EQT Holdings Limited (EQT) Earnings Call Transcript & Summary

Good morning, everyone. I'm Mick O'Brien. I'm the Managing Director of EQT Holdings Limited, and I'm here this morning with Philip Gentry, our CFO and Chief Operating Officer. Welcome to this call, where we're going to talk about the full year results for Equity Trustees to 30 June 2021. So the agenda for today, I'm going to go through an overview of the results, and then I hand over to Philip who will take you through the detailed financials. And then I'll come back and talk about the strategy update and the outlook for the company, and we'll be very happy to take questions at the end. Before starting, I'd like to acknowledge the Aboriginal and Torres Strait Islander people as the First Australians and respect their long and enduring connection to the land on which we're on and pay our respects to their elders past, present and emerging. I also want to acknowledge Australians are all doing it tough at the moment in lockdown in our 2 biggest states and elsewhere in the country. And that may apply to some people doing it tough who are sitting on this call today, and I wish everyone all the best at this difficult time. So let me give you an overview of the results. It's been a year of really strong growth for the company. Our funds under management, administration and supervision grew by 43% to $144 billion. So it really has been really strong growth on the funds under supervision. Revenue was $101 million. So the first time in the company's history it has exceeded $100 million. So that was a great result, a 5.9% increase on FY '20. Underlying net profit after tax was $22.4 million, and that was up 5.5% on the previous year. And the Board decided to increase the final dividend to $0.47 for the final dividend, up from $0.44 the interim dividend, giving a total for the year of $0.91. So that's a 1% increase on the financial year last year. I'll just give some highlights of how the company has performed through the course of the year. We've had a lot of new wins. And the momentum of new business, particularly in superannuation and corporate trustee services, has been really strong. We eventually had to invest ahead of the curve to achieve some of that growth that I've showed on the previous page. So it's not possible to take on that amount of business that quickly without investing to do it, and we've been doing that. There's no doubt, the industry is now fully understanding the importance of the trustee role and great governance, the importance of that. And that's really provided some tailwinds to our business and providing a lot of opportunity and a lot of people to talk to for us. We've kept investing in our people and technology. And it relates to our people that sets us apart. We need expertise, we need judgment, and we need people with the culture that fits with this business. And I'm pleased we've been able to secure the right people to enable us to achieve that growth. And finally, this company seeks to fulfill our purpose of trust, which means putting our clients first and contributing as much as we can to the broader community. And we've, again, done that through FY '21. I'll now just look at the funds under management, administration and supervision and how it's grown through the course of the year. And this is really the key driver of revenue. Philip will talk about how the revenue is correlated to funds growth, and it does vary by business unit based on a range of factors. But it is really a key driver of revenue. The funds increased from $101 billion at the start of the year to $144 billion. Now a lot of that -- about half of that increase came in the superannuation business, which has had really strong growth. That's on the back of a couple of major appointments to the AMP Life superannuation business, which is now in the Resolution group and the HUB24 platform business. In the Corporate Trustee Services area, we saw continued growth throughout the course of the year with a lot of new funds being established and new clients coming on board. And of course, the positive equity markets have contributed to that. And just if you look at our whole portfolio, we're about 50% invested in equities across the whole of that $144 billion, and markets were obviously strong through the course of the year. But there is a lot of organic growth in that result there. If I look at the result by each business, the first thing I'll just point out is, for the first time when reporting the business in 3 lines, we've separated out Superannuation Trustee Services business to show it separately from our private client Trustee and Wealth Services business. And the reason for that is because of its greater scale and significance, and also they're very different lines of business in terms of the way fees are charged. And so this, I think, will be much more transparent to all the market and for investors to see. We'll start on the left-hand side there in Corporate Trustee Services, where we've continued to see new Responsible Entity appointments to fund managers, both Australian and global managers, quite a lot of global managers. The diversity of asset classes, I think, has changed a lot through the last year and maybe 2 years or so. And really, our business is well set-up to provide those types of fund structures. We expanded the offerings that we put to the market with our first dual registry quoted funds being put to the market. So we now, I think, have 6 listed vehicles in the market, and this is an increasing trend that we'll see for fund managers to access the retail market. And we've continued to build the corporate trust business, so both in the debt loan and securitization side, but also in the real asset and custody side of that business. So a really solid result for Corporate Trustee Services increasing from $81 billion up to $101 billion for the year. Superannuation has tripled its assets through the course of the year, from $11 billion to $33 billion. So it really is, I guess, no other word other than to say that's quite extraordinary growth. We've taken on trusteeship for 4 new funds through the course of the year, a bit of a mix of funds: AMP Life book that is transferred to Resolution Life; HUB24, a very contemporary platform; Centric, a brand-new platform; and Aracon, an existing fund that's been in place for some time. And I think it's in this part of the market where the company is really benefiting from the demand for the independent trustee model. And then finally, on the right-hand side, looking at Trustee and Wealth Services. It, again, achieved really solid growth. A lot of that has been the philanthropy side of the business and also health from personal injury side of the business. We've talked about the -- our focus of this business, looking at all stakeholders. Right? We see -- we use this sort of framework to internally drive our behavior and the decisions and maintaining balance between each of the stakeholders. Let's start on employee engagement. You see our engagement result is up 2 points to 70%. That's 2 points above the industry. We're really delighted with that result and really proud that we've been able to keep our employees safe through this time period. But they increased their engagement despite being in lockdown. Most of our staff are in Melbourne, and they were in lockdown for more than 6 months of this year. So that really is an outstanding result. Then on enablement, we're down 2 points, but still equal to the industry average. That's, I guess, understandable being that people working remotely, not been quite as enabled in some areas. On client satisfaction, our results of Net Promoter Score was 12 and Net Loyalty Score was 13. They're both positive scores. They're down on the previous year. I think that reflects lower distributions from many of our trustee clients. We've [ tried ] a lot into our communication efforts, and I think that's showing some promise. Shareholder value. I'll talk in more detail about the earnings per share, but you can see statutory EPS was up $0.10 to $1.034, and underlying EPS was up $0.045 to $1.072. And I mentioned before the dividend, up to $0.91 for the full year. And finally, community impact. We're really pleased that we were able to pivot a lot of our philanthropic granting through the year to the areas of most need as COVID hit hard. Our granting increased by $5 million; through the course of the year, up to $96 million. So that was a great result given dividends were lower in the Australian equity market, which is a major driver of that number. Now volunteer days were 22. We'll obviously be looking to get a much bigger number next year and hopefully, as we return to some normal ability to get out into the market. I just now turn to the earnings per share. And you can see in the top line there, our underlying earnings per share up to $1.072. So that's growth of 4.4%, and the statutory earnings per share of $1.03 was 10.9% up on FY '20. And the dividend there, you can see at full year, $0.91, versus last year at $0.90. So I'll just make the point that we have managed to increase dividends in 5 of the last 6 years, and we maintained it in the COVID impact here of FY '20. So I really think that's a fairly unique result in the market for some -- for financial services companies. I just want to touch on a few other areas. I mentioned the people side before. That's really important to this business. We kept our employees safe and increased engagement through the lockdown. So I'm really delighted with that result. We've made some successful changes to the Board with Carol Schwartz taking on the chair from Jeff Kennett at the last AGM. And Kelly O'Dwyer had been appointed to the Board after Alice Williams' retirement and also Jim Minto's retirement. So I think it's been a really smooth succession for our Chair and the whole Board configuration. We've transitioned new leadership into Corporate Trustee Services, appointing Russell Beasley to head up that business. Russell has been with us for 15 years. He's a veteran of funds management service and funds management governance, and I'm delighted that he's taking on that role for us. And we've been managed to -- being able to manage to secure the -- a lot of new superannuation talent into our business, which has been really important to have that expertise to achieve that growth. On the marketing front, we changed a lot of our marketing to digital, increased communication through this whole period. And I think that's been well received. On the technology front, we continue to invest in very specific targeted technology. CAMMS is a new platform for risk and compliance, and that's so important to us because governance is our business. We rolled out another platform, Ziedler, for service provider oversight. Again, critical for our business. We are -- we operate an open architecture in the service providers we use, and we've probably more network than any service -- than any financial services player in the market to custodians, insurers, administrators and the like. So it's really important in our oversight activities there. We've continued evolving Salesforce in all parts of the business, and investing in cyber resilience. And finally, I just want to call out asset management. We've put in place a new team a couple of years ago under Darren Thompson and Chris Haynes. And our flagship Australian equity fund delivered over 200 basis points of alpha for the financial year, and the team have delivered over 200 basis points of alpha since they've come on board. So it's really a great result for our clients to be able to do that. We undertook a major consolidation of our funds, reducing 24 funds down to 13. It's somewhat a hangover of the ANZ trustees acquisition some years back, but it's really streamlined our operating model for asset management. And we launched a new global equities fund, rounding out the range of products in Australian equities, fixed income, cash and mortgages to have now global equities. So in summary, the funds under management growth has been really strong through the course of the year, both organic and through the equity markets. Solid EPS growth, both on an underlying and a statutory basis. We increased the dividend, as I mentioned before. Continuing to invest in the business, and we really have a solid foundation going forward. And as always, with this company continuing to deepen our community impact and attempting to deliver for all of the stakeholders of the company. So I'll stop there, and I'll now hand it over to Philip to talk you through the financials in some detail.

Thanks, Mick. Let me firstly take you through some of the higher level comparisons. On this slide, you can see we've had pretty consistent performance across a range of financial dimensions over the last 5 years. Revenue, you can see steadily increasing. EBITDA and NPAT, likewise. And dividends, also very consistent over that period and increasing, as Mick said, in 5 of the last 6 years. Let's now have a closer look at the profit and loss. On this slide, just sort of coming down from the top of the page, some of the key points. You can see revenue year-on-year, up 5.9%, quite strong. And half-on-half, it's even better, up 9.1%, in part reflecting the stronger markets but also quite healthy organic growth. Underlying expense growth is actually in line with the revenue growth. I would refer -- explain what underlying is in just a moment. You can also see that there's pretty robust EBITDA margins of 38.5%. Underlying just removes 2 elements. One is the M&A expenses from the -- that didn't proceed in due course during the year and also normalizing for the tax provision write-back that occurred in relation to the ATO fine now. So that's essentially what gets us to the underlying. And on an NPAT basis, statutory were up 12.1%; on an underlying basis, up 5.5%. So pretty healthy improvement in profit over the year. Let's now unpack the revenue line in a little more detail. This revenue bridge, just moving from left to right, you'd see some of the key points there. We have a very large single estate back on the FY '20 year at TWS that didn't proceed for subsequent year, so adjusted for that. There's a competitive repricing of fees on advice, a quite significant interest rate impact on the cash funds as a result of interest rates being much lower. And also, as Mick alluded to, the impact on our distribution revenue as a result of lower dividend more broadly across the market. That was offset to a significant extent by the positive equity markets impact on FUMAS. And overall, you can see the organic growth was very strong, up -- revenue up 5.9% and on an adjusted basis, up 7.3%, mainly driven by particularly strong organic growth in superannuation and corporate. Overall, though, you can see that the net impact of markets, if one includes the interest rate markets as well, is relatively negligible. Now turning to look at some of the BU performances. And as Mick said, we're now providing this information across the 3 business units: Corporate, Superannuation and TWS. Starting first with the TWS bridge. Here, you can see there's a range of impacts and a number of headwinds for TWS. I will cut on some of these in my previous slide, single estate impact, interest rate impact and the dividend distribution impact, offset by equity markets and some organic growth, which was good to see. So a quite strong increase in FUMAS on the right, in part a function of the organic growth, in part a function of strong equity markets. And also, the alpha has been generated across our equity portfolios by our asset management team, which met tough time before. So let's look at some of the components of the TWS business in a bit more detail. Here, you can see some of the major components, pretty good momentum across most of the BUs, again, a function of reasonable organic growth momentum in these businesses, positive equity markets and a particularly strong performance across compensation trusts, on the right-hand side there. We could see 26 new trusts in the financial year. Now having a closer look at Superannuation. Here you can see, on the left-hand side, some pretty extraordinary organic revenue growth, pretty limited equity market impact. The linkage to equity markets for the Superannuation business is only about 20%. There's a lot of fixed rate arrangements in place. So it's not as pronounced as you might see in CTS and TWS, which is closer to 50% linkage to markets. On the right-hand side, you can see the dramatic increase in members. Mick's already touched on the tripling of funds under supervision and driven by the organic growth, in particular, the appointments of AMP Life and HUB24. Now let's have a look at the Corporate Trustee Services business. Again, pretty strong performance. Equity markets have certainly helped, and they're leveraged more to the MSCI, which has been particularly strong, but you can still see pretty strong organic growth there. And again, currently, over 40 new funds under establishment, various stages of development, normal as well for the FY '22 financial year. Now I'll give you just a little bit more detail of this business. Here you can see the number of funds has increased from 289 to 310, up 21, and 8 new fund managers. I might add that these numbers are net, of course. And every year, there are some fund terminations and closures. So the fact we've actually grown the number of funds and fund managers are quite a bit stronger than this. Nonetheless, the net numbers are all accounts. Here you can see the fund manager locations, very much a global fund manager base. In the fund types, we just about service every different type of fund you can imagine. Now turning to the corporate trust business. This is still a small business, but as you can see, it's got good momentum and growing quite quickly. But a number of Tier 1 clients on board now, and you can see we had retail note transactions, of course, with Macquarie and Challenger notes during the year. We're continuing to invest in this business, deploy additional resources to support its growth and the momentum -- there's good momentum we should see further pronounced in the FY '22 year. Now let me turn to our overseas businesses in the U.K. and Ireland. Here you can see progress is continuing. The numbers of clients, the numbers of funds and total assets under management continue to grow. It's been a little slower than we would have liked, obviously affected by the pandemic, and that's made it more difficult to establish funds as quickly as we would have liked and it's also slowed the distribution efforts of fund managers. But nonetheless, you can see some pretty reasonable progress. Ireland is particularly strong, and we see very good prospects there. U.K. is a little more subdued. We've actually grown funds -- regulatory intensity is increasing, particularly in the U.K. Competition is also more marked than it is in Australia, as you might expect. But nonetheless, the opportunities are also very significant in terms of the size of the markets as well. We continue to have a good pipeline. But the breakeven is probably going to take a little bit longer rather than next year, but at least the following year before we'd expect to see breakeven. And moving on to the balance sheet. Here you can see, it continues to be very strong. We've got high levels of cash, a significant portion of which is required for regulatory purposes; low gearing; plenty of headroom in our covenants; and lots of flexibility to take advantage of future opportunities should it be required. I'll also just call out the ORFR facilities. These are the facilities that are used to support superannuation fund [ maturity ], and the borrowings are matched by cash on the other size of the balance sheet. The net interest is effectively neutral to us. And ultimately, the recourse is not set with EQT. Just moving on to the cash flow. Again, we're a consistent high-quality cash generator. You can see from this waterfall the cash principally used for payment of dividends, income tax and, in this case, in the payment of corporate facilities. We have very negligible bad debts, and the strong and reliable cash flow generation enables the reliable payment of dividends, which we've evidenced over the last 5 years. Turning to liquidity. Just to paint a bit of a picture here for you, high levels of liquidity, a lot of cash used to support our RE business, in particular. I've touched on the ORFR-related cash, which is matched by borrowings on the other side of the balance sheet. So we've got surplus cash of around $15 million and committed undrawn facilities of around $30 million. So about $45 million of surplus cash and committed undrawn facilities, plenty of flexibility should be required for any purpose. So in summary, strong organic revenue growth supported by growth in equity markets. Underlying cost growth was pretty much in line with revenue growth. Continue to maintain -- particularly healthy margins, 38.5% on an underlying EBITDA basis with a strong capital position with a flexibility to fund future growth. I'll now pass back to Mick who'll take you through the strategy and outlook.

Fabulous. Thank you very much, Philip. Now let me quickly summarize our strategy for you, and it really hasn't changed. So as our name suggests, this is a company founded on trusts. And what we do is we help people take care of their future. So safeguard their wealth, protect the interest of members and investors in schemes and trusts and the like. We're independent in the way we go about doing that, and also looking to empower clients and the community in that process. Our values haven't changed. They're clear: trusted, accountable and empowering. If I look at our current position, we are a leader in providing trustee services in the market. Trustee and Wealth Services on the left-hand side there. It's the original part of the business, 130 years old. We have more than $2 billion in philanthropy funds that we look after and making $96 million of grants a year in that space, and really lead in a number of different areas of traditional trustee private client services. The Superannuation side, clearly, we're the #1 provider of independent outsourced superannuation trustee services. And to some extent, that has really helped drive the growth that we've seen in FY '21, the 200% growth. In Corporate Trustee Services, we're the #1 provider of Responsible Entity services in Australia, the #3 provider of corporate trust arrangements in Australia, and we're continuing to build that business, both in the real asset side and also on the debt and loan side of the market. And we've got a building presence in the U.K. and Europe that Philip touched on. Now I won't go through all the products and services on this slide, but I will point out a couple of things that we've been continuing to build the list of services that we can provide. Because we only provide trusteeship, it's very important that we're in every line of business that we have the capability to be in and where there is demand. So we've been building, if I start at the top of the pie there, the debt capital markets area, the securitization area, I keep winding around the circle, custody, investment management and the investment we made in putting the team in place there a couple of years ago. Indigenous trusts is a building area for us, and also compensation trust. So that circle has been built out quite a lot over the last 4 years, and we're starting to see the benefit of that, winding through the rest of the circle of the services we've been in for some time. Let's just touch on the industry. Trust has never been in more demand than what it is at the moment and, in fact, dominates a lot of the industry and a lot of the regulatory push from both APRA and ASIC. It's been clear in recent years that conflicts of interest have not been managed well. There's increase in regulatory oversight from both the main regulators in trying to deal with that issue. And the regulatory landscape is changing. And for us, that's a two-edged sword. In one respect, there's more work for us to do. But in another respect, it makes our services and our offer more valuable to those who have got other core capabilities that they really want to bring to market. The expectations are obviously heightened for trustees, and we feel we're very well-equipped to lift to those standards. And the ownership changes have been going on in the financial services market, have really provided some opportunities for equity trustees over the last couple of years. And we see those trends that are on this slide continuing for some time to come. We'll just talk about our strategy at a very high level. So we're looking to deliver, what I'd say, consistent growth in shareholder value and returns. So this is a company that has a core of its business that is very stable, and we're looking to front that base, deliver really consistent returns. We want to lead in the parts of the market in which we operate. So we're not there just making up numbers. Where we compete and provide services, we want to focus on being the best. And of course, as a trustee, it's important to us, our reputation and the enduring nature of the arrangements that we enter into and that this corporation would be a trusted corporation. So the strategy really sort of comes down to 4 areas. Continuing to grow the business. Our aspirations and ambitions are high, and we can see many opportunities for growth. Focus on client service. I think we've got more work to do in continuing to improve the client service experience and enable the team with more technology. Capability is critical. Getting the right people is absolutely critical to this business. So it's a people business, and it's all about judgment and expertise. And finally, we're serious about the impact that we can make on the community. We have the privilege of granting such a significant amount of money to the for-purpose sector each year, and we take it really seriously and making the most of every dollar that we can contribute in that area. If I move on, and just talk a little bit more detail about our investment in technology, I mentioned before, we've put in place through the course of the last year. And our focus is on information security and cybersecurity. You can see we've a footprint of $144 billion. We cover a lot of the financial services market, and that's really important. Digital solutions for client self-service is a focus, and also through our service providers that we operate with. And data analytics is becoming increasingly important to us, particularly in the superannuation space. So our focus for the next 12 months in Corporate Trustee Services is around reengineering some of our processes to handle the increased scale as the number of schemes and funds continues to increase. For Superannuation, it's around data analytics, and that's aimed at improving member outcomes, a very key responsibility for our trustees there. And in Trustee and Wealth Services is about improving the client experience, we'll be putting a big focus in that more in the second half of this year. So a major investment in technology for FY '22. If I talk about each of the strategies of each of the business units, in Trustee and Wealth Services, we see opportunities in expanding our presence in other states and in more lines of business. As I mentioned, enhancing the client experience, really building on our philanthropy business and what we do in the for-purpose market and continuing to increase our expertise in the intergenerational wealth transition part of the market. Now we're never going to be an enormous player in that market, but we do aim to be a very specialized player in targeted areas of wealth transition. For Superannuation Trustee Services, it's about capitalizing on the industry ownership changes that are going on and APRA's push for higher governance standards that works in our favor, further increasing our focus on member outcomes and continuing to look for opportunities to build more scale in that business. And for Corporate Trustee Services, continue to capitalize on the leadership position we have in providing Responsible Entity services to the Australian funds management market. It's a great industry. It's innovative, it's growing, and we lead it in terms of providing governance structures. Accelerate the growth in our corporate trust business. We've put more people into that business of late, and we see great opportunity there. And we've got to continue to achieve greater scale and improve the profitability of our U.K. and Irish businesses. So that will be a focus going forward to try and do that. I'll just touch on a couple of points in each of these areas on each of these slides and then open it up to questions. For Trustee and Wealth Services, we come to -- let us touch on the last 3 points here, and that is increasing investment in technology. So we have a better client service experience across all parts of our trusts and other clients that we have in the business. We'll increasingly segment our client base. So we're providing greater levels of service to our high net worth clients. And we are reengineering our operational processes, and that's to reduce risks but also improve operational leverage. If I move on to indigenous communities, you can see there the growth that we've had in the last couple of years in this area. It's been an area that we are very proud to be working in. It's a small area for us, but we now have a presence across 4 of the states and territories, having won new clients through the course of the year. So we're delighted with that. It's important to us because we believe the communities need our services and our expertise, and they will achieve better results with the governance that we can provide in working collaboration with indigenous communities. We move on to Superannuation Trustee Services. I'll probably mention most of the points on this slide, but I'll just focus on the last point there, and that's continuing to build capability by investing in our people and our technology. And we're deep in the middle of a data project at the moment. And I think that will give us great insights to looking after members in a more streamlined way than what we've been able to do in the past. Obviously, there's a lot of complexity in dealing with a portfolio of 15 superannuation funds of all varieties. So hence, it's really important that we have the capability in our people, and I'm delighted that the team have been able to manage the growth through the course of the year. Together with all the other regulatory change that has hit the superannuation area, and I think we're really well positioned going forward. If I move on to Corporate trustee Services. I'm just going to touch on a couple of things here. The market for fund vehicles is changing. Superannuation funds and their investment programs are changing. So we're increasingly using our expertise to provide vehicle solutions to super funds. We're using our expertise to build listed vehicles. I mentioned that before, and that's expanding the distribution capability of our fund managers. And I think that will be something that we'll continue to see both on the ASX, on APRA-listed offers, Chi-X-listed offers and the like. And just the last point I'd make on this point. We've had a small corporate trust business that we established about 4 years ago. And that has been building over time, as Philip showed you in those numbers. And we continued to expand the types of services and products that we can offer in this area, and really comfortable with how the team is now positioned to continue to build that business in FY '22 and beyond. So -- and just in finishing, I'll give you an outlook. The momentum in the business is strong. You can see that in the growth in funds that we're overseeing. The trend to outsourcing fiduciary services continues to transform the industry, both in superannuation and in the investment markets of the industry, and that's a benefit to equity trustees. Obviously, equity markets have continued to be strong, and that benefits our revenue. We've seen really good growth in our debt and securitization and corporate trust area, and we see further opportunities there. We'll keep investing in our people and our capability and the technology to support them. To talk you through the balance sheet, it's in a really strong position. And that's important in these volatile times. And we've got the flexibility to fund our growth, and we've got a positive outlook for FY '22 and beyond. So I'll stop there, and we're happy to take any questions. People can use the question-and-answer session on the screen, and looking forward to any questions.

As we're waiting for questions to come through, I guess one question that would occur to me if I'm sitting on the other side of the table would be -- well, you've had quite extraordinary growth in superannuation in FY '22, do you forecast the same will happen -- sorry, FY '21, the same will happen in FY '22? Look, I think it has been a very big year in FY '21. We've got a good pipeline of conversations that we are having with other superannuation providers. But these deals are inevitably complex, and they take a long time to put in place. So we'll continue to have those conversations. And -- but I wouldn't expect the same type of year in FY '22 as to what was achieved in FY '21. Could be delightful if that happened, but that is a little unlikely. But we're having a number of positive conversations in many areas. We've got another question here, and that is, "Is the overseas operations profitable? What return on investment is EQT targeting?" I might hand that over to Philip to answer.

Sure. Thanks, Mick. The overseas operations are not yet profitable. The loss is around 3 million mark. It's a little reduced from last year. We would like to obviously get that profitable as quickly as we can. It will probably take at least another year or 2. In terms of return on investment, we're certainly targeting return on investment that's in double digits and higher than current return numbers.

Fabulous. Thanks, Philip. Thank you. Another question here is, "What are the biggest challenges that you have for FY '22?" Perhaps I'll take that question. One of the biggest challenges we have is the increase in regulatory load. Both APRA and ASIC are introducing new lines of legislation almost on a continual basis. I should say we're well set up to manage that, and our clients really benefit from us taking on that workload. I won't go through the long list of what we're working on and what's to come, but it is extensive. So just managing that requires great planning and organization. I have another question here. "Gents, can you please provide any commentary on M&A and what you are seeing in the market?" Perhaps I'll take that. Look, we're always active looking in the market at M&A opportunities. I would say we're very focused on our specialist areas of trusteeship. And whilst it's not an enormous universe of opportunities in that area, there is quite a number. And it's fair to say we're active in looking at all of those opportunities continually. So you've seen in the past the types of acquisitions that we've made, the one would be Responsible Entity business, Sandhurst private client trustee business, the ANZ trustee business, the superannuation business out of Zurich. They've all been in our core spaces. Yes. The next question is, "Can you please give a bit more detail on your expectations around cost efficiency benefits from the IT investment and process reengineering?" Thanks, and hopeful as well. So I might hand that one over to Philip.

Sure. Thanks, Mick. Look, and answering this question, there are investments and projects underway in all 3 revenue business units to improve productivity, improve the client experience and also the employee experience. Of particular note are the projects that are underlying CTS, where we do -- I talked earlier about the client -- 40 funds being established. We've got 300 funds now. There's a real opportunity to get some scale efficiencies there with some proven organization and business process engineering. So we're quite optimistic we'll see some material benefits from that particular project. There's also projects in the superannuation business where increasingly, it's been growing very quickly as they go, and we think there's some scale benefit opportunities through appropriate systems investment there. Likewise, in TWS, so that's probably longer-dated in terms of giving their systems upgraded performance of time. Not yet in a position to give you any sort of quantification of that. It's certainly going to help us in the months and years ahead.

Thank you, Philip. The next question is, "Clearly, Superannuation Trustee Service is a lower-margin business, but will profitability from that funds growth flow-through more in 2022 than in 2021? Perhaps I'll take that. Yes, look, it is a lower-margin business, but of course, our margins have been increasing as we've increased the scale of the business. I think we've got a great foundation going into FY '22. So you'll see the profitability come through from that higher foundation. And some of the clients in this area are growing. Some are declining, mind you, with some of the funds as well. But on balance, we've got a growing portfolio there. So there will be some increase in profitability coming through, we expect. Next question is, "Is the underlying expense growth of 5% to 6%, what we should expect for FY '22? Or will the expense growth be lower because you've hired ahead of the curve the new super clients that you want?" So I might hand that over to Philip.