Perpetual Limited

Good morning everyone and good afternoon or evening to those joining us from other parts of the world. Welcome to Perpetual's full year 2023 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 and acknowledge the traditional custodians of the various lands on which you all work today. Presenting here with us is 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. And before I hand over to Rob, we'd like to draw your attention to the disclaimer on page two of the presentation. Rob, over to you.

Thanks, Susie, and good morning, everyone. Thanks for joining us today for Perpetual Group's FY23 results briefing. Chris and I are pleased to present these numbers. They're important results for the group, not only as a solid set of annual results in a difficult environment, but because they also mark milestones in our progress on executing the strategy that we laid out back in 2019 and that we are refreshing today. Today, Perpetual is a transformed business following the acquisition of Pendle. We are a diversified financial services company with three distinct market-leading divisions, which now includes a truly global asset management business. Through the acquisitions of Trillium, Barra Hanley and Pendle, we now have created a world-class asset management business with high-quality investment capabilities managed by investment teams who lead their respective categories. And those teams now supported by a global distribution team covering all key regions and channels. And we have significant capacity for growth from those existing capabilities. And we are now fully focused on driving that growth over time. With the acquisition of Pendle, we have more than doubled our assets under management to over $200 billion. In fact, $212 billion across our seven leading asset management boutiques. Whilst we're only six months in, the integration of Pendle is on track. We are delivering the anticipated expense synergy benefits and the upgraded target of $80 million of synergy benefits two years post-completion is reaffirmed. Pendle's contribution since we completed the acquisition in January has been impacted by net outflows across a small number of products, which has been disappointing. Importantly, given the quality, the breadth and depth of investment capabilities, we remain confident of returning to growth over time. We have retained all key investment talent, investment performance is strong or improving, and our combined global distribution team is starting to positively impact. We are entering a new phase of Perpetual. Today we are announcing a strategy refresh which focuses on unlocking growth opportunities, seeking simplification across all of our businesses and delivering synergies whilst improving our net flow profile. After a period of inorganic expansion, we are now fully focused on driving organic growth and delivering returns on the investments that have been made. Turning now to our headline result. Perpetual delivered total operating revenue of $1,013.8 million, so just over $1 billion for the year, an increase of 30% on FY22, reflecting the five-and-a-half-month contribution of Pendle and growth in both our corporate trust and wealth management businesses. Underlying profit after tax was $163.2 million, 10% higher than the prior corresponding period. Statutory NPAT was $59 million, 42% lower than FY22, which primarily reflected transaction and integration costs related to the Pendle acquisition. Diluted earnings per share on UPAT was $1.96, down 24% on last year, with a full year of Pendle's earnings yet to flow through to our numbers. While there is some noise in our FY23 statutory numbers, influenced by one-offs related to the Pendle acquisition, we believe this is a solid result in what has been a difficult operating environment for equity markets and for asset managers in particular, and one that demonstrates the strength and diversification benefits in our unique combination of businesses, seen through the growing contributions of both our corporate trusts and our wealth management businesses. The board has determined to pay a final dividend of 65 cents, of which 40% is franked. Total dividends for the year were at $1.55, representing a payout ratio of 76% of second half 23 UPAT and 78% of the full year UPAT. Turning now to each of our divisions, starting with asset management. Today we are reporting one asset management result for our global asset management business, which is a change from our previous regional view and aligned with our new global structure, which I will talk more about shortly. Asset management underlying profit before tax was up 29% due to the inclusion of Pendle, with total assets under management, as I mentioned, of $212 billion, which includes $110 billion from the acquisition of Pendle, completed in January. and that was supported by positive markets, the AUM number supported by positive markets, strong relative investment outperformance and favourable currency movements. As you can see from the chart on the right, we now have a highly diversified spread of AUM across our boutiques and further diversification across investment strategies within each boutique. We reported total net outflows of $8.1 billion for the year, impacted by a variety of factors which included underperformance in J.O. Hambro's global and international select strategies, asset allocation shifts by clients from equities to fixed income, primarily impacting flows in U.S. equities for both Barra Hanley and TSW. And we have seen defined benefit schemes becoming fully funded, hence de-risking by reducing their equity exposure. Whilst the net flow result for the year was disappointing and market dynamics remain challenging, with a strong outperformance profile that we have across our investment capabilities, we feel we are well positioned to see an improvement in flows led by Perpetual's Australian Equity Strategies, Barrow Hanley's Global Strategies, Hambro's Emerging Market Opportunities and Global Opportunities Funds and Regnan's Impact and Thematic Strategies. As you can see from the next slide, our relative investment performance is strong. 78% of the group's strategies outperform their benchmarks in the three-year period to 30th of June 2023. The strong outperformance in perpetual asset management in Australia across all sectors, in Barrow Hanley and in TSW particularly augurs wealth. As an example, we have previously disclosed over $1.5 billion of new wins for Barra Hanley, expected to fund this quarter. Barra have either won new accounts or are in finals for new clients from the US, UK, Europe, Asia and Australia. Their global equity fund here in Australia is now firmly in the top 10 global equity funds for net flows from the intermediary channel. Their second CLO fund is expected to fund in the coming months. And with our newly combined intermediary distribution team in the US, we will be making that channel a real focus for Barrow. As mentioned, disappointingly, we have seen material outflows from Hambro's international select strategy in particular. We have highlighted on the right-hand side of this slide the improved relative performance of this important strategy. Being a concentrated growth-oriented strategy, there will be a degree of volatility in performance. This near-term improvement has pleasingly led to a moderation of the outflow profile, and knowing the quality of the investment team, we are confident of continued improvement over time. Now turning to corporate trust. As you all know, Corporate Trust is a high-quality business that continues to deliver growth, underpinned by unmatched long-term client relationships. Unlocking profit before tax was up 12% and revenue was up 12% in FY23. And again, reporting consistent delivery of EBITDA margin. It's pleasing to see this consistent delivery of the prized combination of both strong margins and earnings growth. It's a feature of our Corporate Trust business. While the current higher interest rate environment has put some pressure on competition and activity within the corporate trust segment, the business is well supported by its long-term client relationships and service model. We have highlighted the tenure of our client relationships in corporate trust, and as you can see from the middle chart, 70% of our clients have been with us for more than 10 years. Our brand and our relationships are strong, which drives the consistency and the persistency of growth for this important business. Our relatively new digital division has also shown consistent levels of top-line growth, as you can see from the chart on the right, and we expect that to continue into the future. Finally, now turning to wealth management. In wealth management today, we have reported strong growth in non-market linked revenues, supporting underlying profit before tax growth of 6% for the year compared to the prior corresponding period. The diversity of services in wealth management underpins its quality of earnings through market volatility. It's been pleasing to see our gross margin relatively stable despite a difficult operating environment. As mentioned, we've seen a material improvement in our non-market linked revenue streams during the year, led by Fordham, our accounting and financial services business. Fordham had a standout year following a rebound of client activity post-COVID lockdowns. And Priority Life, our specialist risk advisory business, had its best year since acquisition, leading to the medical segment growing revenues by 17% over the period. Now let's turn to an update on the Pendle acquisition. The integration of Pendle, six months in, is on track. As we've previously disclosed, client consents at completion were 98%. As I've mentioned already, importantly since completion, we have retained all key investment professionals across our seven boutiques. As mentioned, whilst particular strategies have led to disappointing total net flows, we are fully focused on improving flows. The quality of our investment teams, our strong relative investment performance, combined with significant capacity, provide us with confidence into the future, as does the expected future impact of our newly combined distribution team. As at June 30th, we've delivered $29 million of full run rate synergies and we reaffirm our synergy target of $80 million by January 2025. Costs associated with gaining synergies to date have been approximately $39 million. Over the next 12 months, our integration activities will be focused on technology, on product and platform rationalisation, combining head offices here in Sydney and a program of work to optimize our third-party vendor costs. So whilst it's still early days and there is much for us to do, I firmly believe that this acquisition will deliver value to our shareholders over time. We have an enviable array of world-class investment managers, one that would be incredibly difficult to replicate. They're delivering strong relative investment performance. we now have a truly global distribution footprint and an experienced management team. Our focus is now fully on positive execution and delivery. Turning to the next slide. Importantly, our management team has demonstrated an ability to deliver and add value to acquisitions we have made in recent years, as this slide highlights across four of our transactions. In each case, we followed a detailed execution plan We delivered on expected synergies where they existed. We've invested in those businesses in a disciplined manner to strengthen our acquisitions and to open up new avenues of growth for them. Trillium, for example, which we acquired on 30 June 2020 in the fog of a global pandemic, had a one-person distribution team, low brand awareness, no institutional relationships and no international clients. Today Trillium leverages Perpetual's 170-person strong global distribution team They have active institutional relationships and clients and has product availability across the US, UK, Europe, Asia and Australia. We've had several record net flow quarters since acquiring the business and total assets under management has nearly doubled to $10 billion. When we acquired our 75% interest in Barrow Hanley in November 2020, the business was 100% institutional and largely US-focused, with declining ex-US distribution support. Working with the Barrow team, we have seen material growth in their various global and international strategies, with flows coming from the UK, Europe, Asia and Australia. In FY23, Barrow saw $3.5 billion in inflows into those global strategies and emerging market strategies. In Australia, we've seen good results from the intermediary channel, with Barrow Hanley's global equity strategy receiving over $630 million in net inflows, ranking it in the top five global equity managed funds for net inflows for the year, according to Morningstar. And with our larger proven distribution team in the US, we are looking to emulate that early success in the US intermediary channel, which will be entirely new for Barra Hanley. In our wealth management business, Priority Life was operating in one Australian state only. We saw the potential to grow that capability by leveraging our presence across Australia. And today, as part of our medical segment, we now have more than $50 million in premiums in force across that segment. Finally, in our corporate trust business, Laminard Capital is today a growing business that's leveraging the strength of the perpetual brand of our longstanding relationships to attract new customers. Today, assets under advice have now moved up to over $24 billion and we expect that rate of growth to continue. So through these examples, I hope that you can see that we are positively executing on our plans and we are adding value to each business. But there's always more to do. And in all cases, we are on track with our, importantly, in all cases, we are on track with our original ambitions and we remain confident about future delivery. Whilst I have said it is still early days for Pendle, we have the same confidence for future delivery over time as we have had for each of our acquisitions. We are entirely focused on execution and delivery. As I stated earlier, these results mark a milestone for us as we deliver on the commitments we made back in FY19 and now shift to focus on driving organic growth to deliver the expected return on our investments made. For those of you that might be new to Perpetual Group, this page lays out our execution scorecard against commitments we made back in 2019 when we first launched our growth strategy. Our goal was to build scale in asset management, to add new investment capabilities beyond value and beyond Australian-only capabilities, and to expand offshore to accelerate growth over time. We aim to develop new growth opportunities in corporate trust with a focus on digital and wealth management through our advisor growth strategy and our segment focus. And in terms of the report card on asset management, We, sorry, slightly out of order there, but in terms of our report card on asset management, we acquired Trillium, Barrahanley and Pendle, adding multiple global, regional, ESG and thematic investment strategies with substantial capacity for future growth. Since 2019, we've built out a global distribution team to support our boutiques and to drive our growth aspirations. Combining Pendle and Perpetual's global distribution teams now means that we have a unified team and a product infrastructure covering all major markets and all channels. While there still is a lot to do in the context of the Pendle integration, and the last quarter of FY23 in particular was disappointing from a net flows perspective, as I have said, we remain confident of improving our net flows over time. In our wealth management business, back in 2019, we commenced the execution of our advisor growth strategy with new top quality advisors joining our ranks during the dislocation in the advice industry post the Royal Commission. And those new advisors bought over $1 billion in new clients. Our segment focus has been solid in our medical, native title and NFP channels, and our acquisitions have added new components of growth. On the other side of the ledger, our expectations from our family office focus have not yet been met and we have work to do in terms of improving our clients' digital experiences with us. Turning now to corporate trust, back in 2019 we said we would focus on creating further digital service offerings for our clients whilst launching new products and services to our core clients. Through the combination of internal development programs and the acquisitions of RFI Analytics and more recently Laminar Capital, We now have a third segment in Corporate Trust, Perpetual Digital, which will be a driver of future growth. We still have work to do on our technology platform to fully replace legacy technologies and to further develop our cloud-based operating systems. So whilst it's useful to reflect, our focus is, of course, forward-looking, and we have refreshed our strategy to highlight our key focus points going forward. After more than four years of execution and having invested the capital, we have refreshed our strategy to focus on building a simpler, stronger, more streamlined and better perpetual. We have three high quality market leading businesses focused on delivering sustainable returns for the group. Across all of our businesses, we have invested for future growth and we are now fully focused on driving organic growth and our refreshed strategy and our page reflects that. We also recognise in the process of growing our businesses we have become more complex and hence we see opportunities to streamline our business and we recognise that we must be more agile to face into the current and expected future macroeconomic environment. Our three strategic imperatives are now client first, which of course remains, We will continue to focus on delivering superior service to our clients with top quality advice, strong investment performance and contemporary product solutions to meet their needs. We will simplify and streamline our business as mentioned. We will seek areas of simplification across our portfolio of businesses and we will be focused on areas where perpetual adds value. And sustainable growth. Following a period of inorganic growth, which has created the potential we now have across all of our businesses, our focus is going to be on unlocking and fully realising that potential. We will grow from our current base and deliver the return on investments made across the organisation. In line with our refreshed strategy to simplify our business today, we've also announced changes to our asset management leadership structure. We are moving from a regional approach to a global approach with a streamlined global leadership team and therefore a smaller number of perpetual group executive committee members. This important change we believe is a more efficient and effective structure for the management of our global asset management business. We will have global functions that can prioritise regions and channels of focus and support the differing needs of each boutique, allocating resources and prioritising areas of superior growth potential by taking a truly global view. From today onwards, our global asset management leadership team will be led by me, in addition to my group role, with a dedicated global asset management leadership team in place. That team will be formed effective today and will have end-to-end accountability for executing and delivering on our strategic ambitions, providing an improved focus on unlocking growth opportunities for our suite of asset management boutiques across the globe. These changes will also outline, as mentioned, a simpler group structure and create a smaller group executive committee. Turning now to our focus for FY24 before I hand to Chris, you'll see our priorities across each of our three distinct business divisions for the year. In asset management, our focus is on delivering year one synergies in FY24 for the Pendle transaction. It is for us to start to see the benefits of bringing together our leading investment teams with our global distribution coverage through an improvement in net flows. And we will be focused on improving flows from key intermediary markets. In wealth management, our focus is on strengthening our offerings for key segments and channels that are growing, where our advice and services can add value to clients. We will continue to grow our ESG products and services and seek to improve operational leverage in the business. And in corporate trust, we will be further leveraging our leadership strengths and long-term client relationships to grow our digital solutions and deliver further growth. Across the businesses, we are committed to delivering the return on the investments made across Perpetual. I'll now hand to Chris to take you through the financials in more detail.

Thanks Rob and good morning everyone. Turning to our results for this financial year, operating revenue of $1,013.8 million was 32% higher or $246.1 million greater than the prior corresponding period. primarily driven by the Pendle Group acquisition in January 23. Further growth was delivered through Corporate Trust's three service lines and strong performance in wealth management's non-market revenue, group investments and favourable foreign exchange movements. Revenue was partially offset by lower average markets across asset and wealth management and net outflows in asset management. Performance fees earned in FY23 were $15.2 million, $2.2 million lower than FY22. Total expenses of $794.6 million were 40% higher. This was mainly impacted by expenses associated with the incorporation of the Pendle Group, including higher interest rates impacting funding costs and foreign exchange impacts, as well as the annualisation impact of investments we made at the back end of FY22. We also had a number of one-off expenses late in the year, including those related to an IT security incident in June, and an earn-out triggered by the strong performance of Priority Life. Underlying profit after tax of $163.2 million was up 10%. Statutory net profit after tax of $59 was down 42% due to significant items predominantly in relation to Pendle's transaction and integration costs. The effective tax rate on UPAT during the year was 25.5 down from 26.5 due to a greater proportion of offshore earnings. Earnings per share on UPAT was 24% lower, with return on equity on UPAT 9.8%, down from 16% in 22. The final dividend declared for the second half of FY23 will be explained later in my presentation. For now, I'll turn to revenue. Rob's talked to each division, so I won't go into too much detail, other than to show that there was growth in revenue and AUM, or FUA, across each division. Asset management strong growth in AUM was influenced by improvements in the US, European and Australian equity markets, the contribution of Pendle Group boutiques together with the impact of foreign exchange rates. Wealth management revenue was 3% higher with a stronger performance in non-market linked revenues versus the market linked revenues which were impacted by lower average equity markets. Growth in funds under advice was supported by positive net flows in the native title and the not-for-profit segments in the wealth management. Corporate trust revenue was up 12% on the prior corresponding period with strength across all areas of its business. Looking at our segment UPAT performance in detail, UPAT was high primarily due to the Pendle acquisition. Asset management's PBT increased by 29.8, driven by those earnings from Pendle. Wealth management's PBT increased by $2.7 million, driven mainly by organic business growth and a high interest rate environment, which led to higher cash earnings. In corporate trusts, the PBT increased by $9 million, with contributions from across all three business lines. In group support, PBT decreased by $23.5 million, predominantly due to high interest expense, following interest rate rises and the additional funding costs associated with the Pendle acquisition. Across the business, there was also a reduction in variable remuneration, comprising of group-wide short-term incentives, equity REM and performance fee share. And the tax impact on the revenue resulted in a movement of $3 million due to lower effective tax rate applied in FY23. Onto expenses, controllable cost growth was 4%. mostly attributable to higher FTE expense, combined with technology investments and those costs associated with that IT security incident we had. Cost growth from higher interest rates and FX impacts on non-Australian expenses added 4% to expense growth. Overall cost growth reflected the incorporation of Pendal's expenses and the associated interest expense from the funding of the acquisition. For FY24, factoring in a full 12-month contribution of Pendal's expenses, we expect total expense growth to be between 27% and 31% for the year. We note that this excludes remuneration expenses related to performance fees. It's also important to note this guidance will fluctuate depending on currency movements, interest rates and variable remuneration linked to AUM. Turning to the cash flow, where the main movements reflect the completion and nearly six months of integration of Pendle. Free cash flow of $85.8 million for FY23 was driven by an uplift in net cash receipts in the course of operations. However, there was a net decrease compared to the $148 million free cash flow available in FY22 due to the acquisition and integration costs that we've incurred. After paying dividends of $131.6 million, the resultant net cash position prior to the acquisitions and seed funding was $129.6 million. Total cash at 30 June was $263.2 million. The balance sheet as at 30 June remains strong with a gearing ratio of 23.9%, well within the group's risk tolerance. The Pendle acquisition has obviously had a material impact on the balance sheet with key movements highlighted on this slide. Goodwill and other intangibles reflect the intangibles created upon the completion of the deal. The increase in borrowings reflect the additional drawdown in debt to fund working capital requirements as well as other strategic initiatives. Gross debt to EBITDA was 1.87 times. This uses the EBITDA definition we use for our banking covenant purposes and includes a number of inputs such as the full annualisation of perpetual earnings. We reaffirm our target to reduce debt to 1.2 times gross debt to EBITDA by January 2026. Contributed equity increased by $1.373 million, which was due to shares issued to Pendle shareholders in January 2023. We retain our dividend policy, which is to pay out within the range of 60% to 90% of UPAT on an annualised basis. On that front, let's talk to dividends now. The Board has declared a total final dividend of 65 cents per share, which will be 40% franked and paid in September. Combined with the dividends paid in the first half, the total dividend for the year is $1.55, which reflects a payout ratio of 78% of UPAT, in line with our dividend policy to pay between 60% to 90% of UPAT on an annualised basis. We expect the dividend payout ratio to remain around the midpoint of our range, acknowledging the need to balance the shareholder returns with cash needs for integration and our intention to pay down our debt. Before I hand back to Rob, I'd just like to draw your attention to the detailed divisional results that are in the annexure, as well as some other information. With that, though, I'll hand back to Rob.