MA Financial Group Limited

Good morning and welcome to the first half FY25 result for MA Financial Group. My name is Julian Biggins and I am the joint CEO of MA Financial alongside Chris Wyke who is in the room with me. We also have Giles Boddy, Chief Financial Officer and Michael Leonard, the Head of Investor Relations with us. We're once again very pleased to report a strong group result underpinned by contributions from all of our businesses with momentum continuing into the second half. I'll start the presentation on slide five and spend a moment on our philosophy before we run through the first half performance. In June, we celebrated our 16th anniversary with the business being founded in 2009. As a reminder, MA Financial was founded as a corporate advisory business, along with the key approach being clients first and providing a positive environment for our staff. This approach stands true today, despite our business now covering a number of different business divisions and countries. Over the years, we've built numerous businesses from scratch, including the Asset Management Division, which initially focused on the innovative immigration-related products and later successfully expanded to include hospitality, private credit and real estate, and investing on behalf of a very broad range of investors. More recently, we've expanded into the residential market through FinShore and the MA Money business we've both attached to the large Australian residential market. Businesses are not built in a linear way and strategies need to be proactively managed and refined over time. Building is often commenced with periods of investment and therefore short-term headwinds although ultimately we want to see the growth come through. In managing MA Financial we have a portfolio approach to trying to make sure we have a diversified collection of businesses where some are more mature and offer predictable growth and others are freshly planted seeds that offer growth opportunities in the future. We're also very focused on building an ecosystem where the various parts of the business work together to succeed and that includes both people and capital. Results are key and we believe the approaches worked well with the group having grown substantially over the last 16 years while the future provides even bigger opportunities. Now turning forward to slide seven and some of the key themes from the result. Underlying earnings up 26% on the prior comparable period with growth across all key operating statistics. Record gross flows into the asset management business with a broadening of the distribution channels to include the listed market equity with the IPO of MA1. We believe this channel can be a very strong contributor to growth as investors seek liquid alternatives to the hybrid market. The acquisition of IP Generation introduced a differentiated direct high net worth distribution channel to our real estate raising capabilities. And the group started deploying capital with Warburg Pincus, our institutional partner in real estate credit. These are all significant strategic milestones for MA Financial and demonstrate our ability to identify market changes and adjust our strategy proactively for market conditions. This has been a consistent focus for us since we founded the business. The residential mortgage marketplace continues to grow strongly with both MA Money and FinShore experiencing strong growth over the first half, with a unique ecosystem touching one in nine home loans in the country and MA Money adding almost $2 billion of loans over the last 12 months. The corporate advisory business had an impressive first half with strong transaction flows and revenue growth as market performance was strong over the half, although volatile. Finally, we retain a strong focus on active management of the balance sheet to optimise capital and earnings. This covers both our asset management and lending initiatives that require significant capital from time to time, although they can also be the source of capital through recycling opportunities. The strength of the business is in its whole and the demonstration of this couldn't be stronger than in relation to MA Money, Finsure and Asset Management collaborating across the residential marketplace to innovate and deliver strong growth in a sustainable and capital light manner. As you can see on slide 8, the operating financial results across the business were very strong and this reflects the proactive strategy and investment we made in the past delivering growth. Recurring revenue was up 26% to $120 million, a record for the group. Earnings per share is $0.14 for the half, up 26% on the prior comparable period. Assets under management up 31% to $12.7 billion half on half and gross flows were $1.5 billion versus $1.1 billion in the prior comparable period. Another record. In the lending and technology division, Finshaw continued to grow strongly with the loans managed by the group up 28% and MA Money's loan book growth accelerated materially to finish the period at $3.3 billion, up 134% on the prior year half. As I previously mentioned, corporate advisory had an excellent start with revenue up 19% to $26 million. All in all, a really strong result right across the group, and pleasingly, momentum has continued into the second half as well. Turning forward to slide nine, a new slide for us focused on recurring revenue. Recurring revenue is a key focus as it talks to the sustainability of the top line. In the first half 25, recurring revenue increased to 74% compared to 68% in FY24 and was underpinned by strong growth in lending and technology and demand for private credit products. We really like the stable revenue base of the group and believe that our absolute recurring revenue base will continue to increase over the medium term. Clearly, some of our more cyclical revenue streams associated with transactional activity, such as performance fees and corporate advisory revenue, will fare better in a more buoyant market, and we believe that with interest rates rolling over, we're seeing some green shoots in both businesses. Turning forward to slide 10 and our FY26 growth targets, which are getting much closer. As you can see on this slide, we have made significant progress across nearly all five key growth targets in the period. Assets under management at $12.7 billion is within striking distance of the $15 billion target, although we acknowledge that we acquired IP generation through the period. MA Money's loan book at $3.3 billion is already approaching the $4 billion target with 18 months to run. We do caution investors to not extrapolate directly into profit as the residential loan market is dynamic and will go through periods of investment to manage increased volumes. Whilst we are confident, our impact guidance remains unchanged for this business. Finshaw at $155 billion shows the implied target growth to be well below historical numbers, and we're confident of hitting this target next year. Corporate advisory is more a point-in-time measure, and we feel really good about the talent in the business, industry coverage, and diversity in pipeline. And finally, we do see the group EBITDA margin improving over the next 18 months as our focus on operating efficiencies start to provide some benefits. alongside MA money scaling and market conditions improving for more cyclical fee streams, including performance fees. We're really pleased with how the business has performed over the last couple of years when we first published these targets and remain focused on delivering and exceeding expectations. Now turning forward to slide 11 and the financial results. Revenue was up 21% to a record $163 million in the half. Asset management revenue was up 10% driven by ongoing growth in demand for private credit funds. Loan book growth in MA money contributed to revenue growth alongside corporate advisory delivering a stronger start to the year when compared to last. The revenue results are strong across the entire business. On the expense side, the 20% increase was primarily there to support the growth in MA money and included the investment in diversifying our distribution channels primarily into the US and Singapore. Statutory profit was impacted by establishment costs to launch MA1 and the acquisition of IP generation. Both costs have been removed from our underlying result to provide investors with a normalised result. Strategic investment spend impacted underlying earnings by $6.1 million. which is in line with our previous guidance and expectations. On slide 12 you can see the momentum remains with our key financial drivers across the business and we see this continuing into the second half. Now turning forward to slide 13 and divisional highlights. Asset management again reported record gross inflows being driven by strong demand for private credit and we've also seen a return in interest for real estate over the last 12 months with Red Cape and the marinas being particularly active. Net inflows increased 2% to nearly $700 million compared to the prior period and was impacted by global volatility and some increased liquidity sought in our open-ended strategies. Importantly, post-result, we have seen gross flows remain strong and net flows stabilise at around $100 million per month. Recurring revenue margin at 155 points was up 5 points on the first half last year and remains supported by private credit funds and is in line with our guidance. In lending and technology, Finshaw continues to grow strongly, driven by new brokers joining the platform, with the broken numbers now exceeding 4,000, up 17% on the prior. Again, MA Money added about $2 billion to its loan book over the last 12 months and continues to grow strongly. The NIM, net interest margin of 1.5%, was up from 1.1% in the prior, which is a strong result for the group. And finally, corporate advisories saw a strong contribution, advising over $1.6 billion of transactions in the first half alone. We see all three divisions working well and contributing collaboratively to deliver strong results across the diversified group. Turning forward to slide 15 and post-result activity. The strong momentum in the group has continued post-30 June with positive gross inflows in the first seven weeks of almost $380 million and $182 million net, excluding institutions. Whilst early days, this returns the net flows run rate to around 100 million a month, which is a strong result given the market environment. We've seen the real estate business become more active as the IP generation team and our core real estate team collaborate on a number of transactions And including our alternative real estate business, we have over $1 billion of potential acquisitions under due diligence. Red Cape Hospitality continues to go from strength to strength as the fund has stabilised post the period of uncertainty attached to both COVID and a material increase in interest rates. Red Cape has recommenced its growth journey with acquiring over 180 million of hotels over the year to date. We've recently commenced a $50 to $70 million capital raising to fund further growth and the underlying performance of the assets has been stellar. with the forecast FY26 distribution increased 17% to 11.25 cents per unit. Moving to lending and technology and MA Money's volume growth have continued to accelerate with almost 570 million of new loans in the last seven weeks and the loan book now reaching 3.7 billion. This is a fantastic result and again demonstrates our ability to strategically build valuable businesses over time. Turning to slide 16 in our outlook, We expect the continuation of the momentum and look forward to delivering a strong second half result. In asset management, we expect to deliver growth in both gross and net inflows. We expect IP generation to settle in the first week of September and are excited about the number of opportunities that the business is working on that will see our core real estate asset management business return to growth. We think it is a great time to be active in the real estate sector. Recurring revenue margin for the year is expected to be higher than FY24 at 160 points, although it will step down slightly post the settlement of IP generation. Performance and transaction fees are anticipated to increase in the second half relative to the first half, although they remain subdued compared to our stronger years. In lending and technology, we expect MA money to continue to deliver growth. However, the stronger than anticipated volume growth today will accelerate a requirement for some OPEX and technology spend in the second half of 2025. Importantly, the performance of MA money today increases our confidence in delivering on the FY26 target of 15 to 20 mil NPAT. We continue to remain focused on retaining a capital light balance sheet and using our various sources of capital, including asset management funds, to grow our lending business. In corporate advisory, we expect conditions to remain supportive of deal flow and accordingly are retaining revenue per executive to be within the 1.1 to 1.3 million range. In regards to strategic spend, our guidance remains unchanged at approximately $10 million in FY25, slightly down on the prior period. The investment spend largely relates to the US private credit platform and there's a slight skew to the first half as we see the US platform grow. We'll pause the presentation there today and leave the divisional detail for you to digest and obviously feel free to ask questions. As you know, our focus is on creating long-term value and building sustainable diversified business. We believe that we are executing on a strategy to deliver this outcome and thank you for taking an interest in MA Financial. With that, I'll end the call and pass back to the moderator to take questions.

Thank you. If you wish to ask your question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. The first question today comes from Gayachandra with UBS. Please go ahead.

Hi, team. Thanks for taking my question. I just have a couple, if that's all right. So the first one is, are your expectations around a 40-60 underlying profit skew for the first half and second half still unchanged?