Perpetual Limited

Welcome to Perpetual's full year results briefing 2026. Following the formal presentation, there will be a Q&A session where participants can ask live audio questions. To ask a live audio question, press the request to speak button at the top of the broadcast window. The broadcast will be replaced by the audio questions screen. Use the dial-in number and access pin provided to ask your question via the phone. Alternatively, for those on a home or personal network, you can ask your questions via the web by pressing Join Queue. If prompted, select Allow in the pop-up to grant access to your microphone. If you have any issues using the platform, dial-in details can also be found on the homepage under Asking Audio Questions. Press the Documents icon to see today's files. Select a document to open it. You can still listen to the meeting while you read. The audio queue is now open. I will now hand over to Suzanne Evans, Chief Financial Officer.

Fantastic. Thanks, Michelle. Good morning, everyone, and good afternoon and evening to those joining us from other parts of the world. Welcome to Perpetual's four-year results briefing for 2026. Before we begin, I would like to acknowledge the traditional owners and custodians of the land from which we are presenting today. Here in Sydney, that is the Gadigal people of the Eora nation. We recognise their continuing connection to land, waters and community and pay our respects to elders past and present. We also acknowledge the traditional custodians of the land on which participants are joining us from today and extend our respect and welcome to any Aboriginal or Torres Strait Islander people joining the call. Presenting today are our CEO and Managing Director, Bernard Riley, and myself, Suzanne Evans, the Chief Financial Officer. As Michelle, our operator, has indicated, there will be an opportunity for questions at the end of the presentation. Now, before I hand over to Bern, I would like to just draw your attention to the disclaimer that is up on screen now on page two. With that, Bern, over to you.

Thank you, Suzanne. Good morning, everyone, and thanks for joining us today. Before I talk through Perpetual's FY26 results and further to our ASX announcements, I'd like to provide a brief update on the proposals we received from EQT. Subsequent to our announcement on the 29th of July, Perpetual entered into an NDA with EQT and is providing access to limited non-public information on a non-exclusive basis to determine whether an improved proposal can be formulated. the Board remains willing to engage constructively with third parties where doing so is in the best interests of shareholders. Moving now to our results. FY26 was a year of solid delivery and meaningful progress against our strategic priorities. We've delivered earnings growth through a year of geopolitical and economic uncertainty, supported by a disciplined cost management and strong cash generation. We have strengthened our financial position, providing greater flexibility to continue investing in growth opportunities. As you can see from the table, our headline results showed total operating revenue of $1.37 billion in line with FY25, underlying profit after tax of $217 million, up 6% on FY25, Diluted EPS on UPAT was 186 cents, 3% higher than FY25, and the Board will pay a final dividend of 63 cents per share, unfranked, representing a payout ratio of 70% of the second half of UPAT. The full-year dividend increased 6% on FY25 in dollar terms, as shown here on the slide. Our teams have delivered strong progress against our priorities through a year of significant corporate and strategic activity. A key focus remained our simplification program, which has now delivered $72.6 million in annualized savings. This disciplined approach to cost management has improved profitability and created capacity to reinvest in growth initiatives. In asset management, while the year included an impairment charge related to our TSW boutique, overall earnings improvement was supported by stronger equity markets and continued cost discipline. We saw stronger contributions from Barra Hanley, Perpetual and Pendle, partially offset by net outflows. Corporate Trust performed well, delivering strong growth across all three business lines, reinforcing its importance as a complementary earnings engine for the group. The business benefited from strong securitisation markets, continued client growth, and investment in new capabilities, including the acquisition of Indify Systems. Finally, in March this year, we signed a binding agreement to sell wealth management to Bain Capital. Subject to satisfaction of the remaining conditions precedent, this represents an important step to creating a simpler, more focused group positioned for our next stage of growth. Turning to the next slide. We made tangible progress across each of our strategic priorities. Simplify the group, improve operational excellence and investing for growth. On Simplify, the sale of wealth management remains on track and I'll provide more detail on that shortly. The simplification program continues to deliver meaningful efficiencies with further benefits expected to be realised in FY27. And we continue to evolve our business model to drive end-to-end business accountability while retaining appropriate group oversight. On delivering operational excellence, cost discipline remained a key focus, with the group cost-to-income ratio improving by 119 basis points to 78%. We executed succession planning across our boutiques, with leadership appointments at JL Hambro, TSW and Trillium. We will organically strengthen the balance sheet, reducing gross debt by 15%. And finally, on investing for growth, Corporate Trust completed the acquisition of Interfire and Income Asset Management's term deposit broking business. During the year, we launched the Perpetual Diversified Income ETF, which has already grown to $295 million in AUM and successfully raised a further $268 million for the listed Perpetual Credit Income Trust. We also seeded four new products across international and thematic equity strategies globally. I'll expand on some of these shortly. Turning to the next slide. The sale of wealth management is a key strategic priority and remains on track to complete within the final quarter of the 2026 calendar year. We continue to make progress towards satisfying the conditions precedent with Perpetual obtaining the required AFSL variations from ASIC and Bain Capital receiving ACCC approval. Court proceedings have also commenced to facilitate the transfer of certain assets, liabilities and undertakings related to the wealth business. Under the sale agreement at completion, Perpetual will receive an upfront cash payment of $500 million subject to customary adjustments. There is also the potential for a further $50 million at settlement based on the performance of the advice division and a further amount of up to $50 million payable two years later related to the performance of the accounting and wealth operations. Throughout this period, wealth management continues to attract advisors and stay focused on delivering client outcomes. Net proceeds from the sale will be used to repay debt. Following completion, we expect to move to a net cash position, taking into account expected transaction and separation costs, tax and other adjustments. Updated assumptions, including a lower expected tax outcome from what was originally estimated, further strengthen this position. Following completion, Perpetual will comprise two complementary businesses, Asset Management and Corporate Trust. Together, they give shareholders a resilient earning space, a stronger balance sheet, and improved capital flexibility. Turning now to the next slide, simplification. Since we launched the simplification program in August 2024, we have delivered tangible results. As at the 30th of June, 2026, annualised savings were $72.6 million, well ahead of our FY26 aim and already within our FY27 target range. In FY26, we realised $60.8 million of gross savings. The majority of these savings have been delivered through operating model efficiencies, such as removing duplication and back-office simplification. For FY27, our key focus areas include closing out finance systems transformation and middle office simplification. We remain on track to deliver annualized savings at the upper end of our 70 to $80 million target range with total costs to achieve this remaining unchanged and approximately $55 million. We'll be in a better position to assess further efficiency opportunities following the completion of the sale of wealth management. Turning to the next slide, Moving now to our balance sheet where we've made good progress this year. Strong cash generation and disciplined capital management strengthened our financial position with gross debt reduced by 15% to $629 million as at the 30th of June, 2026. Our gearing ratio fell to 28.8% with approximately $200 million of available liquidity at year end. Reflecting this stronger position, the Board declared a final dividend of 63 cents per share, unfranked, delivering a higher cash dividend to shareholders than in FY25. Our global footprint will limit franking levels. However, we expect franking credits to return gradually. Looking ahead, a stronger balance sheet gives us greater financial flexibility and allows us to assess capacity for capital management opportunities over time. With that, I'll now outline how we've allocated capital across the business, starting with asset management on the next slide. Our multi-boutique model brings diversity across capabilities, clients and regions. Total assets under management at the 30th of June was $224.4 billion. Net outflows of $25.1 billion remained a headwind during the year, with a further $7.6 billion reduction in AUM from adverse foreign exchange movements. While these impacts were largely offset by stronger equity markets, we recognise that flows remain challenging across the business. That said, we continue to attract new client money across a range of strategies and regions. We also recognise we need to do a better job in delivering investment performance. Throughout FY26, underperformance was concentrated in select strategies, particularly within Joe Hambro, where we are taking appropriate steps to strengthen investment teams and operations. While market conditions and flows can be cyclical, our focus is on executing the levers that are within our control. We're driving growth through product development and leveraging our global distribution platform to broaden our reach and client access. turning now to distribution and growth initiatives. One of the key advantages of the global platform already in place across our boutiques, including established investment capabilities, improving structures and longstanding distribution relationships, really is a key benefit for Perpetual. Importantly, this platform opportunity extends across our boutique portfolio. Our Australian distribution platform remains a significant strength, providing deep client relationships, especially in the intermediary space where we have relationships with over 11,000 of the 15,000 advisors, helping connect investors with specialised capabilities across the perpetual group. Combined with our global reach, this gives us multiple avenues to broaden client access and support growth. Developing new products and vehicles is an important part of this approach. Active ETFs remain a significant growth opportunity, reflecting growing client demand for actively managed strategies through new distribution channels. Following the launch of the Perpetual Diversified Income Active ETF, we're seeing encouraging demand from Australian clients for active investment solutions from Perpetual. Building on this momentum, we are also progressing plans for additional active ETF offerings, targeting demand in the US wholesale market. We're also expanding our ICAV based products across the UK and Europe, providing greater flexibility to deliver our investment capabilities to new client segments. The opportunity now is to better leverage the capabilities already embedded within to the business, extending successful strategies into new channels and markets. As part of that effort, we seeded four products during FY26 across international and dramatic equity strategies globally. These investments create a pipeline of future opportunities and support the expansion of our offerings into areas where we see client demand and long-term potential. Taken together, these initiatives strengthen our distribution reach, broaden client access to capabilities and position the business to capture future growth. Turning to JL Hambro. Restoring JL Hambro to its heritage strength will help drive our growth ambitions. Today, the business remains a differentiated equity specialist with a strong brand and established distribution platform. As at the 30th of June, the business managed around $33 billion in assets. However, it's relying on a small number of strategies, some of which have experienced challenging flow patterns. Under the new leadership of Bill Street, we have a clear plan to build a more scalable and resilient business with an ambition to grow AUM to around $55 to $60 billion by FY30. Our priorities are focused on adapting our products and strategies to meet evolving client demand, such as seeing the new climate transition strategy in Joe Hambro, improving investment performance across our core capabilities to deliver better outcomes for clients and support sustainable long-term growth, and underpinning all of this, identifying opportunities to simplify our operating model. The work is underway, and these priorities will continue to guide our focus in FY27. Now moving to Corporate Trust. Corporate Trust delivered another year of strong growth in FY26. Debt market services benefited from the Australian securitisation market growing at a near record pace. Managed fund services grew through higher funds under administration and new client wins across property, infrastructure and credit funds. Momentum continued in Singapore, where the business became the trustee for three new REIT listings on the Singapore Exchange. Growth in ETFs, LITs and other investment structures continue to support demand for the administration, governance and fiduciary services that we provide. Digital markets grew assets under administration by 14%, supported by growth in our perpetual intelligence and fixed income portfolio management offerings. This reflects the increasingly importance of specialised data, governance and administration solutions in an evolving regulatory environment. Turning now to the next slide. While market conditions will vary over time, corporate trust remains an integral part of Australia's capital markets infrastructure. Its services support funding, lending and investment activity across the financial system. underpinning a resilient business model built on long-standing client relationships and a long-duration asset base. We continue to invest in capabilities that strengthen our client offering and position us to capture growth opportunities. During the year, we acquired a majority interest in InterFi, which expands our loan servicing and digital capabilities to complement our core debt market services offering, particularly Perpetual Intelligence. Endify supports the full loan lifecycle for non-bank lenders with approximately $55 billion in assets under administration. It broadens Perpetual's exposure to a growing segment of the lending market and creates opportunities to deliver more integrated client solutions. Turning to wealth management. As I mentioned earlier, the sale of wealth management remains on track for completion in the final quarter of 2026 calendar year. Throughout the year, the business stayed focused on delivering for clients. Revenue moderated this year with market-related revenue benefiting from stronger equity markets, although growth was more modest than in prior years. This was offset by softer non-market revenue, particularly within the accounting and wealth operations. Underlying profit before tax was $44 million, $7.5 million lower than FY25, reflecting lower non-market revenue and continued investment in staff and technology to support the business. Funds under advice increased 3% and the business achieved a record high net promoter score, highlighting the continued commitment, client outcomes, service quality and engagement. Achieving this result during a period of significant change reflects the strength of our client relationships and the discipline with which the team has remained focused on delivering for clients. I'll now hand over to Suzanne to walk you through the financial results in detail.

Fantastic. Thanks, Bern. As Bern said, I'll just provide a bit of additional detail around the FY26 results. So if we just start on slide 16, which has a summary of the group's financial performance. Operating revenue for FY26 was broadly in line with FY25 at 1,374.2 million with contributions from all parts of our business. Operating expenses of 970.3 million were broadly flat on FY25. Cost discipline and our simplification program benefits continue to enhance earnings together with the completion of a number of key projects during the year. Underlying profit before tax increased 6% to $295.8 million. This reflected continued growth in corporate trust, improved asset management earnings, and higher income and group investments, as well as lower operating costs. Underlying profit after tax increased 6% to $217 million, with an underlying effective tax rate of 26.6%. Significant items reduced by 51% and were predominantly non-cash in nature. Key items recognised during the year included a non-cash impairment, 63.5 million relating to TSW, which was announced last week, as well as tax credits associated with the proposed sale of the wealth management business. I will cover significant item movements in more detail shortly. Net profit after tax was 88.9 million compared to a net loss of 58.2 million in FY25. Diluted earnings per share on UPAT increased 3% to 186 cents. The board declared a final dividend of 63 cents per share, unfranked, to be paid on the 2nd of October, 2026. I'll now move to asset management, slide 17. Asset management underlying profit before tax rose 3% to 207.5 million, with higher average AUM from improved equity markets and ongoing cost discipline from our simplification program. Management fee revenue was broadly stable. Higher average AUM was offset in part by asset class mix impacts and lower performance fees. It's worth noting that performance fees remain a modest contributor at just 3% of total revenue in FY26. Over the past three years, only a small proportion of our strategies in AUM have carried a performance fee entitlement. Total operating expenses fell 4% with cost savings flowing through and lower variable remuneration consistent with the drop in management fee income. Moving now to corporate trust on slide 18. Corporate trusts delivered growth in underlying profit before tax of 9% to 98.8 million, with all three businesses contributing to the top line revenue growth. Debt market services revenue grew 10% on FY25, supported by growth in securitization, trust management and custody volumes. Managed funds services benefited from growth in funds under administration and continued momentum in our Singapore operations. Digital and markets were supported by growth in perpetual intelligence and fixed income portfolio management offerings, albeit at a more moderate pace than the first half of the year. Operating expenses increased to support business growth and capability investment, as well as including costs associated with the InterFi acquisition completed at the end of the financial year. Despite this investment, the cost to income ratio has remained stable at 55%. Moving now to group support services. The underlying loss before tax in group support services improved $9.7 million to $54.5 million. Revenue increased reflecting higher seed fund income and favourable foreign exchange movements. Financing costs were lower following reduction in debt levels and benefits from the refinancing completed just over a year ago. Operating expenses rose on higher distributions on employee-owned Barrow Handley units following its improved contribution, together with continued investment in technology, artificial intelligence and productivity initiatives. I'll move now to the UPAP to MPAP reconciliation on slide 20. During the year, we completed a review of our significant items policy to provide a clearer and simpler view of the underlying businesses. This resulted in a number of aged projects being closed out, and where appropriate, costs moving back above the line. As flagged at our interim results in February, Kendall Group costs were closed out during FY26. The remaining cash items were related to the proposed sale of the wealth management operations and our simplification program. Simplification program costs are expected to conclude by the end of FY27, with costs associated with the wealth management sale also expected to cease in a similar timeframe. The remaining movements primarily relate to the non-cash amortization of inquired intangibles, the non-cash impairment of TSW goodwill, and the accrued incentive compensation liability associated with the employee-owned units in Barahunley. and this is partially offset by unrealised gains on financial assets. It is important to remember that the TSW impairment was recognised as an adjusting item for FY25 in line with the accounting standard. However, the impact of the outflow will not be recognised until Q2 of FY27. The impairment has no impact on the group's liquidity or borrowing covenants or on UPAC, the metric on which our dividend payout ratio is determined. After significant items, net profit after tax for the year was $88.9 million. I'll move now to expenses on slide 21. Total FY26 expenses were broadly stable at $1,078.5 million. Before external factors, controllable cost growth was 1% towards the bottom end of our guided range. Reflecting measured investment in corporate trust, cost absorbed within our wealth management business, and higher barrel handling distributions. Inflation-related pressures continued across the group. However, our simplification program benefits provide a meaningful offset. Foreign exchange movements and lower interest expense reduce total reported expenses by a further 3%. This demonstrates the progress made on cost discipline, while still remaining targeted investment in growth and key technology and productivity capabilities. We also, excuse me, we will also revisit the simplification opportunities following the sale of wealth. And looking ahead, we expect FY27 controllable cost growth to be between 1% to 2%. Based on the assumptions set out on the slide, including the expected timing of the wealth management sale, it's expected to translate to a cost to income ratio of approximately 78% for the group. Moving now to cash flows on slide 22. Free cash flow increased by $93 million to $228.5 million. reflecting lower transaction-related expenses and ongoing cost discipline. Strong Cash Generation supported net debt repayments of 100 million during the year, strengthening the balance sheet and improving financial flexibility. We completed the acquisition of 70% of InterFi at the end of the financial year, again funded from free cash flow. We also continued to actively manage the seed portfolio, recycling seed capital into new opportunities and supporting product development without increasing the overall size of the seed portfolio deployed. After dividends of 126.5 million, the InterFi acquisition, debt repayments, seed fund movements and foreign exchange impacts, total cash at 30 June remained at a healthy 331.8 million. I'll now hand back to Bern to take you through some of the key priorities for the year ahead.

Thanks, Suzanne. Our priorities over the next 12 months are clear. First, we remain focused on completing the sale of wealth management and following completion, further deleverage the balance sheet to increase financial flexibility. Asset management and corporate trust will remain our strategic priorities as we build a simpler business with a stronger balance sheet. In Corporate Trust, we will expand our capabilities and deepen client relationships through innovation, partnerships and selective bolt-ons. In Asset Management, we will target product innovation and selective investment in new capabilities and we'll also invest in technology and productivity initiatives to support scalable growth while delivering on our cost reduction commitments and building a leaner, more efficient operating model. FY26 was a big year for Perpetual. We made good progress on our strategic priorities and remain confident in our direction as we build a simpler, stronger and more focused business. Thank you for joining us today. I'll now hand back to Michelle, our operator, for questions.

Thank you, Bern. If you've not yet joined the live audio queue, please do so now. I will introduce each caller by name and ask you to go ahead. You will then hear a beep indicating your microphone is live. Our first question comes from Nigel Pitaway from Citi. Nigel, please go ahead after the beep.

Good morning, Bern and Suzanne. Question first just on the ambition for J.O. Hambro. I mean, obviously the performance even in the emerging markets on sort of a key three-year view does look slightly negative. I mean, apart from the UK Equity Income Fund, which obviously has got very strong performance, this looks like a pretty difficult turnaround. I accept you've got new leadership, but why should we view that as a realistic ambition for 2030?

So, hey, Nigel, nice to hear from you. I'd say there's a couple of aspects to that. One, if you look at that emerging markets performance, it is actually quite volatile, so you could expect to see that in the next period, you know, presenting a different result relative to benchmark, so I wouldn't destroy the most recent performance. But that being said, it is soft, so I'll grant you that. But I think there's an element here of really focusing, and Bill and team are very much focused on investment performance, but we're also focused on New channels and building, using that existing capability in those new channels. So I mentioned in my remarks earlier about expanding our archive range in UK, Europe. So that's an example of where thinking about product and channel, different channels where we can... leverage the capability that we already have. And I also mentioned active ETFs in the US, which I know we've mentioned in the past. We've made really good progress on that and we've got in mind at least two ETFs that we're going to be launching in the short-term period out of the J.R. Hambro business into the US market. Again, a different channel, a different marketplace for some of those products and a different channel in particular where you can see quite a bit of growth. So, you know, it is an ambition. We felt, I don't know, Suzanne and I, I think felt strongly about actually putting an ambition out there so that the team have something clearly to aim for. And I can tell you that they are all rallying behind that. And, you know, there's a number of years yet for us to be able to achieve that. So I'm not putting anything into that other than the team are very focused on delivery.

Okay, thank you for that. Maybe just a question on the costs as well. I mean, how significant do you think the cost opportunity will be once wealth management has gone? Is the 45 million group support services operating costs a number that could potentially come down? And previously, you've talked about cost of income being generated, the improvement being more generated by revenue than cost. So is that still the case?

Okay. Thanks, Nigel. I'll have a crack at that one. I think you're right. There's definitely more opportunity for us on the simplification side. And I think as Berne called out, I think a big catalyst for that will be the successful divestment of the wealth business and then giving us an opportunity to revisit both those group support costs and, you know, are we still – size the right way to be able to support the ongoing businesses, so the asset management and corporate trust. So I definitely think there's more that we can do there. Probably a little bit early for us to size that, but I think we're starting to take a good look at that now as we get closer to completion of the wealth sale. And on the second part around the cost of income part, you know, yeah, absolutely. We want to make sure we maintain momentum in top line revenue. But, you know, we're acutely aware that, you know, we have at least, you know, one part of our business and asset management that is much more exposed to market movements. So I think the area that, you know, I've sort of turned my mind to in the near term is very much on the cost side. But we haven't lost sight of the importance of investing to make sure that we are still driving top line revenue growth.

Okay, thank you for that. And then maybe just finally, sorry, it is a small point on the AUM conversion rate, but it seems as though that's now being stated at 67 cents, whereas I think spot at the time was 70 and in the quarterly you mentioned 69. So can we just confirm that that is actually done at 67 cents? Yes.

Nigel, can I come back to you? I know we've got a call scheduled this afternoon. I might need another coffee before that one.

Yeah, all right. I know it's a detailed one, but I suspect I'm not the only one with the question, but all right. Fantastic.

Thank you.

The next question is from Elizabeth Miliatus from Macquarie. Elizabeth, please go ahead.

Good morning and thank you for taking my questions. First one's just on the cost out program. Obviously, you've got it to the top end of that, but I think then also on slide seven. It seems like you've made a comment there, Scrope, for further simplification, and there's like a little box with a dotted line. Should we read into how big that box is, or is it just sort of indicative of more to come?

Hi Elizabeth, Suzanne. That's probably me being a little creative, I think, with some of the charts and graphs. I didn't think too much to the scale, so what I would say is perhaps don't read too much into the sizing. But I do, as I've just said, I do think there's an opportunity for us to be able to do more. You know, we've made really good traction in the programme and ahead of schedule. And again, I would reiterate with the wealth divestment now quite close. And remember when we set this program up originally, we weren't anticipating the sale of the wealth business. So it's giving us a chance perhaps to go back and test some of our early assumptions. So as I said, probably a little early to put a number to it, but I definitely say we're confident we can do more to increase that target.

Okay, got it. Thank you. And are you also able to sort of give us a bit of a run through of the various bids where appropriate that you've received and also where is all the different parties in terms of access to accounts or whatnot? Just a bit of a run through because there's been a lot of press and then also statements coming up from you guys as well.

Surely. So let me just sort of reiterate the point I made, I think, at the beginning, and that is that at this point in time, perpetual has one bid from one party, which being EQT. And so subsequent to the announcement that we made on the 29th of July, we've entered into a non-disclosure agreement with EQT or Windflower, their entity, and we have given them access to limited non-public information to determine whether they can improve their bid. So yes, there's been speculation in the press, which I obviously can't comment on, but all I can underline is that we're dealing with one party at the moment, and it is also important to note it is on a non-exclusive basis.

Okay. Thank you. That's helpful.

Thanks.

Thank you. There are no further questions. I'll now hand back to Bernard Riley.

Thank you very much and I know for those of you on the call who haven't asked questions that there's a number of analysts meetings today and in the next few days so I'm sure you have the opportunity to address those questions individually with the team. Thank you for the time today for listening to our FY26 results and to your question and answer and we look forward to having those meetings going forward in the next few days. Thank you very much.

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