EQT Holdings Limited (EQT) Earnings Call Transcript & Summary

Hello, good morning, everyone. As numbers are building up, I'd just like to welcome everyone to this presentation of EQT Holdings' full year results to the 30th of June 2023. I'm Michael O'Brien, I'm the Managing Director of the group, and joining me today is Philip Gentry, our Chief Financial Officer and Chief Operating Officer. So let me take you through the agenda for this morning. I'm going to give you an overview of the results, and then I'll talk particularly also about how the AET integration is going. Then Philip is going to cover the financials in some detail, and I'll come back to reaffirm what our strategy is and give you an outlook for the company, and then we can take questions at the end. So let me first give you an overview of the results. So just at the headline level, our funds under management, administration, and supervision has increased to $160 billion, so up 7.5% on the prior year. And there are some big numbers in that, which I'll talk about shortly. Revenue was up to $141 million, so up 27%. On an underlying basis, it's up 109%. So really strong organic growth. We have a 7-month contribution in revenue from AET in there. So that was $22 million, so 16% of our total revenue for the period. Net profit after tax was $18.8 million. On an underlying basis, net profit after tax is $29.1 million, up 19.4% on FY '22. And the dividend is $0.50 for the final dividend, bringing the total year's dividend up to $0.99 or $0.02 up on prior year. So this set of results is the first time we're reflecting the AET numbers. So we'll go through the detail of how they impact the numbers. We'll also talk about the difference between the statutory net profit and also the underlying net profit because that takes into account the one-off acquisition costs and the integration costs and also the technology costs that we've been talking about for some time. The balance sheet remains in a strong and healthy position with low gearing. And let me move on to talk about some of the key highlights. So firstly, starting on the funds under supervision. So this is a key driver of revenue for the business. So in each of the business units, they have a strong correlation to asset values between, somewhere between 30% and 60% for different lines of business and a mix between Australian equities and global equities and other asset classes for that matter. But I think the key point from this slide is that funds under supervision have grown by 7.5% up to $160 billion. And it's a really consistent residual growth through recent years. AET has contributed $7 billion to that. Not all of those assets will be ongoing, and I'll talk a little bit more about that as we go through these numbers. This slide is important because this really shows the different experience of each of the businesses. So firstly, just a headline level, you can see that corporate trustee services, their funds are down to $99 billion, so down $6 billion. I'll talk about that in a sec. Superannuation, the funds were up $10 billion over the year. So it had a really strong year of growth. And trustee and wealth services, their fund is around $7 billion. So it's a mixed result across those lines. But let me just touch on it, for me to start with. So in corporate trustee services, we continue to experience a lot of new funds set up and have been successful in winning new mandates and winning many new fund managers. Some of our clients have lost funds, and in fact, lost something -- 4 clients lost in the order of about $9 billion of funds from losing institutional mandates. So now that's a big headline number and it hasn't impacted our revenue to the same sort of extent, and Philip will talk about those numbers shortly. But if you [indiscernible] result, there's a lot of positive growth in the CTS business as well. I'll just comment on the growth in dual registry and listed, unlisted schemes. So we now have 12 schemes listed on the ASX and [indiscernible] exchanges. We've got 10 funds in setup. So that growth continues. So if you like, this portfolio is growing a little more on the retail side than the institutional side. We expect that to continue. We are establishing our corporate trust businesses, both in the debt securitization space and the real capacity in net custody space. And we've had great growth in both of those areas through the course of FY '23. So we're really happy with the progress of those businesses. On the superannuation front, you can see that 29% growth up to just under $45 billion of assets under supervision. So it's clear that our model of independent trusteeship is really gaining widespread support in the market. We've also brought on board the AET small APRA funds that contributed just under $1 billion to that growth, and we've taken on the trusteeship of that business quite smoothly. We've got a good pipeline of business. On the 1st of July, we took on the trusteeship for the future superfund, which is a very innovative ESG orientated funds. We're delighted to take that fund on. So the assets are already up over $46 billion, and I expect after we made an announcement early next week that these assets will be above $50 billion with the take on of another fund of [indiscernible]. So a really healthy growth in that business and the pipeline is really strong. On trustee wealth services, so this is where the bulk of the Australian executives trustees business has gone. So $6 billion of assets into this business. The organic growth as well has been really solid. Over $1 billion of organic growth, some of that in the asset management side and also in the trust side. You can see in the asset management side of the business, we're now managing $4.8 billion of assets. I'd see that's set to grow from about that level to about $6 billion in a relatively short period of time. So really helping result for trustee wealth services. Now, I'll just give a quick overview of how we sort of see the business. So the company is in very good shape. We're in the middle of a 3-year investment in technology, and that is going according to plan. The acquisition of AET happened on the 1st of December, and has provided a really great platform for trustee wealth services in different segments of the market and in different states. And I'll talk about how the business has come together with our existing business. The investment program in technology is focused on firstly serving clients better. So allowing clients access to information which they haven't had previously. So portals that allow them to facilitate their own transactions, improving productivity for the business and, importantly, providing us with a really sound foundation to continue growing the businesses the way they've been growing. Now a couple of weeks ago, we announced that we are combining the superannuation and the corporate trustee businesses. And the reason for that was, firstly, and Russell Beasley, who's been with us for 18 years has announced that he want to transition to retirement. So we have an opportunity to make some change. The operating models of corporate trustee services business for fund managers, [ NRE ] services, is very similar to the operating model we have to superannuation and superannuation promoters and originators. So we will be, I guess, over time, it will take some time, align those operating models where its appropriate to do so, and capitalizing on the strengths of both of those businesses. And you can see the path of the superannuation business is following very similar, similarly to the path that we experienced as we build up trustee services business. We also announced last week decision to exit our U.K. and Ireland investments. So this is a business providing response or the equivalent of responsible entity services in both of those markets. And we're well advanced on exit plans, which may be a sale or may be a wind down in one or both of those locations. And we'll say more about that to the market when we can over the course of the next month. But just we've been experiencing loss in those businesses and once we're out of those, there'll be significant increase to earnings. I can also say that as of yesterday, and we'll announce in a release out the market -- to the media early this morning, that we have reached agreement with SuperConcepts to outsource the administration of our small APRA fund business to them. That will enable us to continue focusing on trusteeship. So we had always planned to do that. We've also reached agreement to refer clients to them for the AET portfolio management business. That's important. When we acquired Australian Executive Trustees, those businesses were making a loss for AET. And now with the way we are reconstructing the business, it'd be making a profit and have them well set up going in the future for the small APRA fund business. And ultimately, we will be out of the AET platforms business. So I'll talk more about that shortly. So really happy with that result. It's very important for us achieving the expense synergies of the whole AET integration. And we'll continue fulfilling the purpose of this company, which is caring for people and reaching the broader of community. And obviously, with AET coming on board, we have many thousands more investors, beneficiaries, and clients that need to be looked after, and we're privileged to be able to do that. I'll just talk very briefly about the technology plan and how it's going because it's very important for setting up this business to continue its growth. Starting on trustee wealth services. We launched a new platform for our active philanthropist called [indiscernible] in December of last year. We now have more than 350 clients on that platform, about to go onto that platform. Our active philanthropy business now with AET joined in is more than $400 million of assets, and we see -- close on $500 million of assets, sorry, and we see great growth in this area, and we'll be continuing to build the marketing that we do for active philanthropy. And I think we have the government, to some extent, behind that as well, wanting to double philanthropic granting through the course of the next 5 years to set themselves. So we're really excited about the prospects for the active philanthropy business. All the traditional trust business in trustee wealth services, we're putting in place a new platform called [ NAV 1 ]. We launched the first phase of that in December last year, putting the AFL Players' Association account on to it as well as our cash management fund. Phase 2, we put out continuing or slight testamentary trust onto that platform, and that's planned for November. So [ Trustee ] is a U.K. company specializing in this type of technology, and we're utilizing HUB24 as our custodian and covering the asset side of the platform for our full trustee wealth services trustee business. That's going really well. We will see this whole project completed by the third quarter of the calendar year '24. And we're well and truly on track to do the next stage of migration, which happens in November, which is, as I said before, more of equity trustees, continuing trust clients, and then we'll move on to the AET. Moving on to rights on corporate trustee services. We've deployed sales force to cover all of our 200 clients in this area. That's important for ensuring them to have some productivity improvements and straight-through processing of certain of the transactions we need to undertake in this business, and we'll continue building our sales force through the course of this year. On the superannuation side, the APRA reporting requirements and the requirements to assess member outcomes is becoming all the more onerous over time. We have a complex book file of funds with a variable range of investment and other types of options in them. We currently produce something like 140 member outcome assessments, which is probably I guess the largest in the market. We are setting ourselves up from a technology point of view to make that as efficient as possible. So we're happy with the progress through FY '23 on the key developments. Now people have always heard us talking about the focus on all of the stakeholders of this company, so our clients and our employees, shareholders and the community. And I'm really pleased with this set of results. So on the client side, we've held our Net Promoter Score of 28, Net Loyalty Score of plus 36%, down a little. These are really outstanding results. I'm really pleased with that in a year where our business was very, if you like, busy in terms of taking on the AET integration and all the technology development that we're doing to be able to hold those client service results, and that's really important for us, particularly given the needs, the high needs of many of our clients. Now, technology is one thing, but really this business is built on its employees, and we need people who are highly skilled, expert in different areas and empathetic to our clients' needs. And I'm really pleased with the increase we've got on employee engagement and also employee endowment through the course of the year. And that result on engagement puts us at the high-performing level, which we've always aspired to. It's been a 7-year journey to get there and delighted that we have got there and we continue to focus on getting the best people into this company, and then enabling them to do the job for the clients. The shareholder results, which I'll talk more about, you're going to see EPS is even now on an underlying basis and not because of the investments that we are putting through the course of the year. And you can see there the dividend income is between 97% to 99%. And I think that dividend sort of is based on I guess the earnings of FY '23, but also how we look at the underlying result and where we stand moving forward. On the community front, well, there are many things we do here. We do volunteering, we do employee giving. But we just got one measure showing here, which is the community granting that we do through our philanthropic trusts. You can see it's gone from $92 million up to $122 million through the course of the year. That's really important in terms of the impact that it gets to make on the community. We don't want to waste $1 of that money. We have a great, a really deep philanthropy team putting those funds out to right use in the community. Of course, it's good commercially for the organization as well as solid growth. I'm just looking at the results for shareholders. So you can see there the earnings per share on an underlying basis coming at the same level on a statutory basis. It's $0.73. Now it's important to note that there's a lot of one-off acquisition cost leading up to the acquisition of AET. And then, of course, the integration costs for AET, the technology spends that I mentioned before. Now that we have AET onboard, we have the amortization of management rights coming through there, not a cash item, but amortizing through those numbers. And when we announced exit in the U.K., we wrote off [indiscernible] in relationship to that. So there's a lot of one-offs in those numbers. Also, of course, the capital raises that's happened 7 months ago that we only had 7 months of earnings in these numbers from AET. So an underlying result of EPS being flat. And I mentioned before the dividend increasing $0.01 up to $0.50 as the final dividend. I'll just talk about how the AET integration is going. Firstly, first message is that we are absolutely on track to what our plan was. Nothing has surprised us on the downside in this acquisition. In fact, we've been really pleased by the fact that quality of the people that have come on board to join and the alignment of the culture in terms of putting clients first. We completed the deal on the 1st of December. And at that point, we changed the pricing on the trustee wealth services products, consolidated some licenses in that first stage. The organizational restructuring we did in mid-February after we got through Christmas, we repriced the small APRA funds at that point in time. We've started building on the new applications that are required. We've merged our 2 foundations in AET and the EQT Foundation, which is actively -- active philanthropy platform, and we have the IT infrastructure aligned. There is really now 2 mainstreams of work to complete. Firstly is exiting the platform business. And I mentioned before the agreement we've reached yesterday with SuperConcepts to outsource the small APRA fund administration to them and also to refer our platform and self-managed super fund clients to them. And our plan is then to close the self-managed super fund and [indiscernible] business by the first quarter of 2024 and be exited by the end of the 2024 year, and for the superannuation small APRA fund business to be set up on a growth basis going forward with SuperConcepts as our administrators. So we're delighted with that. The second stream of work is to build the NAV 1 platform so that it can house all of the AET clients. We're well advanced on that. November is the next key date to put on the continuing trust clients of EQT, which will put out that model for the AET clients to go on in February. And then we hope to have all of the AET clients and EQT client onto the NAV 1 platform by the time we get to June of 2024. But we have got another quarter, if you like, of buffer before we come out of the Insignia systems at that point in time. So that's the 2 main items of work to go on the AET integration. Moving on to just a couple of other points around the integration. I'm really pleased to say we've secured and been able to maintain all of the key people in AET, and they've got an absolutely common trustee mindset, which aligns with the culture of equity trustees. On the product front, all the products are aligned in terms of prices. Our investment framework that's utilized in equity trustees is being rolled out progressively into AET. And that's very important for the revenue synergies of this acquisition. On the premises front, we are co-located in all states. We have new premises in Perth and Brisbane. We're consolidating Adelaide and we will, through next year, move into a new premise in Adelaide. We've exited the lease we had on the safe custody business, which we also exited earlier on. The organizational structure is now set with the operation teams combined. Not physically combined, but certainly in an organizational sense. And the front-facing businesses in each of the states are combined. License consolidation is progressing. We've achieved that on the advice side and also on the state planning, and the traditional trustee license and custody license will be combined over the course of the next 18 months. Our framework for risk governance -- for governance and the risk framework and controls have been outlined in the business, and client relationships will be maintained and strengthened. Our distribution partners are all well engaged, websites aligned. And so we're really happy with the progress. We'll just touch on asset management. I'll just focus here firstly on performance. So on the 3-year numbers, you can see there positive alpha across every one of the key investment strategies in this business. So we're delighted with that. The main strategy underpinning most of these trust is the Australian equity strategy, and that's a really a solid performance by the team of Australian equities. We've continued to build the team. So we've gone from 12 to 15. That's important because we've got more investment strategies, and there are more funds being managed. So we're currently sitting at $4.8 billion, but we do expect to see that closer to $6 billion in short time. We've continued getting ratings on the products and most of the products are rated at 4 star, and some are 3.75. With the new strategies that we brought on, 8 Bays Global Equities was brought on, I think, probably just on 18 months ago now. And you'll see the alpha over the course of the last 12 months there at 2.7. Delighted with that in our partnership with 8 Bays. We acquired the Spectrum Strategic Income Fund through the course of the year, not for a consideration, but we brought on the investment manager there and the funds, which we were previously the [ RE ] of that particular fund, and that gives us more fixed income credit capability than what we had previously. So that builds out the market price. And finally, we achieved RIAA certification on our Australian and our global responsible investing strategies, and we'll continue to build that out in the next year. Now I just want to touch on the synergies. Just reminding people the expense synergy we're looking for was $3.5 million. We expect to come in around the $3.1 million. So broadly on track on that. That's the full run rate for FY '25. Importantly, on the revenue synergies, we were previously expecting $3.3 million. We've upgraded that revenue synergy number to $5.5 million. We're already achieving some of that. We expect the $3.3 million in FY '24 and the full $5.5 million in FY '25. No change to implementation costs of $22 million. In capital release, originally, we didn't factor in any capital release, but we're now very confident of the $10 million capital release when we consolidate the traditional trustee and income free rises. So really pleased with this set of results. The business continue to grow strongly. Our strategy has been well accepted by the market. The integration of AET is progressing well. And I might hand over to Philip to take you through the financials in more detail.

Many thanks, Mike. Let's start firstly with the P&L and the overall financial performance. Here you could see something of a summary and just sort of working down some of the key points. You see the strong revenue growth, up circa 27%, partly a function of, obviously, the 7 months AET contribution, but also some pretty good organic revenue growth. And I'll talk a little bit more about that shortly. On the expense side, expense is up some 48%. A whole range of factors there. Obviously, the inclusion of AET, the one-off acquisition integration and technology costs, amortization of management rights and write-down of goodwill and management rights in the U.K. as well. Moving down a little further, you can see the underlying EBITDA, net profit before tax and net profit after tax, all pretty healthy. Statutory NPAT, of course, is well down, some 22%, inflecting these one-off costs I've just referred to. Underlying EPS is pretty much flat on the prior year, and dividends up a couple of cents to $0.99 for the year. Let's just take a look now at revenue in a bit more detail. Just starting with the revenue bridge and moving from left to right here, you can see the 7 months contribution there from AET of some $22.5 million. The slightly adverse impact of markets over the course of the year. The impact of some CTS mandate losses was significant. And I'll again, I'll talk a little bit more about that shortly. But underlying revenue growth of some 9.2%, which is pretty encouraging in the circumstances. Now let's just look a little bit more at expenses. And again, moving left to right across the spreadsheet, you can see quite a few non-recurring costs there, some $12.2 million associated with the AET acquisition, the integration and technology implementation costs. The non-core costs associated with Europe, which we're exiting, costs associated with the AET uplift and then sort of net OpEx increase for the group. That's around a 12% increase in salaries and related costs driven by several things. Significant reduction in vacancy levels as we've staffed ourselves back to more normal requirements, the higher cost replacement staff and some targeted investment in revenue BUs to support growth. Let's now look at some of the broader key financial metrics. You can see here, revenue, EBITDA, net profit after tax, and dividends over the last 5 years, all heading in a positive direction, particularly on an underlying basis, of course. Let's dive in a little a little bit more detail now on the BUs. And starting with trustee and wealth services. Revenue bridge for them, and you can see here, strong organic growth of some 9.9%. Nearly double digit for TWS, which is a great outcome. A modest impact from equity markets, but overall pretty strong performance and an encouraging contribution from AET as well. FUMAS obviously increased in part as a function of organic growth, but the principal part of that is from AET. And having a little bit more of a dive into the TWS sub-businesses. I won't go through each of these, but you can see AET has boosted key product lines and strengthened our position in key states and markets. In estate management, you can see the year-on-year -- FUMAS is actually fairly flat. The -- as you may recall, the estate FUMAS is quite lumpy. And in fact, there has been a reasonable contribution from AET offsetting what's been a reduction this year from the EQT side of those estates. Just to call out a few more. If you look at on the right-hand side, the community [indiscernible] trust and also the health and personal injury trust, very significant increases in FUMAS that AET is bringing to the business, which are all going very well. Now turning to STS. Again, the revenue bridge here, you can see actually double-digit revenue growth in SGS. A very good year, combination of growth in both new clients and good growth from existing clients, particularly the platform clients. You can see underneath the chart there, some of the new clients there. FUMAS increase quite significant, nearly up 33% and a small contribution from AET in relation to small micro funds. Looking forward, future super business. Future super mandate commenced effective from the 1st of July. So it's given FY '24 a good start for the super business, and there's also a strong pipeline beyond that, and we'll talk more to that shortly. Moving on to CTS. Here, you can see in the revenue bridge, organic growth is more modest, and that had to deal with the impact of those 4 large mandate losses. Nonetheless, quite a significant amount of activity, a lot of new funds. And we're also seeing activity levels pretty high at the moment, about 40 funds in various stages of establishment, which augurs well for the year ahead, notwithstanding the beats and mandate losses in FY '23. I'll just provide a little bit more color around this. You can see here a breakdown of fund movements and fund management movements, which reflects the fairly high activity levels. New funds and significantly above funds close, quite a few funds closed during the year. You can see likewise there's quite a few managers exited as well. On the right-hand side, you can see the breakdown of the fund manager location, some 61% domestically, nearly 40% offshore. Then moving on to the custody and DCM business. This business is still a smaller business for CTS, but it's growing quite rapidly. You can see the 23% CAGR growth in revenue that's trending nicely. The DCM component in this business has had a slower first half with the interest rates rising during that particular market, but it's bouncing back in the second half and should be in reasonable shape for the year ahead. There's, again, a pretty strong pipeline of transactions in this business in the months ahead as well. Moving on to U.K. and Ireland. As Mike mentioned, we've announced our decision to exit this business. Plan is well advanced in terms of the precise mechanism and timing. We will keep the market informed of that. Nonetheless, the business is pretty stable, and it's in reasonable shape. And as I said before, we will confirm the nature and timing of that particular exit in due course. Moving on to the balance sheet. You can see that the balance sheet here summarize as it is the cash liquid investments have increased over the years. It remains in very good shape. Gearing is low at 9.3%, notwithstanding there has been a moderate increase in corporate borrowings in addition to AET obviously, increased the goodwill and intangibles significantly. Nonetheless, the balance sheet is strong, and we have surplus borrowing capacity and plenty of flexibility to take advantage of other opportunities should they arise. Moving on to the cash flow, remains strong. Tax -- sorry, you can see the net cash from operations there. Pre-tax of some $28 million, payment of dividends and income tax. We do expect quite a significant income tax refund this year, probably several million dollars, which will also help proceeds and borrowings associated for the main with the acquisition and costs associated with that. Overall, leading to an increase in liquidity over the course of the year. Let's just focus on liquidity a little bit more as well. Here, you can see the unencumbered liquidity position, picking this up as you left to right on this chart. You can see there's $133 million of liquid assets held at various forms. Some $78 million of regulatory capital were required to have, less the operational risk financial reserve related to cash, giving us net available liquidity of about $42 million, committed undrawn facilities of $43 million. So quite a strong surplus liquid asset and committed undrawn facility position, plenty of flexibility. So in summary, strong organic revenue growth, AET performing as expected and interaction on track, higher expenses in part due to AET and in part due to the one-offs we've talked about, good cash generation still, but the opportunity to improve there further as well, statutory impacted by the one-off cost, the underlying performance is strong, and a sound capital position. Let me pass back to Mike to talk about strategy and the outlook.

Thanks, Philip. So I'll quickly talk about strategy. Firstly, the purpose of the company has not changed. To help people take care of their future is the reason why everyone turns up to work here each day, and we take it really seriously. It's a 140-year-old company. Trust, I think, is being increasingly valued in financial services, and this has underpinned the company in building a very strong position [indiscernible]. Let me move on to the strategy overview. Again, this hasn't changed. And just our key objectives. Firstly, consistent growth in shareholder value and return. So expect to get volatility in this business where obviously [indiscernible] market movements for much better revenue, but it's a very consistent business. Market leadership in our specialty areas. We've been very keen to make sure that we've got leadership in each of the key segment of the market. Of course, AET adds a lot to that. And critically, our reputation is all important for a trustee, and it's no surprise you hopefully do not see every trustees in the faith very often. So let me move on to talk about market leadership. Firstly, on trustee and wealth services, it's mentioned that we were already the leader in the philanthropy sector of the market, and AET has just add to that. Of course, AET was the market leader by a long way now in personal & injury market, and we add a little to their exposure. So a great position, a clear market leadership position. Estate management, our business has increased in size there. Estate planning has more than doubled with AET coming on board, and we are probably the #1 estate planner in the Australian market at the moment. Continuing trust, we're the leading provider there. Advice, we have a small business there, looking after our client base. Effectively, that hasn't changed as a result of the acquisition. I think on the asset management side of the scale, that business is now increasing quite materially in terms of a number of strategies, the team size and the funds that are being managed, and then geographically, just continuing on, if you like. Under trustee and wealth services, we've brought leadership position that we had already in Victoria, but we now have in South Australia and Western Australia and much strengthened positions in Sydney and in Brisbane. For corporate trustee services, we clearly been the long-term leader in providing responsible entity services to fund managers. That continues. We're building a strong new business for custody and real assets and also in the debt and securitization market. And you've seen those results with superannuation. We really are the leader in providing independent trustee services in the superannuation market. And this will get to each of the businesses and their key initiatives for FY '24. For the trustee and wealth services, it's the AET integration continues, divesting of the platform business as I've mentioned before, continuing to build on the technology so that we're delivering on the next phases of the NAV 1 project, building on our responsible investing capability and capitalizing on the rating of those investment funds. For superannuation, we will focus primarily on the retail segment of the market -- that's where we have been most successful -- and to a lesser extent on the corporate and industry fund segment of the market. There will be a strong focus on operational excellence, and particularly as we bring together the superannuation and the corporate trustee services business, capitalizing on the strengths of each of those businesses, and ensuring that we're fit for the continuing growth of that business. As I mentioned, we'd expect by the time we get to Monday or the end of this month, we'll get $50 billion in superannuation business. From corporate trustee services side, the focus is on beginning to strengthen our proposition in the market and attracting new managers, particularly global fund managers that are coming to the Australian market, more innovative solutions in the superannuation space and larger scale opportunities that are customized to larger investment, also continuing to build on the listed capability -- I think we see that as an expanding area for funds management distribution -- and continuing the growth in our new businesses of the day and securitization and custody and real assets based. I think I've touched on most of the things on the technology front, but we will continue to focus on the technology to improve client service and client access to our services and also focusing on productivity. I'll touch on the bottom box there on finance and people front. We're implementing [ Workday ] platform for both finance and for our people function. And that's important given the increased size of the business. I should just also touch on governance, risk and the regulatory framework. It is core and a foundation to our business. We seek to be a model regulated entity. So we have close relationships and constructive relationships with the regulators and always seek to do that. Risk culture is essential underpinning to being a trustee and we continually survey our people around the risk culture, and we have really strong results on that front. And looking forward to $18 billion brought into that process as well as progressively coming into that process, we feel very confident about that. Coping with regulatory change is enormous part of this business. I'm pleased to say we are coping with the long list -- I've got a short list here, but there's a much longer list of regulatory changes that's occurred and will continue to occur in FY '24. But we're well set for that. And we're looking at different ways to price inevitably for that change as it continues on. And we are utilizing specialized platforms in our risk management and compliance management. So in summary, we're firmly of the belief that our strategy is working, focusing on being a trusted, and being the leading trusted in Australia has worked well for us. We still see a massive runway of future growth in this area. Revenue and funds have continued to rise, and we're investing in the business. The AET acquisition is going according to plan. It's given us a great leadership in different market segments and different states. We expect the overall revenue synergies to exceed what we had originally anticipated. But the transformation in terms of technology will continue through FY '24. I'm confident that we'll have those platforms built and be in a great position by the end of the year. We see ongoing opportunities for the businesses that were, the smaller businesses that we're growing. As Philip said, the balance sheet is in really strong condition. And we've got positive momentum moving into FY '24 and beyond. So with that, I think we can take questions. So we've got a fairly long list of questions. So let's start working on them straightaway.

So the first one, I think it's for you, Philip. Statutory net operating cash flow of $8.9 million looks a little weaker than normal. Can you unpack what's happening there?

Sure. So that $8.9 million, so that's a post-tax number. There's about $20 million of the tax, as I mentioned earlier. I do expect a significant refund, which makes that cash flow number look quite a bit better. But look, there's also opportunities to improve the working capital management. We're still digesting AET and I expect the cash flow will continue to improve in the year ahead.

Thank you. I think the next one is for you as well. Can you talk through the additional costs added to the TWS business? And what the annualization of that looks like for FY '24?

There's a couple of components to that. If we think of TWS as including the AET business, I called out some of the uplift in AET support costs in particular that were required to be put in place because you may recall, when we bought the business, those support functions resided in IFL and didn't come with the acquisition and we needed to put them in place. The other dimension to this is the operating costs associated with TWS, and it's normal business. And there have been some modest increases in particularly frontline relationship staff that were a function of essentially business opportunities being greater than expected and we needed to make sure we resource it accordingly to make sure we can capture those and service the clients properly. So overall, there will be a modest increase for the year, partly in the annualization factor as you've suggested, not dramatic.

Next one is, are you still anticipating divesting for some consideration, the portfolio [ SAF ] and sales and super fund businesses of AET? I'll take that part. No, we don't expect to receive any consideration for those businesses. So they are effectively loss-making businesses, the platform business. We may get -- we get some small referral payments that come through, but nothing particularly material. Some small referral that is coming through. In respect of the small APRA fund outsourcing, well, that's not a sale, it's just simply an outsourcing arrangement. But I guess the bottom line is that we've turned to something that is a loss-making business, which would have been an increasing losses into our profitable business, a small APRA fund business for us, and moving forward, then it will be in growth opportunities for that and partnering with SuperConcepts. Next question is, have you seen any benefit to margins in trustee and wealth services associated with the tech investments being made? Perhaps I'll take that one. I think the answer to that is not yet, but we do expect to receive them. So you might have seen on one of those slides, we expect synergies to emerge once the NAV 1 platform is completely built. And we've got modest synergies there, but I would hope that we might be able to do a little better than that once that new platform is bedded down. The next question is, what is the expected benefit to operations in trustee and wealth services of undertaking administration of assets on '24? Is there applicability of more than the initial $4 billion transition within trustee and wealth services? Perhaps I'll take that, I think. So effectively, we'd be utilizing HUB24 as the backend in terms of the administration of the assets for almost all of the traditional trustee business within the trustee and wealth services as well as the administration of all assets for, if you like, the health and personal injury book of business over time, and that will take a little moment to move. So I can't really comment on what the total of that is over time. But effectively, the solution of NAV 1 for our traditional trustee business as well as other platforms for nontraditional trustee business is now sort of set plan, and most of the assets will move that way. The next one is, can you talk through the corporate trustee Services client losses? Why did they leave? What's the impact of the annualization of this into FY '24? Perhaps I'll comment on the losses. So the first thing is, of the 4 main ones we're talking about there, one of them was a client internalizing an arrangement and the investor was also the investment manager. So there wasn't, if you like, an RE protection process, if you like, in that arrangement that we had. It was more a scheme facilitation process. So they've just internalized that. And it was at a much lower margin and that was some $3.5 billion of the $9 billion. For the remainder 3 clients, they are still very important large clients of equity trustees, and it's just simply that they have lost some of their underlying clients. We've analyzed the whole corporate trustee services portfolio, and it does have exposure, obviously, to institutional mandates throughout it. Not that there is nothing like those types of exposures that we continue to have going forward. So really don't see major change going forward for the outlook for the corporate trustee services business. But I might let Philip talk on the annualization that appears there's. So $1.4 million of reduced revenue as a result of those losses in FY '23, but how we will see it in FY '24.

Thanks, Mike. Look, the annualization impact is circa $1 million drag for FY '24 or of that sort of order.

Can you please talk through EQT's exposure, if any, to the capital business? Sure. So the capital business is a funds management business out of Sydney. And I think there's been some reports in the press about the investment manager and some of the investments of that. We are the responsibility for a capital fund as well as 2 other funds that are managed within that group. And we've taken actions that a responsible entity you'd expect to take if there's any, if you like, elevated redemption requests in those funds or the underlying units within those funds. So there's no exposure to the company at all in respect of capital. And really it's just to some extent, normal responsible entity activity in protecting the investors' interests and ensuring equitable treatment of remaining and leading investors basically where there is illiquid investments involved. Next question is, should we anticipate any further large client losses in corporate trustee services? I think well, of course, there's something like 400 schemes in corporate trustee services and 120 fund managers. So there will always be losses, but there's nothing in particular that we would call out. And the ones that have occurred this year, we could see a couple of those coming. I think we had flagged that the market has -- our corporate trustee services portfolio did have a couple of very large exposures to underlying clients of our fund manager clients.

And perhaps I think it's also worth adding that there's a reasonable chance we may see some mandates coming to us the other way of some size in the not too distant future as well.

Yes. Do you anticipate being able to divest the corporate trustee services U.K. and Europe business or winding these businesses down?

There's reasonable prospects of some form of sale, but we're committed to exit one way or the other, and we'll just keep you posted.

In superannuation, margins were up considerably. Can you talk about what benefited the operating margin in this segment? Yes, a couple of things. One is significant growth. And as a fund grows, it doesn't necessarily mean that we need to grow resources. Of course, as we'll get more new funds often more resources are put in, but we cannot achieve. They're redoing the backlog funds, simply growing. And the portfolio now is a little more skewed to funds that are in positive net funds flow territory as opposed to negative net funds flow territory. So that is helping. One other thing that we were able to do through the course of the year was, if you want to put in a number of fees for some of the regulatory changing client, I guess, quite initiated change in some of those funds might also help you margin there in the superannuation business. Next question, what was the rough quantum of non-cash amortization and when are the AET amortization begin? Philip?

Sure. The MAT amortization began on the 1st of December. So we have 7 months of it, and it's about $1.6 million for the 7 months.

Next question is that you framed a $2 million to $2.5 million of one-off OpEx related to tech. Can you talk to the return on investment on this spend? Good question. I can't give you a number on return on investment. But the investment is primarily focused on better enabling clients access to information and to actually transact some things directly. So that will improve our efficiency and productivity. It's also aimed at improving our productivity overall. We haven't factored in that we would expect to get some material number of savings out of that, but more to set the business up for future growth. So you can see in each of the 3 businesses, ignoring CTS's performance in FY '23, each of these businesses is growing materially. And we expect given our market-leading position for that to continue. So we need to have more efficient models in each operating models in each of these businesses. So the [indiscernible] is about ensuring we can get that growth without, yes, putting on and make sure little of resourcing in each of those areas. Would you add anything to that, Philip?

Look, I think that's fair. We're certainly looking -- there's a spread across a range of projects in all 3 revenue businesses, and we're looking for gains in both the client proposition, the employee proposition and productivity. We have our own metrics around those, but this is something we'll keep you posted on as we go.

Should we think about the $7 million before tax in the 7 months from the AET when $12 million annualized being partly offset by that $2 million of additional support costs?

That's correct. Yes.

It's the way to think about it. Next question is superannuation organic funds under supervision growth was 27% and organic revenue growth was 11%. What is the difference due to -- Were the new funds won on lower fees or is it more timing related? Good question. No, the new funds aren't being won on lower fees. It's primarily coming from we set fees if you like, at a floor level for a fund, and then we have a basis points level for the starting level at the fund. And then as the fund grows, we have reduced fee levels. And some of those funds are getting to the tail end of those reduced fee levels. So if the growth is on some of those funds, in some of those areas, it has been quite significant, and it's coming in around lowest fee levels basically on the table. So that's what it is. So we haven't changed our pricing down. In fact, we're in some areas, increasing the pricing. Next question. I'm interested to better appreciate the performance of the underlying business. Can you advise the underlying earnings per share without the benefit of the AET acquisition?

No, haven't done my -- I'm happy to take it offline.

Good morning. Is revenue uplift and cost efficiencies from tick-up grades on Slide 27 included in the synergy targets for AET integration? Or are they in addition to that? Good question.

Yes. They're an addition. So the synergy targets don't include the opportunity from those tech projects.

Revenue from interest and fund distribution increased from $1 million to $5.2 million in aggregate in FY '23. Interest rates have increased. But how should we think about that guide moving forward?

Yes, there likely will be further increases as these higher interest rates certainly at least annualized, and it depends a little on what the cost of those interest rates will be over the year ahead. But you should still see positive management there.

Is it right to expect a large development in EPS in FY '24, given, one, excludes the $6 million of U.K. Island losses and, 2, full year contribution from AET?

Yes, look, conceptually, I understand the question. One of the questions that we don't completely clear on it is it will take time to exit the U.K. regardless of the mechanism. The sale process will require the consent of either the U.K. and/or the Irish regulator, and that can take time. It could take 6 months. But hopefully, it's a lot less than that. So it depends on the timing of the U.K. exit as to the benefit coming through. There also continue to be some significant one-off costs, a few associated with U.K. exit, I expect, but also some associated with the ongoing AET integration and the restructure of the exit the platform business over the course of the next 6 months. So there will still be on a statutory basis, some one-off costs. It won't be really till FY '25, but it's completely clean.

Next one is in regards to U.K. exit. Did you say you would update over the next month? And if not, what's the likely timeframe? So if business wind down, how do you progress [ in each ] and is a sale, I assume, financially better outcome? I mentioned, in the next month, I think, don't hold on us on the month, but it will be in the next month or 2 that we'll be able to update as to what the likely path is that we're taking. It's not right to assume that sales will be better than a wind down because the sale won't really be for consideration and we'll determine -- it will come down to the timeframes of each effectively. So they're fairly [ one that we ] might consider. So we've come to the end of all questions. If there's no more that are coming in, we're in to the end of our hour. So hopefully, that was insightful for people. Just finishing, we're very happy with this set of results. We're really happy with how we are positioned in the market and what our plans are. And we're really confident going into FY '24 and moving forward to updating the market more as we move forward. And as always, thank everyone for the support of the company. Thank you. Thank you, Philip.