results. The headline financial result is obviously down. Although when you take into account the $44 million lower contribution from performance fees in this year versus last, it's a strong result in a difficult market. Recurring revenue increased to 66% of total revenue. That's up from 48% in the prior period. Expenses are down 3% year on year. despite our significant strategic investment in future growth initiatives. These investments added approximately $16 million to the expense line item. ROE and EBITDA margins were also impacted by our strategic investment spend and cyclically low revenue from our transactional revenue streams reflecting the uncertainty and lack of market confidence. We increased our working capital facility to $80 million over the period, which provides us with more flexibility to run an efficient balance sheet and we remain very focused on capital efficiency and having a capital light model. Overall, we believe the result is a very strong result reflective of a business growing its recurring earnings through difficult market conditions whilst continuing to invest in growth initiatives for future. Turning forward to talk more about our strategic initiatives. On this slide, we want to emphasise just how much We focus on investing strategically in the business to build future earnings growth opportunities. The balancing act here is delivering short-term earnings whilst embracing substantial future growth opportunities. We believe that we find a good balance in this regard. Since our founding in 2009, we have demonstrated our ability to substantially grow and diversify the business over time. Clearly, growth involves forward investment and a lot of hard work. Whilst the timing and impact of growth initiatives can be fluid. Our experience is that patience and vision is generally rewarded. Whilst we're excited about all the initiatives, I'll focus on a couple today that we might not have talked about previously. In FY23, we invested strongly in the MA Financial brand. The initiative is focused on elevating MA Financial to become a trusted household name. We believe that this will benefit all of our divisions, driving growth, and in particular, in growing our number of consumer-facing businesses. We acquired New York-based Blue Elephant Capital Management earlier in the year. This established our US credit platform with a team that has been in business in the US for a decade. Our objective is to leverage their strong track record as investment professionals with our distribution and product development capabilities. The US credit market is the largest in the world, and that's a massive opportunity for us as shareholders of MA Financial. We also invested into a digital distribution platform in Japan. named MA Alternatives Japan. This platform is targeted at attracting Japanese investors into foreign asset management products. Our first products on this platform will be private credit products. MA Financial owns one-third of the business in conjunction with our local partners. We've been on the MA money journey together and are really pleased about its progress with the line book of 15 to 20 million of impact in FY26. After a number of years of focus and financial investment, the meaningful prize is now within reach. Our middle technology business continues to gain momentum as we look to improve efficiency and accuracy in the way home loans are processed and approved in Australia. Middle makes the process of applying for a home loan easier and faster for mortgage brokers and their customers. While still in the investment phase, middle is rapidly moving towards being a key component in the processing of over $1 billion in home loan applications monthly. Growing user numbers and processing volumes is a key step in building the use of MIDL to become widespread across the home loan industry. Increasingly, mortgage brokers on the Finshaw platform are routinely using MIDL as part of their interface with their individual borrowers. The efficiency achieved using MIDL is proving to be a significant time-saving technology for brokers. and thus improves the attraction for them to be on the FinShore platform. The combined impact of these investments on our FY23 underlying earnings per share is around $0.05. However, when you consider the potential upside, it's exciting to think about what additional growth can be achieved. We think this investment is critical to grow the business over the long term, and we have a track record of delivering considerable growth for our shareholders. an ability to build a substantial business capable of navigating difficult markets and delivering strong growth. Now turning forward to slide 14. The charts on this table illustrate a year where we see the number of market headwinds. The trend in revenue growth demonstrates the longer-term momentum in the business and our ability to continue to grow revenue. Importantly, a lot of the growth is recurring in nature. The weaker second half result in FY23 is reflective of some of our strategic investments. MA Money and the US credit platform particularly impacting the second half result by $0.04 per share relative to a $0.01 per share impact in the first half of the year. Now turning forward to the business highlights on slide 15. Asset management now contributes roughly 80% of Group EBITDA with the other businesses providing diversification and a stronger ecosystem to create value. Asset management delivered record fund inflows, driving AUM to $9.2 billion, with a strong recurring revenue margin of 173 basis points. Asset management EBITDA was always going to struggle to lap the prior period, when we had $44 million more performance fees. Strategic investments in US, Singapore and Japanese distribution channels also impacted expenses by approximately $5 million, with most falling in the second half. Despite both the performance-based strategic investments, EBITDA was only down $20 million, with recurring revenue representing 87% of asset management revenue, and that compares to only 64% last year. Lending and technology grew its loan book by 150% to almost $1 billion, driven by accelerating growth in MA money. Binshaw continued its impressive momentum attracting almost 500 new brokers to its platform and growing managed loans to $110 billion. Almost double the amount of managed loans that were on Finsure's platform when we agreed to acquire the business in late 2021. It was a difficult year for corporate advisory and equities, as was the case for all market participants. The skew of activity remained towards M&A with very little ECM activity through the year. Early signs in 24 are more hopeful, however, we remain cautious. It remains an uncertain market. Turning now to our FY23 strategic outcomes on slide 16. Our strategic priorities have remained consistent over time and we continue to deliver on executing them. Recurring revenues across asset management and FinShore both increased materially over the year. Our distribution channels continue to expand and diversify, driving a 27% increase in gross inflows to nearly $2 billion. One of the continued highlights was the growth in our domestic flows, which exceeded $1 billion in FY23 and was up 81% on the prior period. We are and will continue to invest in future growth opportunities in our business across all three divisions. We focus on executing our strategy in a capital-efficient manner. We have demonstrated this through recycling assets from our balance sheet, including the maiden $500 million MA Money RMVS. Safety, low earnings. It is critical that we protect and reward our people for the future.

We continue to invest in the future and development through the MA Academy.

We also mentor executives to build new businesses within financial. We have global growth opportunities and move people around our business where it makes sense. We are proud of our culture and look to reinforce it as it's so important to our success. And the rebranding exercise was part of this. Now turning to our post-balance state performance and outlook, This is on slide 18. The positive momentum has continued across the group into 24. Our asset management funds have continued to attract strong inflows with $262 million gross raised in the first six weeks of the year. We have started our journey to build out distribution in the U.S. credit platform with the appointment of a head of U.S. distribution. We also launched and raised the equity for our MA Accommodation Hotel Fund with a seed asset and we see a significant opportunity to grow in this sector at a time that many assets are selling at material discounts to replacement costs and on attractive yields. Our digital distribution venture in Japan has received its license to distribute product with our first offering to be a private credit fund. MA Money's volumes over the first six weeks has exceeded $150 million and our run rate remains well on track to hit our FY26 loan book target. In lending and technology, Finsure continues its positive momentum into FY24, including building out a presence in New Zealand. The middle technology is gaining traction with Finsure brokers and received in excess of $500 million of loan applications on its platform in January alone. We anticipate this to reach $1 billion per month by the end of first half 24. And in corporate advisory and equities, we've started the year well with approximately $10 million of fees largely de-risked or paid. Now turning forward to our outlook. We are optimistic about the year ahead, although macro uncertainty remains. In asset management, we expect continued growth in both gross and net flows. In terms of recurring revenue margin, we expect there to be some headwinds due to the rising interest rate environment impacting our core real estate and hospitality strategies, and the sale of approximately 200 million of Red Capes assets. The FY23 recurring gross margin of 173 basis points was also elevated due to strong performance from the private credit funds. We expect transaction and performance fees to be broadly in line with FY23. In lending and technology, MA money is expected to hit a break-even run rate in second half 24 and remains on track to deliver 15 to 20 million of MPAT in FY26. In corporate advisory, while we've had a good start to the year, we are cautious about overall market confidence and volatility. We have a strong M&A Pipeline and equity markets are improving, although it still remains uncertain, and therefore we are pointing to the lower end of the target range in FY24. The year has a long way to play out. And finally, we are continuing to invest in expanding our distribution channels and other growth investments, such as brand and MA money. We believe these investments will represent around a $0.06 per share earnings impact in FY24, with a few to the first half as MA money continues to build momentum and we invest into the US credit platform. We plan to continue to focus on balancing shorter-term earnings performance with an appropriate investment in growth initiatives. As is our practice, we will invest in growth as we see the opportunity. Overall, the operating performance of the business is very pleasing, and our momentum of the last few years continues. We're navigating difficult markets that impact the more transactional side of our business, and we're well-positioned to deliver strong growth as the cycle turns. Our AUM is expected to grow along with FinShore section before handing over to Chris to briefly pick out some of the key highlights for lending and technology as well as CA and E. Let's jump to slide 24 quickly before I touch on flows. Clearly our assets under management have grown significantly over the journey. with AUM up eightfold since we listed the business in 2017, and up 18% over the last year. Private credit has continued to attract investors to a defensive yield, and we've also witnessed strong interest in alternative real estate, both the accommodation hotels and marinas. I believe today our AUM would be closer to 9.4 billion. Turning forward to flows on slide 25. When we look at this by investor channel, Clearly, domestic flows have had an exceptional year, growing at 81% and surpassing $1.1 billion of gross flows. Only three years ago, we were raising just over $100 million domestically. That's a phenomenal outcome. International non-migration flows were up a strong 27% to nearly $650 million. Non-migration flows were subdued as the review of the program continued, and institutional flows were marginally up with a couple of LPs allocating the private credit products. We see the institutional market as a significant opportunity for the group and continue to have more meaningful discussions with global partners. And turning forward to slide 26, the chart on the left demonstrates the execution of the stated strategy to both diversify and increase gross flows over time. In only three years, we've taken our domestic and non-migration international flows from 330 million per annum to 1.7 billion today. nearly a five-fold increase over three years, and we see plenty of opportunity for future growth in Australia, Asia and the United States. These numbers are very exciting and demonstrate the asset management business's strength in a market where many are finding it difficult to raise money. It is a very diversified investor base with many products offering tenure certainty. We're continually looking at adapting products or innovating new products to cater for ever-changing market conditions, whilst also having a bias for larger, more scalable funds. I'll now hand over to Chris to talk through the other divisions and close out.