ASX Limited (ASX) Earnings Call Transcript & Summary

Good morning, and welcome to ASX's Results Briefing for the Financial Year ending 30th of June 2025. And thank you for taking part in this virtual presentation. I hope you're well wherever you're joining us. My name is Helen Lofthouse, and I'm the Managing Director and CEO of ASX. I'm pleased to be presenting these results today, along with ASX's Chief Financial Officer, Andrew Tobin. First, I would like to acknowledge the Gadigal People of the Eora Nation, who are the traditional custodians of the country where I am speaking today. We recognize their continuing connection to the land and waters, and pay our respects to elders past and present. We extend that respect to any First Nations people joining us today. Today's presentation will cover 4 areas, and then Andrew and I will take your questions. I'll begin with the highlights from the year, then Andrew will provide a more detailed view of our financial performance, and I'll then provide an update on the delivery of our Accelerate and technology modernization programs as well as progress on some of our customer-driven growth opportunities. This will be followed by some observations on market outlook and its implications for ASX, and then we'll finish with Q&A. So let's begin with highlights from FY '25. We delivered strong operating revenue, which was driven by our portfolio of high-quality businesses, which deliver value for our markets and for our shareholders. And we saw strong revenue growth in our markets, Technology and Data and Securities and Payments businesses with listings being stable. Andrew will provide more detail on our financial performance shortly, including each line of business, and I'll talk about business outlook at the end of the presentation. We run critical market infrastructure and Australia's financial system depends on us. W e hold 9 licenses, which means that we must make sure we're operating at the high standards commensurate with this. And that's crucial to creating sustainable long-term shareholder value. And to support this, we have been investing in our great fundamental strategic pillar and particularly our key focus areas of operational risk management and resilience uplift and technology modernization. And I'll provide more detail on our progress in these focus areas shortly. And finally, we continue to be cost conscious in the way we run the business, including being disciplined in our approach to prioritization and improving efficiency. And during FY '25, this included further actions taken as part of our operating efficiency program, which Andrew will talk to in more detail shortly. Turning to our financial highlights. ASX delivered a strong financial performance in FY '25. We reported operating revenue of $1.11 billion, which is up 7% compared to last year. Underlying net profit after tax also benefited from growth in net interest income and increased by 7.5%. Statutory profit was up by 6% following the impact of significant items. The Board has determined a fully franked final dividend of $1.121 per share, reflecting a payout ratio of 85% of underlying NPAT, which is in the middle of our guidance range. And this brings the total dividend to $2.233 per share, an increase of 7.4%. Our EBITDA margin also increased by 70 basis points to 62.8%, and we're targeting margin expansion from the current level over the medium term. And underlying return on equity, one of the key metrics by which we measure the performance of the organization is up by 60 basis points to 13.6% for the year and well within our medium-term target range. Our 5-year strategy is about transforming ASX to make sure we're operating at the high standards commensurate with our role in the Australian financial system and positioning ourselves to capture future growth opportunities. And as you'll remember, this strategy required a reset of our capital management settings to support the investment required in our organization. Now as I said earlier, this investment in the great fundamentals of ASX is focused on modernizing our technology environment and uplifting our operating management frameworks. And we're making good progress on delivering our technology road map. However, we're not where we want to be in terms of operational risk management and resilience. So earlier this year, we implemented a program which will prioritize and increase the pace of our work in this area, and that's what Accelerate is about. At our Investor Forum, we provided some detail on the Accelerate program and how we see it as a key vehicle for achieving our operational risk management and resilience uplift. It will be enabled by our focus on capability and culture, including uplifting our leadership capability, risk culture, cross-organizational change capability and workforce strategy and planning. And while many of the elements of the Accelerate program were already underway as part of our 5-year strategy, the development of this program gives us a further opportunity to make sure that we achieve our key milestones through rigorous planning, disciplined execution and embedding the uplifts we're making. And all of this needs to be supported by effective change management, culture and capabilities. An important part of Accelerate is ensuring that the lessons we've learned and the uplifts that we make are applied across our entire organization where relevant. We also need to apply learnings from other financial institutions, both domestic and offshore. As part of the Accelerate program, we're targeting the delivery of several uplifts to our operational risk and resilience profile during FY '26. This includes a refreshed risk operating model and enhancements to core risk capabilities, and this will underpin our approach as we move to a more proactive risk and learning culture. We also plan to continue improving our technology environment and data management as well as uplifting our business resilience profile. The Accelerate program is a high priority for us, and we've taken important steps to make sure that we're in a position to deliver. We're taking an integrated approach across the organization, which includes investment in capacity and capability and the enhancement of governance and oversight to track our progress. And while we have plenty to do, I am confident this is achievable. This is a crucial part of how we're building a better and driving long-term shareholder value. Now I'd like to provide an update on the progress in our indicative technology modernization road map. We last published this road map at our Investor Forum in June. And since then, Release 15, which is part of our cash market trading project went live on the 23rd of June. We've also begun replacing and simplifying our trading network infrastructure. And these private telecommunications networks underpin our cash market trading and derivatives market trading systems. They provide secure and dedicated connectivity for participants to our applications. And once the replacement is complete, we expect that it will improve customer experience and increase network resiliency. For the CHESS project, we're working closely with the industry as we continue the technology build and undertake testing. Industry testing for Release 1 is continuing, and we've had good levels of engagement with approved market operators or AMOs, and their specific software providers. The code required by AMOs to complete their remaining testing activities in preparation for the accreditation phase was delivered last month. And we continue to target Q4 of this financial year for the go-live of Release 1. In mid-June, ASIC announced that it will commence a compliance assessment and inquiry into how well ASX is complying with its obligations as a market licensee and the clearing and settlement licensee. And since then, it's appointed an expert panel to examine the frameworks and practices within the ASX Group related to governance, capability and risk management. And this is a wide-ranging inquiry that will provide an independent and transparent view of the work we've done and the work that we still need to do. It's expected that the panel will provide their report to ASIC by the end of March 2026. And we're taking this inquiry very seriously and are cooperating fully. We have a dedicated team who are ensuring that we quickly and proactively coordinate our response to the inquiry. And this response requires a significant investment of time and resources by the organization and we announced the financial impact of this last week. As I said earlier, ASX is 2 years into a multifaceted transformation driven by the significant investments we're making in our organization as part of our 5-year strategy. The Accelerate program is a key vehicle driving our operational risk and resilience uplift, and we'll actively review and refresh this program based on feedback from the inquiry. More broadly, we run critical market infrastructure and trust and confidence in ASX is a goal we share with all of our stakeholders. I've said previously that our role has always meant that we're subject to scrutiny and that's appropriate. We have high expectations of ourselves and the community has high expectations of us, too, which is why last week's issue relating to TPG Telecom was very disappointing. It demonstrates how an error by ASX can be very disruptive, and we've acknowledged that mistake and apologize to TPG Telecom for the incorrect cross-referencing of their ticker to a market announcement by another company. We're reviewing that incident and making sure that we are learning and improving. And I'll now hand over to Andrew to provide a more detailed view of the financial results.

Thanks, Helen, and good morning, everyone. As Helen has already mentioned, we delivered strong operating revenue this financial year, demonstrating the quality of our portfolio of businesses. Operating revenue was $1.11 billion, which was an increase of 7% compared to the prior corresponding period or PCP. Total expenses for the year were $460.3 million, which is up by 7.2% and below the midpoint of our guidance range. Net interest income was up by 13.2% to $86.8 million, supported by higher net interest received from ASX's cash and collateral balances. . Underlying net profit after tax was up by 7.5% compared to FY '24 due to the strong growth in operating revenue and net interest income. ASX's statutory net profit after tax was up by 6% following the impact of a significant item. This primarily represents an onerous lease provision incurred in the first half as a result of moving our Sydney headquarters to Martin Place. Our EBITDA margin was 62.8%, an increase of 70 basis points compared to FY '24, following the strong operating revenue performance and lower operating expense growth. Underlying earnings per share of [ 2.629 cents ] is consistent with the trend in underlying net profit after tax. Underlying ROE generated in the year was 13.6%, up 60 basis points compared to the PCP, which reflects the increase in underlying NPAT. Now turning to the business unit revenue outcomes, starting with listings. Total listings revenue was stable at $208 million. Annual listing fees make up around half of total revenue for listings and are driven by market capitalization as at 31 May each year. higher market capitalization in May 2024 supported revenue growth of 2.9% to $110.3 million in the period. We recognized the revenue derived from initial listings and secondary raisings over 5 years and 3 years, respectively, and so the revenue outcomes reported mainly reflect prior period activity. This is shown on the bar charts on the slide. This amortization profile was the primary driver for lower initial listing revenue recognized in the year of $19 million, down 5.5% and secondary raisings revenue of $68.5 million down 5.9% compared to the PCP. Total new capital quoted for the year was $90 billion, up 10.1% due to stronger activity across our listed markets particularly secondary raisings and dual listings and total net new capital quoted for the year was $35.6 billion, up 27.9%. Moving now to the Markets business. This business generated revenue of $349.2 million, up 10.7% compared to FY '24. Futures and OTC revenue of $262.6 million was up by 10.4% on last year, supported by a 19.5% increase in total futures and options on futures volumes as global interest rate market conditions in the period drove strong activity along the curve Strong growth was observed across all major products, including 90-day bank bill futures and 3 and 10-year Treasury bond futures with traded volumes up 23% and 30% and 19%, respectively. Commodities revenue was down, primarily driven by lower trading activity in electricity derivatives as a result of lower volatility in electricity prices. Cash market trading revenue was $69.5 million, up 15.3% on PCP, driven by a 15.8% increase in the total ASX on-market value traded. This was also supported by auctions traded value, which was up by 19.9%. ASX' share of on-market cash market trading averaged 88% for the year, which was consistent with the PCP. Equity options revenue was $17.1 million, down 0.6%, reflecting low trading activity in index options, which was partially offset by an increase in single stock options. Now looking at the technology and data business. This business had another strong period with total revenue of $275.6 million, increasing by 8% compared to FY '24. Information Services generated revenue of $171.3 million, up 9.6% supported by strong demand for data across equities and derivatives markets. Technical Services was also up with revenue coming in at $104.3 million, up 5.6% despite the decline in the number of cabinets at our ALC data center. Revenue growth was primarily driven by demand for core infrastructure services, increased access to ASX applications and third-party ecosystem connections along with targeted fee increases. And finally, moving on to our fourth business segment, securities and payments. This business generated revenue of $274.4 million, up 7.4%. And Issuer Services revenue was $58.5 million, up 0.7% driven by a higher number of test statements issued reflecting higher activity in cash markets. Equity post-trade services revenue also benefited from higher activity in cash markets, increasing by 5.4% to $136.4 million. Austraclear generated revenue of $79.5 million, up 16.7% compared to last year. It benefited from strong debt market activity during the year leading to a 16.2% increase in transaction volume and a 5.6% growth in the balance of issuances to $3 trillion at 30 June. Austraclear revenue also includes the net operating contribution from Sympli ASX's property settlement joint venture. ASX's share of Sympli's operating loss was $11 million, compared to a loss of $10.8 million in FY '24. There remains ongoing uncertainty around the timing of interoperability between e-conveyancing platforms, and we continue to review our equity portfolio to consider if it is delivering the right return for our shareholders. And turning now to expenses. Total expenses for the year were $460.3 million, up 7.2% on the PCP, which is below the midpoint of our guidance range. Employee expenses were well contained and up by 0.5%. Permanent and contractor head count increased from 1,193 in FY '24 and to 1,331 at the end of this year. The growth in project-related head count primarily relates to our technology modernization program and reflects the increased level of activity in the trading, derivatives clearing and CHESS projects. Technology expenses were higher, primarily due to higher licensing fees and costs related to technology projects, and this was partly offset by a decline in administration expenses and the ASIC levy in the period. Regulatory expenses increased by 9.5% and primarily related to legal costs associated with the ASIC investigation and ongoing ASIC litigation. We reported depreciation and amortization of $48.4 million, up 30.8% as more elements of our new technology systems started to go live. Turning now to total expenses growth. FY '25 total expenses growth was 7.2%, which is below the midpoint of our guidance range. Operating expenses growth was 4.9%, which is at the lower end of our guidance range and reflects the cost optimization actions taken during the year. Last Thursday, we announced that we are expecting to incur additional operating expenses of between $25 million and $35 million to respond to the ASIC inquiry. This includes the establishment of a secretariat function to manage our response, legal costs and other internal and external costs. As a result of this, we have updated FY '26 total expense growth guidance to be between 14% and 19% compared to FY '25. Excluding the expenses related to our response to the ASIC inquiry, we expect total expense growth of between 8% and 11% for the core business. Depreciation and amortization is expected to make a higher contribution to FY '26 total expenses than in previous periods. And we expect D&A to increase by a similar dollar amount as FY '26 in each year for the medium term as more of our major technology projects go live. Excluding D&A, we expect operating expenses growth of 4% to 7% for the core business. Similar to FY '25, we anticipate the growth in FY '26 operating expenses will be primarily driven by a further increase in technology expenses due to higher software licensing fees and costs related to technology projects. This element of our guidance also includes costs associated with the Accelerate program, which Helen talked about earlier. As we said at the Investor Forum, we have been taking further actions on core business operating expenses under the ongoing efficiency program. This is expected to achieve approximately $17 million in annualized savings in FY '26. This program continues the work we've been doing on workforce optimization, the simplification and automation of processes and strategic procurement. We will report the operating expenses we incur in relation to the response to the ASIC inquiry separately to give you transparency on the total expenses for our core business. Now moving to capital expenditure. FY '25 CapEx was $176 million, within our guidance range. Today, we confirm the forward guidance provided at the Investor Forum in June. We have narrowed our guidance range for FY '26 and to be between $170 million and $180 million, with a range of $160 million and $180 million for FY '27. This reflects the multiyear delivery profiles of our major projects but noting the inherent delivery risks in the technology program may impact this guidance. Our aim is for CapEx to start to reduce after FY '27. We also expect an average depreciation and amortization schedule of 5 to 10 years for these major projects once they go live, noting that the CHESS project is expected to be amortized over 10 years. Moving now to net interest income. Net interest income consists of net interest earned on ASX' cash balances and net interest earned from the collateral balances lodged by participants to meet margin requirements. Total net interest income for the year was $86.8 million, representing an increase of 13.2% compared to FY '24. Group interest income of $38.5 million was down 7.7% and was primarily driven by higher financing costs relating to the full year impact of the $275 million corporate bond and an increase to the committed bank liquidity facilities to support ASX Clear. This was offset by higher earnings on ASX' cash due to the higher ASX group cash balances and higher average collateral balances during the year. As we said at the Investor Forum in June, any reduction in the RBA cash rate, including the 2 from May, will have an impact on the net interest income on ASX's group cash. Net interest earned on the collateral balances was $48.3 million this year, up 38% compared to the PCP. This reflects an increase in the average collateral balance to $12.2 billion this year due to growth in activity across our markets. This was combined with a 6 basis point increase in the average investment spread on these balances to 16 basis points as we saw opportunities to achieve higher returns by adding a small amount of tenor to our investment portfolio. We expect this spread to stay around the current level in the next financial year. The average collateral balances subject to risk management haircuts increased from $6.8 billion to $8.2 billion this year as overall collateral balances increased. As at 31 July, collateral balances of $13 billion and balances subject to risk management haircuts of $9.6 billion were higher than the full year average. ASX's balance sheet continues to be strong and positioned conservatively with an S&P long-term rating of AA-. From a shareholder return perspective, underlying ROE for the year was 13.6%, up 60 basis points compared to FY '24, reflecting the higher reported underlying profit. As Helen mentioned earlier, the Board has determined a final fully franked dividend of [ 112.1 cent ] per share or 85% of underlying earnings per share reflecting the midpoint of the dividend policy to pay out 80% to 90% of underlying NPAT. This takes the total dividend to [223.3 cents ] per share fully franked. The Board has also approved the operation of the dividend reinvestment plan for the final dividend. No discount will be applied to the DRP share price and shares issued will be neutralized. Our balance sheet and shareholder return profile provide the capital management flexibility to support ASX' future funding requirements. This includes a dividend payout ratio range of 80% to 90% of underlying NPAT and the operation of our dividend reinvestment plan. We have $300 million in corporate debt facilities available, which are currently undrawn as well as a $275 million corporate bond, which we raised in February last year. We also have a leasing program of up to $60 million to help support our future technology equipment requirements. In summary, the strong operating revenue we reported in the year reflects the strength of ASX' diversified businesses. Despite the additional operating expenses relating to our response to the ASIC inquiry, which we expect to incur in FY '26, we continue to target an increase in our EBITDA margin percentage over the medium term from where we were in FY '25. This demonstrates our ongoing focus on operating cost control as well as revenue growth opportunities. We also continue to target an underlying ROE range of 13% to 14.5%, which illustrates the strength of our portfolio of businesses, market positions and value chain. And with that, I will hand back to Helen. Thank you.

Thanks, Andrew. I'll now provide an update on our customer-driven growth opportunities before finishing with the outlook and guidance. Many of our customers have observed the uplift in the way we're listening and partnering with them to make sure that we're offering the products and services that they need. And at the Investor Forum in June, I talked about the 3 main ways that we're looking to create customer-driven growth. And these are market quality, pricing and rebates and new initiatives. So today, I wanted to provide an update on the progress of some of our near-term opportunities since then. So starting with market quality. As I mentioned before, the recent update to our cash market trading platform is delivering benefits for participants and improving market quality. We've now moved to a single opening auction, and that's an enhancement which was strongly supported by our customers. And the removal of the staggered open also resolves structural challenges, including ETFs opening before their underlying constituents. Another feature is the introduction of a post-close trading session, which is supplementing the existing closing auction. And this provides an additional opportunity for investors to execute any residual orders and has driven an increase in activity. And we have a review underway of elements of the listing rules as they relate to shareholder approval requirements in transactions. We've held roundtables with investors and we look forward to receiving input from a wide range of stakeholders as part of a public consultation later in the year. You may have seen our recent announcement that listed entities must now publish the nature and effect of any waivers granted by ASX in order to provide greater transparency to investors. And this is an important first step in the process as we want to make sure that our market evolves to remain attractive to companies and investors in Australia and around the world. Next is pricing and rebates. We regularly review our pricing across our businesses as well as our rebate structures in our markets and securities and Payments businesses. to ensure that we're delivering value for our customers, while recognizing the value of the crucial services that we provide. As we're currently the only provider of cash market clearing and settlement services, pricing is subject to additional regulatory settings and oversight. And we introduced a new pricing policy for those services from the first of July this year. This applies to cash market clearing and settlement and issuer services, which together equate to approximately 18% of ASX' FY '25 group operating revenue. And this model uses a methodology similar to other regulated infrastructure providers, resulting in a targeted return of 11.5% each year on our capital allocated to this part of the business. And we don't expect that changes to fee levels in the next 2 years. And in addition, this new pricing policy will replace the previous revenue share arrangements. Finally, for new initiatives, we launched our debt market activity product in the second half of FY '25. And this product offers aggregated repo bond and money market activity data from the Austraclear settlement system. And this newly available data allows issuers and market participants to accurately assess the size market share and relative activity levels in the primary and secondary market. It provides details of the most active instruments and tenors and unique liquidity and concentration metrics for index tracking, relative value and market impact in sites. And this product is generating interest from both domestic and global participants looking for a more informed view of the Australian debt markets. We also launched ASX Colo OnDemand in late June. And this is a fully managed infrastructure as a service solution within the Australian liquidity data center. It enables rapid client onboarding and scalability, creating a solution that allows access to ASX's trading and clearing and settlement services without the need for on-premises equipment. We continue to review our equity investment portfolio to ensure it's aligned with our strategy and providing the right return on the resources allocated. We had flagged for some time that we were exploring the sale of our shareholding in digital assets as it was no longer core to our strategy. And we completed the sale of our stake in mid-June with a pretax gain of $9 million compared to the original acquisition cost. Before I move to outlook for our businesses, I wanted to talk about the importance of public markets more broadly. A vibrant public market is critical to the Australian economy, powering economic growth, innovation and wealth creation. And you may have seen ASX announcement last week that it's considering granting a listing market application to Cboe Australia. And we're supportive of competition, and we have a strong value proposition. A recent endorsement of this is Light & Wonder's announcement that it plans to move from a dual listing with NASDAQ to being solely listed on ASX. Our listings business with many other local, regional and global exchanges and continues to offer one of the world's leading listing venues with over 2,000 listed entities. And we already compete with Cboe in Australia, both in trading securities and in listing exchange traded funds. Moving now to the outlook for our Listings business. There was solid momentum in listings activity in the second half of FY '25. And during that period, there were 30 new listings, including the IPOs of Virgin Australia and Infragreen Group as well as several dual listings, including Southern Cross Gold. GemLife completed their IPO in July, and there continues to be interest from companies considering a listing in FY '26. As I just mentioned, market quality is a key focus for us. And net new capital quoted is an important metric to measure the quality of our listings market as it takes into account delistings, new listings and secondary ratings. A net new capital quoted was $51.3 billion, in the first 7 months of calendar year 2025, which was driven by this new listings activity as well as secondary capital raisings. Strong cash market activity continued into early FY '26 with total value for July, up by 20% compared to the same months last year. And volumes were primarily driven by expectations of local and global central bank rate cuts combined with volatility caused by international geopolitical events and particularly U.S. economic policies. Total futures and options on futures volumes fell 5% in July 2025 compared to the same month last year. But despite this decline, the current rates futures environment remains supportive with activity across the curve. At the short end, activity is being driven by ongoing speculation about RBA monetary policy settings. And at the longer end of the curve, volumes have been driven by domestic debt issuance and global economic dynamics and their impact on central bank rates and currencies. And we have more new data products, which are targeted to launch this year, including our new ASX 24 activity product, which went live in July. We expect that additional products will also launch throughout FY '26 to provide fresh insights into the markets ASX operates. Moving now to guidance. Our response to the ASIC inquiry is expected to increase our FY '26 operating expenses by between $25 million and $35 million. And this has increased our FY '26 total expense growth guidance to between 14% and 19% compared to FY '25. Excluding these additional costs, we expect total expenses growth of between 8% and 11% for our core business. FY '26 capital expenditure is expected to be between $170 million and $180 million and between $160 million and $180 million in FY '27. And then our aim is for it to start to reduce. As our CapEx is primarily to support our technology modernization program, inherent delivery risks in the program may impact this guidance. In terms of key metrics, we're targeting an increase in our EBITDA margin percentage over the medium term from where we are now, despite the additional inquiry response related operating expenses incurred in FY '26. And underlying ROE remains a key metric for the organization as we continue to focus on disciplined cost management and growth opportunities. Thank you, and I'll now invite questions.

[Operator Instructions] The first question today comes from Julian Braganza at Goldman Sachs. .

Just a first question on the spread benefit on the collateral balances. Can you just elaborate what's driving it firstly? And then secondly, if I just look at it half-on-half, it looks like you're seeing an increase in the spread, yet still, I think you're sort of saying for FY '26 about 16 basis points with the second half, I think, at about 17 basis points. I just want to understand that trajectory. And is there room for further improvement as well upside risk to this number for FY '26 .

Thanks, Julian. Andrew?

Yes. Thanks, Julian. So I think from memory, Julian we published up 15 basis points in the first half, 16% on average for the full year. So it has been extending slightly. We've taken advantage of sort of some opportunities still at the short end of the curve. You'd probably understand that our sort of a weighted average of the portfolio is relatively short, but there have been opportunities that we've taken advantage of over the last 6 to 12 months. It's difficult to sort of forecast fully into the future, but our best guidance at this stage is to guide to around these levels, around 16 basis points going into FY '26. And it really just depends on those opportunities, persisting into that period of time. .

Okay. That's clear. And then just a second question on on the annual listing fees, which didn't seem to show much growth on the second half '25 versus the PCP. It feels like you're saying go through some pricing of the market cap benefits, but that was offset by lower revenue recognition on the initial and secondary listings. Can you maybe just on that last piece articulate just your forward view of where this kind of bottoms out in terms of initial and secondary listings, how much more pressure we can expect to see on the amortization of that? Just your perspective on that? .

Julian, the thing I look to is sort of the net capital added to the market, and that's been positive. Really strong performance in the last 6 months. And so that's a good indicator of sort of the trend in sort of initial and secondary fees, that amortization profile sort of increasing into the future. But again, it does depend on the rate of roll off. And in the charts today, you can see that roll-off profile. And you can follow from our monthly market activity report sort of the net capital that is coming to the market. So hopefully, that assists you in sort of modeling that forward, but it has been a strong last 6 months.

Okay. No, that's clear. And then the last question in terms of Sympli losses from here. any comments around FY '26 it seems to be pretty stable, around $5 million, $5 million, $6 million. Yes, just any comments around whether we'd see a benefit into FY '26 from more cost control on that business.

We haven't guided specifically, Julian, but I would note that the business did take further action to restructure in the last 6 months. And so that will reduce slightly the cost base going into FY '26. .

Your next question comes from Andrei Stadnik at Morgan Stanley.

Helen, can I ask my first question around just like the dividend and how you think about the dividend sustainability in the sense of the cash position, reduced by almost $150 million year-on-year given [ Disconnect ] spend cash expenditure and accrual expenditure. So how are you thinking about the dividend payout sustainability going forward? .

That is a matter for the Board to consider each period, Andrei. But at this stage, we have signaled that, that is the current dividend payout policy, 80% to 90%, 85% determined for the last couple of years. And if I think about going forward, sort of modeling out profitability, we've signaled the increasing amortization or depreciation profile, which is a noncash component of our profit outcome. And so if you sort of model that forward, that gives you sort of positive cash coming out of the business.

And then can I ask about cost. I appreciate it's sort of a tough one, but something many investors thinking about is just the cost outlook into FY '27, particularly given additional impacts in FY '26, on what should be a one-off from a broad range in ASIC inquiry. But how are you thinking of that in terms of cost into FY '27. Do you think that $30 million stood entirely fall away or to the message, but think and the rig prospects of maybe additional operational risk management spend that might need to arise heading into FY '27. .

So Andrei, I'll [ fill ] that one initially. The range that we've given of the $25 million to $35 million that we expect to spend on the ASIC inquiry response, we believe that's specific to this year. We've obviously got a transformational strategy in place. We've talked about the Accelerate program and the importance of that in driving our operational risk and resilience uplift. So that was work already underway that we also talked to us at the Investor Forum. So look, we don't give guidance for FY '27, as you know, but the $25 million to $35 million is a piece we expect to be specific. And beyond that, it's very difficult at this stage to -- it's not certainly not appropriate for me to prejudge what the outcome of the inquiry might be.

If I can ask third final question. Just in terms of the markets business, official revenues were up [ 10% ] year-on-year. Our volumes were up almost 20%. Is that a combination of mix shift? Or is there some pricing as well? Just see what's kind of driving that gap between revenues up 10%, volumes up almost 20%?

Yes, definitely some mix shift. And also with the increased volumes, you've got increased volume rebates. So we had slower performance in our commodities business in the futures in the derivatives part of the business. which is typically a higher price point and big growth in the rates part, which is the lower price point part. So that's the mix shift. And then with rates growing so significantly, then you've got the impact of volume rebates there. But the pricing, in particular, the rebates is certainly an area that the business actively looks at to make sure that those are set appropriately to try and drive the right market quality. But those were the dynamics that we saw in FY '25.

Your next question comes from Ed Henning at CLSA.

I've got a couple. Unsurprising, going to start on costs and a bit more on the outlook there. You touched on before, you're hoping that 25 to 30 is a one-off. But if you think about the review and potentially you've been through a few of these you talked about investing in your technology and your pathways kind of set there. What do you see the risks coming out of the review? Is it just about increasing the pace of the technology? Or is it more people? Or is it more ASIC regulation, which they then got the chargeback model I'm just trying to think about the unknowns going forward potentially on the risk for costs as a first question, please.

Yes. I think if you -- well, first of all, it's worth looking at the scope of the inquiry. So it's looking at our frameworks and practices around governance, capability and risk management. So that sort of gives you a sense of the brief. And that's certainly -- those are certainly areas that we're already very focused on as part of the Accelerate program. But it's certainly, the challenge, I suppose, in your question is it's not really appropriate for me to preempt the outcome of an inquiry that's already in -- that's at this stage in quite an early stage. We certainly expect that they'll take a good look at the work that we've already got in plan and consider whether that's the right work, but it's hard to say what their conclusions will be when they announce their report in March.

Okay. And just a follow-on costs. The operating expense growth at 4% to 7% same as last year. Look, that's well above inflation. How can you get this down to run around inflation? Or is it just too hard with the vendor costs continuing to push this up and you're kind of beholden to them so you're going to run above inflation kind of looking forward is how we should think about it? .

Well, you've correctly identified the technology costs as an area where we typically have seen well above inflation growth. And of course, that is a significant area of spend for us. So that is a component of it. But of course, the work we're doing on the Accelerate program is also a key component of that. So there's various areas that go into that cost growth. But equally, we do continue to focus on our cost optimization program, and we've obviously talked for a couple of years now about the results that we have there, and we're also prioritizing what we're doing very carefully.

And do you think with this cost optimization program you can continue to potentially get more savings coming through is because the cost growth continues to kind of ratchet up and you've talked about higher D&A again coming through, which I understand why but just is it becoming more and more important to try and get that cost growth down from that team?

I think being cost conscious about how we run our business and looking for efficiencies in that is just part of running a good business. And you can expect it to continue to be a focus. And in some areas, it also aligns with the work that we are looking at around managing risks and more effective controls, right? Because as we drive automation in some areas, that has multiple benefits. So I think the opportunities will continue for us to be able to focusing cost -- on cost in some areas and by also go back to the prioritization point, right? We need to choose carefully where we're focusing our time and effort.

And just one last question on the annual listing fees and you touched today in your presentation, potentially [indiscernible] might be getting a license or ASIC reviewing that. when they came into the trading market fee significantly dropped or just before they came in from you guys. Can you just talk about how you're seeing about risk in this? Can a company shift away from giving you annual listing fees and how we should think about potential competition coming into that space? .

And sorry, just to clarify, you're talking about competition in corporate listings specifically?

Yes. And the listing -- the annual listing fees, yes.

Yes. Got it. Okay. So look, I think the thing to bear in mind with our listed market is it's already an intensely competitive market for us. because any company that wants to this or even any company that wants to raise capital, has a choice about how to do that. They've got a choice of different exchanges already in Australia, in the region globally. And of course, they've got a choice of public and private markets as well. So I think that's just an important context to consider that we're pricing and our value proposition is within an already very competitive market.

Your next question comes from Nigel Pittaway at Citi. .

Just first of all, sorry, another question on costs. But just on the $25 million to $35 million with the inquiry not finishing until March 2026. Why is that radar further any risks to it? And just in terms of the timing of incurrence, is it relatively straight line between now and March -- or is there a sort of front-loaded or backloaded component to that?

Thanks, Nigel. Look, it is obviously a fairly wide range we've given, and that does reflect, obviously, some uncertainties, and we've never done one of these before. So where there are some uncertainties in that. That said, we have set up the ASX [ Secretary ] at the various areas of support that we need to do that. And so there's parts of it, which were -- that are already known and on track and other pieces that are less certain. In terms of when we incur those costs, there's obviously an intensive period in the first half of the year, but the report will be delivered at the end of March. And we're certainly expecting that we'll have some follow-up work to do after that in terms of our response to the report. So at this stage, lots of intensive activity this half, but we do expect it to carry on a reasonable level throughout the year. Andrew, anything you'd add to that?

Yes. I think maybe Nigel weighted a little bit to the first half, but the exact percentage is difficult to guide on. .

Yes. Fair enough. Okay. And then maybe just also handing in a bit on sort of a subject that's already been asked to a degree on the derivatives yield. I mean -- it did seem to fall from $1.37 to $1.31 first half to second half. So I mean, I guess the question is, do you think an element of that is maxed out with the rebate component largely of max debt or unlikely to fall as much moving forward? Or is that not an appropriate conclusion?

I don't have a definitive answer to that question, Nigel. But I would say that taking a look at those rebate structures and making sure that they're shaped in the right place to make sure that we're supporting market quality and driving the right liquidity, certainly a focus area for the team. But I can't give you a definitive answer on whether that's the absolute limit. .