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.

So going to our Venn diagram which we continue to use in these presentations just as a reminder of how we view the market and I think also to just highlight that there hasn't been, other than the growth in the two segments, both are continuing to grow very strongly but there hasn't been any significant change in the way that the market is playing out and the convergence between those markets for the reasons we've highlighted there. In one way a lot of that is demographic. There's an ageing population, there's a relatively wealthy country with a cohort of very high network individuals and that's demographics and demographics is destiny. So we don't expect that this is going to change materially. over the coming period and so when we view the market that way it allows us to set a strategy to say how can we succeed in a market that is composed in that way and likely to stay composed that way but likely to grow continually very strongly. In terms of how we meet the needs of that product, now that we've launched Spectrum we're able to put a slide up like this that talks about what our various offerings are and how they meet particular needs as encapsulated in the Venn diagram on the previous slide. So again, very happy to take any questions. I encourage you to look at that and consider those bullet points individually and why that positions Amy very well to enjoy ongoing success in what is already a very dynamic market. That leads us to conclude with just what our focus is and the outlook over the coming period. First of all, we do want to realise the full potential of that product range. We regard it as the best overall platform and administration solution for high network advice and so the challenge now for us as a management group is to realise the full potential of that. We want to continue to develop our leadership position in alternative assets. Again there's more and more conversations and reporting on the fact that as our wealth grows in Australia, mostly superannuation but also non-superannuation wealth, that that has defined appropriate investment alternatives. You can't just keep piling into the Australian Stock Exchange because the wealth is growing faster than the Stock Exchange itself. So there has to be more and more investment in alternative assets. We have a readership position and we want to further develop that and demonstrate to our clients that the ability to execute and report and administer alternative assets on our platform means that there's no degradation of the reporting and the visibility that clients have of their overall portfolio just because they're starting to invest in assets that don't have the same requirements for reporting that an ASX listed security does. We have the tailwind now of the state rate pricing and we want to realise the financial benefit of that as part of our aspiration to continue to grow revenue in double digits. We obviously need to complete the full integration of OneView and finally we continue to target greater scale. The reasons, whilst they might be obvious or worth stating, one is to allow ongoing investment in the development of our technology. You can see from our numbers we continue to invest in technology. Our technology spend is growing as a proportion of our total spend. That is justified at the moment. But for those who have heard me say before about the wonderful opportunities that technology is providing at the moment and the growth in AI as one example of that, Whoever does the best over the next five years and beyond, the change from where you are today will be extraordinary. So you've got to get that right. You've got to make the investment but you've got to be intelligent and smart about how you make that investment. We're very happy with how it's going so far but we continue to be cautiously optimistic I should say. We're not going to be complacent about where we invest. Part of the value of scale is to allow that investment to take place without detracting from shareholder returns and that's the second key point about the scale. It should allow gradual increase not just in overall profit but in profit margin. in terms of executing on our strategy. Once again, as this is the last formal ASX presentation I'll do with David, I want to say how tremendous it's been to sit with David through all of those presentations, quarterly and half yearly. It's been a privilege to sit with him as GFO on these calls. I'm delighted that as part of the changes he's making, he's agreed to continue to be involved in our investor relations function going forward. We're a small enterprise and we don't have our own investor relations people so we do it internally with a bit of help from our marketing people who are tremendous at the way they help us on this but David has really lifted that over the years and I'm delighted that he'll continue to be involved in that way and I obviously wish David great success as he continues to pursue a career. He's, in my opinion, a very young man still. And so he's got a lot of runway in front of him. So thanks, David, for all you've done over the years. And hopefully all the questions that we now get will be for you.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star key. If you're on a telephone, please pick up the handset to ask your question. Your first question comes from Rafatani Soturu with MSP Financial.

Hi, guys, and good morning. Can I start off with OneView and the anticipated synergies cost out? Can you just remind me... what the timing of that is and how we should think about it. So if you look at your split out for one view, it's got to annualise that $9 million of expenses. How much of that will transition into the new organisation or the existing organisation or how should we think about the underlying cost out from here?

We've consistently focused on one metric which is $3 million in synergies, meaning that's the amount of cost that we'd expect to take from a normal run rate. To the extent then that we have a second and equally important commitment in the market is to have mid-teens accretion on EPS, which is a demand on us to either ensure that we've got the same revenue, grow that revenue, or go further on the cost. So we're very focused on those, but we'd restate those commitments. But I would suggest that Now, at least $3 million in costs because we're then consistent in every presentation to market on focusing on that number.

Just clarifying, and the timing of those?

The timing will be first half next year. There's nothing we'll drop through in the second half of 2025. Or if it does, it would be marginal at best. I think would be the best way to describe it. The nature of transitioning these clients to our own technology is very much akin to a big bang. It's a lift and drop. Well, it's not really that, but it's going to take place holistically with very few exceptions on the one transition date.

Got it. And just with the repricing, I know there's been repricing in the SMA platform and there's a slide there, but just for, does it seem like there's also been repricing for VMA or what is now Scope as well?

Yeah, so that was what I was referring to as the second half tailwind. in the presentation on P&L. We had originally planned that we would go contract by contract, reprice the clients. We found that, counting against ourselves to some degree here, that because Scope was such a long-lived product in the marketplace relative to wealth management businesses and their lifestyles, that we had a number of different contract terms, a number of different manners in which we'd have to edit it so that the easier way to get this done was a big bang, 1 January 2025, mail out to clients, here's your new terms, here's your new contract, please indicate your acceptance here. Now I'm not going to sit here and pretend and maybe Anthony would want to reflect on it as well but every client just thought that was wonderful and signed up to it and returned their form within three days but by and large that's been a pretty successful means by which we've negotiated with clients for what realistically had to occur in an inflationary environment. By and large we haven't seen price increases in scope for around 10 years and everyone understands that that's not the way that cost basis of suppliers have worked over the last four years in particular.

I'll just push one more multi-part question. So just with the staff headcount, you can see a drop-off in Armenia in the last couple of months. Can you just talk to the strategy? Are you moving away from that as a support centre? Has that just been downsized to locally? And just more broadly, Anthony, with succession planning and David's only been in the role three years. And I think when you were first appointed, it was more a sort of an emergency type scenario. And could you just talk us through your own intentions and what the succession planning would be over the medium term? And how did we get to a situation where you've lost the CFO after three years?

Yeah, thanks a lot for those questions. I'll go to the Armenia question. then I'll come back to the more substantive question. In terms of Armenia, what we have done, we had about 90 people over there, as you can see from the graph, and it's dropped to around 50 now. Now, initially it was set up as a technology and development, you know, high-tree development, and then with the success of that, we expanded and put some administrative staff there or operational staff. Now we also have operational staff in India and it's not only a different geography but it's a different arrangement because the Armenian people are employees of Payen whereas the Indian team is an outsourced provider who provides a service to a lot of financial service companies globally and quite a number in Australia. So we made the choice that what we wanted to do was just run the administration function that we offshore out of India. There was a number of reasons for that but we came to the conclusion that was a better outcome for us and it was better to do that through an outsourced provider rather than employ the people directly. But we've got no plans to get out of the technical development and the technology people that we've got in Armenia continues to be a very successful development hub for us. Part of the reason for the change, I said there was a number of reasons, one of the reasons was because we just wanted the people in that office to come in and know we are technology development people, we just do software development, that's what we do. So we're very happy to have made the change. It's been very well received. in Armenia. It's still a very low cost operation. The Armenian currency tends to be closely related to the US dollar. So as the Aussie dollar reduces it can slightly lift the price to us but you're talking it's well under half the cost of an equivalent resource in Australia and very high quality people. So just focusing that off us on development We've still got the same office space, and part of it was the people in Armenia tended to have less space per person than an office worker in Australia. And so we wanted them to have more space without having to go and find new premises as well. So that played into it as well. And I should say, in Armenia, the people come in every day. There's no work from home over there. People are coming into work every day by choice. So we just wanted that to be focused on that. In terms of the succession, first of all on my plans I'm very appreciative to our shareholders because one of the things that they did at the AGM was award a grant of performance rights to me that go out for three years. So there is a financial incentive for me to stick around for another three years and as you quite rightly said it wasn't sort of envisaged that When I was appointed it might be a six year appointment. I feel like I'm closer to the end of my career than the beginning although I'm conscious that I'm very lucky to be living in a country where life expectancy is long and perhaps I shouldn't think of now that I'm 60 just getting out and doing nothing for 20 or 30 years if that's how long I've got. I'm very happy, I love the challenge and I'm very happy to have a financial incentive for at least another three years which is significant and it would be material to me not to either shy away from the fact that my own personal investment in premium which is all every share I own in premium has been bought with cash in my self-managed super fund and so I've got a significant financial interest in it doing well. Having said all of that, People can take this as they like but I'm genuinely interested in making sure that the business has the right person running it and if I ever thought somebody else should run it rather than me I'd be very happy to hand it over. What I've tried to do is say to the board every one of the direct reports that I've got is in my view a potential successor for the role. I think all of the people in the business have done very senior jobs not only with premium but in other areas and all of them, Richard, Dennis and James being the other four execs and Brett Marsh who's come into the business through OneView and was essentially the CEO of OneView when it was in Iris. So we've got five people besides David who would all be considered viable alternative successes to me and if the board ever told me, you know, we think that one of those five is ready, I'd be only too happy to say, well, let's get it done and I would like that because all of them have been involved in developing a strategy and how we execute the strategy and we give a certain continuity to do it that way. Obviously the CFO is typically another role that can being thought of as a successor and so that's why we've said in the announcement we won't move to a permanent We'll get an interim. I think everyone knows that interim executive positions are a feature of the market and something that you can do. So we're in final discussions to appoint an interim CFO and then we'll take our time to get a permanent CFO and we would anticipate that we would get somebody to come into the role as they prove their worth in that role. will ultimately also be a potential successor to my role. But I do feel I want to close by not saying, oh yeah, I'm just waiting for three years to go. I'm very enthusiastic about the opportunity. This is a wonderful opportunity. I'm actually inspired by how well our two bigger competitors in the challenger space do. They've been two of the great success stories in Australian business generally and financial service specifically and I don't think it's gone forever. I do believe premium can have a journey like that as well and so I'm extremely motivated by the opportunity. I feel that I'm very young. I'm coming off the back of a cold you might tell from the way I'm talking and nobody ever feels at their best as they've just come out of a cold but other than that I feel fitter and healthier than I've ever been and I I relish the challenge. I'm delighted with the team we've got. I've loved working with David. But three years is sometimes, you know, that's about the average of a role in Australia these days and so we shouldn't be surprised if somebody after three years is ready to say, you know, I'm ready to do something else.

Just to clarify, Anthony, you said that, you know, a new CFO, like once they can prove themselves over a few years or may be considered for the top role. Is it in your view or the board's view that David proved himself over the last three years?

Yes. David certainly was a very – he made a huge contribution to premium and he not only made a contribution in the areas that he was involved with. I hope that all shareholders see the value of what he did but he made a great contribution at the executive team. Not only on saying to the executive team here's what we do in finance but also here's how the business as a whole should work. And so we made a general contribution, not just a specific contribution of science. So yes, there was no doubt David was, you know, when we talked about my direct reports, all potentially being successes in my view. If that had have fallen to David, he would have been outstanding in that role. But we are where we are.

We might move on just to give some of the other guys on the line an opportunity. You can come back, of course.

Our next question comes from Tom Tweedy with MA Mollusk Australia.

Good morning guys. Thanks for taking my questions. I just want to start off with how you see about the pipeline for the custody side of the business, maybe just across the three different products, sort of SMA, PowerUp and Spectrum. Can you give us a sense of, especially Spectrum, what you're seeing there in terms of potential pipeline wins, tenders? into the second half or potentially FY26 what the environment's kind of shaping up to look like?

I'm not going to give you the pipeline of course. It's commercially sensitive information but our pipeline is healthier than it's been in the whole time I've been here and we take a lot of time on that pipeline now. We have a meeting Obviously the sales people are working with their pipeline every day but they have introduced the discipline under Dennis's leadership of meeting monthly on the pipeline and any of the executive team can go to that meeting. I go to the meeting every month and it's always a challenging meeting. Challenging in the sense there is genuine challenge from the executives about Are the opportunities moving through at the right pace? If somebody's been in stage two of the pipeline for a few months, it shouldn't be there. It should have dropped out altogether or it should have moved to stage three or stage four. We're very happy with it. There are quite a number of big opportunities and opportunities in our sweet spot which is the high net worth advisor. Yes, we are confident. We're encouraged by the flow of new leads into the pipeline. work that our marketing people did around the launch of Spectrum and so we've got no reservations about that. Of course pipelines are a probability weighted exercise. In stage one your chance of winning a prospector moves into the pipeline might be only 5 or By the time they get to the final stage in the pipeline you might be up to 50% probability of it landing but it's still a probability. You've still got to land it and so there's still work to do to get all of those prospects in the pipeline through to fruition and close the sale. very happy with how it sits and there are big opportunities out there, which is why I said earlier in response to another question, we don't feel the opportunity has gone, that the market has now been decided and market share is locked in on a trajectory for the next five or ten years. We feel that it's a very dynamic opportunity still and there will continue significant market share shift as well as growth in the overall market and we feel that if we were able to go in the DeLorean five years down the track, we should have success in growing our share of the market from where it is now.

Thank you. And just to follow up on the cost base expectations going forward, a couple of your peers with their recent results, sort of revised costs. slightly higher in the near term just to capitalise on the opportunity. How are you guys thinking just overall blending obviously full-time FTE and IT costs, et cetera, going forward? If we look at the overall expense growth, how would you be thinking about that sort of in the next sort of 12 months or for the full year anyway, for the financial year?

So we think that expenses continue to grow. Partly through inflation, like people would say inflation is being conquered now. We still see some inflationary forces at play and we will respond to that. We're not going to underpay our people and partly through growth. What we have been able to achieve in more recent times is more of the growth comes from investment in technology than in support staff and we would anticipate that happening. Everyone on the call probably reads the newspaper and articles here and there about what people are doing on Gen AI and I encourage anyone who was interested in that field, you should read a lot about it. I certainly read a lot about it and so do most of my executives and are all closely involved in our AI initiatives. Yesterday's article that was particularly interesting was what Westpac are doing with Accenture and you only have to look at that article as an example of the sorts of that are coming out of use cases at the moment. We're starting to see that ourselves. Some of the growth that we would see will be in investment in technology. As use cases come to fruition and we say, oh, yes, there's an opportunity to invest a bit more and get some more synergies, we may be able to grow the business without needing to grow the operations and support staff numbers as much, but we'll continue to invest in tech. So we see growth. Our aspiration is for the revenue to grow. at a faster rate than the expense line. Obviously, every now and again, people ask us, you know, this AI is so powerful. Do you ever envisage that, you know, there'll be a dramatic cost reduction? And you can't rule that out, but we're not budgeting for that at this point in time.

Great. Thanks, guys. I'll jump back in the queue.

Your next question comes from Nick McGarrigle with Baron Joey.

Thanks for taking questions. I guess my first suggestion is you should reach out to Grant Boyles who's recently retired from NetWealth. He might be a good appointment. Maybe just on the one-year cost outs, can you just give us a sense of, as you've gotten into the business, is that $3 million, you think, a conservative estimate? Timing, you mentioned earlier next year, is it kind of a more out of date than that that you can allude to and then I guess the notice from one of the larger clients that they're withdrawing a billion dollars, has that been affected or is it just a notice at the moment?

I'll just start with the last part of that query. It's not a single client for a billion dollars that's subject to the reduction in FUA between what was announced for December and what was aggregated for the earn-out statement. So that's a number of clients with whom we've had protracted discussions and come to a conclusion that we couldn't establish a commercial relationship. And even under those circumstances, it's not as though the separation is entirely free from goodwill. We will do that responsibly and amicably with those clients, but it's not a single client for bidding. I just want to clarify that. And Anthony might turn your attention to the other parts of that question, with the exception of the Grant Boyle comment.

Just for the under $3 billion that we – the way the internet works, it's not – obviously when we published our FUA recently, there's more than $3 billion in one year. So it's partly the way that we have the conversations with clients about the transition to premium and how that will work. One of the things probably, and I know you understand Nick and probably most people understand, OneView was quite a diverse business. There was a range of services that were provided, not just the pure platform and administration service. There were various niche services provided as well. Some of the poor that's dropping off is because when we look at those niche services and the how we would provide those going forward on the premium technology. The commercial arrangements just weren't going to work for both parties and it's all been pretty amicable on that front. But we still remain very excited about that. We think where that lands is we wouldn't expect a quarter of the revenue to drop away. We'd expect the revenue drops away a lot less than that. but we certainly still see the potential for the synergies and we're still saying that it's 3 million of synergies. We've got line of sight about how to get that 3 million of synergies. That makes it a very profitable acquisition for us and so we've just got to keep delivering on that.

Okay, thanks. And then I guess in terms of the new products, you mentioned, I don't know if you can give us an update on kind of new advisor groups that have signed up to use the new products and what kind of the run rate. Obviously in December it had kicked off well. Just an update, any kind of sentiment statements you can provide us into January?

Yeah, no, the sentiment's still strong. As I said, the pipeline's very encouraging. We're happy with the way prospects are moving through the pipeline, as you would expect if you're watching a sales pipeline. Certainly people understand that Spectrum is now realising the full potential that Premium's got to offer. So sentiment remains strong and we're encouraged by what we're seeing in terms of the interaction we're having with prospects and also our existing client base.

Okay, thanks for that.

Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from Nick Burgess with Ord Minute.

Morning, gentlemen. A couple of questions. Firstly, just on one view, can I follow up that previous question? So, $4 billion of farm, you're losing somewhere between $1 billion and $1.5 billion. You've given an update on the revenue margin in the half of 28 basis points. A little more help would be appreciated on the revenue impacts, given you've said it's going to be less than 25% or less than the proportion of fund loss. So how should we think about that 28 basis points? And are there fee increases going through on that 28 basis points exclusive of the loss of fund anyway? So any updates on those items would be appreciated.

So yes, on those fees, what we've done with the Spectrum pricing as we've launched it, it's built on the back of the pricing work we did on the SMA and the platform pricing there. So what we've now got is what we regard as the premium price point for different products and services. So one year fits into that. and our view without putting the exact dollar amount on it, our view is that the average cost or the average revenue that we'll generate from sticks with premium through the migration onto the premium product and technology will be higher than it was before. So that's the answer to that. Just as when we repriced the SMA, I think you'll probably remember, Nick, that we weren't overly prescriptive about how much that might be because there's a few moving parts that if we were to give guidance about how much the uplift is, we're not confident enough that we've got all the moving parts sorted out to be confident enough to give the guidance about here's what we think it will be. But we certainly don't think if you took a pro rata of $4 billion and it finishes at $2.6 or $3 billion or wherever it finally settles, that if it was three, you should say the revenue will be three quarters. It will be higher than three quarters in our view, but we're not going to give you guidance about exactly what we think it would be.

Okay. But if we think about BSMA going from low 30s to high 30s, something of that vicinity of a new overall premium pricing point is an appropriate place to start at least on that calculation based on the logic that you mentioned there.

Yes, it is. Again, I know you know a lot about OneView because you've researched Hallmark and you looked at the acquisition and all of that. Just be conscious because it is a diverse There are clients in one year who would be more like Ballarat clients and there are clients in one year who would be more like SMA clients. You know there's a big difference because of the average account size rather than because the pricing philosophy is different. The pricing philosophy is the same in both. but the difference in average margin comes about because of the different account size. So as long as you factor in a bit, there'll be some very large accounts in one view and some more like the SMA average account size, and the very large accounts, you know, will continue to get what would appear on a basis point number to be a lower price, but when you look at it as a dollar per account, as we put in the presentation, it will be higher.

Yep. Okay. Got that. So last question, just on your strategic priorities, superannuation. So you've mentioned this for I think a couple of years now as a priority. So just wondering what the progress there is on those improvements and what sort of timeframe we should think about for completion and what the potential outcome is there. Are you looking at a reduced cost to serve, an increase in satisfaction, increase in flows? What's the outcome of those issues that you've identified on superannuation?

Yeah, so just very quickly on the part, what are you doing? You might, you know, it's probably burned in everyone that, you know, a few years ago we had to talk about backdating a significant price increase on the administration service that we had to wear. And so for a few years we've been paying a higher price for our admin service and that was part of an uplift by the provider to lift the service. And we're still working through that. The service is lifting, but one of the two things that we're doing is with the trustee of our super fund, which is Diversa, with whom we've got a good working relationship, Diversa have, with all of their funds, because we're not the only fund that they're the trustee of, have been undertaking a process just to review the market. Given that the pricing went up, Given they know what they know about the service levels, they've been saying it became time for them to review the market and who's providing services. It's a dynamic market. Many of you will know that there was a company called Grow Technologies or there is a company called Grow Technologies. There's a new provider in the market. There's a whole lot of others. Recently there's been some publicity around Superhero or building out a super admin solution. The market's in a state of... And indeed, our supplier, which is Iris, one of the superannuation services, is now being sold to Apex. So it's a dynamic market. We were very supportive of this when they said, we think it's time to review the market and just make sure we're getting the good alternative. In conjunction with that, We're also looking at whether we should bring the administration in-house and we're doing the work on that. So we're not yet landed on a final decision. I'm sorry that took a bit of while but that's about what are you doing and also why are you doing it. What do we want the outcome to be? I read enough about the state of the superannuation market in Australia. Perhaps because it has grown so fast in the unusual structure, but there doesn't appear to be anyone who's doing this as well perfectly. By definition, nobody will be perfect, but there's a lot of problems in the market. You read about it all the time. You read about even big super funds being fined, being sued by ASIC and the like. You read about challenges that a number of people have got. So superannuation... Very few, if anyone, can say we've got super rights. So where do we want to land? We want to make sure that we've got – because we're a high net worth in high net worth demand, high standards of service, we want to have what would be regarded as a best in class service offering in superannuation. That's our aspiration about where we'll land. We do think we can do that cost effectively based on the work we've done so far and it should be. It should be cost effective. Obviously we're not trying to be the biggest player in the market, but we're trying to be a player that uniquely meets the needs of a high net worth individual who still has a need for retail super as opposed to just a self-managed super fund. And if we get that right, we feel that our proportion of platform assets in super can grow significantly from the current less than 10%. It could grow. So if our whole business grew, then, you know, like if somebody said, you know, we think you should double your business, and if super as a proportion of the business doubled, well, you can do the math and say, gee, that super fund's going to be massive in a few years' time.

Okay. Thank you very much.

There are no further questions at this time. I'll now hand back for any closing remarks.

Well, once again, thank you, everyone, for your interest in the call. As always, I value all of the people who are involved in our business, all the stakeholder groups. I want to especially say thank you to all the people who work in Pranion who have helped to deliver this result which we're very pleased with, thank you to our clients who us their business and their trust that we will serve them well and thank you to all of you who were shareholders on the call for your support and we look forward to continuing to try to execute on that strategy.

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