Insignia Financial Ltd

Good day and thank you for standing by. Welcome to Insignia Financial's full year 2024 results 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 the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, General Manager of Markets, Andrew Elich. Please go ahead.

Thank you. Good morning, everyone. Welcome to Assignia Financial's FY24 results announcement for the 12-month end of 30 June 2024. My name is Andrew Elich, General Manager of Capital Markets. I'd like to begin this morning by acknowledging the traditional custodians on the lands on which we meet. In the spirit of reconciliation, Insignia Financial acknowledges the traditional custodians of the country through Australia and their connections to land, sea and community. We pay our respects to the elders past and present and extend that respect to all Aboriginal and Torres Strait Islander peoples today. Presenting today's results are Scott Hartley, Chief Executive Officer and David Chalmers, Chief Financial Officer. There will be an opportunity to ask questions at the end of the presentation. I'll now hand over to Scott to begin. Thank you.

Thank you, Andrew, and good morning, everyone. I'm pleased to present our four-year results for FY24, which saw a strong growth in UNPAC, up 13.6%, driven by a net reduction in operating costs of 24 million as we pursue our strategy to simplify our business and reduce costs. Just unpacking the headline a little, net revenue was up slightly by around 1% driven by markets not sending a small decline in revenue margins and the impact of divestments. Our cost to income ratio improved from 75% to under 73%. Whilst this is still too high, we do have a strategy underway to reduce costs and we'll today be announcing an acceleration and increase of our cost out target. Net profit after tax was of course adversely affected by previously announced transformation costs and provisions related to remediation of legacy issues acquired largely with the acquisition of ANZ Wealth. As you all have noted, we did not pay a final dividend this year. The IFL Board acknowledges that the dividend cause will be disappointing for some of our but it is prudent for us to strengthen their balance sheet to enhance strategic and capital flexibility. In terms of deliverables this year, when I joined in March, it was important for the business to continue delivering its FY24-26 strategic initiatives that are critical to our future. I'm pleased to report the successful completion of several of these key strategic initiatives. Firstly, optimisations. We exceeded our FY24 target cost optimisation, delivering optimisation benefits of $71 million, resulting in a net cost reduction of $24 million. Secondly, in simplification, we successfully completed the largest single RAP migration in the Australian platform industry, and we migrated over $38 billion from MLC RAP to the Expand platform. We have already started to see the benefits of this migration in the scale efficiencies it has delivered. In terms of our portfolio, we have successfully completed a multi-year restructured device from loss-making to EBITDA positive. This position will be further enhanced in our FY25 results given the separation of our licensee business, Robins Advisory. Separation of Robins Advisory has created a unique and innovative partnership model. Our relationship with Rhombus Advisory and Godfrey Pembroke has been strengthened by our strong support in their successful separations to advisor-owned and led businesses, which I strongly believe is the right model for furthering the professionalism of the advice industry. Insignia had a significant opportunity not only to retain but grow platform funds under administration within these two advisory businesses, in addition to growing from the broader market. I personally remain close to both CEOs and their boards and have joined the Rhombus board given we retain 37% to remain connected and supportive of the success of Rhombus Advisory business moving forward. With the completion of our advisory structure, including these separations, we will focus on building stronger relationships with Golfie Pembroke and Rhombus Advisory and growing the profitability of our wholly owned and operated advice businesses, Shatterport and Bridges. Our other 24-26 strategic priorities remain on track for completion this financial year ahead of schedule, creating space for our 2030 vision and strategy that will be presented later this year. In addition to 24-26 initiatives already announced, we will also be accelerating cost optimisation We are extending our cost optimisation program, and David will talk through the increase to the cost reduction target, which we aim to achieve ahead of schedule. In July, I announced my new executive team. These experienced executives bring a deep industry experience and strong track record in growing your businesses, and in leveraging technology to transform customer experience and business models. We are now in the process of cascading and embedding the new operating structure to further drive accountability and efficiency. Also, simplifying our Master Trust platforms is critical as it represents half of our revenue and costs. We have commenced review of the Master Trust target end state and will communicate the outcome of this review later in the year. This review will not slow the pace of Master Trust simplification as we have to complete successful separation from that before we can simplify and transform. In terms of flows, platform flows, during the year we saw successful migration of MLC-RAP to expand, as I mentioned. Ahead of this migration, we saw disruption in our flows to MLC-RAP as some advisors lost patience with the delayed migration. While it's pleasing to see the improved flow since migration, we remain cautious in the medium-term trajectory of advice flows due to the expected one-off loss of a small Superfund admin agreement. FUA related to an historic divestment. Workplace flows remained resilient during the year, delivering positive net flows. While we didn't win any new corporate mandates, we did see consistent inflows from the existing book, pointing to sustained organic growth. In terms of asset management, the large outflows from direct capability were almost entirely driven by institutional investors rebalancing fixed income and global equities. But it's pleasing to see strong performance of our default MySuper options. Three of our MySuper default options achieved top 10 performance over one year in the Super Rating SR50 MySuper survey. And Sydney's largest MySuper option, the MLC MySuper Growth, has delivered performance in the top quartile over one, three and five years. Also important to note, the recent placement of $1.2 billion of MLC private equity via new US secondary. Points to the attractiveness of MLC's alternative asset management capabilities to the institutional market. In terms of advisors, this slide talks purely to Chad Folsom Bridges. We have seen strong year-on-year growth across advisor and client metrics, including an increase in revenue per advisor due to strong new client growth and higher fee income. This growth has occurred despite prioritising advisor numbers and rationalising unprofitable clients predominantly in the bridges business. I'd now like to hand over to David who will take us through the detail of the financial results. Thanks Scott and good morning to everyone on this morning's call.

I'd like to start the review of financial performance with a summary of the group's results for the 12 month ended 30 June 2024. starting with revenue at $1.39 billion, a 0.9% increase on FY23 revenue. To understand the drivers of this uplift, we need to look at performance of each of our segments. So firstly, platforms, where revenue was up 0.9%, with the increase in average funds under administration of 4.9%, offsetting margin decline from the planned strategic repricing that occurred both in FY23, therefore having a flow-on impact into 24%, and new pricing changes made in the FY24 financial year. Exit management saw a decline in revenue of 6.1% or $13.7 million, the main driver of which was a decrease in the revenue associated with the divestments of Jana and the restructuring of that relationship in FY23, and IWL is limited in early FY24, plus the impact of reduced private equity investment fees to new list also executed inside FY24. Our advice business had flat revenue year on year, but with a significant change in composition, with a number of divestments throughout FY24 to realign our advice business around our professional services businesses, Shackforth and Bridges. The Rhombus advisory business, which was our advice licensee business, was partially divested on the 1st of July 2024 and decontaminated from that point, but its results are included in the FY24 results for advice. And finally, the corporate segment contributed $17 million more revenue than FY24, the majority of which was due to one-off gains from the investment of IAAF Limited and several smaller businesses as part of the restructuring of advice. Moving now to operating expenses, which were 2.3% lower than FY23, representing a net reduction in OPEX of $24 million from the optimisation program committed in early FY24. As indicated in the first half results, the realisation of these savings were back-ended to the second half of this year, with first half of X being essentially flat on PCP. As a result of the revenue uplift and cost decreases, FY24 EBITDA was up 10.8% to $381.3 million, and underlying net profit after tax up 13.6% to $216.6 million. And while speaking of taxes, it should be noted that the unpat effective tax rate which was just over 31% in the first half of 24, has normalised the full year at just over 28%, which is more representative of what we would expect in the future. However, while unpaid increases, it's important to acknowledge that statutory losses were minus $185.3 million, as against the FY23 statutory profit of $51.2 million, with the FY23 account held by the $43 million gain on sale, related to AET Limited. There are two key drivers of these statutory losses. Firstly, remediation expenses of $232 million and secondly, transformation and separation expenses of $243 million. A reconciliation of the adjustments between UNPAT and NPAT are in the appendix of today's presentation. Turning over to the next slide now, let's take a look at the drivers of the improvement in the full year unpack, with this slide showing a bridge from FY23 to FY24. As I covered when talking about segment performance, net gain on divested businesses from a revenue perspective was $10.3 million higher than FY24, albeit the upper tax contribution from these divestments for the full year was only $2.2 million, thanks to the CGT payable on the This benefit was offset by the loss of $19.3 million of ongoing revenue from the divestments made across each of those periods. Our margin reduced by $32.7 million, mainly due to three planned product repricing from the platform segment. The first being the flow-through of expanded repricing and rate card alignment from early FY23. The second being pricing changes as a result of the transition of MLC Wrapped to Expand completed at Easter this year, and the third being the impact of legacy trade-offs from closed products and OPC that were migrated to contemporary products at a lower margin from the 1st of July, 2023. Offsetting these declines were increases in revenue driven by higher funds under management administration. Our average sperm group grew by 3.2% during FY24, with market returns more than compensating for net outflows of 3.4%. of a further $3.7 million. The last driver I'll call out on this page is the net op exchange of $24.2 million, which I'll now step through on the following slide. So the $24.2 million is made up of the net result being an increase in salaries of $24 million, consistent with our sort of typical annual salary increases, and these were offset by gross savings of $68 million in optimisation savings, Note that while total cost savings was $71 million, there is $3 million of procurement savings recognised in net revenue. The other costs increased by $19.8 million, mainly driven by the investment in cyber and governance expenses, consistent with the FY24 guidance given 12 months ago. Turning to the next slide, stepping through now the progress on the strategic initiatives announced in July 2023. These initiatives, which include separation from that, the restructuring of our advice business, the transition of MLC rep to expand, and funding for cost savings was originally forecast to cost $265 to $285 million over the FY24 to 26 period, and generate gross cost savings of $175 to $190 billion. Having delivered the first year of that plan as forecast, we've now decided to accelerate the delivery of that program from spanning two years, FY25 and 26, to being fully complete in FY25, which has the effect of bringing forward both costs and benefits. In addition, we've identified an additional $30 million of cost out of benefits, which will require an increase of spend of $35 million to cover additional costs associated with realising those savings. Importantly, on the right-hand side, we will now track this program on a net OpEx reduction basis, rather than talking about gross savings. And on the right, you see how the growth savings in FY25 will translate to a $65 million decline in expenses, which forms part of our guidance for FY25, as I'll cover shortly. Importantly, the FY25 plan allows for additional ongoing investment in our proprietary RAP platform and additional marketing spend to support the MLC grants. The next slide gives an overview of corporate cash and debt facilities with net debt of $371 million as at 30 June and available funding of $599 million from corporate cash and undrawn facilities as at the same date. Senior leverage was 1.1 times net debt to EBITDA, consistent with our comments back in February about leveraging declining in the second part of the year as second half free cash flow improved. Also set out here are the expected pre-tax funding requirements for FY25 and FY26, which includes remediation, the net cash investments being required to execute the strategic initiatives in FY25, that I outlined on the previous slide, and the refinancing of the subordinated loan notes, which mature in May 2026. Moving on to the next slide to focus on free cash flow. There was a significant improvement in free cash flow in the second half of FY24. with free cash flow of $112 million in the half, representing a $193 million improvement from the first half, which was negative 81. And for the full year, free cash flow stood at an increase of $32 million. Having generated $351 million of cash unpapped, the main users of that cash, as I outlined earlier, were the strategic initiative programs and the cash costs associated with remediation in FY24. Importantly, despite the significant cash spent on remediation and the strategic initiatives, there was minimal change in debt across the year, with the spending being financed by operating cash and corporate cash on the balance sheet. Turning to the next slide that Scott mentioned earlier on dividends, the board is elected to pause the payment of dividends and declare no final FY24 dividend. As a result, the total FY24 dividends are 9.3 cents, being the amount declared at the first half of 24 results. As Scott covered, the rationale for this approach is primarily to strengthen the balance sheet. Our senior leverage is the lowest it's been for some time, at 1.1 times net debt to EBITDA, and being towards the bottom end of our target range makes sense given both the opportunities we see, the cash required to complete remediation, and potentially downside risk in equity markets. We'll be providing a capital management update at the Investor Strategy Day in late calendar 24, where we'll give more detail around future capital management strategies. The next slide is a quick check on FY24 guidance and where we landed relative to the four aspects of guidance we gave last year. We met our extended guidance on both net revenue margin and grid leader data margin. Our spend on strategic investment was in line with guidance as well as the delivery of in-year gross benefits of $60 to $70 million. The next slide sets out some information on revisions we're making to our reporting segments for FY25 to align reporting with the new operating model. So moving forward in FY25, we'll report five segments, Master Trust, RAP, Asset Management, Advice and Corporate. Master Trust and RAP are a split of the current platform segment, while the composition of the advice segment will change significantly following the deconsolidation of Rhombus Advisory from the 1st of July this year. We provide a split in the tables on the page of pro forma FY24 revenue for RAT and Master Trust, showing revenue, FUA and Net Flows. For the advice segment, we will report both the professional services revenue, principally Shadeforth and Bridges, which makes up 146.7 million of revenue in FY24, and other advice revenue, 28.2, which is made up of para-planning, self-licence and other ancillary services. There's still work going on the allocation of overheads across all segments and how we will allocate the former platform segment cost base between Master Trust and RAP. So we'll provide an update of the market ahead of the first half 25 results once these allocations have been finalised. Moving on to the next slide, finally to FY25 guidance. Starting with net revenue margin, we expect that to decline from 46.2 basis points in FY24 to between 42.5 to 43.3 basis points. While over recent years the declining group net revenue margins has been primarily driven by product repricing, in FY25 the changes relate more to the reshaping of our portfolio with the deconsolidation of Robins Advisory and the loss of one-off revenue from divestments contributing a significant amount in terms of that top line revenue decline. To highlight this and in light of the new reporting segments, we're providing a more granular view of guidance for FY25. We expect Master Trust Net Revenue Margin to decline from 54.5 basis points... Sorry, from 56.3 basis points to between 54.5 to 55.2. Rapid Net Revenue Margin from 29.6 to 28 to 28.7. And Asset Management from 24 to between 23 and 23.5. The best way to think about the advice business for 25 is to look at expectations relative to the performance of the continuing business, which excludes Romless Advisory and other divested assets. And we do expect to see a decline in legacy ancillary revenue, but growth in the underlying professional services side of the business, again, being shaped by bridges. Finally, on the corporate side, we expect to see a decline of the one-off revenue associated with the gains in FY24. Turning now to expenses, that on an earlier slide, we expect group OPEX to fall from 1.011 billion to between 947 to 952 billion, a decline of between 60 to 65 million dollars. And with guidance covered, that covers the conclusion of my session, so back to you, Scott. Thanks, David.

So when I joined six months ago, I took time to meet with and listen to our stakeholders, including our boards, team members, shareholders, market analysts, regulators and key customer groups on where the opportunities lie for our business, what we're doing well and what we could be doing better. I believe we have solid foundations upon which to build and deliver sustainable future profit growth and competitive, compelling propositions for clients and our members. As a diversified wealth management business, we have a unique combination of capabilities across wealth management value chains. which provides us with competitive advantage, and economies of scope, and which position us to deliver to a broad range of customers. Our proprietary RAP technology is built on contemporary technology, where we can control our priorities, enjoy low cost of change, and speed to market, instead of having to wait in a SaaS provider's queue. Also, our RAP client-first service model, which is anchored on single point resolution, He's industry leading and a game changer for advisors who use the Expand platform. We have strong multi-manager investment capability which has delivered competitive returns. Our employee advice business, Shattacourt and Bridges, are a point of differentiation and revenue diversification. These businesses will enjoy strong tailwinds from demand for advice and any of the government's proposed QIR changes. In terms of brands, there is strength and recognition in MLC, our primary consumer brand that will benefit from investment to further build awareness in both the advice and direct customer channels. In terms of opportunities, while the business has strong foundations and capabilities, there's also room for improvement, which presents significant opportunities. While we have strong and sustainable positions across the value chain, But what we are yet to realise is the scale benefits of these positions due to our complexity, which leads to stupefaction and a high cost base. There remain significant opportunities to reduce our unsustainable and uncompetitive cost base. The new operating model, centred around four dedicated business lines, are led by executives focused on specific customer segments and competitive landscapes, allowing for tailored strategies to drive profitable growth and enhance customer satisfaction. This new structure provides three lines of accountability, enabling more effective and timely decision making to achieve greater efficiency and cost effectiveness and improved risk governance maturity. With two employee advice businesses and a large superannuation business, we are looking forward to the opportunity to do more to meet the advice needs of our clients. Our capability across the value chain and the government's response to the quality of advice review should enable us to improve engagement, drive improved retention and enhance our proposition to attract new clients. There is also the potential for it to improve advisor efficiency and allow us to serve a greater number of clients. We understand that we should be seeing more details on Tranche 2 of QAR in coming weeks. If delivered, If delivered well, it should make advice more accessible for all Australians. There's been a lot of work done at Insignia to bring three cultures together and I've found it to be a very welcoming and inclusive culture. As we continue to simplify the business, we will free people up to focus on delivering what matters. What we want to build is an environment that supports our people to be as effective as possible in supporting our business goals. So to finish this presentation, we now want to turn to our full year 25 priorities. Remain committed to completing our FY24-26 strategy in 2025 and accelerate new initiatives which I previously outlined and which I want to reiterate. Firstly, onboarding our new executive team and embedding the new operating model by December 25. Net cost reduction of $60 million to $65 million, which represents a $35 million increase above the top end of our savings range presented last July. NAB separation program is tracking on plan and green. Our Master Trust target end-state review has been underway since May and making rapid progress. We're continuing to enhance RAP functionality with $19 million of development costs baked into RAP operating costs, which was previously below the line. MLC is a go-forward brand for insignia products and services other than professional advice that is provided under the brands of Shadfort and Bridges. We will refresh, reposition and invest significantly promoting the MLC brand. A significant uplift in our data and digital marketing capabilities will enable us to significantly improve customer experience and engagement. And finally, we will provide more detail on some of of the more meaty topics above and our strategy more broadly to achieve our 2030 vision and our investment strategy day later this year. On that note, I'll hand back to Andrew first.

Thank you, Scott. We'll now hand over to our operator to take calls on the line.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit to three questions per person. If you have more questions, please re-queue. Stand by while we compile the Q&A roster. Our first question comes from the line of Andre Stanik from Morgan Stanley. Please go ahead.

Good morning. Can I ask a couple of questions, maybe three at a time? Can I firstly ask just around the below the line items, the FY25 commentaries is very clear, but how should we think about FY26? Should we be thinking that there should be very little, if anything, below the line in FY26?

I think based on the plan that we're working to at the moment, which is that FY24, 25, 26 plan moving through, that would be right. So based on what we know today, I think that's a reasonable expectation. We expect, you know, we talked about remediation of which the provision we hope and expect will be the final one. So that's a reasonable assumption for 26 based on what we know today.

thank you uh we'll come back to andre we'll do the next question next question comes from nigel pitaway from city please go ahead um morning yeah afternoon guys just about um so first of all just uh

The 60 to 65 net decline in costs that you're expecting in FY25, how much of that does relate to Rhombus and the disposed businesses? I appreciate you've said you've not done the cost allocation yet, but it's a pretty important piece of information. So can you just sort of give us a bit of help with that, please?

Sure, Nigel. So based on what we have today, and you're right with the caveat around cost allocation and those sorts of things, I think about the cost out, if I think about the current segments, as being roughly sort of 60% for advice. Now that is split between deconsolidation of wrongness in addition to cost savings associated with the retained business, 30% in platforms and the balance in asset management. based on the current segments is how I think about it.

Right, okay. So that's the latest split, the 60 to 65 mil across like that, yeah. Okay, very good. Secondly then, I mean, obviously the dividend cut seems to have surprised a few people. And again, noting that you said you'll give us updates on capital management strategy later. But, I mean, do you think this is a one-off cut or do you think there's going to be a requirement to sort of continue this into next year?

Oh, look, I think it's too early to say at the moment. We purposely called it a pause and made a reference to the fact that, you know, we haven't changed our dividend policy. But I think if you look at particularly the timing of what we expect from some of the spend in FY25, You know, we expect a significant amount of remediation to fall in the first part of 25. Likewise, the bulk of our specific spend in the first part. And typically, just as this year, the benefits of the cost out tends to be weighted into the second half. So, you know, I think what that would have done if left unaddressed is potentially seen leverage increase in the first half beyond our sort of appetite. You know, I spoke to the fact that we're, you know, we're thinking about markets as well. But importantly, because there are further cost and opportunities, we want to be able to execute on those. And to execute on those also takes funds. So it's too early to really give you a view as to how long that pause will be. But that's a bit, I guess, of the rationale for what we saw in 25 cash requirements.

Okay, thanks for that. And then maybe finally, I mean... You did flag that you were cautious about flows in advice. Are you, therefore, reasonably confident that you've stemmed the outflows in platforms? Obviously, the fourth quarter seemed to suggest that, but in terms of that move to the MLC wrap, are you pretty confident that those outflows are now over, or would you expect further outflows as time moves on?

So Nigel Scott here. I didn't talk to this in my opening remarks. We remain cautious on platform flows because we have some known one-offs that are ahead of us. So there was the super fund admin arrangement which we expect will terminate in the coming 12 months. But I would say that we're continuing to see positive underlying flaws, and that's encouraging, but we just remain cautious at this point.

So sorry, that comment was more platforms than advice.

That was a platforms comment, not an advice comment.

Yeah, yeah, yeah, okay. All right, very good. Thank you.

Thank you. Just a moment for our next question, please. Next we have Anthony Hu from CLSA. Please go ahead.

Hi, thank you. My first question, just picking up on the earlier question around the dividend cut, can you tell us more around the reasoning? Because if I look at your normal operating cash flow, looking at your undrawn debt facility, you would have you know, on the face of it, it looks like you would have had enough to cover the known outflows in terms of mediation and also the cost of your program, cost program. You know, can you tell us, is it really just about, you know, you want to pay down debt or are there any other cash requirements that are coming up that you see coming ahead?

Anthony, it's over here. None that are known. I mean, what I would say is that, you know, going to my earlier comments around the timing of spend, So a lot of the spend, as I said, is weighted to the front part of the year, benefits to the back. And so while certainly the facilities are there to do that, we are mindful around leverage. And we understand that different investors take a different view in terms of leverage, but I think we've been consistent that we're pleased with where we are at the moment in terms of, as I said, the lowest it's been in some time. So I'd say there's been, firstly, a more prudent approach Secondly, we need to have the flexibility there so that, again, if there are future opportunities that come up and we need to be able to execute on those without putting further pressure on the balance sheet. So that's the way I sort of think about the dividend decision.

Okay, thank you. And my second question was on the advice business. You know, did this business saw a small loss in the second half of the year Previously, you talked about a target for a $10 million unpaired run rate. Can you tell us where you're up to on that and then also give us a split between Rhombus and your retained business in the second half in terms of profitability?

So I think on your first question, look, it came in around about 10. So 10 was the number we were guiding to on an annualised basis. I think, to be fair, it came in maybe a little bit less, something like eight. One thing to note, when we talk about divestments, the one-off gains of any divestments are captured in corporate, but the reduction in revenue is six in the segments. And so that's one of the reasons why at the first half of the year I got it that we expected there to be a decline in the second half of the advice business as we sort of executed through. There's been a lot of movement in that business as we've really been setting it up. I would say a little under the $10 million, but probably circa $8 million or something of that sort of order of magnitude. The split in the second half, I don't have a split for you in terms of Rhombus versus the other parts of the business. Not on a half and half view. But as I said, it's... Rhombus, a lot of those savings were also backhanded, as I sort of noted earlier, so that's probably the best I can give you on that one.

Well, I guess I was just more wondering about going forward into next year, because once Rhombus is split out or spun off, how do we think about the underlying profitability of the ongoing business?

Yeah, so I would think about it as being, if we look at the cost base for advice in FY24, which is $202 million, about 75% of that we expect to remain

in the advice business going forward.

Okay. And on the revenue side?

We've given the revenue. So the revenue with the going forward business is the $146,000. $146,000 for progressive services plus the $28,000.

Yep. Got it. All right. Thank you.

Thank you. Our next question comes from the line of Andre Standick from Morgan Stanley. Please go ahead. Hello, Andre?

Sorry, apologies, I was on mute earlier. Can you hear me okay? We can. Oh, thank you. Sorry. Look, can I just ask a question around the current position in terms of product and fund numbers? So I think back in the end of FY22, start of FY23, I think you showed that there were at that time six platforms, nine funds, and four RAC licences. Can you give us a comment on where those numbers stand today?

Yes, so at the moment the only change to the most recent numbers we gave is really the consolidation on the RAP platform. So the number of RSEs has not changed. I don't have an update for you on the number of products, but the key simplification since the date you mentioned is really the migration of MLC

wrap into expand so there's a single wrap platform um there hasn't been any further consolidation on the master trust side of things so that's the that's the remaining opportunity on master trust okay so in other words it's potentially at the moment around five platforms still being used across wrap and master trust okay okay and so that's a big opportunity

As David said, RAP has been consolidated, other than a couple of white label arrangements that we have. The opportunity for further consolidation is in Mars Trust.

Thank you. And what's your approach on owning versus renting? Is there an opportunity to rent more in external technology to expedite the process and lighten the Capex spend or do you think it is very important you own everything?

No, I think it's what's the right answer depending on the business. Obviously with RAP we have proprietary technology which we're very happy with. It's contemporary, arguably the leading most modern technology in the country so very comfortable with that. Mass Trust, quite happy to rent and We're exploring those options as we speak to firm up the end state for that platform.

Thank you.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. Just a moment for our next question, please. Next we have Lafatani Sotorilu from MST Financials. Please go ahead.

Good afternoon, guys. I want to kick off with the one-off expenses or one-off items going through. Can you just remind me on the definition of what is your hurdle for what's included and what's excluded? I would have thought gain on sale would have been excluded from UNPAT, yet there's over $400 million in one-off costs that's being included. Can I just follow up on one of your earlier answers? Is it expected that in financial year 16, sorry, financial year 26 onwards, that any one-off project spent will be included in UNPAT? So some of the projects that you're exploring at the moment around Master Trust, will you be including UNPAT that additional spend in the UNPAT line?

Yeah, I'd like to start with you. So let's take those in order. So we work on a $10 million threshold in terms of UNPAT. So there's a couple of ways of looking at it. The divestments this year were a bit unusual in that they were reasonably small in nature, spread across several divestments, and there was a large one-off tax loss in the first half associated with those divestments. At an unpat level, when you put them all together, there's only a $2.2 million unpat benefit in a year. And that's the reason we've given all that information, because we respect that there's always an element of judgment with unpat adjustments. So we provide the numbers, but that's the approach we've taken. And as I said, it's because the cumulative impact was only $2 million of unpat that we've used the treatment the way we have. To your second point around FY26, look, the answer, I think, is it depends. So what we said 12 months ago was that the strategic program that we set out, being the three-year program of spending, 24, 25, 26, now condensed into 24 and 25, that as far as we knew, that that was the extent of adjustments below the line. What is it really to say, given we're still doing the work ahead of Investor Day, is what would be the treatment for any, should there be, any large project going forward, how would that be treated? And it's too early to know what that would be yet. But certainly we are working towards the same commitment we had 12 months ago, which is to absolutely minimise the number of below the line adjustments and get back to a much closer alignment between NPAT and UNPAT.

Got it. All right, just moving to my second question. I just wanted to better understand the margin decline guidance within the platform business and also funds management for FI25. I guess there's two components, right? There's some one-off shifts, changes that have occurred that are resulting in lower margin, and there's also mid-shift change. If we sort of think ahead to financial year 26 onwards, would you anticipate both of those dynamics changing flowing through or would you just suggest there's just some mixed shift changes that will impact margin from FY26 onwards?

Based on what we know today it's more mixed shift so that's what we would expect going forward again from FY26 onwards.

Okay, got it. I just wanted to clarify two things, one is on the net flows in the fourth quarter and Based on your previous guidance you said about a year ago, it was expected that net flows would be worse in the June quarter than what they came through and they weren't. Can I just check, were there any sort of freezing of redemptions as you worked through the migration? So was it sort of an artificial number for us to understand or was it all still open for people to redeem and make changes as they typically would?

So there was a blackout period during the migration. I can't remember how long that was. I think it was in weeks. I think it was weeks, not months. And that was lifted, obviously, post-migration. And to be frank, I was expecting further redemptions post-migration. And that was very much muted, as you can see in our fourth quarter flows. So, yeah, we're not sort of backing up on any redemptions or holding off any of that. So it is what it is now. It's flying normally.

Got it. And can I just clarify, earlier on you said there was a super fund admin arrangement that's termination coming in within 12 months. What is that and what's the quantum of that?

So it's a small super fund. It's between $1 billion to $2 billion, so it's quite a small one.

Okay, excellent. Thank you.

Thank you. I see no further questions at this time. I will now pass the conference back to Scott.

Okay. So I guess I'll just say thank you. Thank you for your time today and we look forward to catching up around the grounds over coming and we'll close the conference there. Thanks very much.

This concludes today's conference call. Thank you all for participating. You may now disconnect.