Praemium Limited

I would now like to hand the conference over to Mr Anthony Womsacker, Chief Executive Officer. Please go ahead.

Thank you and good morning everyone. Nice to see so many people online and interested in the premium half year results. David and I look forward to presenting an update on the business and then taking some questions after we've finished. Obviously this presentation and the results themselves have been loaded to the website and I encourage those of you who have access to the ASX website to follow along with us although of course the slides will also be up as we go through. At PROMIEM we acknowledge the traditional custodians of country. We pay our respects to their elders past and present. I draw your attention to the disclaimer on page three. Whilst I won't read it, it's very important background for the presentation that we're about to go through. As I go to the agenda, you can see there what we're going to cover, and I won't dwell on that. We'll just get straight into it. But as I've said, I'm delighted to be joined again by David Coulter. Unfortunately, this is the last half year or the last results presentation that David and I will do together. I think everyone will be across the announcement we made today that David is going to be leaving premium, which is disappointing for me at a personal level, but we obviously wish David very well going forward and I'll say a bit more about that at the end. Going to the business highlights, the highlights for the half year, if I could just start off with this observation I think many people on the call, perhaps most people on the call will have joined calls like this before. I've said previously that we get the opportunity to have presentations of this type of nature, a business update or a company update, about seven times a year. There's four quarterly releases, there's two financial releases and there's the AGM. What you will notice is that for a number of years now we've been relatively consistent in the sorts of things we focus on and we have said that one of the things we try to do is set our strategy as a long-term strategy. We try to be quite disciplined about looking at the market and where we think it's going and our own strengths and opportunities to meet the needs of those market conditions. and that should lead to a longer term strategy. So what we start to see if we're doing that right is that the results that come through half on half or indeed when we present a quarter should reflect the way we're executing on a strategy that is relatively well known amongst our close shareholders and the analysts who follow us. So I think what we see this half is when you look at those numbers I think a relatively impressive We're comfortable with where the business is tracking and we're comfortable that they reflect that we're starting to see the results of executing on that consistent strategy. One of the things that's very important to us is revenue growth. Again, I'll talk a little bit more about that later but we're pleased to see the very strong revenue growth and the translation of that into underlying EBITDA. The other thing is you've got to have the right product and so of course we're delighted to have launched our new core product in the overall range spectrum and so we're starting to see the funds under administration in that platform growing. So very happy with the growth. Finally of course the business is owned by the shareholders, many of whom are on the call. As always, thank you for your support and we're conscious of our duty to, as the opportunity arises, to return money to shareholders and we've been able to do that again in the last six months. If I go to the next slide, I did talk about the product and it's very important that our product meets the needs of our target market which, as you know from our strategy, is the high net worth advice segment. We were successful in the most recent Investment Trends Survey which only just came out to retain our overall rating of number three in the market overall. We were number one in the two categories that we value the most highly and so that was a very good outcome for us and we were number one in 18 subcategories. Overall, the platform Again, quite pleased about that. It was actually marginally above 89%, but we've rounded it here for 89%. If I then go to the strategy, which I did talk about, and people have seen these five columns in the past, and so those columns, we've narrowed the focus this time. The five categories are product, operations, service or customer service, superannuation and acquisition opportunities. We've sometimes had slightly different headings but we've just been a bit more precise this time about what the actual area of focus is and then used the bullet points to talk about what we've been up to in the last half year in each of those areas. So whilst I won't go into them in detail, needless to say with the launch of Spectrum and the repricing of Scope, we are very happy where our product suite is at the moment. We're never going to rest and say there's no further improvements needed but we are very happy that we've now got the comprehensive product suite that we need to meet the needs of our preferred segment in the market. Operations, we have again been very busy behind the scenes somewhat. Obviously operations are often seen a bit more behind the scenes but we're We're very excited about the progress that we've been making. There's two continuous improvement programs that are always underway in operations. One is Lean Six Sigma and we've had some good wins there and we continue to be pleased that that's the improvement methodology that we've chosen for our business. But we are extraordinarily excited, like everyone. about the potential for AI already and going forward. And we're very confident about some of the initiatives that we're running. There's a few AI pilots running in our business at the moment and AI will deliver a range of improvements for our business and for our customers. So very pleased with the focus of ongoing improvement in the way we run our business operationally. Service, we have always said customer service is crucial to what we do. Once again I don't hesitate to say when we target the high net worth market we're conscious that high net worth individuals are used to having the best service in whatever they do. They're used to doing business with enterprises that have got a very high net promoter score, the cars that they drive, the restaurants they dine at, the entertainment that they look at or the holidays they go on or whatever. We have to aspire to be number one in customer service because that's what the demand is and we're pleased with the progress that we've been making and we're also pleased. We're very confident with the way we survey our client base. There's always ad hoc surveys available to people in the market and an anecdotal feedback but we've got a very disciplined process of surveying our customers and we've recently completed that. We tend to do that at least once, sometimes twice a year. We'll certainly be doing it twice a year this year but part of the reason why we value the work that we do on that front is because it's so good at telling us this is what you need to do next to continue to drive the customer service up so that remains and will always remain a very important area of focus. Superannuation, you know, I don't need to tell anyone on the call the wonderful success story of superannuation in Australia and the ongoing continuous growth that that delivers. And whilst we've got a lot of superannuation money on our platform, a lot of that's from self-managed super funds, which you would expect when we target the high net worth segment. But we do feel that we're probably underweight in terms of our retail superannuation offering. The work that we're doing there is to say as we continue to grow, the retail superannuation offering which is marginally under 10% of the total assets on our platform should be significantly higher than that in a proportion of the total assets. So we have to improve the overall offering. Whilst self-managed super funds will always be the preferred vehicle for high net worth people, there is a significant demand for the retail superannuation offering and we're going to make sure that our offering is completely consistent with the that a high-net-worth individual would expect. And on the acquisition front, we continue to be very pleased with how OneView is going. We always get asked, so before we get asked, We will say that we do have a few files open at the moment on some new opportunities, some in the same line of business as we do now and some that are related to what we do and would represent synergistic improvements in the total desktop offering that we give to our advisors. So having mentioned OneView and for two reasons, it's always of interest to our shareholders how it's going. It's also a good discipline for us to say we don't lose sight of the fact that we need to finish the execution of that transaction and it is tracking the plan. We recently issued the first earn out statement, nil was owed. That was because the way that the earn out is calculated, it's below the $3 billion threshold at the 15th of January. We expect that it will remain that way. Part of the reason for that is that our emphasis has been on ensuring the relationships are commercially sustainable and we feel that the food is going to land in a place where all of the relationships that stick with us for the longer term on the premium product suite and technology will be just as commercially viable as the rest of our business having recently undergone an exercise in repricing. And then the final slide for me before I hand over to David is you've heard me talk many times about our stakeholders and so we've taken the opportunity this time to just put this slide together about the various stakeholders in our business, our people, our clients, our shareholders and the broader community. Again it's a detailed slide and I encourage you to look at it and if there are questions about what we're doing there we would welcome those questions. Needless to say all four stakeholder groups are very important to us and the way we run our business and we don't think any business can be successful unless you achieve good outcomes for all four stakeholder groups and that remains our focus. So with that I'm happy to be handing over to David and David I look forward to you walking us through the financial results.

Thanks very much, Anthony. Thanks for those kind words at the commencement of the presentation as well. It's a great set of results that I've got to present to shareholders, analysts and other stakeholders today. I'll start with the group results overall, but I won't dwell on them for very long. And the reason for that is that they're coloured greatly by the inclusion of OneView in one of the halves, but not in the first half or the prior comparative period. But running through it quickly, you've got outstanding revenue growth, You've got reasonable discipline on costs and you've got a good drop through to either there at the bottom line. We've got a reconciliation to the detailed OneView contribution, the detailed X OneView contribution as an appendix to the pack and I'd encourage you to look at that. Also the statutory financials in the operating segment note go into a lot of detail about the various contributions from OneView, X OneView. Turning however to the group result X OneView. We're just having a little delay on our slide, Kerry Ford, I think, today. Focusing on what has happened within the group X1 view, noting that 1 view is essentially at run rate as was established for the second half of the 2024 financial year. Anthony, in particular, has been very consistent that the aim of the premium business is to run revenue at double-digit percentage growth. and constrained cost growth to something in the order of, let's say, 10% or lower. And we've been able to achieve that now consistently across three halves. The platform margins have improved because we've repriced, we've had good organic growth, and we've had very kind tailwinds from markets, admittedly. But revenue growth on platforms up 12% on the last half and on 23% on the prior comparative period. Our portfolio services business, and we'll have some detail on all of these, We're expecting there to be significant second half tailwinds as we reprice the Scope product. It's stable to the prior period and it's up significantly on the prior comparative period. As we've known portfolios, although I did note, and we'll get into this in some of the other slides, we had some rationalisation on portfolio numbers from one of our major clients. On the cost side, as you'd expect, and as I've noticed for a lot of participants in this sector, our IT costs are up reasonably significantly. It's not as though it's a complete arms race, but we recognise as management in these companies that we need to invest significantly, one, in our people capability, of course, but also in our IT capability to stay at the leading edge functionally and with technological capability. We're no exception to that. What I would note, though, is our cost of operations, as our IT costs have been increasing, is that our cost of operations have been able to be constrained to close to flat over that period, in fact, a slight decline. What we've also been able to absorb in the current half, particularly as it pertains to comparing to the second half, 24, is the launch of a brand new product in Spectrum. We estimate outside of essential additional STIs paid to people who work very hard on that project, it costs around $800,000 overall in additional marketing and IT and other administrative costs to launch Spectrum in the first half of 2025. It's not to say we don't give guidance that we'd be expecting our marketing costs necessarily to decline in the second half of 2025, but do note that there is a spike there to having done something that you wouldn't conventionally do half on half on half. So I'm very happy, of course, with the way that Spectrum's been received by the market in its initial green shoots. As I said earlier, OneView's really just on a run rate, and we have detailed backup for the OneView result in an appendix and in the operating segment results. I referred earlier to our margins, and we probably show more detail in this regard than any other participant in the market. We have our platform revenue margins for the S&A products, for PowerApp, and the impact that that has on our portfolio overall. As a footnote, I've provided the OneView average there as well. OneView can be a little more volatile given the way that we've been repricing or looking at accruing for the revenue in that business, but These are the outcomes for the group overall. You can see with the big red oval circling there, the impact that it's had repricing from April 2024 in the SMA and the elevation we've gained to the portfolio overall. You have that margin increase backed by good organic growth and good market growth, you're going to get the revenue increase that you've seen. I'm happy to take any questions on some of the trends that slide here. Turning now to that custodial business and the fund flows therefrom. This is something that we issued to the market on the 23rd of January on our fund flows. There's no new information in this slide, but it is worth revisiting that we've had very significant flow. We've got elevated FUA, and in the PowerApp product in particular, we've been able to rebound strongly from advisor exits that were well publicised and continue to have a drag on PowerApp, admittedly, but we've been able to rebound from that to restore PowerApp's flows to at least just above parity. Looking now in more detail at these portfolios and the revenue derived therefrom, then just a little more detail on the SMA and PowerApp and the portfolio numbers, average revenue per portfolio and also the advisor numbers. So turning to the SMA first, you can see clearly here that the impact of the SMA repricing has been entirely positive for the corporate overall. We've gone from first half 24, 628 per portfolio up to now $839 per portfolio. And our portfolio or account is the other way to describe it. Account numbers have even grown strongly in the meantime. I would note that there's been a slight decrement to the advisor numbers. And we had said on many occasions that we expected there'd be some potential decrement there as a result of doing the repricing. And that's fine. The question was whether or not we'd be able to wear it in terms of the eventual revenue drop through and these statistics and the P&L itself demonstrate that we've been able to do that very capably. On the PowerApp side, the average FUA portfolio has elevated very significantly. That's no surprise in a high net worth business where you've had good market tailwinds. Advisor numbers relatively steady, meaning although we've suffered some advisor exits, those businesses have been able to recruit back in to make up the shortfall. It is a more stable, mature business. earning what it is earning as revenue per portfolio as we'd expect because these high net worth businesses, even though the FUA increases greatly, we do have a lot of cap fees and fee tiers within those businesses that constrain the absolute amount of revenue that's derived from the portfolio. So at close to $3,000 per, that's as much as you could expect to earn anywhere in the market that's reasonable for the sort of bespoke service that PowerApp offers. And we'd expect that that's the continued trend that we'd see within that business. Turning now to the non-custodial business. Again, with the net close and FUA for non-custody, we're looking at something that we've already published in January for the December quarter. You've got the half yearly stats here. Scope portfolio is up significantly. Scope plus portfolio is up significantly. Scope plus FUA up significantly. and I'm very pleased to report that the pipeline remains very strong. To some extent, this is where we – well, not to some extent. We absolutely dominate the market in this space and we're looking to continue that dominance. When Anthony mentions that we're on the lookout for accretive acquisitions, it's in this space that we're particularly interested and see ourselves as being able to add more value to clients who are interested in taking, say, a state-plus service or acknowledging that the scope reporting function is leading in the market and to avail themselves of it would put them in a very strong position. So we see ourselves as being able to grow very strongly in this part of the market. Cash flow. There's something here of a disconnect from our EBITDA to our cash flow generation. As we've grown so strongly, we've grown our working capital component to a larger degree than I'd be necessarily comfortable with. You can see in the detailed balance sheet where the receivables are up and we've been paying down the payables. We've also had, beyond the operating cash flow, a return to the conventional cadence on PAYG income tax after having a tax benefit from a significant refund over the divestment loss or tax recognition on divestment of the international business and there's a lag on receiving that money from the ATO. I'm pretty sure no one would be surprised that there's a lag on receipts from the ATO but that's as much as I'll say. Everywhere else on the cash flow here, you're seeing a very regular pattern of investment now intangibles and a very regular pattern now of returns to shareholders. The dividend pay there represents the dividend paid as a final on a full year 24 and very pleased that we've announced another $0.01 per share dividend, which equates to $4.8 billion as well for the 2025 financial year as an interim dividend. But net cash movement down because we're returning funds to shareholders and we continue to make investments. But the cash position overall at $37.3 million, given our requirements on licences, is extremely strong. And the requirements on licences are disclosed in the balance sheet slide, which is the next in the presentation. So on the balance sheet, cash of $37.3 million is a very strong balance sheet. There's funds available there to fund future growth. good cash flow through on operations and how it's allocated for investment returns to shareholders is now fairly predictable and reasonably reliable, notwithstanding that we do have to make further investments in OneView, which will be the subject of the slides to come. I'll turn to that now. I just wanted to, on this occasion, go into some detail about the OneView one-off costs. It's easy to talk to an underlying EBITDA number in these presentations. but the one-off costs that we've been spending on one view, very, very sharply focused on these because they represent genuine cash outflow. We had announced when we made the acquisition and we've talked in successive presentations to market that we're expected to pay $1.5 million on acquisition, $4 million for integration and another $1.5 million in separation. I'm focused only on acquisition and integration on this slide because we haven't spent a cent on the separation just yet as we've worked assiduously to get this business integrated into the greater Holland. We've talked a little about that. Well, Anthony's referred a little about that in terms of working our way through commercially sustainable relationships, repricing and the impact on earn-out FUA. But in a little more detail, we had expected to spend 1.5. We've ended up spending 1.8. To some extent, when you get into drafting of legals, you can enter into a fairly iterative process. So that went slightly over our forecast. and also referred to a PPA, which is a purchase price allocation there, which was somewhat more complex than we'd expected it to be. Very happy with the service provided by those service providers. I think an overrun of that degree, given the amount of uncertainty it has in any M&A activity, is not something that I take lightly, but is also something that I reconcile myself to as having been reasonable under the circumstances. On integration costs, We've incurred $2.3 million so far. That's $1.4 million this half and $0.9 million in the prior half. These are largely focused on a TSA from IRIS and also having contractor project management resources at our disposal to make sure that our own integration staff aren't distracted and to keep us well on track with how we expect this to roll out. I expect these costs will come into forecast at around $4 million, that they might roll out a little more quickly. is something that we'd acknowledge, but that would be great for us because that would mean we were getting our 1G clients onto premium technology a little quicker than we might have otherwise expected. And then at the next half, I'm sure, having established the precedent here, we'll talk more about whether or not we've made it to that forecast and also about our separation costs of $1.5 million. But overall, should the – and Anthony will talk to this in some more detail as well – If the earn out remains at zero, we've paid $1 million up front and we've paid around $7 million to execute the transaction itself. For the sort of revenue that one view will continue to generate even with the reduction in the FUA that we've seen from the earn out statement, we'd expect that that's going to be a very, very successful acquisition. So with that, I'll turn it back to Anthony for the strategy section of the presentation.