Insignia Financial Ltd

Thank you. Good morning, everyone. Welcome to Insignia Financial's FY25 results for the year ended 30 June 2025. I'm Andrew Ellick, General Manager of Capital Markets. I'd like to begin by acknowledging the traditional custodians of the lands on which we meet today. I pay our respects to their elders past and present. Presenting today's results will be Scott Hartley, Chief Executive Officer and David Chalmers, Chief Financial Officer. As mentioned, there will be an opportunity to ask questions at the end of today's presentation. I'll now hand you over to Scott.

Thanks, Andrew. Good morning, and thanks all for joining today. I'm pleased to deliver our full year results for FY25, which saw strong growth in UNPAT, up 18%, and an improvement in NPAT by over 200 million, as we see the finalisation of separation and remediation. FUMA increased, sorry, our costs fell by 6%, driven by net reduction in operating costs of $60 million, as we pursue our vision to become Australia's leading and most efficient diversified wealth manager. FUMA increased to $323 billion, supported by strong net flow performance of $1.6 billion, a $5 billion turnaround from FY24. Our cost to income ratio continues to improve, from 73% last year to 68%, which is a significant reduction, but of course we still have more work to do. So when I joined at the beginning of last year, I committed to the continued delivery of our FY24-26 strategic initiatives, as these were critical for our future. I'm pleased to report the early successful completion of these transformation and separation initiatives, which lay the foundation for our 2030 vision and strategy. Rhombus Advisory was launched on the 1st of July in 2024. This innovative model, this innovative partnership model enables us to maintain strong relationships with Rhombus high-quality self-employed advice businesses while allowing us to focus on the growth of our sales advice businesses. MLC RAP was successfully migrated to expand in late FY24 and bedded down during the first half of 25. We delivered 60 million in OPEX savings in FY25, a total of 84 million over two years, while completing NAB separation. There was no net increase in historical remediation provisions in FY25, and we remain on track to complete APRA license conditions. At the end of next year, Sorry, at the end of last year, we announced our vision to become Australia's leading and most efficient diversified wealth manager by 2030. With the early completion of our previous strategy in FY25, we've been able to build early momentum toward our 2030 vision. We've embedded our new operating model with four accountable business lines, refreshed the executive team and put the MLC brand back in market. In our advice business, we've unlocked future growth by investing in advisor efficiency, delivering a significant uplift in revenue per advisor and positioning cost to income ahead of FY28 targets. Our platform continues to scale with funds under administration now exceeding $100 billion. We've also launched MLC Retirement Boost, a new retirement income solution supported by a strategic partnership jointly with TAO and Challenger. This will bring significant benefits to our customers' retirement outcomes. We've advanced our master trust strategy with price reductions to the master key suite, completed the transition to SS&C, and confirmed a long-term direction supporting a simple business and improved customer experience. Our asset management business Our asset management business is continuing to gain momentum with new alternative funds launched for institutional and wholesale markets. And our $3.3 billion in managed accounts of FUM now spreads across 10 industry-wrapped platforms. Our advice business is performing strongly with new client growth and a focus on higher-value clients, boosting revenue from $70K to $850K per advisor. This growth is complemented by a more efficient cost-to-income ratio supported by $6 million in optimization benefits. We've earned industry-leading recognition with 25 Shadforth advisors featured in Barron's Top 150, And we're off to a strong start on our 2030 strategic agenda and advice, enhancing advisor efficiency, improving cost of income ahead of FY28 targets, and increasing the number of clients per advisor. Strategic investments in automation and AI are helping simplify the advice review process and expand advisor capacity. Our RAP business continues to perform strongly with FUA surpassing $100 billion and enjoying $2.1 billion in net flows to the MLC Expand platform in FY25. Despite margin impacts from the MLC RAP migration, we've improved cost to serve through $20 million in cost optimization benefits, while also supporting net revenue growth by higher average FUA. Advisor satisfaction has significantly improved with Expand Essential ranked as the number two platform in the recent Wealth Insights FY25 survey. Advisor engagement with both Expand Extra and Expand Essential has grown markedly with usage up over 50% for both platforms. And NPS has increased 25 points for the full wrap and 15 points for essential versus industry uplift of 11 points. Additionally, we're expanding investment options on the Xpand platform, simplifying our product suite and investing in AI to streamline advice processes and enhance advisor efficiency. In MasterTrust, we've completed key transformation milestones with the NAB separation a few months earlier than planned. and the One Path Custody Transition, which was successfully completed in May 2025. We realised $9 million in optimisation benefits, helping to lower the cost to serve. We also delivered net revenue growth, driven by higher average floor and supported by improved master trust flows, reflecting the positive impact of pricing changes. We've well progressed on our 2030 strategic agenda highlighted by the successful transition to the Master Trust Tech and Ops function to SS&C, and I'll touch more on this later in the presentation. In October 2024, we reduced fees in Master Key, which is beginning to show positive signs in retention. While there was no revenue impact in FY25, there will be margin implications in FY26. We're also maintaining strong momentum in our digital direct strategy that will be supported by a refreshed brand position launching in the first half of 26. In asset management, our multi-asset capability continues to perform strongly with 85% of outperforming benchmarks and the flagship MySuper growth option achieving top performance over five years. The asset management team earned multiple industry awards highlighting both performance and recognition. FY25 saw strong momentum with $1.9 billion in net flows into multi-asset retail managed funds and managed accounts, and new large institutional mandates in fixed income. In terms of key metrics, we saw improvement in cost to serve from 14 basis points to 11 basis points. We're accelerating progress on the strategic agenda with the launch of new alternative funds, including the MLC Reinsurance Investment Funds and private equity co-investment fund number four. And our SMA continues to enjoy strong flows, now with over 3.3 billion in FUM across 10 industry-wrapped platforms. As I mentioned earlier, in FY25, we launched the refresh of the MLC brand for the first time in more than five years. MLC is one of Australia's most recognisable financial services brands with prompted awareness of 68%. In FY25, we began revitalising the brand with a targeted campaign to recognise awareness and address declines in key metrics, positioning MLC as a resilient and strategic brand for the future. As a result of this campaign, MLC's brand responded well to relatively small investment. with key brand metrics improving notably reputation and consideration up three and two points respectively. These foundational activities built in FY25 have set the stage for full-scale brand relaunch in coming months. So you'd have to have been living under a rock not to know that we, have reached an agreement with CC Capital. We're following a seven-month process which began in December 2024. On the 22nd of July, we announced we have entered into a scheme implementation deed for CC Capital to acquire Signia Financial. The offer values equity in the company at approximately $3.3 billion, a 57% premium to the undisturbed share price on the 11th of December 2024. The board unanimously rents the scheme which remains subject to regulatory and shareholder approval. I'll now hand over to David Chalmers, Chief Financial Officer, to take you through our financial results and details.

Thanks, Scott, and good morning to everyone on the call. I'd like to commence the review of financial performance with a summary of our results for the period ended 30 June 2025, starting with net revenue of $1.405 billion, a 0.9% increase on FY24. It's worth noting that the FY24 comparison period includes revenue from several divested or deconsolidated advice services businesses, most notably Rhombus Advisory. Revenue in FY24 and a loss of $4.3 million in FY25, which represents a loss of degradation of Rhombus Advisory on the 1st of July this year. Looking at performance on an ongoing business basis, which excludes these divested and being consolidated businesses, FY25 revenue was 4.7% higher than FY24. Turning to costs, our total OPEX fell by 5.9% with net cost reduction of $60 million over FY24 in line with FY25 guidance. Early progress on our base operating cost reduction projects in 25 allowed us to be ahead of our cost out targets for the year And so we were able to invest $12 million for the early stages of the SS&C transition work, the timing and quantum of which were not known, therefore not included, at the time we gave the original guidance. We've tagged this spend as reinvestment OPEX to allow the monetization of OPEX that will be used from FY26 and going forward, as I'll cover shortly. From a profitability point of view, there was a significant uplift compared to FY24, with EBITDA up 18.9%, while underlying net profit after tax increased by 17.6% to $254.8 million. Unpaid adjustments for the period were $238.7 million. The notable adjusted items including expense transformation and separation costs of $167.3 million, legacy legal settlements of $41.3 million, and the impact of fair value adjustments to the subordinated loan notes of $51 million with the variable equity link component of those notes now confirmed and booked. These adjustments result in a statutory NPAT of 16.1 million for FY25 compared to an NPAT loss of 185.3 million in FY24. Focusing now on the drivers of the changes in profitability, I'll step through the bridge between FY24 and FY25 UNPAT. Firstly, as covered on the last slide, NetOpEx fell by a net $60 million as we continue the execution of our cost-out initiatives consistent with the 2030 vision and strategy. On the revenue side, our two advice businesses grew revenue by $10.6 million, a pleasing result driven by a lift in revenue per advisor and favourable growth in investment markets, helping to grow account balances. Turning to our three FUMA link segments, the strong investment markets, predominantly in the first half of FY25, and better than expected full year net flows, saw FUMA growth contribute increased revenue of $81.6 million, with FY25 average FUMA of $322.6 billion, being 7.1% higher than FY24. The divestment and deconsolidation of our advice services business, Rhombus Advisory, and the link sale of other smaller businesses were the main driver of the change in our corporate segment, which is where these legacy businesses were reported. Net margin contraction for the period was 23 million, with group net revenue margins of 43.7 basis points versus 44.7 basis points on an ongoing basis in FY24. During the period, margins declined modestly in master trust and asset management, with 15.9 million of the net $23 million revenue decline coming from our RAP business. And the main driver of this contraction was approximately $9 million full year impact of the pricing changes made for the migration of MLC RAP to expand, with FY25 representing a full year's impact and therefore no further margin erosion from this transition in FY26. Other factors impacting RAP margins were the impact of fee tiers and caps in a rising market, as well as changes in the mix of our RAP portfolio. Net interest and net non-cash together impacted UNPAD by $17.8 million, with a $12 million increase in net interest costs due to higher drawn average balances and increases in funding costs. Higher depreciation and amortization charges had a $5 million impact. And then finally, there was a 15.9% increase in tax expense. Moving on to the next slide, on slide 16. This shows the evolution of our cost base over the last few years with base operating expenses declining by $96 million between FY23 and FY25. As we set out last November at the Strategy Day, we see the opportunity to reduce these costs further through FY28 and FY30 with efficiencies driven by business simplification and improved operating efficiency. Another part of last year's Strategy Day presentation was the new way in which we will report our operating expenses, splitting them into two categories. base operating expenses, which represents the running costs of the business on a BAU basis, and reinvestment OPEX, which will cover investment made into our business into new capability or one-off incremental investments. Now, importantly, we have different expectations for the trajectory of the spin for each of these types of OPEX. We expect base OPEX to materially decline over time, and the opportunity we see, as we set out last November, is to lower base OPEX from around 880, 890 and FY26, to low to mid 800s in FY28, and then low to mid 700s in FY30. Across the same period, we expect the average spend of $60 to $80 million a year for reinvestment OPEX to effectively remain throughout that period. We report this breakdown of OPEX from FY26 onwards, with FY25 being a little bit of a hybrid year, because we'd established OPEX on a total basis, and so for simplicity, we've only reported one item as being in reinvestment OpEx for FY25, that being the early start of the SS&C-related spend, which was flagged at the first half results. For FY26, we expect total reinvestment OpEx of circa $80 million, the largest amount being for the next phase of the migration work with SS&C, which represents approximately 40% of the FY26 reinvestment spend. We continue to invest in simplification projects, which will generate future cost efficiencies, including investments in AI and data, uplifting our anti-money laundering and counterterrorism financing capability, custody simplification and rationalising our corporate structure, as well as continued enhancements on the Xpand platform. Slide 17 links to the last slide and illustrates the changes we'll bring to the reporting of below-the-line expenses from FY26, again consistent with the approach we outlined at last November's Strategy Day. Because significant items, cash items, such as transformation, separation, and remediation, have been recognized below the line, the difference between reported unpat and NPAT was almost $402 million in FY24 and $238.7 million in FY25. Moving forward from FY26 onwards, we expect to see $20 to $30 million of cash items adjusted, principally being some of the expected redundancy costs linked to cost-out work, and a further $50 to $70 million of non-cash items, which is principally the amortization of acquired intangibles, such as the customer records of historical acquisitions, including those made by IOOF, such as Shadforth, ANZ P&I, and MLC. We see the benefit of this new approach as being twofold. Firstly, that there'll be greater clarity on the cost required to run and invest in growth for Insignia. And secondly, we're bringing this approach in at a time when the expected spend on cash items below the line will be a fraction of what they previously have been, meaning that the gap between UNPAT and NPAT will significantly reduce. As a practical example of this, the investment in the next stage of FSMC migration that I referenced earlier as forming part of our $80 million of reinvestment spend for FY26 would previously have been reported below the line. And so from FY26, it will be part of OPEX and therefore above the line. Moving now to cash flow, slide 18 highlights both the actual cash flow for FY25 and really identifies the opportunity for growth in future free cash flow. We're pleased to see the improvement in the second half cash flows compared to first half 25, which is always, the first half for us is always a period of high level of cash spend. As a reminder, first half 25 cash flow was minus 239 million and we set a target to improve second half by more than $250 million. pleasingly due to better than expected earnings, better working capital management, and slower remediation payments, free cash flow improved by over $400 million across the period, meaning for the year free cash flow was minus $71 million, funded through a draw in corporate cash predominantly and some on the debt side. It's worth noting that free cash flow in FY25 was also supported by the pause in dividend payments and the fact that we're not expecting to commence regular income tax payments until FY27. The opportunity for free cash flow from FY26 is clear, with expected remediation spend approximately half of FY25 and the completion of the transformation and separation projects at the end of FY25. Following on from cash flow to net debt and cash funding, the first pleasing thing to note is how much simpler this chart is than in previous years, when there were far higher levels of future spend required on transformation and remediation relative to available funding. The improved free cash flow profile in the second half of 25 reduced senior leverage to 1.1 times net debt to EBITDA, with a reminder that the calculation of EBITDA used for our banking facilities is different to the EBITDA I outlined on slide 14, mainly to some IFL subsidiaries being excluded from the calculation of the syndicated debt EBITDA. For FY26, our future funding requirements are the final legacy remediation amounts of $87 million, as well as the repayment of the supported loan notes in May 2026, the early repayment option on which was exercised by NAB in March of this year. In order to ensure sufficient financial capacity to cover the peak funding requirements and capacity in FY26, we've recently increased our total facilities by $100 million which will enable the SLNs to be repaid from existing cash and bank facilities. We expect FY26 leverage to stay within our target range before reducing from FY27 onwards. Turning to dividends, as Scott mentioned earlier, as part of the terms agreed with CC Capital, there'll be no dividend declared under the terms of the scheme implementation deed unless the scheme has not become effective by the 22nd of July, 2026, after which we have the potential to pay a special dividend on a monthly basis at 50% of monthly unpat, so long as that's subject to a range of conditions, most notably that net debt remains less than $500 million. Finally, looking back at the guidance we have for FY25, it's pleasing to note that all guidance metrics were either met or exceeded. For FY26, we're giving guidance on the same basis as FY25, noting that the biggest movement in FY26 is expected to be in Master Trust, with margins expected to reduce to 51 to 52 basis points, as the impact of the pricing changes made to Master Key will begin to impact margin. Given the scale of this impact, it's worth summarising these changes. As we previously noted, the impact of the pricing change made in October 2024, so therefore a nine-month period in FY25, impacted approximately $50 million of revenue, with this reduction being fully funded through fund reserves. In FY26, there'll be a full month impact, meaning an additional $15 million of revenue impacted, and the reserve funding will reduce also by an additional $15 million, meaning a negative impact of revenue and therefore margin of approximately $30 million. In addition, there are other pricing changes impacting Master Trust, most notably the impact of smart choice allocations to alternatives, which has been plagued for some time. In RAP, the reduced guidance reflects the loss of revenue from the exit of a small, the IOOF Alliances business, with other pricing changes largely being offset by other revenue drivers. Asset management will be impacted by Maltese reprice, which impacted about $6 billion of FUM from the 42 billion Maltese portfolio. We also expect performance fees to moderate, given there was an element of fee catch-up in FY25. And in advice, we expect the recent momentum of both Chadforth and Bridges, with similar revenue growth to FY25. While FY26 has a number of important repricings and margin give-up, it's important to note that the timing and quantum of these is in line with what we expected as part of the 2030 vision and strategy. And then finally, as I noted earlier, we expect base OPEX at between 880 to 890 million, with reinvestment OPEX of approximately 80 million. With the guidance covered, that concludes the financial section, so I'll pass back to you, Scott.