EQT Holdings Limited (EQT) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to this briefing on EQT Holdings' half year results to 31 December 2022. I'm Mick O'Brien. I'm the Managing Director of the company and helping today is Philip Gentry, our Chief Financial Officer and Chief Operating Officer. So the agenda for this morning, I'm going to give you an overview of the results for the half year and also importantly, give you an update on how the AET acquisition and integration is going. Then I'll hand over to Philip, who's going to take you through the financials. I'll come back on to talk about the strategy and also the outlook for the company. And then we'll take questions at the end. So let's jump into it. So this just gives us a summary of the headline results, and there's a couple of things I'll point out. Funds under management, administration and supervision is the main driver of our revenue. And you can see that's up to $155 billion, so 4.4% increase on the 30 June 2022 number. So that's a pretty good result. If you look at the revenue, revenue is up 12.3% on the first half '22. So that really represents really good organic growth across all 3 business units, [ got one last ] contribution from the AET business. And that more than offsets the negative investment markets that would average over those 2 corresponding periods of inflation in revenue. The net profit figure of $7.6 million. The underlying net profit after tax is $13 million. That's 11.3% up from the prior half and 2.5% up on the first half of '22. Statutory net profit after tax is down on PCP, primarily due to the one-off acquisition and integration costs that occurred as a result of the AET acquisition. The dividend there is at $0.49. That's $0.01 up on the prior corresponding period and equal to the final dividend we declared for the financial year '22. And finally, the balance sheet remains in a really strong position with low gearing and healthy levels of liquidity. Now this slide just shows the progression of the funds under management, administration and supervision. And you see it's a really steady progression over each of the halves -- recent halves despite the market volatility that's been going on over this time period, and we're now up to $155 billion. I think probably what's more important is to look at this by each of the business units. So I'll just turn to that slide now and see how that number has built up. So this shows for each of the 3 client-facing business units. The -- I guess, the progression of funds under supervision. So personally, in Corporate Trustee Services, you can see that down roughly $5 billion and I'll come to that. On the superannuation side there, up $5 billion to $39.9 billion of the funds under supervision. And then finally, trustee wealth services is up some $6 billion to $15.4 billion. So if I just walk through each of those. So previously Corporate Trusted Services, that result is really driven by a couple of things. Some of our clients lost some mandates. So that obviously impacts the funds under supervision. We also had one client, a $3 billion client internalize their trustee, their wholesale trustee role and -- but I should stress that was at 2 basis points of that $3 billion. So not [indiscernible] impact on revenue, but obviously on the headline from [indiscernible] number. We continue to start a lot of new funds and get funds fall into those funds. So that's generating new business. And also we've had continued growth in the dual registry quoted funds as fund managers seek to expand their distribution into the retail market and also pleasingly the corporate trust appointments have continued to grow through the course of the last 6 months. If I move now to superannuation. As you can see there, it's gone from $34.7 billion to $39.9 billion. That's principally as a result of some new appointments. So we're appointed to 2 new superannuation funds through the course of the period. The first one was a Super Simplifier and the other one was Raiz Invest. It might be known to many people in the market. So that was pleasing. And also with the AET acquisition, we've taken on a portfolio of about 850 small APRA funds with funds under supervision of $0.9 billion. So a really good growth in the superannuation business in that period. Turning to Trustee and Wealth Services. I guess the biggest item of growth there is the acquisition of the Australian Executor Trustees business, adding $5.9 billion of assets. But TWS has also put on another $0.5 billion or so of assets in the time period. So it's had a good period in terms of new business generation. Our specialist funds management business continues to perform well across all of its asset classes, managing assets there of $4 billion. And I'll just sort of touch on how the overall company is positioned and how our strategy is unfolding. So firstly, I think the company is in a really solid position. There is increasing intensity in the regulatory environment that really is a 2-edged sword, it's difficult for all parties, but it's certainly an opportunity for us because this is our specialty. And this is the, if you like, the benefit we take -- we provide declines when we take on their trustee shipping for major investment schemes and also superannuation funds, so I certainly look at it as an opportunity for us. Our focused strategy of just focusing on trustee services, I think, is holding us in great stead. We've held that strategy for many years. I guess it's unique in the way we go about business. And there is increasing demand for our [indiscernible], I guess, expertise and also the independence of the role that we bring to most of these arrangements. We are building the business to support growth, so the AET acquisition, which completed on the 1st of December, I just remind that it was newly complementary to our Trustee and Wealth services business gives us great strength in different market segments geographically as well as in different business lines. And I'll come to more of that later on. We mentioned before that we're making major investments in technology, and that's to better serve our clients, improve the productivity of the business and set us up for continued growth because we're very confident about the growth prospects in each of the lines of business. And finally, this company continues to fulfill its purpose of trust by caring for people and engaging a broader community. I just want to touch on the technology development because really it's been an unprecedented deployment of new technology in the last 6 months, so I'm really pleased with the results. And I'm just going to walk around this slide. I'll first start with trustee and wealth services. We deployed a new platform called iPhi, it's leading U.S. technology from a group called Stellar. We looked at it a couple of years ago in the U.S., and we think it's going to position us really strongly in the active philanthropy market. We've transitioned our full active plans we booked across $250 million. And it's really kind to enabled us to accelerate the development of that business. We've got people, we've got the expertise, now we've got the technology platform. And of course there is very significant demand in the market for increasing a structured philanthropy in Australia. It provides clients with full access, full self-service capability. It has everything loaded in there in terms of LIP as well as the PGR charities can be granted too. So we're really delighted with that, deploying that platform. If I move down to the other new platform in Trustee and Wealth Services, and that's the NavOne platform. And that's going to be our main platform replacing [indiscernible], which we've had in place for more than 10 years. So it's a, if you like, a once-in-a-decade investment to upgrade into a new platform. NavOne comes from a group called TrustQuay in the U.K. It's also -- we are also backing it up with Hub24's capability in terms of servicing these trusts. We've already completed Phase 1 in December, loaded on one of our major clients, AFL Players Association and also our cash management fund to the platform. This will be the future platform for all of our TWS business in the future. Again, it provides client access capability, which we haven't had in the past and it's going to streamline our processes, particularly in nondiscretionary trusts, which will make us more efficient. This program will take 18 months to be fully implemented. So we've been building it progressively in stages and migrating across, and we'll be migrating across our trustee and wealth services business as well as the AET business from the Insignia platforms over the course of the 18 months. We'll move on to Corporate Trustee Services. We deployed a new sales platform in November of last year. Salesforce will be well known to everyone. But for this business with $100 billion of funds under supervision, something like 400 investment schemes and 120 fund manager clients and other clients. It was important that we had a really solid foundation of a platform that can automate some of our processes and really support our risk and compliance management and deliver service to clients, and I'm really pleased with the rollout of the first phase of that. And then finally, on the superannuation front, there's increasing demand by APRA for reporting on all superannuation funds and also we're undertaking member outcome assessments. We had built the first stage of this platform previously. We've now developed to a more proprietary platform for ourselves and it rolls out in February and March. I think this is an excellent example where we're utilizing data to analyze the whole client base and member outcomes, but then using trustee judgment where that needs to be applied and utilizing our data efficiently. Now you've heard me talk in the past about delivering for all our stakeholders. So nothing's changed on that front. So I'll just quickly roll through this slide. But firstly, our employee engagement, which I think is somewhat important to us at this point in time given the employment market and also given we're bringing on 170 people from Australian executives trustees. So I think our hybrid workplace model had worked really well. We've just adjusted it slightly to be 3 days out of the Monday to Thursday window in the office at a minimum. And Thursday, a collaboration day for all. We've been operating that way really quite from the start when we come back to work and staff had accepted it. I think it makes us really productive and it has a really appropriate balance and is competitive in the market. Just reminding our engagement and enablement results, we will be surveying again in April of our employees. But at the moment we sit above the industry on engagement and the high-performing level on enablement. So I will move on to client satisfaction. We'll be watching this really closely as we rollout new platforms and also looking at the AET client base. But the last time we surveyed, our net promoter score was at plus 28 and the loyalty score at plus 41. So really positive results. Earnings per share, the underlying EPS was down 11% on the first half and down 3.2% on the second half of '22. It's primarily due to the capital raise that was done in September of $125 million. We've only got 1 month of earnings from, if you like, the AET business. So it was a mismatch there, if you like, in this 6-month window. I mentioned before, the dividend has been maintained at $0.49. And on the community side, we launched our fifth Annual Giving Review at the end of last year, celebrating the $92 million in philanthropic grants to fabulous charities that we did in FY '22. We've now published at 5x. In total, we're close to $0.5 billion of grants over that period. It really is just an enormous contribution that we're facilitating from our clients into the charitable sector of Australia. So we're really proud of that result. And we're trying to increase our volunteer levels following COVID where they dropped off. Now this slide at the top just shows the progression of earnings per share. I mentioned before that it's been impacted by the capital raise in September. So we have that capital on board for 3 odd months. But we had earnings from AET for 1 month. So you can see the EPS down there at $0.532 on an underlying basis. And the dividends there, as I said, set up on the prior corresponding period and equaling what we did at the final dividend for FY '22. I think that dividend -- the Board chose to pick the dividend there of $0.49. I think it reflects the underlying organic performance of the business, the outlook for how we see that progressing in the future. And I think our increasing confidence of the benefits that the AET acquisition is going to give to the company. Now this is a little bit of a busy slide talking about the AET integration, but I can say that it is on track to our plan. We've established a really solid governance structure to deliver the program. It is a program that's going to last for another 18 months as we build the NavOne system and then transition the AET client base from the Insignia systems across to our new NavOne platform. We setup the plan in 4 stages. The first stage, we announced this acquisition in August of last year. The first stage was to get to completion by 1 December, and we achieved that. The next stage was to do a complete organizational restructure, which we have now done just in the last week, and that has been really well received by people in the business, and I think sets us up really well for our front-facing efforts to the market. The next 2 stages is -- the next stage is to exit the platform business, as we've indicated before, outsource the administration of the small APRA funds because it's not really an area that we would want to have expertise in, and repricing this more like a business and continuing to build the NavOne application and HUB24 application for our business. And then migrate data progressively at the time and there will be stages of data migration. Our plan is to have this all finished by October of '24. So -- but what I can say is we're absolutely on track and according to plan that we set at the start. In terms of how the integration is progressing, I just want to touch on a couple of points. So just start on the people front. I guess the most pleasing thing about this is the AET people are very professional, experienced trustee people and a very common trustee mindset, and we're building that cultural alignment. So we really been pleased with that. We've secured all the key employees from the company. That was really important. The main asset of this company, whilst it's the client base, it is actually the expertise within the employees, and I'm really pleased that it will come on board. Mentioned before, we've undertaken organizational restructure. So we're now operating on one single structure. We have great leaders in place in there, the key parts of the Trustee and Wealth Services business and also on superannuation side that's come across as well. So being able to choose between the expertise that we have now, leadership ranks as well as what is in the AET leadership ranks really, it's going to serve the business incredibly well in the new structure we've got. On the product front, we've aligned new business pricing, and we did that on the 1st of December. That has some increase in the AET prices embedded in it. We are implementing new prices for the small APRA fund business, and they're being implemented in March to start on the 1st of April. So that's positive. We're aligning the investment approaches, is a quite important point. So we've been very clear investment framework for trust investment management within equity trustees, and we'll be aligning the AET investment approach to that investment approach, which also includes managing some of those assets ourselves. And we're reviewing the brand strategy. We're not in any hurry on that, but we will progress that through the course of the year. On the governance side, we've consolidated licenses in respect of advice and estate planning. We have a plan as to ultimately how to release capital in relationship to the traditional trustee license we're operating under and custody license, and we are implementing the EQT governance and risk frameworks, controls that's well advanced. On the premises front, we're all co-located together, and we were from December. We have new premises being established in Perth and Brisbane and our people will be into those by April -- at the start of April. Finally, the interaction with Insignia who we are relying on for transition services is working really well. We think then for that communications will -- have been rolled out successfully, our websites are aligned and all of our distribution partners have engaged. So just remind people of synergies and how we're going on those. So we effectively the -- when we announced this acquisition, we said there were 3 against key financial measures. Our net cost synergies of $3.5 million per annum, revenue synergies of $3.3 million and implementation costs over the course of 2 years is roughly $22 million. We didn't indicate to the market that we would achieve any capital release, but we now feel confident we will achieve a capital release of $10 million. We're just reminding investors, this is an acquisition of $135 million, and we expect $10 million capital release. That will take us to the end of 2024. But we've released capital before in putting trustee companies together and I am very confident we'll achieve that. How we're going on achieving this. On the net cost synergies, we are advancing on the exit of the platform business. We've reached agreement on exiting the safety deposit business, which wasn't making money. So that will be implemented in March. SAF repricing, as I mentioned before, is on target to start on the 1st of April, and the other synergies are well advanced in terms of some other expense synergies. The full timing of this will come down to 1 week and actually exit platform business, and we're progressing as quickly as we can. On the revenue front, that will be progressively achieved over FY '23 and FY '24, fully achieved going in FY '24. And I think I'd say that we've got increasing confidence level in the potential for additional synergies on the revenue side. And our estimate of implementation cost of $22 million, I think we're about -- we're on track with that. I think it's a good estimate. It includes technology, integration, transition services from Insignia as well as the redundancy cost built in there. So in summary, we've had strong performance. We've got continued growth momentum. The funds under management administration division have grown to $155 billion. EPS was impacted, as I mentioned before, by the capital raise and also the one-off acquisition and integration costs. Really pleased with how the AET integration is proceeding. Major technology investment is starting to pay off. We've delivered on the first stages is what we want to achieve and now have a clear plan for the following 18 months. Including the [indiscernible] community impact AET enables us to do that even more with parts of their client base and continuing to deal with the whole of our stakeholders. So with that, I'll hand over to Philip, who will take you through the financials in details.

Many thanks, Mick, and good morning, everyone. Let me start first with the P&L. And here, you can see the sort of working down the chart. The top line is particularly strong, 12.3%, including AET, but still double digit, excluding AET. Expense growth has also been significant, but naturally reflects the one-off acquisition and integration costs and the additional AEG costs, of course, higher levels of technology investment. Underlying profit after tax is up 11.3% on the second half of '22 and up 2.5% on the PCP, notwithstanding adverse markets on average over the period. Statutory EPS is well down, reflecting those one-off large acquisition integration costs, in particular, and underlying EPS is also down, reflecting the significant share issue with only 1-month earnings from AET. And also that at the bottom of this chart, you can see the underlying EBITDA and EBIT continues to be pretty healthy. Now just looking at the revenue in a bit more detail. This bridge just working across left to right, you can see the AET contribution there of $3.2 million for the month. The equity market impact on the growth more broadly has been negative, reflecting those the impact on average over the period. Organic growth, quite strong, circa 10%, which is pretty healthy for the EQT business. And then moving now to the expenses. Similar bridge here, just working that across again from left to right, you can see the nonrecurring cost there, was about $4.6 million of acquisition/integration costs, One-off $1.4 million of technology implementation costs. The AET uplift costs, you can see there, and a small increase of support staff that EQT required to support the expanded business that didn't come across with the acquisition. And then you can also see the underlying OpEx increase, which is particularly driven by increases in salaries and related costs. You may recall a year or so ago, we had quite high vacancy levels. And those have been normalized somewhat over the last 6 to 12 months. There's been a catch-up there that's been material. Replacement staff, unsurprisingly, typically going be more expensive than the staff that have gone before them. There's also been targeted investment to support growth in the revenue BUs. Now looking at some of the key financial measures. You can see the progression here remains quite encouraging. Top line, in particular, quite strong EBITDA remains solid, underlying net profit after tax, likewise, and the dividends remain at good levels. Turning now to the individual business units and providing a bit more color on their performance and starting firstly with TWS. Here you can see the particularly strong performance from TWS, even stripping out the AET contribution. You can see on the right-hand side, the increase in FUMAS, which is contributing particularly from AET of $5.9 billion and setting TWS up for a pretty good second half in particular. Now having a look at the impact of the acquisition more broadly on TWS. You can see the main sub businesses, if you like. And then the light below is the increase in FUMAS as a result of the AET acquisition. And you can see that the large increases are particularly in continuing trust, community note, clonal trust and health and personal enduring. As Mick mentioned, this is highly complementary. The increases are particularly where we haven't been as strong, and this has really rounded out the all-around capability and strength of the TWS business. Putting the FUMAS to one side, the underlying momentum in this business is also quite strong, and particularly across advice, estate management, investment mandates in health and personal injury. We're a good pipeline of new business, which we expect to benefit us in the period ahead. Turning now to superannuation. Again, on the left-hand side here, you can see the bridge, pretty good revenue growth, notwithstanding the negative equity market impact, a slow contribution from AET. And overall, a pretty sound performance. You can see on the bottom left, some of the key contributors to that and overall healthy growth in both members and funds under supervision in the pipeline continues to look encouraging. Turning now to CTS. Again, the bridge here, you can see pretty good revenue growth, as Mick mentioned, impacted by a small number of client mandate losses and one significant internalization. The pipeline continues to be very active, and we think the business continues to have a positive outlook, notwithstanding there's a drop in the funds under supervision there. Then one of the key components of CTS is the custody and debt capital markets business. Let me just provide a bit more tight in relation to that. Here, you can see good momentum more broadly with positive trends across most of the key metrics. There has been a slower start to debt this half, partly and accounted the rise in interest rates and the less economic outlook. But more broadly, custody and other aspects of this business continue to look promising. And now moving to the U.K. and Ireland, slightly lower FUMAS overall, principally reflecting adverse markets and the exit of some small, uneconomic clients. More broadly, the pipeline is still positive, particularly in Ireland where we're seeing some good growth. We're exploring all options to improve performance in this business. Then moving on to the balance sheet. Here, you can see it remains quite strong post the capital raise and post the AET acquisition. We've got high levels of cash. Much of that, of course, is related to the associated regulatory capital needs, and I'll talk more about that shortly. The ORFR loans have reduced. This is due to a positive reassessment of the risk profile enabling a lower ORFR in relation to one of our key clients, which has been helpful. There's been a modest increase in corporate borrowing more broadly distorted by plenty of flexibility should we need it in the future for growth opportunities. And then turning to the cash flow. The cash flow remains pretty solid. The key outflows of course, tax and dividends. Collections are expected to materially improve in the second half. And likewise, we see the cash flow improving further in the second half, along with that, bad debts continued to remain negligible. And then finally, turning to liquidity, which is a key metric for our business. You can see moving from left to right on this chart, the high level of liquid assets well over $100 million. There's about $78 million required for our regulatory capital, some ORFR related cash and our surplus for cash of about $21.6 million, along with the committed undrawn facilities of $48 million takes us to about $70 million of surplus liquid assets and committed undrawn capacities -- undrawn facilities, which gives us plenty of capacity for the additional flexibility or selective investment. So in summary, strong organic revenue growth, higher expenses largely due to the one-off items, statutory impact consequently impacted that the underlying impact is solid. AET's performing as expected, and the integration is on track. Cash generation remains strong. We've got a sound capital position and flexibility to fund future growth. Let me now pass back to Mick to update the overall strategy.

Thank you, Philip. Let me give you an update on strategy and the outlook for the company. So you've seen this slide before. I think if you've come to these presentations, but hasn't changed our purpose, help people take care of the future. It's simple. It's important, right? And so rewarding for everyone working in this company. What does that mean safeguarding people's wealth now and generations to come, being a trusted independent partner to help grow and manage clients well, help protect members and investor's interests and empower clients to improve the lives of others and support the community. It's underpinned by our 3 values, trusted. This is a really important point given the power of the trustees have in the arrangements that we enter into. Accountable, the high standards of the regulatory oversight makes the employment were accountable. And finally, empowering, we are really facilitating others to do things that they can't do themselves. This is an overview of the group's strategy. Again, this hasn't changed. So this company is looking for consistent growth in shareholder value and return. So we're not expecting some huge blowout in returns, and we're looking for consistency year-on-year. Market leadership in all of our specialty areas. So we don't want to be in markets and just being an average player. We want to be the leader. And certainly, AET gives us a step-up in so many areas. And our reputation is really going to be a stable enduring trust in corporation. In terms of the strategy of business growth is important. So our focus here has been on all lines of trusteeship and building them out over time. It's on ensuring that we've got the capability to deliver in each of the areas. And the underpinning of the markets are very attractive to trusteeship. So firstly, the growth in separation depends our Corporate Trustee Services business and the super business and the intergenerational wealth transfer opportunity underpins our trustee wealth services business, both of them very strongly growing opportunities in excessive GD, normal GDP growth. In the client service front, that will be an increasing focus going forward. I talked about the technology investment that we've already done and what we plan to do. On the capability side, the people in this business are incredibly important. We've got teams that have committed carrying still resilient people looking after clients and in many cases, very, very vulnerable clients, and they take that pretty seriously. So the capability of team as well as the technology that supports them is critical to business. And finally on community front, as I mentioned before, we're having a bigger impact on community with the acquisition of AET, the plans of the business will increase in size. We take on a very large health and personal injury book of clients. That's a very vulnerable client base in a considerable assistance and advice. And then finally, we've significantly increased in on the indigene community business in looking after indigenous communities wealth, particularly over in WA. This slide just tells you the sort of time line of acquisitions that Equity trustees is made over in the market, culminating this acquisition of Australian executive trustee. So we've been very active over the course of the last 10 years with a number of trustee acquisitions, all trustee companies, good private client trustee companies in ANZ and Sandhurst and one in Superannuation and one in the responsible entity part of the business. But Australian executor trustees have also been very active over this time and prior to that, and has a long history dating back 140 years similar to equity trustees. So this relates to some extent, brings together 2 really leading active companies with a 140-year history. And I guess, it gets to a point in this market where some opportunities of acquisition last away, but this is really an important asset for equity trustees to have acquired. What AET gives us is leadership geographically and by business line. So AET was the leader in the market in Adelaide, where it's headquarters have been. It's the leader in the market in Perth. It's the leader in the health and personal injury market. It's got a really strong and sizable indigenous community trust business. EQT is a leader in the Melbourne market, is a leader in philanthropy across Australia, had a pretty strong position in Sydney and in Brisbane. And of course, AET has positioned in both of those markets as well, giving us a really combined strong position in both of those markets. So we couldn't have had an acquisition that is more complementary as our 2 companies come together. The initiatives of each of the businesses are focusing on over the course of the next 6 months. I'll just quickly run through these. In Trustee and Wealth Services, the whole focus is on the AET integration and making sure that works. Capitalizing on the new iPhi system to active philanthropy, so that has rolled out well in December, and they will have an opportunity to apply it more broadly across the market, continuing the technology investment we've started and enabling us to deliver excellent client service to our clients. And with that, reengineering some of our processes in TWS, building on our responsible investing capability that we put on more people in that area over the course of the last 18 months. That is very much aligned with our purpose as a trustee company and capitalizing on the highly rated and top-performing funds that we've got in our asset management stable, and that's really important for trustee and wealth services business. I'll move on to the superannuation side, continuing to capitalize on the demand for independent governance. The pressure from APRA remain regulator in this space and is meaning that people are turning more to our service. And our focus on business development is in the retail institutions and those are heavily advice based, and we see great opportunity there. And we're industrializing our digital platforms. As I mentioned before, this is a $40 billion business with 15 superannuation funds, many options of complexity and some plans throughout. And so technology is really important to enable us to focusing on the trusted judgment applied. In the corporate trustee services front, we've rolled out the first stage of sales force. We'll do more stages of that to build that platform out. We want to be the RE of choice in this market, which we are. So we're picking up a lot of the global fund managers that enter the Australian market and continue to enter the market, structuring innovative solutions for superfunds as they internalize their investment management. We picked up a number of super funds as clients in the last 6 months. Focus on larger scale opportunities, there is increasing demand for listed vehicles as fund mergers expand into retail distribution. And importantly though, accelerating our growth in the debt and securitization market and custody and the MIT market. So we're only a small player there. We've now got a team of 8. So 4 in each of those areas as we build out capability, but also continue just to secure new clients. And as was mentioned before, address the performance that we've got in the U.K. and Ireland business. Touch on the technology, but just to size it up in terms of scale. For us, in FY '23, it's a $2 million to $3 million one-off OpEx investment. That continues into FY '24 to be a $1 million to $1.5 million investment and mostly on the OpEx side. It's focused on all parts of the business in Corporate Trustee Services continuing to build out the sales force platform to enable us to centralize our client and task management. We expect a good productivity improvement of 10% to 20% from that investment. Trustee and wealth services, we're replacing the [indiscernible] system that we've had for more than 10 years with TrustQuay NavOne platform backed up by the HUB24 platform. We expect an annual revenue uplift from that. We've already achieved some $750,000 of revenue up, which is because of the capability that NavOne platform has given us, enabling us to secure a new client and then cost efficiencies over time of about $0.5 million annually. On the Superannuation Trustee Services side, the data analytics will continue to increase in importance and reporting will continue to increase importance but we'll keep investing in that. And on the finance side, we are putting in place the Workday platform, and we're advanced on that already and we rolled out over the course of the next 6 to 12 months. Governance risk and regulatory management is core to our business. So here's just a couple of measures about how we're going on that front. And relationships with both APRA and ASIC and 2 main regulators and really solid. We aim to be a model regulated entity. And I think we have been that over the last 5 years when the market has been in a significant amount of turmoil in this area, we haven't. So I'm really proud of that. All of the issues that are going on in the industry from ASIC and both APRA, we expect Equity Trustees to be involved in all of them given the footprint of $150 billion of assets that we have. And I think we're doing very well in meeting all the needs of 2 regulators in terms of the areas that they will be at. We've got specialized platforms that we use for risk management. So CAMMS for our risk and compliance and Zeidler for a service provider oversight, APRA for disclosure production, and we have something like 700, 800 disclosure documents on offer at any point in time and proprietary member at consistent platform. We measure risk culture every year by surveying all of our staff, and we're really happy with the overall results what we've got there. But you can see there is actually ticked down just in the last month. Now part of that is a bunch of new people coming in the business, 500 people in total now, but it is an area we'll continue to focus on. So finally, in summary, just let me walk through this. We firmly believe our strategy is on track. It's delivering really good organic growth features saw in those revenue numbers and inorganic growth in the way we taken on the AET business. We are transforming the business. Revenue is continuing to rise and the funds continue to rise. Net profit reflects the investment we've made in growth. The AET acquisition provides us one, a leadership position in so many markets. And over the course of the last couple of months, our integration is really on track, and we're very confident about achieving those synergies that we set ourselves both on the expense side and particularly on the revenue side. We are making a transformative investment in technology. I'm really pleased in the last 6 months how much we have already rolled out and gives me confidence about what we can do in the next 18 months and the impact that will be on client and productivity. We see more opportunities for growth. We've got a small corporate trust business that we've started investing in some years back, really providing good solid earnings up or for us now, and we'll continue to develop that business even further. Philip mentioned how solid the balance sheet was and the flexibility that we have there. So we really see positive momentum to FY '23 and beyond. So with that, I'll stop and we'll take some questions. We've had some questions that were delivered to us earlier, and I'll start on those.

So the first one is how we're tracking against competitors? Well, I mentioned before, we've got a really strong position around the country in the private and trustee wealth services. On the RE front, corporate trustee services front, we are the leader in RE services. So we feel in a really good position in securing clients there. We win more than we lose in that market. And really an independent, I guess, trustee services for superannuation funds were really the only party, I guess, being considered in the market by most clients. So it's a strong position against competitors across the board. Corporate Trust services, we're a small player against a really successful quality player in the market, and so we'll just keep trying to prove out our capabilities and expand that 5 months. The next question is, are we looking to diversify into new or adjacent business sectors? Look, I think the answer I'd say to that is not yet there's no need to do that. Our strategy of focusing on trusteeship and being every line of trusteeship is really proving successful and has proven successful. So we'll continue pursuing that at this point in time. There's a lot of runway in each of these sectors in trusteeship. Is there any update on any plans to exit the AET self-lead super fund and PMS platform business? I'd like to hand over to Philip, if you want to comment on how we're going on indexation business.

Thanks, Mick. Look, we're running a process and we're talking to a number of parties. We are interested in that particular business. There's the SMSF piece, the PMS piece and also the outsourcing of the superannuation administration. Ideally, we find one part of it can deal with all 3 components, but we can deal with a couple of parties if we need to. It's still early days. There's obviously diligence going on. We'll have more report in the next few months. Thanks.

The next question we had in prerecording is, what is the Board's expectation one, for business growth; and 2, for the share price in '23-'24. Well, I'll comment on business growth. I don't think the Board has an expectation on the share price going forward. So if I just comment on business growth. We've had very good organic growth. We've got a leadership position in each of the markets we're competing in. So the underpinnings are really solid. So we expect to continue to see good organic growth, and we've got a good pipeline of new business in each of the areas. So our expectation is for continued solid growth. We'll come to the questions that come up through the presentation. So firstly, the first question goes, can we provide some more color on our operating cash flow for the half one of the details around timing of collections and how the higher expenses impacted the result should we expect a return to more normal cash flow conversion in the second half 2022. So Philip, I think that was for you.

Yes. Thank you. [indiscernible] good question. The collection is largely a timing issue. There is 1 or 2 large receipts that will assess considerably and which will fall quite soon in terms of their recovery into the business. Obviously, the addition of AET is something we're still getting our arms around, but we're very confident that we'll return to more normal levels of collections. And there is also some outstandings in CTS that over the summer haven't come in as quickly as we like, but they'll do so shortly. We're very much focused on it. And I'm very confident you'll see a significant improvement in the second half.

The next question is, is there any reason the 1-month revenue contribution of AET would scale for a financial year NPAT contribution to 1 month? It's high at $2.3 million. Anything to think about then. So I think that's another one Philip.

The revenue contribution for 1 month isn't too far off what we'd expect multiplying that by 12. There will be some pluses and minuses, and we'll again talk more about that in the months ahead. But yes, that's a reasonable starting point. The NPAT for AET which you have there does look high. The best guide is the revenue numbers and the expense numbers that we've shown in the investor presentation. In the accounts, the actual number for the AET entity is different, not only expenses and revenues are in that AET entity. We'll probably take that offline with you Nick to give you more clarity.

Thanks, Philip. It was a similar line. TWS revenue margin, excluding AET, looked very strong at 59 basis points. Will this pick up even post AET being included for April period.

Look, possibly not initially, but over a longer period of time, there is some prospect of that. Still a little early to tell.

Thank you. The next question is cost in STS up a lot on PCP, but in line with the second half '22 is the $8.2 million per half year OpEx run rate is sustainable? Maybe I'll take that. Our superannuation business, just remind people, it's gone from $1 billion to $40 billion over the course of 5 years. So it's had very significant growth at a quick rate. And we kind of fold to drop the ball. So we have been recruiting and basically putting the expertise that we need to manage that business. But I think it is set up in a position now where we can take on new clients and new funds, if they're small and relatively simple without really additional resource. If they're more complex, larger-scale investments, then that might take more. But I think the budget cost base is sustainable the way it stands in superannuation. Next question is, where do the nonrecurring costs sit within the segments, tech in which segment?

There's a mix. TWS has got the largest component of the tech piece. But there are other smaller components in the other segments as well.

Thank you, Philip. The next one is, great to see confidence on the capital release of $10 million. We assume it will be like APRA and self-made Super Fund platforms. How does it reconcile with the $1.1 billion funds on the [ Super Division ] in place? That's -- not quite right, but leave that to you.

Yes. The capital relates more to the -- not necessarily to the SAF business at all. It's really the core trustee business. Essentially, AET has all the requisite licenses that it needs. Our licensed subsidiary in the TWS business also has all the licenses at needs. Both of them are holding capital for those licenses over longer periods of time at we take 18 to 24 months. We will consolidate all of that activity into just one of the legal entities, and we'll be able to effectively hand back some licenses and the need to hold capital -- the need to hold duplicate capital.

Thank you, Philip. Next question is highlight pipeline in Trustee and Wealth Services, which is encouraging. Where is that coming from and timing of the size. Look, that's coming across the board in Trustee Wealth Services. So primarily, we are securing business through the legal referral channels, but also through other advisory channels as well. I think what's happening is we've always had a strong leadership position in Melbourne, but it's increasingly becoming a leadership position in Sydney and in Brisbane -- now will, of course, in Adelaide and Perth with AET coming on board. So I think our business development capability has just become stronger over time. It's not possible to really say exactly where it's coming from. I mean I think, I think it's fair to say there's an unmet, if you like, demand for trustee services. So if we can't get in front of advisers, then our services really can add value to clients. And I think it's about ensuring the trustee services well understood across the whole market. I should say, in the AET business, of course, there's a strong pipeline in health and personal injury prospects that continues. So as it does for the EQT business, we've put those 2 teams together throughout the country now and that pipeline business should continue. The next question is, how does iPhi help clients? How does it help funds under management generation, please? Well, we've got iPhi is, firstly, a self-service system. If you want it to be that, you can pay higher fees to utilize our philanthropy advisers in helping or granting programs. The other thing is it has allowed us to drop the minimum, if you like, investment to go into an active philanthropy sub plan of the foundation. So it's now been dropped from 20,000 down to 5,000. So it makes it feel like a much more mess market offer that we can put to market. We couldn't have done that before without the technology, we just would have been operationally too expensive, but this is straight through technology. It allows clients to choose from the full list of 3,000 DDR1 status cherries from the AEP CNC website. Without having to check whether they are eligible to receive the grant, we will just drop down through that and then they get till through. So we think it's a fantastic technology. It will give clients history of everything they've done. And I think this is the future of philanthropy instruction giving like starting earlier and younger with small amounts of money building over time. So the philanthropy team are incredibly excited by the capability that gives us on how it will help our clients. As a reminder, how quickly does recent market strength take to flow through the business in terms of the revenue? Is there a lag? Or is it immediate? So I'll hand that one to Philip.

Sure. Thanks, Mick. Look, the market strength as effectively comes through immediately. It's the average daily market impact that is important. So as each day goes up or down, it has an immediate impact.

Thank you, Philip. Next question is in regards to AET, $22 million implementation costs, does this assume that all staff in the AET platform business exit rather than being transferred to a new owner? Is it likely that some stuff will actually be transferred to a new owner? Is it realistic to expect [indiscernible] will actually receive some dollars for the sale of the platform business? What's the process and the timing of that?

Look, it's more likely than not that some stuff would transfer, but the $22 million is a conservative worst-case scenario. In terms of process and timing, obviously, the process is underway. The timing will depend on the nature of the arrangements that we ultimately intend with the preferred party and the extent to which there may need to be technology transfer and a TSA associated with that. I think we'll know a lot more about the situation at the full year results and where we can give -- I think I would hope we'd like to take a pretty comprehensive update at that point.

Thank you, Philip. Yes, anything to that -- yes. The next question is, can you give an update on synergy expectations from AET and when they'll be realized, also transition costs, assuming you can sell the platform. Perhaps I'll make a couple of comments and if you want to add to it. So firstly, the net cost synergies is $3.5 million. We expect to be a full run rate of that for FY '25. Now that is all pretty much dependent so we've achieved a lot of that already, but a good component of it is dependent on the timing of selling the platform business and outsourcing self-administration. So a reminder, we're selling the platform business, and we're outsourcing small fund administration. So it's all dependent on that, but we're a dance so far in terms of some of the other synergies on that side that we're trying to achieve. So feeling quite confident that the $3.5 million we put forward is what will be achieved. On the revenue front, the $3.3 million per annum of synergies we expect that fully by FY '24. We have started on that already, we have aligned, if you like, what are those investment structures for different trusts that we're taking on board. So that process is starting. And again, we feel confident about that number. We also point out that we've got increasing covenants that, that synergy may be higher than what we put there. And then finally, on the implementation costs, we've done a full review of the whole implementation costs 7 months on from when we did it last time, and the $22 million is pretty much in the ballpark of what we expect might be fraction less. But that's what I expect. Most of that will be in FY '23 and FY '24, a little bit in the first half of FY '25. So hopefully, that totalize that. And as Philip commented on the $10 million capital release is more likely at the end of 2024 to achieve that -- that brings me to the questions. So I really appreciate everyone coming on the line this morning. Hopefully, that gives you a good overview of the results for the first half of FY '23. As I said, we're really pleased with the results. I'm really pleased with how the integration of the AET business is going, and we look forward to coming and talking to investors individually over the course of the next week or so. So thank you very much for your attendance.