Perpetual Limited

Ladies and gentlemen, thank you for standing by and welcome to Perpetual's half year results briefing. At this time all participants are in a listen only mode. There will be a presentation followed by a question and answer session. You may register a question by pressing zero followed by one on your telephone keypad. I must advise that this conference is being recorded today, Thursday the 24th of February 2022. I would now like to hand the conference over to your first speaker today, Susie Reinhart, Head of Investor Relations. Thank you and please go ahead.

Good morning, everyone. Welcome to Perpetual's first half 2022 results briefing. I'm Susie Reinhart, Perpetual's Head of Investor Relations. Before we begin today, we would like to acknowledge the traditional owners and custodians of the land on which we present today here in Sydney. the Gadigal people of the Eora Nation, and recognise their continuing connection to land, waters and community. We pay our respects to Australia's First Peoples and to their elders past and present. We would also like to extend our respect and welcome to any Aboriginal or Torres Strait Islander people who are listening in today. I'd acknowledge the traditional custodians of the various lands on which you will work today. Presenting with us today are Rob Adams, Perpetual's Chief Executive Officer and Managing Director, as well as Chris Green, Perpetual's Chief Financial Officer. There'll be an opportunity to ask questions at the end of today's presentation. Before I hand over to Rob, we would like to draw your attention to the disclaimer on slide two of the presentation. Rob, over to you.

Thank you, Susie, and good morning, everyone. Thank you very much for joining us for today's first half 22 results for Perpetual. We are very pleased to report our results today, which we think demonstrate strong outcomes and very positive momentum across all of our businesses, with all divisions delivering solid growth. In these results, you'll see that we are investing in new capabilities, new products, opening up new distribution channels, and investing in our trusted brand to drive future growth. At this half's results, as this half's results will evidence, these investments are now starting to deliver growth. Our balance sheet remains strong, providing us with confidence to continue to invest in both organic growth and further quality acquisitions. We have confidence and positive momentum going into the remainder of the financial year, and today we have reaffirmed our expense growth guidance for FY22. There has been much public discussion and market speculation regarding the potential emergence of an extended inflationary environment. Should that occur, perpetual is very strongly placed to benefit, with deep expertise in value investing across our asset management businesses, which typically outperform in inflationary periods. Further, our diverse and growing global portfolio combined with our non-market linked earnings from perpetual corporate trust and parts of perpetual private positions as well for such market conditions should they eventuate. So turning to the high level numbers for the first half of FY22. Perpetual delivered total revenue of $384.9 million, up 37% on the prior corresponding period. Underlying profit after tax was $79.1 million, up 54%. Net profit after tax was $59.3 million, up 113% on the prior year. And our return on equity rose to 17.3%, up from 13.2% in the first half of 2021. Key drivers of the result were a full six-month contribution from Barrow Hanley, additional earnings from both of our recent acquisitions, Jacaranda Financial Planning for Perpetual Private and Laminar Capital for Perpetual Corporate Trust. Contributing were, of course, higher average markets, and our stronger relative investment performance across both our domestic and international asset management businesses were also contributors, as was strong organic growth in both perpetual private and in perpetual corporate trust. This morning, the Board has declared an interim fully franked dividend, ordinary dividend, for the period of $1.12 per share, which represents a payout ratio of 80%. So now turning to some of our operational highlights for the half. Our strategy to build a global asset management business, adding world-class investment and distribution capabilities, is well underway and is delivering results. We reported growth in assets under management of 15% versus the prior corresponding period, with 74% of our investment strategies outperforming their respective benchmarks over the last 12 months. In perpetual private, we continue to see our strong brand, our advice model, our industry-leading advisors and their positive client relationships combine to lead to another half of positive net flows, making it a quite remarkable 17 consecutive half years or eight and a half full years of positive net flows. In Perpetual Corporate Trust, which provides essential infrastructure for the financial services industry, with another strong half, PCT has now delivered an outstanding compound annual growth rate of underlying profit before tax of 15% per annum over the last 10 years. In Perpetual Asset Management Australia, we've seen a demonstrable and consistent improvement in our relative investment performance and in our net flows. Our strong investment performance over the half and the full calendar year was recognised by Xanath, who named Perpetual as their overall fund manager of the year for 2021. In Perpetual Asset Management International, Trillium is building from strength to strength, with around 74% growth in assets under management in US dollar terms since we acquired the business just some 18 months ago back in June of 2020. So as you can see, across Perpetual, we are delivering some great outcomes, and I feel entirely confident that our positive momentum will continue into the second half and beyond. Turning to the next slide, Perpetual has a truly unique combination of businesses. We have one of Australia's strongest brands in asset management, and we now have a broad array of world-class, globally relevant investment capabilities ready for substantial growth. And we have one of Australia's premier true high net worth advisory firms in Perpetual Private. And we have a corporate trust business that is a clear industry leader across its core products and services. You can see on this slide the significant progress that we've made in transforming our business since the launch of our new business strategy back in February of 2019. The acquisitions of Trillium and Barra Hanley have provided us with a substantial global footprint, which we have already materially expanded since acquiring those businesses. We now have a truly global growth opportunity ahead of us, and we have invested very carefully in our distribution and in our product framework across key developed markets in order to realise that opportunity over time. Perpetual Asset Management International is now contributing 22% of group operating revenue and 27% of our underlying profit before tax, and I expect that contribution to rise disproportionately over time. Our unique combination of businesses is one of our greatest strengths. We have market-linked revenues and material non-market-linked revenues. We have domestic earnings and material international earnings. We have value-driven investment approaches and more growth-oriented investment approaches. We have a blend of revenue sources, management fees, fees for service and transaction-based fees. And as you can see, today the source of our revenues by business line is balanced. And I feel that this positions us extremely well for the future, particularly if we see a continuation of the market volatility that we have seen of late. I'll now move to the next slide for more detail on the results in each division. It's, of course, very pleasing to be able to report strong growth across all areas of our business. Perpetual Asset Management, which includes both our international and Australian asset management divisions, delivered total revenue of $194.6 million, up 67% on the prior year. As mentioned, it incorporates a full six-month contribution from Barra Hanley, which compared to the first half of 2021, which included only six weeks of Barra Hanley revenues. Total Group AUM has now eclipsed the $100 billion mark for the first time, with Group assets under management growing by 15% to $102.8 billion compared to the prior period. Perpetual Private, or PP as we call it, delivered a total revenue of $107 million with funds under advice ending the period at a record $19 billion, which is up 23% on the first half of 2021. This is driven by strong organic growth plus the new contribution from Jacaranda Financial Planning, which we acquired during the period. Perpetual Corporate Trust, or PCT, as I've mentioned already, has delivered consistent year-on-year growth over the past decade, which continued in the last half, with total revenue up 17% to $76.6 million. This increase was driven by organic growth in PCT's existing businesses and new contribution, of course, as mentioned, from the recently acquired Laminar Capital. Total funds under administration were $990.4 billion, up 6%, with solid growth in both debt market services and managed fund services funds under administration. While our financial scorecard is very encouraging, I would like to spend some time on the progress and future intentions of our growth strategy. It is the disciplined execution of our strategy that has driven these results and will continue to do so in the future. Our strategy remains unchanged. You've seen this slide several times over the last three years. It describes our focus points to drive the future growth that we expect from each of our businesses. Our purpose is enduring prosperity for all of our stakeholders, and our vision is to be the most trusted in financial services. You'll recall that our three core pillars within our strategy are client first, where we want to be heavily focused on contemporary delivery of contemporary products and outstanding service. Our future fit pillar is about the creation of an efficient, scalable platform that empowers our people to perform and deliver. And finally, our New Horizons pillar is focused on extending our reach, investing in new capabilities and services, expanding in key markets and delivering quality growth. I'm pleased to report that our progress on each of these pillars over the last half has been strong. We remain fully focused on the positive execution of our strategy in order to drive sustained quality growth across perpetual. At our FY21 results, we set out the priorities under each of the key pillars of our strategy. Over the last half, we have made great progress in all areas, with the majority of these priority points well underway, with significant progress made in terms of new product development, the build-out of our global distribution team and our global operating model, material steps forward in improving the efficiency and scalability of our operating platform. And over the next few slides, I'll talk through some of the key developments across our businesses, all of which are strongly aligned to these strategic priorities, which will hopefully give you a sense of the progress that we're making. Of course, many of these initiatives require investment, both initial and ongoing, and we are committed to continuing the program of positive investment in growth initiatives, always with a clear focus on the expected return on each investment made. On the next slide, I'll take you through some of those investments. Our investment for growth is focused on new markets and new channels, new products and services, building out our global distribution and our global operating model frameworks to support sustainable long-term growth. In the last six months, we've expanded both in new markets and channels. We've opened a European office. We've appointed a head of distribution for Europe, Jan Hein Alfrenk, who has deep experience across key European markets. We've launched a U.S. mutual fund structure ahead of plan, providing Barrow Hanley with access to the U.S. retail market for the first time in its 40-year history. We have just this week received approval for a new USITS fund structure, now opening access for both Trillium and Barrow Hanley to European and Asian investors. And we are thrilled to have secured a seed client for this new platform who will be initially investing around 500 million US dollars into a new Barra Hanley global equity ESG strategy. This tier one Nordic institutional client has invested their initial tranche just overnight. And so that's an exciting development with future cash flows expected from that client as well. In perpetual private, our acquisition of Jacaranda Financial Planning has now added more than $1 billion in funds under administration to our business, up from $915 million when we acquired the business just in August of last year. As mentioned, we acquired Laminar Capital in October last year, and Laminar is now integrated into the newly created division of PCT called Perpetual Digital, which I'll comment on specifically in a moment. Like Jacaranda, Laminar is performing ahead of our initial expectations. In the section of new products and services, we have launched the Trillium Global ESG High Conviction Strategy based in Edinburgh, led by a former colleague of mine, Ian Warmerton, who has a superb career record, most recently at Janus Henderson. We worked with the Barrow Hanley team to launch Barrow's first collateralised debt obligation offering, CLO, and we have secured equity commitments of $110 million to support our plans to build a portfolio of CLOs of over a billion US dollars over time. In Perpetual Asset Management Australia, we listed two active exchange-managed funds on the ASX during the half, making it easier for investors to access our specialist capabilities in global innovation and in ESG. The new multi-asset ESG Real Return Fund, launched in late June, has now raised well over a billion dollars Australian, evidencing the high interest in contemporary ESG products. And in PCT, off the back of creating Perpetual Digital, we've launched new treasury solutions with five new clients signed up before the launch and a strong pipeline of new client opportunities. These initiatives, many of which occurred late in the half-year period, are already delivering new business growth to our businesses, with over $1 billion in new AUM added, over $1 billion in funds under advice added, and over $21 billion in assets under administration. We're also investing in the essential support structures that help us to drive growth from these initiatives. In global distribution, we continue to make great progress in building out our global team to drive the sales program of our investment capabilities across key markets. We have repointed the Barahandy distribution team to Chuck Thompson, our head of distribution in the Americas. We've added further distribution support for Trillium to meet the high demand that we are seeing, whilst also opening up new channels for Trillium. And locally, we have activated a direct marketing campaign for our Australian equity strategies, promoting our value heritage through multiple cycles, which is driving strong interest. As our business has expanded beyond Australia's shores, so too has our operating model. We are investing in our technology and governance to ensure that we are fit for purpose as a global company and fit for growth. We are also identifying key areas of our business where we can be more efficient, including our strategic partnerships, ensuring we get the best out of our major service providers. What you will see later in this presentation when Chris talks to our expense guidance is that the majority of our growth in expenses planned this year are growth initiatives, which are either directly revenue linked or we expect to have a meaningful impact on future revenue growth. We feel this is an important message to highlight. We are growing, and this requires investment, whether it be in organic initiatives, inorganic initiatives, or support structures. And this investment in growth is delivering growth. On the next few slides, I'd like to take you through some examples to highlight the impact of the investment we are making across each division of our business. So firstly, turning to Perpetual Asset Management International, or PAMI, we have invested significantly in our distribution team, our product capability and our channel framework, and in adding new investment capabilities to both businesses. As you can see in the chart here, we are already seeing a return on this investment with strong growth in net flows for Trillium. We have continued that investment during the half, extending our reach in Europe, as mentioned, with a full expectation that our returns on those investments will maintain this growth trajectory. The chart on the right-hand side shows Barrow-Hanley flows. Whilst in total net outflow, when we look at flows by sector, we've been very pleased to see that our focus on promoting Barrow's exceptional global equity capabilities is leading to positive net flow outcomes. Whilst we've been disappointed by outflows from US equities and fixed income, on acquiring Barrow, our expectation was that we would see total net flows turn positive in the third year post-acquisition. Just 13 months in, the opportunity for strong growth in all of Barrow's global equity capabilities and the significant improvement in relative performance across US equity strategies combined to lead us to conclude we should reach that point earlier. Since acquiring both Trillium and Barrow Hanley, we have invested in brand, in product development and distribution. Trillium now have a dedicated distribution team opening up new channels, including the critical, untapped US and global institutional channel. For Barrow, we've invested in product development and we're building our distribution team to open up the massive US retail market to them for the first time. We've worked with both businesses to expand their investment capabilities, bring a new investment team into Trillium, as mentioned, to run the ESG global conviction strategy. And we have been working with the Barrow team to launch a CLO capability. Both businesses will benefit greatly from the recent launches of both the US mutual fund range for the US retail market and the USITS range structure for European and Asian markets. For Barrow to have secured a 500 million US seed client for their new global equity ESG capability as part of this new usage platform is a very exciting development. We believe that each of these initiatives represents multi-billion dollar growth platforms for both businesses. As a result, we see Trillium and Barrow Hanley evolving into truly global asset management firms with their core capabilities sold around the world to institutional and intermediary led clients. We will continue to help them build a strong presence in key markets as we expand our global distribution reach. And we will seek to continue to add new investment capabilities by team lift-out or through bolt-on acquisitions, as we have already done with Trillium. And I'm confident that the future of both Trillium and Barry Hanley looks extremely bright in partnership with Perpetual. Turning now to PAMA, where we are also investing in product in channels and in distribution. And you can see that it too is delivering results. PAMA has now reported three consecutive quarters of net inflows, positive net inflows. The first time the business has reported three consecutive quarters of net inflows since March 2015. We have a strong and trusted brand with a history of investment outperformance. In the last 12 months, 82% of PAMA's funds have outperformed their respective indices. As mentioned, this performance was recognised by major research houses and the Fund Manager of the Year Award. 91% of our investment strategies have at least one recommended rating or higher from a major research house. With this as the background, we have increased our investment in our already strong brand. You can see in the bottom right of the slide some of the images from our perpetuality campaign for Australian equity strategies, which has been very successful in generating new leads that over time we believe will deliver additional flows. Whilst the flows for our Aussie equities team remain negative, our strong near-term performance, combined with a renewed distribution and marketing focus, has led to a material slowing of outflows and growth in new business opportunities. Strong flows into our Australian credit and fixed income funds continue, and our multi-asset funds have seen a material uplift in flows this year. We've also been focused on making it easier for our investors to access our investment products. And with that in mind, this half we launched the first of what will be a suite of active exchange traded managed funds with two active ETFs listed in December of last year, as I mentioned. This is a key initiative for us, these launches, and supports the delivery of contemporary products to meet the needs of our clients. We expect to launch more active ETFs in this financial year. In perpetual private... The integration of the newly acquired business Jacaranda Financial Planning is going to plan. Jacaranda is a strong player in the pre-retirement segment of the market and opens up new growth opportunities for us as we work with the Jacaranda team to expand their operations along the East Coast, leveraging PP's existing infrastructure in Melbourne and Brisbane. Despite the impacts of COVID, Jacaranda has performed ahead of our expectations since the acquisition and we are excited about its future growth. More broadly, Perpetual Private's advisor growth strategy, which we first announced back in February 2019, has now delivered over $1 billion in additional funds under advice. We will still seek out selective opportunities to drive further growth from this strategy as the advice industry continues to go through significant change in a post-Royal Commission world. Turning now to PCT, we are really excited about the launch of Perpetual Digital, which brings together the recently acquired Laminar Capital business with PCT's existing digital capabilities. You can see here on the left the services that we are offering, targeting PCT's existing strong network of clients, as well as new clients, covering our unique data services, our roundtables business, and perpetual intelligence tools, now joined by the Laminar offerings. On the right-hand side of the slide, you will see that we are wasting no time in bringing to market a range of new intelligence solutions, from treasury solutions to automated trust reporting solutions. And early interest has been strong. So in summary, I trust that you can see that across Perpetual, it's clear there is a significant level of activity within each of our businesses, all focused on meeting client needs, growing our client base, and driving Perpetual's growth into the future. We have positive momentum in all areas and we feel confident about our future delivery. Finally, now turning to a couple of key themes that we're seeing in the market and how we're positioned in each. Firstly, we expect the ESG thematic to continue to be the dominant global megatrend in years to come. The core of our strategy is ensuring that we are well positioned for sustained growth. So as a key driver of our future growth globally, will be our ESG capabilities. Across the board, we are thinking about ESG, about how we manage client assets, taking ESG elements into account. As the chart on the left-hand side of this slide highlights, we apply integrated ESG analysis across 82% of our total assets under management. The chart in the middle of this slide shows how our dedicated ESG capabilities have grown in recent times, with our investment in Trillium being transformative. Today, nearly 17% of our total AUM is in dedicated specialist ESG funds, and I expect to see that rise disproportionately into the future. Integrating ESG factors more deeply into our investment process and adding more specialist products and capabilities is a key strategic focus for us. Importantly, third-party recognition of our ESG focus is clear, with very strong UNPRI ratings across Trillium, Barra Hanley and Perpetual Asset Management Australia. So we feel that across our asset management businesses, Perpetual is extremely well positioned to benefit from the inexorable focus on ESG investing as the dominant global megatrend influencing the asset management industry. The next thematic that has been emerging over recent times, as briefly touched on, is the current market conditions appear to be creating an environment that is tailor-made for value-style investing, an area of significant strength for perpetual, for both our Australian equities business and internationally for Barrow Hanley. As the charts on this slide evidence, inflation is elevating and bond yields are rising. Markets are pricing in multiple increases in bond rates this year. Supply chain and labour market pressures are impacting prices across industries. Extreme valuations of certain listed sectors and stocks are rerating downwards. It's in this environment where value investment strategies typically outperform the market, and historically that has absolutely been the case for both Perpetual and for Barrow Hanley, with both firms having a storied history of adding value during such periods over several decades. You can see on the right the huge divergence in valuations between growth companies and value company PEs, another telling indication that the market for growth investments is turning. The key point here is that a period of sustained inflation, which we appear to be entering, is a strong tailwind for perpetual. Turning now to the next slide, which sets out our growth in AUM and the capacity we have for growth across our asset management businesses. We presented a version of this slide at our investor day late last year. Back in FY19, two and a half years ago, our capacity was constrained to our domestic capabilities only. With the Trillium and Barra Hanley acquisitions, we have seen a substantial increase in the capacity of our investment capabilities. Of the current $430 billion in total capacity we have, there is more than $75 billion in remaining capacity for our ESG capabilities alone. We now have more capacity in ESG strategies than we did across Perpetual's entire asset management business just three years ago. Today we have the capacity to manage an additional $330 billion across our existing strategies without taking into account any new strategies that we will develop. So as you can see, our growth runway is very long and we now have the global distribution and product framework required to drive that growth. And we will continue to invest in that framework as we see the opportunities emerge. As we look forward into FY22 and beyond, with our strong balance sheet, our desire to add more investment capability in relevant areas, that capacity will increase well beyond the $430 billion over time. Building on the last slide, you can see our investment capabilities position as well across the key thematics of ESG and value. If we turn to the next slide. Our high-performing credit and fixed income capabilities also enable us to capture further flows in a higher interest rate environment. And the lower risk and lower sensitivity to volatility demonstrated by our award-winning multi-asset capabilities are well-suited to the expected future market conditions. Okay, with that, I'll now hand over to Chris to take you through a more detailed review of our financials.

Thanks, Rob, and good morning, everybody. As Rob's already talked to, our results reflect growth across all of our divisions. The six-month period to the 31st of December 2021 continued to be very active for our business with two acquisitions, a number of new product and strategy launches, and ongoing focus on growing our business offshore. Later, I'll talk to the specific highlights in each division, but firstly to the numbers. Operating revenues of $384.9 million were just over $100 million, or 37% higher than the prior corresponding period, driven primarily by PAMI and a full six-month contribution from Barrow Hanley. Also, stronger performance in PAMA, solid growth in PP, and continued strong performance in PCT contributed, along with additional revenue from the recently acquired businesses of Laminar Capital and Jacaranda Financial Planning. Operating revenues included performance fees in PAMA and PP, which totaled approximately $8 million. Total expenses of $275.3 million were $64.9 million, or 31% higher, with a full period contribution from Barrow Hanley, the addition of expenses relating to Jacaranda and Laminar, and investment in global distribution and technology, as well as higher variable REM. Underlying profit before tax of $109.6 million was 56% higher, and significant items totalled $19.8 million, including transaction and integration costs associated with Trillium and Barrow-Hanley acquisitions and the non-cash amortisation of acquired intangibles. It also included unrealised losses on financial assets and accrued incentive compensation liability. Earnings per share on UPAT were 48% higher, and return on equity on UPAT was 17.3%, or 410 basis points higher than PCP. Looking at our segment UPAT performance in detail, PAMI PBT of $31.9 million was driven by contributions from Barrow Hanley and Trillium, stronger investment performance, higher average equity markets, partially offset by net outflows. In PAMA, PBT was $26.4 million, an increase of $7.9 million on PCP, driven by stronger investment performance in higher average markets, lower variable REM, and some offset from distributions and product repricing, which we flagged last year. In PP, BBT increased by 8.6 million or 56%, driven by increased funds under advice from the advisor growth strategy, as well as the acquisition of Jacaranda. Strong investment performance again, and good improvement in non-market revenue, particularly from Fordham. In Perpetual Corporate Trust, we saw continued PBT growth of 5.9 million and 19%, with strong contributions from both DMS and MFS, as well as Laminar Capital, which we acquired in October 2021, contributing since the acquisition. In group support services, we saw higher expenses of $4.4 million, predominantly related to distributions on the 25% employee-owned units in Barrow-Hanley, as well as lower income received from unit trust investments in seed funds. The tax impact on the above resulted in a year-on-year movement of $11.5 million and UPAT for the first half of $79.1 million. We continued to take a disciplined approach to expenses while balancing the need to invest in the business for growth. During the half, there was a 5% increase in underlying expenses, which included short-term incentives and growth initiatives such as the acquisitions I mentioned. PAMI added 26% to total expenses, including the operating expenses associated with a full six months of Barrow-Hanley. In addition, the build-out of global distribution, Distributions on employee-owned interests and interest charges also contributed. Together, underlying expense growth and PAMI expenses added 31% to our expense base. NPAT has been adjusted for four types of significant items. Those that are material in nature and in our view do not reflect normal operating activities. For this period, that was $1.6 million and included transaction and integration costs related to Trillium and Barrow-Hanley and the costs associated with the more recent acquisitions of Laminar and Jacaranda. It also included the non-cash tax-affected amortisation of our acquired intangibles, representing $9.5 million. The tax-affected unrealised losses on our financial assets of $700,000 and the tax-affected fair value movements on the 25% employee-owned units in Barrow-Hanley, which represented $7 million. As far as the cash flow, cash decreased over the six-month period, mainly as a result of additional cash required to acquire Jacaranda and Laminar, as well as payment of deferred consideration for Barrow Hanley. Free cash flow was $30 million, a reduction from the full year, mainly due to spending on growing our business offshore, as well as tax and interest payments. After paying dividends totalling $51.7 million and purchasing $14.8 million worth of stock on market to satisfy our long-term incentive schemes, resultant net cash generated prior to acquisitions and seed funds was $110 million. Total cash was $130.9 million as at 31 December. The balance sheet remains strong with our debt-to-capital ratio of 21.5%. The increase in liquid investments reflected an increase in seed fund investments relating to the ETFs in PAMA and mutual funds in PAMI. The increase in Goodwill and other intangibles was predominantly due to the acquisitions of Jacaranda and Laminar. The increase in borrowings reflects the drawdown of $75 million in debt to fund those growth initiatives. Turning to dividends, with the strong financial results delivered, both EPS and dividends have increased substantially. The Board has declared an interim dividend of $1.12 to be paid in April 2022, and the dividend reflects a payout ratio of 80% within our target range of 60% to 90% of UPAT. Our expense growth guidance remains unchanged. We expect total expense growth of between 18% and 22%. Excluding PAMI, we expect expense growth of 3% to 5% on FY21 total expenses. And this includes the costs associated with the recently acquired Jacaranda and Laminar businesses. We expect PAMI expense growth in the region of 15% to 17%. This includes the annualised impact of Barrow Hanley and the costs associated with the product expansion and the continued build-out of our global distribution team. As Rob mentioned, the majority of the expense growth relates to initiatives that have or will contribute to top-line revenue growth, and we've provided some more detail of that on this slide. We've provided an update to our significant items guidance in our Q1 statement, taking into account the IFRIC adjustments. Significant items for the full year in relation to transaction and integration costs and amortisation of acquired intangibles will range between $45 to $47 million after tax. Note that this excludes gains or losses on financial assets and the fair value movements associated with the Barra Hanley accrued incentive compensation liability. Before handing back to Rob, I'll step through some of the key highlights in each division, noting there are more detailed financials in the appendix. In PAMI, we now have a world-class investment and distribution capability, with strong contributions coming to our results from both Trillium and Barrow Hanley. Assets under management across both institutional and intermediary channels increased during the half year, while at an asset class level, we saw strong growth in global equities and outflows from US equities and fixed income. During the half, Trillium continued to be recognised as a leader in ESG investing, again being designated a real leader's top impact company in 2022. We are seeing early interest in the recently launched Trillium ESG Global Conviction Strategy, with the new team in Edinburgh settling in very well. And as Rob mentioned earlier, we are making good progress in rolling out a range of mutual funds for Barrow Hanley, with two launched in December and more to follow later this year. And as Rob discussed earlier, again, we are building our distribution capability to help drive flows in all of those capabilities. Turning to PAMA, we're seeing strong momentum across all asset classes, with 82% of funds outperforming over the year and assets under management up 3.6% to $25.6 billion. We are seeing strong growth in our specialist credit capabilities in particular, with these strategies delivering strong performance over all periods and over half a billion dollars in flows during the half. Cash and fixed income strategies now have total AOM approaching $10 billion, up from $8.3 billion at 30 June. In our multi-asset funds, we're also seeing good growth with over 300 million inflows for the half. And yesterday, you may have seen perpetual equity investment company results where it reported very strong investment performance, outperforming its benchmark by close to 6% over the past 12 months. Overall, PAMA had its third consecutive quarter of net inflows. And we've also renewed our investment in brand and marketing campaigns for Australian equities and credit in particular. And we are pleased with the interest we've received to this point. In PCT, we have a high-quality business that continues to deliver strong earnings growth across all of its segments. MFS funds our administration are up 5%, and so a really solid contribution from its responsible entity services business, up 43% on PCP. The debt market services business benefited from an increased level of activity in the securitisation market, with RMBS non-bank FUA, which is higher margin than the bank FUA, up 23% on prior corresponding period. The recently acquired Laminar Capital has added extra capabilities for PCT, with the new Perpetual Digital segment set to become a more material part of the business going forward. And finally, the PP, Perpetual Private, we are seeing continued net inflows. As we've mentioned, 17 halves in a row of net inflows and over half a million this half. Assets under management of $8.1 billion came from growth across both our opportunities and our implemented strategies. Funds under advice also experienced strong growth, with the high net wealth segment a highlight, up 14%, and the new family office capabilities added last year attracting good early interest. As Rob mentioned earlier, Jacaranda, which we acquired in August 21, is being integrated according to plan, and we're expecting to expand that business nationally later this year. With that, I'll hand back to Rob before we go to Q&A.

Thanks, Chris. I'll now comment on each of our divisions, focusing on key priorities for the remainder of this financial year. For our international asset management business, as highlighted, we are well positioned to benefit from the permanent global ESG megatrend with Trillium, as well as the shift to value via Barrow-Hanley. We have world-class globally relevant investment strategies managed by world-class investment teams with significant capacity for future growth. And our growing world-class distribution team is now driving that growth, opening up new channels across key geographies. Our Australian asset management business now has had three quarters of consecutive positive flows, which is movement in the right direction. The exceptional performance profile across all sectors bodes well for the future, as do our recent product launches, our revitalised marketing and future product launch plans. In PCT, our leadership role and our consistent growth in debt market services and managed fund services is being augmented by our truly unique position to provide unmatched digital solutions across our client base. In perpetual private, we will continue to exploit the changing shape of the advice industry in Australia and demonstrate the operating leverage that our competitive advantages can provide us with. Our segment focus, our advice model and brand strength combine to make us the leading choice for the industry's best advisors and their clients. Across all of our businesses, we will continue to seek to utilise our balance sheet strength to find new opportunities that expand our offerings and broaden our growth potential. Our successful executions of six transactions in the last three years provides us with a high level of confidence regarding our ability to find, to assess and to implement the right transactions for perpetual. In today's heightened M&A environment, to have that proven ability is critical. So in closing, we enter the second half of the financial year with positive momentum across our unique combination of businesses, which we are confident will continue. We are investing in our business in a disciplined way and delivering growth. Our expense guideline for FY22 is reaffirmed. We have best-in-class teams across our businesses focused on growth and a strong balance sheet to support organic and inorganic opportunities as we continue to execute on our clear strategy to deliver sustained quality growth. Thank you, and I now hand back to Susie, who will oversee our Q&A session.

Thanks, Rob. I can see we've got a question from Ed Henning at CLSA. Do you want to go ahead, Ed?

Yeah, that's great. Thank you for taking my questions. I've got a couple of questions. On slide 13, you highlight the positive flows that have been coming from global equities, and today you highlight another $500 million mandate, which is great. Can you just touch on, of the flows that came in, were a lot of those from the global value fund, and now, you know, performance has slightly dipped. Has that started to bounce back in the last two months since the update of December 31st?

Thanks, Ed. For Barrow, it's probably simplest to think of three different global equity capabilities. There's the broad-based core global equities value fund. There is a global emerging markets value fund run by Rand Wrighton. And we also have, from a U.S. investor's perspective, what's called international equities, so it's ex-U.S., which is a huge segment in the US. So, yeah, they're the three components that make up the whole, and each of them are growing. Each of them are performing well, and investor interest is growing, and consultant ratings are improving. So, yeah, we're pretty bullish about the expectations, particularly given some of our closest competitors struggling from a performance perspective.

Global value fund. Has performance turned there more recently because of the updates as of December?

Yeah, it had a strong January, February to date. Last time I looked, it looks pretty good. Yeah, performance is, yeah, it's exceeding the value indices as well as the core indices. Yeah.

So kind of wrapping that up, you know, with the momentum in all those funds, you hope to see continued inflows coming in from the global equity side in Barrow.

Yeah, I would phrase it as being quite bullish. Yeah, no, that's great.

Thank you for that clarification. And then just secondly, on fees and the mix of the funds coming in, if you look at both separately, Tammy and then Pama, if you look at the Australian business, the fee mix was down. Can you just talk about the outlook for fees, just given the mix of where you think the flows are going to come in, both in the Aussie business and the international business both?

I'll make a brief comment. Maybe Chris might comment as well. Yeah, I think for PAMA, it is a mixed story. Chris mentioned the strong flows into our credit fixed income team. Yeah, that business is doing terrifically well. Strong performance across the board. Yeah, very solid growth. Yeah, as Chris said, we'll be punching through $10 billion in assets in that team pretty soon. So whereas Aussie equities, whilst we've had a material improvement improvement in the flow profile, we're still in outflow and some of that's higher margin.

Yeah, so I think we've been seeing a month-on-month improvement in the retail flow profile for the equities business, so that will have a positive impact over time. But to this point, the growth in credit and fixed has outweighed that. I think internationally as well, we are seeing the growth coming in global strategies, which are higher margin. To this point, though, we've also seen outflows out of US equities, which isn't bad margin. But if we can do both... stabilise US equities and continue to grow or increase the growth in global equities, including the mutual funds as it starts to come online, which will be higher margin again for the Barrow-Hanley transactions. Our expectation in the medium term would be that the Barrow-Hanley average margin will improve.

Okay. That's great. I'll leave it there. Thank you.

Thanks, Ed. And just a reminder, if you'd like to ask a question to press 01... Can't see that there's any more questions on the line. Oh, there's a couple coming through. Okay, I'll take the next question from Liz. Thanks, Liz. Do you want to go ahead?

Thanks for taking my question. My first one, if I can, is just on the market-related margins within the potential private business. If that's not quite materially this half to 85 bits versus the last half, the second half that is from 81, what's really driving that? I assume Jacaranda has helped. Just curious on some color there. Thank you.

I could completely hear that, Liz, but I think it was about the margin and the growth in non-market revenues in PP. And, yes, a big driver of the turnaround in non-market revenues in PP was the turnaround in Fordham. We've talked in the past a little bit about the fact that Fordham benefits from the ability to meet with its clients face-to-face, and it just hasn't had the ability to do that. We were hopeful last half where we had windows that we'd see an uptick, and we have seen that in Fordham. Going forward this half, this is the time of year that Fordham gets or doesn't get consulting fees through the door. And given we're reopening, I hope I'm not jinxing this now, we're hopeful that we see an uptick versus last period on that consulting revenue as well. So we definitely saw it in that more compliance-oriented tax return style work that Fordham does in the first half. We're hopeful to see the same sort of dynamic coming through in the consulting revenue that will come through.

Great. Thank you. Sorry, actually, my question was in relation to the market-related revenue. Sorry, the line is a little crackly. I'm not sure if that's me or you. But, yeah, just focusing more on the market-related margin, if that's okay.

Look, there were some performance fees for PP. Approximately, I think, $3 million. So that would have assisted the margin in PP. Okay.

OK, got it. And then also just looking at the general and administrative expenses in total. I'm a little just confused in terms of the trajectory of that, so I think it came in at around 71 mil for the first half. In the second half 21, it was around 73 and a half. Obviously I assume there's a bit of seasonality within that, that software adjustment that we've had to make very quick. Is the first half 22 number, I suppose, the right base going forward, or is there some seasonality with that? Because it just seems to be a fair bit lower once you do adjust for that staff adjustment.

There is some seasonality in there, and you're right that IFRIC hasn't helped with the adjustments we've made there, which has thrown another spanner into it. So I think it's probably somewhere in the middle, to be honest, Liz, that I wouldn't take the run rate for the first half through to the second. Look as much at the second half, 21.

Okay, great. Got it. And if I can squeeze in one final one, the franking rate was 100%, which I expected it to be a bit lower in line with commentary once you made the acquisition of Barra Hanley. Just wondering going forward, will it be at that elevated rate or how should we think about that going forward?

At this stage, we're comfortable that we'll have fully franked dividends for FY22 and all things being equal, FY23. You know, we've got some franking credits in the account and the way the earnings are being generated, that's the way it's looking at the moment. Beyond that, it will depend on the proportion of earnings that are coming from offshore versus locally, obviously, and that's probably a little bit too far out to look ahead at. But we're pretty comfortable we continue to pay fully franked dividends this year and next.

OK, thank you.

Thanks, Liz. The next person on my list is Andre from Morgan Stanley. Andre, go ahead.

Good morning. I wanted to ask my first question around that real return multi-asset ESG strategy, which has raised over a billion dollars within three months of launch. Can you explain a little bit more about the strategy, like which clients has it been marketed to, and what is it about this strategy that allows it to raise so much money before having a performance track record?

Maybe a second question first, Andre. We had specific interest from an Australian institutional investor that makes up the bulk of that support. So they were very closely involved with the product construct. So the fund is run by Michael O'Day and our multi-asset team. It provides proven downside protection, lower volatility, but still sufficient upside exposure with ESG allocations. So some of those allocations are through to Trillium, to our Australian investors. Australian Shares Ethical Fund run by Nathan Hughes and other exposures. And our distribution team is marketing that through both retail and institutional channels.

I want to talk around the increase in the borrowings to fund strategies. Can you explain a little bit more about that? Is that mainly for seed capital or any other opportunities you've seen?

In that half, it was partly helping to fund seed capital into the mutual fund strategies in the US and the ETMFs locally here. But we also had to pay for Jacaranda and for Laminar. We also paid some deferred consideration for Barra Hanley. So all of that combined to where we've got... We've still got some headroom there. We've got some capacity. I think we've probably got somewhere between $180 million, $190 million of... free cash available to us. So that's, if you're trying to think about capacity going forward, that's probably the number to think about.

Thank you.

Thanks, Andre. We'll take the next question. Nigel from City. Go ahead, Nigel.

Good morning, guys. Good afternoon there. So just on the – I just wanted to tie up, Rob, your comments, first of all, on quite bullish on global equity flows and your comment that you now feel that your initial base case of three years to bring Barrow into positive net flow is now much shorter. I mean, are you flagging there that you could see a positive turn, say, within 12 months? I mean, do you think there's a reasonable chance of that?

I think there's a good way of phrasing it, Nigel. I think there's a reasonable chance of it. Right. Thinking about what could that flow mix look like, the way the pipeline's looking, the way performance is sitting, feedback from our distribution teams globally, I would say it would be a combination of a moderation in the outflows in US equities, a moderation in the outflows from fixed and continued growth. I'm actually expecting substantial growth from our global capabilities.

Great, that's helpful. Thank you. Just secondly, on the cost front, there was a bit of sort of commentary around that, you know, some of the reason why costs might be just a little bit lighter first half was difficulty in recruitment. Is that in fact a factor? And, you know, is that possible? If it is, is it possible that that goes into second half as well?

Yeah, Nigel, it certainly was a factor in the first half. We didn't hire as many people as we had hoped to, given the difficult labour markets. Those markets aren't getting any easier, I have to say, but probably offsetting that is that when we do hire, they're tending to be a little bit more expensive jobs, than we had originally thought too. So I can't really give you an answer except that the dynamics in the labour market that existed in the first half are still there for us and we still have a number of initiatives, not just here in Australia but overseas, that are looking to add capacity and it's taking us a little longer than we thought to add that capacity.

And so the impact is sort of across all businesses as well. Is that fair to say?

I think that's fair. I mean, all businesses are growing and the labour market issue is not specific to any one of our businesses. And Rob also talked to the fact we're building out a global operating model to provide the infrastructure to keep supporting this growth. We've turned from a domestic business to an international business in Australia. 18 months or two years. And so, you know, there you're talking about risk professionals, finance professionals, and they are amongst the most tricky markets at the moment to get people into.

Okay. Thank you for that. And maybe just finally, I mean, I just wanted to get a feel for sort of what flexibility you feel you have in the cost basis, you know, markets do end up being down for the half and, you know, how quickly that you can actually apply that flexibility. Yeah.

Yeah, I think, Nigel, the best way to think about it is when you saw we did have a downturn, what was it, 12 or 18 months ago, where we took a number of measures to adjust our cost base at the time. The board exec took pay rises, variable REM was hit. We slowed down recruitment, et cetera. There were pay cuts. So I think we've evidenced the fact that we can move. We will balance that, though, with we are investing in some long-term initiatives that we believe are going to drive long-term growth. So we'll be balancing that. If markets turn, we obviously have to adjust, but we'll be balancing that against the fact that we're midstream on investing in building out capabilities that we will need when we come out the other side.

Okay, great. Thank you very much.

Thanks, Nigel. And I'm conscious of time. We've got two more people that are looking to ask questions. So I'll hand over to you, Matt, from Bank of America.

Thank you very much, gentlemen. Just wondering if I could ask on corporate trust, the perpetual digital, how much of that growth was driven by Leminar and what's the outlook? Are we expecting double-digit growth to continue in that line?

Laminar came on. We didn't have a full half contribution from Laminar, so I wouldn't overstate that. But Laminar will be material to the new perpetual digital segment. So you'll see more of that coming through in the second half. I think the bigger opportunity from what Laminar provides is the ability to take that capability and roll it out to our installed client base across PCT. So a couple of those new modules you saw on the PCT slide that Laminar brings The sales team at PCT is in full swing trying to roll that out to our installed client base. And without giving guidance, PCT business is in really good shape, and I don't see any reason to – it's been very resilient in terms of its earnings and its profile, and I don't see anything particularly changing that on the downside. If anything, Laminar brings upside.

Thanks, Chris. And if I could just have a follow-up for Rob, perhaps. On slide 30, you're talking about targeted organic and inorganic growth. I just wonder if there's anything you can say around things like your comment refers to more happening in FY22 around inorganic growth. Is there anything you're working on at the moment?

Yeah, I hope so. Yes, there are things we're working on. We're working on, actually, as I think about it, Chris talked about a healthy pipeline of M&A opportunities. We're actually active on opportunities for each business right now as we speak. So, yeah, I'd be very hopeful, Matt, that we can execute on a transaction or two. Yeah, in our asset management business, we've got a few gaps in a perfect world that we'd like to cover, particularly in alternatives. You know, for PP, you know, there's a strong pipeline of bolt-on opportunities. And for PCT, you know, Laminar sort of extends out what we can do for clients and anything that we think can have a similar impact in terms of extension of service and product, you know, could be in the frame. So, yeah, I'd definitely like to think that we can execute something, you know, in this current half.

Thank you very much.

Thanks, Matt. We'll take the final question from Julian. Julian from JP Morgan, over to you.

Good morning, guys. Just a follow-up from me on the perpetual digital question. Look, I just wanted to understand, obviously that business is about just over 10% of revenues in corporate trust, but growing, seems to be growing phenomenally. I just want to understand how you're thinking about the longer-term financial opportunity there. I mean, what is it that you're targeting? And, I mean, further to the question earlier, is it sustainable, these sort of growth levels that you're getting at the moment?

I'll make a brief comment and pass to Chris, who I think, as everybody knows, for more than a decade ran the business and set up components of what is now Perpetual Digital. But Chris talked about effectively the cross-sell of services within Perpetual Digital across our debt market services business. I think, Chris, our current client penetration would be less than 10%. And so, yeah, there's a pretty decent runway there.

Really, the number of it's not complicated in the sense that we've got a lot of new capabilities in perpetual digital of which only 10% of our current clients utilise. So the main game is to penetrate our existing client base with those new capabilities, many of which come from Laminar. And then in time, there'll be extensions beyond, as we've extended beyond securitisation into broader... banking and financial services markets. There will be other markets that in time, I'm not suggesting any time soon because there's a big opportunity in financial services, but the sort of capabilities that we're building lend themselves to analytics and data aggregation in any other industry that needs it with big, complex data sets. But the immediate opportunity is to sell a bunch of new capabilities in perpetual digital to our existing client base beyond the 10% that use them now.

Okay, great. Thanks so much for that. And I just have one last question just on the margins in the Australian business. I just want to get a bit of color as to how you're seeing margins hold up. Obviously, they've been pretty stable in the PCP. And also, I think it was slightly down on the second half, 21. I'm not sure if that's performance-driven. But the question I'm asking is, Are you seeing much fee pressure in the Australian business, or are just the margins holding up pretty stable X mix-and-packs?

If you're talking about the Australian asset management business, I don't think there's been any discernible change in our pricing. We, a couple of years ago, proactively adjusted prices and some of our capabilities that we wanted to prioritise. So I think in some ways we proactively dealt with any potential client-led margin pressures. So I'd say there's been no discernible negative trend in that regard.

half the impact of those repricing moments of 12 months ago coming through. But beyond that, no pricing pressure. Really, what's going to drive margin in PAMA and PAME will be business mix going forward.

Okay, great. Excellent. Thanks so much for that.

Okay, thanks, Julian. I think we'll close it out there. Thank you for watching and listening in today. The financial material and a recording of the webcast will be available on our website shortly. And please reach out to me if you've got any further questions. Thanks and have a great day.