Perpetual Limited

Good day and thank you for standing by. Welcome to the Perpetual Group Half-Year Results Briefing 2024 Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Susie Reinhart, Head of Investor Relations. Please go ahead.

Good morning, everyone, and welcome to our half-year results briefing. 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. As the moderator said, there'll be an opportunity to ask questions at the end of the presentation if you're on the telephone. Please can we ask that we start with two questions each to ensure we have time for all analysts that are keen to ask questions. 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, everybody. Thank you for joining us today for Perpetual Group's first half 24 results briefing. Our business continues to demonstrate resilience in a challenging operating environment. In corporate trust and wealth management, we have delivered a solid performance over the half. As a larger, more diversified and scalable platform with total assets under management of $214 billion, our asset management business benefited from market movements, partially offset by net outflows. At our FY23 results in August last year, we announced a refreshed strategy focused on simplifying our business and driving sustainable growth. In our announcement today, you will see that we are implementing that strategy at pace. The integration of Pendle Group is progressing well, and we are on track to reach our overall targeted run rate synergies of $80 million after two years. And we are ahead of our target for the first year, that target being $40 million in annualised synergies. For the remainder of this year, we are focused on continuing to deliver the synergies we've committed to from the acquisition of Pendle. We are focused on improving the consistency of net flows in our asset management business. We are progressing our strategy to simplify our business. And finally, the board will continue to progress the strategic review announced in December, 2023, to explore the benefits of unlocking value for our shareholders through the potential separation of our corporate trust and wealth management businesses. Turning now to our headline results. We have provided two comparison points for this half-year period, both first half at 23 and second half at 23, with the second half of 23 a more relevant comparison point given the inclusion of Pendle Group from January 2023. Perpetual delivered total operating revenue of $657.8 million for the half year, an increase of 5% on the second half 23 and 69% on the first half 23, reflecting the inclusion of Pendle in the second half of FY23 and growth in both our corporate trust and wealth management businesses. Underlying profit after tax was $98.2 million, 2% higher than the second half of 2023 and 46% higher than the prior corresponding period. Statutory debt profit after tax was $34.5 million, 7% higher than the second half of 23, or 29% higher than the first half of 23. Diluted earnings per share on UPAT was 85 cents per share, down 26% on last year, but 5% higher on the second half of 23. The Board has determined to pay an interim dividend of 65 cents per share, 35% franked. The first half was a volatile period for investment markets with equity market declines in October, recovering towards the end of the period. Inflation peaking, driving speculation over future rate movements and heightened geopolitical uncertainty. Despite this backdrop, Perpetual's businesses demonstrated their quality and resilience. Turning now to some of the business highlights. We are building strong foundations across the group to drive sustainable growth. In asset management, our larger, more diverse asset base provides us with a platform from which to drive scale benefits and an improved growth profile over time. Our quality investment teams across our boutiques continue to deliver strong investment performance, with 78% of strategies outperforming over three years to December 2023. In Australia, Perpetual Asset Management was recognised by Zenith as Fund Manager of the Year in 2023, as well as overall Fund Manager of the Year by Financial Newswire, and was a winner of individual categories at the Zenith Awards across multi-asset and equity strategies. Offshore, J.O. Hambro, despite a challenging period for some of its funds, won Best Asset Manager in the 2023 UK Morningstar Excellence Awards, recognising those asset managers that have served investors well over time. And Borough Hanley, which we acquired just over three years ago, is delivering, attracting $2.5 billion of net flows into its global and international strategies in the six-month period to December 31. In wealth management, the business has seen solid performance across all segments, delivering 18% growth in underlying profit before tax for the first half of 24 compared to the first half of 23. And our advisors continue to be recognised as some of the country's best with good representation in Barron's top 100 advisors list. In corporate trust, despite broader macroeconomic headwinds and the high interest rate environment, the business continues to grow its funds under administration. So you can see across Perpetual we are delivering some high quality outcomes and setting strong foundations to drive sustainable growth into the future. Turning to the next slide where I'll discuss some of the key results in each division. In asset management, underlying profit before tax was up 165% due to the inclusion of Pendle. Compared to the second half of 23, unaligned profit before tax declined slightly, mainly due to the impact of net outflows over the period. Our cost to income ratio for our asset management business has improved through the period, moving from 80% in the first half of 23 to 78% in the first half of 24. Total assets under management of $214 billion was supported by positive markets, strong relative investment outperformance, offset by unfavourable currency movements and net outflows, as you can see in the chart below. As you can also see from the pie chart on the upper right-hand side of this slide, we now have a well-diversified spread of assets under management across our boutiques and further diversification across investment strategies within each boutique. We reported total net outflows of $4.3 billion over the half, Net outflows were impacted by a variety of factors, including underperformance in J.O. Hambro's global and international select strategies during the period. Asset allocation shifts away from equities, primarily driven by defined benefit schemes becoming fully funded and hence de-risking, which impacted flows in TSW markets. As I have mentioned, we saw strong net flows within Barrow Hanley, with around $2.5 billion in net flows into Barrow's global and international equities capabilities during the half. Post the 31 December period, we announced the change in portfolio management responsibilities for the J.O. Hambro UK dynamic strategy following the departure of Alex Zavidis. Whilst we are highly confident in the experienced team that we now have in place, this change does pose a risk to flows in the coming quarter. During calendar year 2023, we had two quarters of flat net flows and then two negative quarters, alternatively, with the December quarter leading to the first half clearly disappointing from a flows perspective. Our focus is therefore on improving the consistency of our net flow outcomes across the asset management business, which I'll cover in the next slide. I've commented on the primary drivers of our flows for the half. Our global multi-boutique model does have the benefit of providing us with investment style, asset sector, distribution channel and geographic diversity, which should smooth our net flow profile, and we're very focused on demonstrating that. Our gross flows have been robust. However, we do need to improve our focus on retaining existing clients whilst also continuing to build our new business pipeline and delivery. Both elements are critical in this next phase as we look to improve the consistency of our net flows. During the first half of 24, we appointed a new head of distribution for the EMEA region. Warren Tonkinson has over 25 years proven distribution experience and was most recently global head of distribution at Jupiter Asset Management. We look forward to Warren refreshing our distribution strategy in this important region, driving an improvement in flows for our boutiques. In the US, the intermediary channel is a key future focus where our product platform integration will bring capabilities such as Barrow Hanley to this key channel for the first time with a well-resourced distribution team to drive growth. Our program of product rationalisation continues at pace with 17 funds closed in the first half and up to 50 further products and investment options targeted for closure in calendar year 24. This will drive operational savings and improve our distribution focus, particularly in Australia. Our global multi-boutique model now means that we have a far wider array of investment capabilities, which is enabling us to have discussions with existing and prospective clients regarding the creation of bespoke investment solutions to meet their specific requirements. Our distribution coverage is now global, covering all key markets and channels. We have the resources in place, strong investment performance and a contemporary business model. We're fully focused on leveraging these qualities to improve our net flows. Turning to investment performance now, which is, of course, so critical to future success. As mentioned, the strong investment performance we have is an important bedrock to driving flows. 78% of the group's strategies outperformed their benchmark in the three-year period to 31 December 2023. The strong outperformance in perpetual asset management in Australia, in Barrow Hanley and in TSW provides the distribution team with a range of strongly performing capabilities to take to our broad client base and prospect base. As with many ESG managers, investment performance for Trillium has been challenged since the start of the Ukraine crisis. However, this has not been a factor that has materially impacted their net flows. Turning now to Corporate Trust. Corporate Trust is a quality sector-leading business that continues to drive solid growth and has displayed resilience through this current higher interest rate environment. In the first half of 24, revenue was up 3% compared to the prior corresponding period, and while underlying profit before tax declined slightly, this was due to important investments in new products for clients and in upgrading legacy technology systems. As you can see from the charts below, funds under administration continued to grow, driving revenue improvement. and we continue to report a strong EBITDA margin, despite the additional technology investments being undertaken. While the current high interest rate environment has put some pressure on competition and activity within our corporate trust business, the business itself is well supported by its long-term client relationships and its close service model. We expect to see continued growth in corporate trust in the second half and also continued momentum in perpetual digital through the anticipated client wins and further product development. Finally, turning to wealth management, today we've reported strong growth in underlying profit before tax, up 18% on the prior corresponding period, with total revenues up 4%, driven by growth across all segments. Funds under advice growth was 7%, supported by positive market movements and net inflows. This half marks the 21st consecutive half year of positive net inflows for wealth management. an impressive track record which demonstrates the quality of our brand, our advisors, and the strength of their client relationships. The diversity of services in wealth management really underpins its quality of earnings through market volatility. In the first half of 24, we saw stronger performance from our accounting business, Fordham, while the high net worth advice channel also showed growth. Importantly, we continue to deliver for our clients with our new ESG reporting tool launched during the half, which is just one example of the diversified offerings we have in the business. We also completed the integration of Jacaranda onto our platform, whilst also reinvigorating Jacaranda's marketing suite, including launching a refreshed website. I'd like to now turn to comment on our strategy to simplify and drive sustainable growth. We are continuing to take steps to simplify our business and to reduce complexity. During the half, we continue to integrate Pendle into our business, delivering benefits ahead of schedule. As mentioned earlier, across our asset management business, our product rationalisation program is well underway. In technology, we are migrating group-wide networks into the cloud, and consolidating collaboration technology to ensure we are more efficient. We have also moved to insourcing some of the support functions, such as database security and service desk teams. Our focus points for the second half of FY24 are to progress the integration of Pendle. We will continue to execute the product rationalisation program I've mentioned. We have more work to do in technology with platform upgrades, particularly in corporate trust, where we are replacing the core legacy applications with a fully integrated platform via a single user interface that increases business automation, transparency and control. And across the group, we are focused on reducing central costs whilst improving accountability and empowerment across each of our business lines. As mentioned, we announced a strategic review on the 6th of December last year with the purpose of exploring the benefits of potentially separating our wealth management and corporate trust businesses. As you would expect, the board's review is thorough and it is considering all options for the business with a focus on maximising value for all of our shareholders. And the board is pleased with progress of the review to date. I'll now hand over to Chris to talk through the financials in some detail before coming back later to summarise.