Generation Development Group Limited (GDG) Earnings Call Transcript & Summary

Good morning, and welcome to Generation Development Group's Half Year Financial 2026 Investor Webinar. From the company today, we have the CEO, Grant Hackett; and the company's CFO, Terence Wong. Before I hand it over to Grant and Terence to go through the presentation up on your screen, [Operator Instructions]. But with that, Grant, I'll hand over to you.

Yes. Thanks very much, Simon, and thank you for everyone joining us today to give Generation Development Group's half year FY '26 results. Just moving on to the next slide, just to talk through the agenda today. What we will be covering off first is the business and the strategy update. I'll then pass it across to Terence to talk through the half year '26 financial results. There's quite a few changes within that given the segment reporting and obviously, the acquisition of Evidentia and some of the group restructure and integration initiatives that we undertook over the course of both last financial year and the first half of this financial year. And then we'll look at some of the priorities for FY '26. Moving on to the next slide, just to talk a little bit around the headline results. So I'll start on the right-hand side of this slide. I think it's been an incredibly strong outcome for the first half of this year. You can see revenues up 35% to $88.4 million, which has been an incredible result from each of the subsidiary businesses. Everyone has performed very, very strongly within the segment, and we'll talk through some of the details of those results in a second. We've also invested significantly within each of our assets to really capture the growth opportunity, not only for this year, but in the years to come, and we'll talk through some of those investments throughout the course of this presentation as well. But even with that high level of investment that we've put into the group, you can see there that underlying NPAT is up 63% to $20.1 million. So probably slightly above what was consensus in the market. But at the same time, we've invested heavily in the business -- moving down more into some of the subsidiary businesses. You can see there, the investment bonds, the total funds under management up to $5.2 billion for the half year or 34% over the last 12 months. That's up. Managed accounts fund up to $34.5 billion, of course, leading the way there with Mike and Pete and the team there with a 36% uplift over the past 12 months. And you can see over the 6 months, Lonsec product uplift is up 5% or to 1,880 products. In terms of a little bit about Generation Development Group, moving to the left side of the slide, you can see there Generation Life being the life company, of course, the key focus being the investment bond and lifetime annuity. We take 60% market share in the investment bond market of inflows. Event is the leading managed account business in the country. It's a combination of both Evidentia Group and Lonsec Investment Solutions, which were the #1 and #2 provider previously until we acquired Evidentia in February of 2025. And you can see Lonsec, of course, which is a very well-known brand in financial services, which is the market-leading qualitative research ratings firm. It's got some great product initiatives that we'll be launching in both the second half of this financial year into FY '27 as well. So really, really excited about a lot of the work that's going on in the group at the moment. Just moving across to the next slide, why Generation Development Group. So a little bit about our business model and strategically how we approach things. What we look for is products or assets that have strong structural tailwinds that can translate into inflows. So anything around retirement, obviously, the managed account sector and the SMA growth that we've seen over the past decade has been quite incredible. Obviously, advice reforms coming through with the quality of advice tranche 2 to come through is going to help drive inflows into a business like ours. So in terms of, I guess, the way that we look at from a financial point of view in terms of the way we operate the balance sheet, we really look for assets that are capital light. So an example of that would be our lifetime annuity. A lot of those sorts of products in lifetime annuities can have a capital charge of 10% to 20% of total funds under management. The way that our particular annuity works is it's 40 basis points on total FUM. So it's just operational risk capital. So you can see there, we try and go into different areas and growth segments of financial services, but we try and do it into a very much capital-light fashion. In terms of, I guess, the multiple earnings levers that we have as a group, we're very, very conscious that through the various cycles that we might find ourselves in from a macro point of view that we've got very much a diversified earnings asset across the multiple businesses that we have, whether you look at the life company, whether it's managed accounts, whether you look at the qualitative research that Lonsec has. So we've got a lot of high-growing assets growing anywhere from that sort of 15% up to 40% per annum. But we've also got that diversity in terms of the revenue that's coming in within the business. When we first started the business back in 2017 when I joined and Terence joined in early 2018, we had a monoline product. We had the investment bond wasn't a very well-known product. It was probably doing around $100 million of inflows over the course of a full year. We now do that in 3 weeks. To give you a bit of an idea of our total applications in that space, back then, we were doing about 2,262 applications. We now do that many applications in 1.5 weeks compared to a full year previously. So you can see the amount of scale that we've been able to get in the business, but also diversify the product set and the type of businesses that we have in GDG to be able to make sure that we continue to grow at the outstanding rates that you've seen over the past few years given the opportunity within each of these assets and some of the products that we're investing in at the moment. You can see there on the right-hand side, just to touch on what are some of the, I guess, the competitive advantages that we have as a group, high barriers to entry when it comes to things like investment bonds or retirement products because of the requirement of the life license to be able to distribute those products and receive some of the concessions on those products. Obviously, the size and scale of our managed account business, it's 4x bigger than the next managed account business in the market. So we want to make sure that we continue to drive the benefits of that. We've got a lot of initiatives underway to be able to deliver that output. And then when you look at the last point there, just talking in relation to Lonsec, that's over 30 years of independent research capability. So there is a lot of IP and credibility that's being built within that business and also the fact it plays such an important role in the ecosystem of financial services, whether you're an adviser, whether you're a fund manager or whether you're in the super industry with super ratings or IRA to be able to access a lot of the stuff and the analytical tools that we have in there as part of Lonsec. Just moving on to the next slide to talk about some of the financial metrics that we've hit this year. So you can see there, I've already touched on underlying NPAT up 63% to $20.1 million. So a really, really strong result there. $6.9 million in terms of statutory NPAT there. That was due to the crystallization of the Lonsec asset, which we bought the other half of in June '24. You can see group revenue up to $88.4 million or 35% up on the prior corresponding period. Dividends have been held flat. The right-hand side, you can see the EBIT results of each of our assets. So Lonsec underlying EBIT is up 29% or to $10 million. You can see that the Generation Life business, underlying EBIT, really, you should be looking at that $11.8 million there. Terence will talk about this in a little bit more detail. Well, that's up 25% year-on-year. The reason that's the case is because we've become a consolidated tax reporting entity. So that tax benefit tax impact overall for the group, but that's been taken out that benefit of the life company and is obviously coming in a consolidated way at group level. But if you're looking at it on a like-for-like, they're up 25% to $11.8 million year-on-year. And you can see evidential managed accounts. It's up 21% on EBIT to $10.1 million for the year. Moving through to the next slide. Talking about some of the key performance measures across the group. So we'll start on the top line there. You can see with Generation Life, we're up $5.2 billion on FUM or 34% up year-on-year in terms of funds under management. We haven't changed pricing for investment bonds since the 4th of December back in 2017. So you can see the margins that we've been able to retain while we've really scaled up that business having been impacted. And we even see probably slight margin expansion moving forward with some of the opportunities that we're investing in at the moment. You can see over a 12-month period, that's up $1.3 billion. So it's a record number, up 57% year-on-year. Market share of inflows, this is a record number. We were taking about 50% of market share of inflows historically. That's gone up to 60% over the past 12 months. So Filipe, the CEO of that business, along with his executive team and the distribution team there have done an incredible job. And I have to say the back office in terms of the processing of all of the applications to really hold the brand and customer experience of our group have done an incredible job because every single period, we seem to be stepping up in not only funds under management and inflows and sales opportunity, but applications that we have to process as part of that and the transactions that sit around that as well. You can see every dollar that comes on the platform sits for over 14 years. So long-term sticky money with good high margins in that business. Moving to the next slide here, just to talk about Evidentia Group. not the next slide, sorry, there, Simon, just the part just on the managed account business, you can see it's up 171% to $34.5 billion. Just to give you the quick mathematics on that, that was $12.7 billion that was Lonsec Investment Solutions. We then bought Evidentia Group, which had $12.7 billion as well. And then on top of that, we've had $9.1 billion worth of growth, and that gets you to the total of $34.5 billion. In terms of the combined businesses being together, so the growth over the last 12 months from the 31st of December '24 to the 31st of December '25, we're up $9.1 billion or 36%, which if you compare that to probably the next managed account business is probably 4 to 6x more in terms of total growth. You can see that in total market share of managed accounts. This is based on the latest data, which goes to 30 June '25. I think the 31st of December data for '25 will come out probably over the next month or so. But we've got 11.6% of total market share. And what you can see underneath that, and we'll talk about this in a little bit more detail, and you can see it as part of our ASX announcement is that we've seen a 42% increase in tailored managed account clients since the acquisition of Evidentia. So I'll give you a little bit of detail on that is we had 41 clients when we acquired Evidentia, which was completed on the 18th of February '25. On average, they would acquire 6 new clients per year. since we have bought them, we had 12 tailored clients for Lonsec Investment Solutions. So that obviously takes you to a total of 53. But since then, we'll have close to over 70 clients in total by the end of this quarter. And by the end of the full year, it will probably be close to 80-plus clients. So we have had a significant amount of growth in terms of new financial advice practices wanting to utilize our services in terms of managed accounts. So you can see that really underpins the future flows, not only for the second half of this financial year, but going into FY '27 and '28, where you really get that conversion from funds under advice to funds under management. You can see on the right-hand side there that really does stack up in the numbers in terms of some of the 5-year CAGR numbers. We have grown FUM of these combined businesses over the last 5 years, 109% CAGR, and that compares to the sector growth rate of managed accounts, which has been quite phenomenal at 26.5%. So almost 4x or effectively 4x the growth of the sector we've achieved within our business. To move on to the last line there, we've got Lonsec. It's probably the more mature asset that sits amongst the stable of GDG businesses. It's up to 1,880 products or 5% over the 6 months in terms of total increase in Lonsec Research. Lorraine and her executive team there have also got some great opportunities in terms of new products that we're going to be bringing out over the course of the next sort of couple of months, which is going to be around our investment governance solutions, which is really going to help licensees, platforms, wealth group advisers be able to manage their approved product list in real time. So that's particularly important with what we've seen on the back of First Guardian and Shield and some of the issues that have impacted financial services. Moving on to the next slide. This just really shows the trajectory of some of the figures that I covered off there in terms of some of the FUM growth that you've seen from FY '21 through to the first half of FY '26, 27% CAGR for the Generation Life Investment bond business. Moving on to the evidential Group side there. I've already touched on that 109% phenomenal growth rate we've seen from Pete, Mike and the broader team there and what they've been able to deliver to conclude the calendar year with $34.5 billion and really take some strong momentum into Q3, and we expect a stronger half compared to the first half of FY '26. Just touching on the next slide, which really talks about the strategic priorities for the group. You can see there when we're talking about Generation Life being the holding entity. We're looking at some further integration and embedding the platform and product capabilities to drive more efficiency, innovation and growth. We've started the commencement and deployment of AI throughout the business, and we've got a couple of slides in a second, which I'll touch on in terms of our approach around that and where we see the benefits and opportunities. We obviously want to drive operational efficiencies, client outcomes and reduce risk within our business, particularly when you've got something like an APRA regulated entity like Generation Life. And also on the right-hand side there, we'll continue to identify and acquire new assets that align to our M&A strategy, which you can see in the appendices. But of course, we're very, very conscious of the significant amount of growth that we have within our existing assets and also the cost of equity. So there's a lot of considerations when it comes to M&A to make sure that it fits the group, and we believe it's got the growth and the upside, and we believe we're in a strong position financially to be able to execute on those opportunities. Just moving into each of the tiles there at the bottom in terms of some of the strategic priorities for each of the businesses. And of course, this is at a high level. We want to make sure we're leveraging that BlackRock relationship. We've got some innovative products, which I'm really excited about that will come out over the course of this calendar year, subject to regulatory approval. We're also working with a couple of super funds as potentially their retirement income covenant provider around the longevity solutions. We really want to maximize some of the tax reforms that are going to come through. And we really see ourselves as the market leader of after-tax performance. That's money that you actually get to keep, not the headline performance. So very, very conscious of been able to maximize that after-tax performance through our investment bond products and the various investment options that we have there. Division 296, of course, which is the super tax, that's one element in terms of tax reforms. More recently, I know a lot of people on this call would have seen there is a lot of discussion around the CGT discount and potentially what's going to happen in May with the budget there. So we're keeping a very close eye on that because, again, it creates a very attractive alternative, the investment bond as part of the overall portfolio construction for advisers and their clients. And we're certainly seeing that uplift month in, month out in terms of new advisers doing business with us and also going deeper into the existing portfolios of supporters that we've had for many years in that part of our business. We've invested a lot, like I said, in our product and technology capability. We knew these changes would eventually flow through in some of these tax reforms. We wanted to get ahead of the game in terms of making sure that we had systems to be able to scale up and ensure that we retained or improve the customer experience, but also had new products in there. So leveraged funds, liquid products, private credit, private equity, we wanted to make sure that we had the right investment choice for those high net worth and ultra-high net worth segments that are critical to us to continue to grow at some of the rates that you've seen over the past couple of years and really maximize that opportunity of those tax reforms for the investment bond. In terms of Evidentia, we've continued to invest a lot into that business. We would have close to probably 16 or 17 new staff that we've hired in the first half of this year. 60% of those are in customer-facing roles. So we really want to make sure that we're maximizing the combined businesses and really driving that growth and the opportunity in that sector. We'll continue to deepen those relationships and drive more market share than our natural market share. We've obviously bought Encore consultancy business. What does that mean? We don't just look at ourselves as an asset consultant. We make sure that we're really embedding ourselves as part of the operating model of that business when it comes to practice management, when it comes to M&A, when it comes to scaling up their business, when it comes to their technology stack, when it comes to client communication. So we're not just on there as part of the outsourced CIO. We're in there helping them grow and drive their business and really becoming a part of that. So that was a really key part I guess, of the first half of this year was doing that transaction to demonstrate, I guess, that competitive moat that we really build around those businesses. And I think that has very much contributed to the uplift that you've seen in new client wins that we've had, which are at record highs. As part of that, of course, like any business that's growing, you want to make sure that you're attracting and retaining and developing the right talent and you want to make sure that you're setting up remuneration practices that really align to shareholders' interest and making sure that we're delivering that output, increasing shareholder value, but also being able to be very, very attractive as an employer to get that alignment between the employer and the execution and what we intend achieving as a business. In terms of Lonsec, we'll continue to drive the product uplift that you've seen, 5% for the first half of this year is certainly above the expectation that we have for the first 6 months of this year. We'll continue to expand the range of services that we do through research and super ratings, and we've even done a bit of work over with the U.K. pension funds as well there. That's driven a bit more of a revenue uplift for that part of the business. And we're also looking at transformational initiatives to really drive operational leverage. So give a bit of an idea of that on our third proof of concept just with some of the AI that we are bringing into that business in terms of managing the data pools that we have within Lonsec given the vast amount of IP with over 30 years of being a qualitative research provider. Moving into the next slide, just to talk a little bit more around AI. Of course, there's 2 parts to AI from a headline point of view. There's the defensive aspect that you have to get AI into the business. It has to form part of your culture and your strategy moving forward. But it's also a great opportunity to be able to increase your competitive advantage. So this really talks to the core areas that we're focused on initially. And the next slide I'll go through, we'll talk around some of the time frames and what we expect to achieve within those time frames. However, I really want to reinforce, we're doing this in a very considered measured approach. So we're working with a few different groups at the moment. We're, of course, doing stuff internally to create more operational efficiency and more productivity within the business. Anything customer-facing we are taking our time doing that. And I don't mean we're dragging our feet. We're very much a fast-moving business, and we like to consider ourselves as being very innovative, but we want to make sure that anything we're deploying that is customer-facing that relates to AI is 100% accurate. So I don't want to get caught up in the hysteria and the panic of AI. We want to be very, very considered, measured and do things properly. And we also want to make sure that any investment that we're making in AI, we're not just throwing money at the wall and seeing what sticks. We're going to be very, very considered in terms of some of the testing that we're doing. We want to make sure that's going to deliver the outcome that we expect and the return on invested capital stacks up, and it's going to drive those advantages and also reduce risk in our business. I won't go into the detail of each of those areas on the slide, but we're very, very conscious about doing this the right way across productivity. We want to see revenue uplift in terms of any investment that we make, and we also want to see cost optimization within the businesses, and we're already deploying that across each of our assets, all in varied capacities at this particular point in time. The next slide that I'll go through just really shows, I guess, what we're doing over the next 2 to 3 years in terms of the focus around AI. So obviously, we want to continue to increase productivity. Like I said, it's going to be very much disciplined in terms of the adoption around this, making sure that we've got the right AI policies in place, making sure that we've got the right tools, the right training and also the culture around AI to be able to utilize it. I know at a personal level, I utilize it a lot and think it's a great tool, but you've got to make sure that, that permeates throughout the entire organization. And it's very, very targeted in terms of the deployment and the reporting and compliance and the analytics that we can drive from AI being brought into the business. We then want to see more operating leverage over the next 6 to 18 months. We want to see margin expansion, scalability, some of the AI-enhanced data management capabilities that we're already seeing in Lonsec. They've already been doing great work, and they're a little bit more advanced than perhaps some of our other assets here at generation development group. And you can see there some of the portfolio analytics that we're already using in Evidentia and some of the retirement modelling that we're doing from a group and also within the life company at the moment. Within 18 to 30 months, we know once we get to that point in time, what we see in AI today and the sophistication of it versus the super intelligence that will be embedded probably in a lot of businesses within 2 years' time, it is going to be very, very fast moving. So we expect that to be really the more transformational side of AI that will be fed through the entirety of the business. So we expect strong competitive positioning there in terms of what we're able to do in terms of really tailoring the customer experience across each of the assets that we have. And also delivering revenue growth and obviously expansion in terms of our margins and really utilizing it as a competitive advantage. We're very, very conscious of not building things straight away around AI that are going to change in 5 minutes' time. So we want to make sure that the model that we've adopted as part of our AI initiatives is very, very flexible as new innovations come into AI, we're able to adopt those and leverage those within GDG and the subsidiary businesses. Effectively, the way that we look at it is that the AI spine is at a GDG level, and then that sort of split off into the various subsidiary businesses to be tailored for what their requirements are. Just moving on to the next part of the presentation, which will really get into the financial results. Like I said, there has been a significant amount of change within the business. We've had a huge group restructure. We've integrated 2 large businesses -- and we've also been able to drive BAU and produce a really good result and adopt some of the new technology that I went through. So it's been quite a phenomenal 6 months, and the team has done a great job. I'll pass it over to Terence now to run through the group financials and each of the subsidiaries.

Thanks, Grant. Good morning, everyone. Thank you for joining the webinar. Thanks for the opportunity for letting me present our financial results. Glad to report it has been a phenomenal result. As you can see, on a consolidated group level, we've had very, very strong earnings growth with operating leverage coming through. We've had revenue growing at 34% expenses going up at 29%. I'll go through the details of financials in each business on a segmental level in the next couple of slides. But as you can see, very, very happy with the overall underlying profits of the business. With the annuity business, we continue to invest in the business, but conscious that we are managing the cost at this stage until we see a greater take up in the annuity product. We're keeping dividends flat at $0.01, we're trying to keep our powder dry. You can see our cash balance is very strong there. I've got very good balance sheet flexibility there, and that's to allow us to capitalize on all the great growth opportunities that Grant alluded to. So that could be anything from bolt-on acquisitions like we did with Encore. There could be some investments on the AI side. And then there's also the great opportunity that we have before us with the alliance that we have with BlackRock as we develop more annuity type products. Grant has already spoken about the investment point and managed accounts growth in terms of funds. So that is a key pillar in underlying our revenue stream in both the life business as well as the managed accounts business. Thanks, Simon. Next slide. Yes. To what Grant has alluded to before, it's been a phenomenal effort by the team at Evidentia and Lonsec in terms of the integration work where they've done the restructure, where they split up the Lonsec business to just be the Research and Ratings business together with IRA and then move the Lonsec Investment Solutions and IPR business across to Evidentia. So there's been a lot of work there in terms of the IT splitting out the IT out of research initially and then consolidating that into the Evidentia business. And to credit of both teams, they have not missed a beat. They continue to deliver record results. I mean you've seen the great fund growth in managed accounts as well as the number of research products across the research business. So it's great that they manage BAU without missing a beat yet executing on what is very distracting and very, very big projects. And with the new decentralized model, we've provided some insights to the market before we increases the accountability and greater transparency of the performance of the business. You'll also be able to see the way we disclose the accounts is very clean and tight in terms of measuring the EBIT in the individual business levels. Moving on then. Thanks, Simon. As you can see from this result, they're all my favorites in the sense that if you look at all the 3 subsidiaries, they all deliver very similar type EBIT numbers. You see Generation Life of $3.4 million, adding income tax rebate circa $10 million of EBITDA. And then there's the tax adjustment, which will get you closer to $12 million, which I'll talk about. Lonsec EBIT of about $10 million and $10 million as well. So again, in this case, all performed very, very well with the different characteristics, which I will go through in the next slide. Thanks, Simon. In terms of Generation Life, that generated a great return there underlying EBIT after adjusting for tax that's gone up 24.6%. Just to get into a little bit of details there. In relation to tax rebate, normally what happens is with increased expenses, you normally get increase in the tax rebate. We don't see that coming through now. But because we've done the restructure, a lot of that tax offset comes through the corporate entity level. So for the restructure, we have got about $2 million extra tax rebate. But instead of getting that $2 million extra tax rebate, we've got a $2 million reduction in the overall consolidated group tax level. So on a net-net basis, it's net impact of zero. So very strong result there. You see expenses going up, and that is basically on the back of 3 key pieces of investments that we've made for that business. Half of that increase is just pass-through costs. But more importantly, in terms of the other 3 buckets, we've invested heavily in growing that business. We've got new great new head of sales. We'll be looking to hire more salespeople there that's to capitalize on the division 296 opportunity as well as other opportunities coming through in that business. We've made heavy investments on the IT side, especially on the registry system to make sure that we can scale. So Grant alluded to how many more applications we go through. We've had minimal increases in headcount. Instead we've invested on the IT side so that we can continue to scale on that front. We've also done a little bit there on cybersecurity to make sure we're well protected. And the third area of investment we've made is in products. Grant alluded to some of the liquid products, leveraged products. Those require quite a heavy IT investment and product investment. But we believe we'll get return on investment returns in space given the opportunity for us and the growth that we're seeing in the investment bond business. So I think there will be more upside, definitely be a lot more upside in the business over the next couple of years and years. Moving then across to the next slide. It's a great revenue stream that we get from the investment bond business. You can see the growth that's underpinned by the strong sales growth. as well as the strong growth as well. We expect that trend to continue to accelerate, again, on the back of the strong regulatory tailwinds that we have as well as all the products and features that we are putting through on our offering. Moving on then to Evidential Group. Thanks, Simon. Great result on the Evidential Group. As I alluded to before, they've been very busy with the integration work, but they haven't missed there. You can see strong underlying earnings growth on a like-for-like basis of 20.7%, noting that we didn't have Evidential FY '25 period, I just put it up there as for illustrative purposes, you can see where the earnings growth has been. There's been a big investment on the expense side and most of that has to do with staff. So we've increased headcount by about 24 people. But more importantly, of that headcount increase, 60% of that front facing. So we've had a lot more asset consultants and salespeople joined and they're very, very good quality hires. So I look forward to embedding the team there to see them deliver greater results. And with less distraction post integration, I've got no doubt that they'll be driving with stronger sales and more client wins on that front. Thanks, Simon. Grant spoke to this. You see the great growth there. It's very, very strong organic growth period-on-period. The small jumps, you see from 3.6% to 6.4%, that's on the back of the RPL transaction and then the 12.7% to 26.8%, that's on the back of the transaction. But even stripping out those transactions, you see very, very strong organic growth. And more importantly, it's growth that far exceeds the growth rate of the market or the system growth, and we far exceeded by multiples, notwithstanding the strong growth rate in the industry already. Moving on to Lonsec Research. The team has done a phenomenal job. If you think of the revenue stream there, more than 90% of that recurring revenue. It's great to see that recurring revenue increased by 7.6%. That's off the back of good margin expansion, but more importantly, more products because of the offering that they're doing -- they continue to invest in the business. Yes, they have pointed some resources towards the spin out IT and so forth. But notwithstanding that, they've been working very hard on new product offering. There's a new governance product that's coming out in the next couple of months. So they're doing a phenomenal job there with great operating leverage underpinned by strong recurring revenue, and you see strong growth of about 29%. With that, I'll pass you back to Graham.

Great. Thanks, Terence. Just to wrap up the presentation before I throw it back to Simon, in terms of the outlook for GDG and its subsidiary businesses, we feel very, very positive in terms of the momentum and the investments that we've made in the business to be able to continue to grow and retain the margins or see some margin expansion within the business. Obviously, Generation Life, we've touched on them on some of the legislative tailwinds. Division 296, I think, is all ready to be legislated and take effect on the 1st of July this year, but it's also some of the other tax reforms and obviously, the capital gains discussion that has been very, very apparent and front and center in the media over the last few days, in particular, as we approach the May budget. We're obviously looking at the execution of the strategic alliance with BlackRock. That was BlackRock's first balance sheet investment into a business in Australia, which is very complementary to the team at GDG in the Generation Life business. We've been building some new products in there that we believe will be market-leading. They really fill a gap within the market at the moment. I can't go into too much detail because I don't want to give away some of the advantages there and obviously, the competitive advantages that we will have with those products, but it's really exciting. Some of the work that the team has been literally working around the clock to bring those to market. Also on the other side of that is, of course, the opportunity to align with some of the super funds, and we are involved in some RFPs at the moment and down to just a couple of, I guess, life insurers to be able to compete for those positions and partner with those super funds around the retirement income covenant and some of those longevity solutions. So some exciting news, hopefully, we can bring over the course of this calendar year. In terms of our managed account business, we've already completed a transition in Q3 of a mandate. Of course, it's been quite front and center in terms of some of the questioning that we've received since we acquired Evidentia around the mandates. We received a mandate of a few hundred million that's already landed as part of this quarterly fund flows. We've also got another large mandate that's set to transition by the end of this quarter. as well, which is even significantly more than what's already migrated in as part of the overall inflows for Evidentia. So very, very exciting in terms of some of the activity that we're seeing there. We've got some new products that we're deploying in the market in the second half of this year, which we think are going to drive a slight bit of margin expansion and some revenue synergies for that business that we probably didn't think we'd receive until FY '27, but that's probably going to come through in the vicinity of probably additional $1 million to $2 million of earnings this year. And of course, we want to leverage the Encore transaction that we did in October and really deeper that customer value proposition as we continue to go out and pitch for new business. In terms of, I guess, some of the M&A opportunities, the inorganic opportunities that we could look at GDG, we've got a very disciplined approach around this. We want to make sure that it fits within the existing growth rates that we have with some of our assets, which, of course, are very high. We want to make sure that it's got that sort of structural or legislative tailwind. And we see that at least 20% 5-year CAGR earnings growth profile from a financial point of view. So it makes sense for us to even consider that. The other aspect of this, which I'm very, very conscious of, of course, is the cost of equity. We've seen the share price come off a bit. We're obviously very conscious of that. If we're going to look at any assets -- we've got to make sure it really stacks up and it's in the best interest of shareholders and we execute those deals at the right time if there are opportunities out there that align to that overarching investment thesis that we have as a group. In terms of Lonsec Research moving forward, like I've already touched on several times in the presentation, we'll continue to expand our product coverage. We've got some new products that are coming out into the market. It's really got a strong position in terms of where it sits in financial services. And I think we'll still continue to see growth in things like the RA subscriptions, which really speaks to that reoccurring revenue that Terence touched on that over 90% of that business has in terms of that growth of 7.6% in revenue over the first half of this year, it's just great to see the performance of that asset has been so consistent. Before I wrap it up and hand it back to Simon, I just want to say a big thank you to all the supporters of GDG. We've had a lot of support over the last few years. We've made a lot of changes over the last 6 to 12 months, obviously, through the acquisitions that have been completed. We've restructured the business. We've got a great executive team in place that continue to drive outperformance relative to our competitors. We continue to find new opportunities of growth in the market, and they've just done a phenomenal job. And the people that I want to highlight there is obviously the group of directors that we've had led by Rob K, of course, who is our Executive Chairman; also Pete Smith, who's Executive Chair of Evidentia Group and obviously sits on our group Board as well and was the founder of Evidentia. Also Mike Wright, who leads the Evidentia managed account business there. We've got Lorraine Robinson, of course, who covers off the Lonsec Research and Ratings business; and of course, Filipe Araujo, who leads our Generation Life business and all the support that we've had through Terence and all of the staff that have executed these great results. I just want to a bit of a shout out to them just to say thanks very much for their loyalty and commitment to what we've been able to achieve over the 6 months of this year and how determined we are to make sure that we finish off FY '26 very, very strongly. Simon, I'll now hand it back to you for questions. Thanks.

Thanks. Thanks, Terence [Operator Instructions] But first up, we have Simon Fitzgerald from Jefferies. Please join back the queue. MST, Mark please go ahead.

To ask a couple of questions. Can I start off with the capital gains tax discount discussion that's currently going on in the media. I didn't actually think that this would be a bit of a tailwind for the Generation Life business, of course. So could you just talk us through specifically the advantages that you believe the investment bond product provides just quickly. But then more to the point, how much is this really resonating in the -- with advisers and in helping you sort of win net new advisers and sales into that product?

Yes. So it's probably even a bigger opportunity than what even the division 296 super changes are because obviously, most things work on capital accounts. So obviously crystallize your investment held over 12 months, you receive that 50% discount. The talk is it's going to be between 20% and 30% discount, so probably 25%. So it's probably going to be half to what it was previously, and it will be interesting to see what they do in retrospect or not there. In terms of, I guess, the difference between us and the CGT discount, we don't receive the CGT discount for our investment. And the reason that's the case is because we work on revenue account However, being on revenue account comes with a lot of advantages. So when we hold our funds, which we do for 35 soon going to 38 different investment options on the menu, we can do things like offset a capital loss against income into the portfolio. So when you think of dividend income coming into the portfolio, and that lowers our accessible tax. So our effective tax rate looks between 10% to 15% for those 35 options that currently sit on the menu. So that's a big advantage. So what happens if the CGT discount gets halved down to 25%. It just means the tax arbitrage that you receive between our structure versus the other structures that you might invest in will be materially greater. In terms of the exact science on that, that will obviously vary depending on investment size, if you're using a trust structure, how many beneficiaries you might have in there and what their tax rates are, et cetera. But it's certainly going to be a significant advantage for us.

No, that's -- it's actually -- you had some good charts with the division, the superannuation changes and the advantages. I mean this sounds like it could be even better. It would be great if by the quarterly, you had some of those potential charts, the comparisons and what it may look like for us to be able to see that. Why don't I move on to my next question. So with the AI slide and implementation, granted you're taking some time, you mentioned something about improving margins. And so are you looking at this from -- over time that you think you can take costs out of the business? Or are you looking to run faster and create finding new revenue opportunities?

I think the way we're looking at it at the moment is not necessarily stripping a whole of cost out of the business. But I think because we've got so many growth opportunities across each of the subsidiaries is really looking at the increased productivity. So we just think the operational leverage that we're going to get in the business through AI is going to increase dramatically over the next 2 years. And then on top of that, the other 2 big advantages that we see is, one, we'll be able to get like a much higher level of tailoring, particularly when you look at something like the investment bond business to be able to be able to tailor down to your specific tax nuances or what you might be doing with your family trust. There's some really exciting things that we're looking at there. And then probably the third part of that is obviously seeing a bit of margin expansion with some of our products potentially as well.

And sorry, can I just squeeze in one more question because you do have quite a big business. So just with BlackRock partnership, when you had your Strategy Day last year -- late last year, you talked to sort of it being an FY '27 story. Could you just update us on how that's progressed since your Strategy Day, the types of discussion, product pitches that you've been doing and what the landscape is looking like?

Yes. To be really specific, working pretty closely with a couple of super funds at the moment, and we're sort of in the final throes of that. So hoping to have some good news over the next sort of maybe 2 to 4 months around that, perhaps around one of our quarterly updates, so fingers crossed there. And in terms of the product development that we touched on as part of the Investor Day, we've made a lot of advancements. We've got one that will be launched in this half. And then we've got another one, which I think is going to be -- it fills quite a big gap in the market. Again, I won't go into too much detail on it, but we've made a lot of progress on that. That one is subject to regulatory approval, but we're hoping we can deploy that in the first half of FY '27. And we feel like that's really going to help us scale up our annuities part of our business. Simon...

I must go back to Simon Fitzgerald from Jefferies.

Can you hear me Fantastic. Just firstly, on Evidentia, you did speak about some of those known mandate wins, Grant. And just going back to some of the sort of mandates that Nick talked about at the Investor Day. I think my understanding was that they would start to contribute at the end of the third quarter. Just sort of wanted to get a little bit of an update from you on that, whether you're still sort of thinking that the right sort of time frame to start to contribute or whether there have been any sort of delays or anything?

Yes. So the good news is one of the mandates has already landed. So it's actually already sitting there as part of the fund. So that's a few hundred million. I won't talk specifics, I'll leave that for the quarterly update that will come out towards the end of April. So that's already in. The much larger mandate that we anticipate migrating over this quarter is set to migrate next month, and there's absolutely zero reason that we're hearing and I had a good discussion with this with Mike yesterday, absolutely no reason why that won't be transitioned and contributing within this quarter as well. And there's also probably one more mandate that we think will transition in Q4. And this is obviously on top of our existing sort of flows from new clients and existing clients that we have on the platform.

Excellent. That's very encouraging. And then I just wanted to ask a little bit about sort of expense growth. I mean, Evidentia, obviously, the expenses increased there. You did talk about hiring new people. I just want to get a bit of a sense in terms of whether the first half is a run rate to sort of be thinking of just given that some of those people would have been hired for a part time in that second half, but just some help there in terms of guidance or anything.

Yes, we don't expect a material tick up in the next half. A lot of those hires have been in that for quite a number of months and profiled well. So we've done the big heavy investments already. So I don't expect a big tick up. But more importantly, all of this investment is really on front-facing type roles. It's really to drive continued growth in the next 6 months and more importantly in the next couple of years as well. And...

Other areas in there, Simon, that we invested in things like cybersecurity, the technology to make sure that we could have a $100 billion managed account business to be able to scale up that much. And obviously, the investment in Encore to continue to deepen that competitive moat. So there was a lot of investment that we did in the first 6 months of this year.

Very happy with the hires that we've done high-quality hires that we've done.

Excellent. I've just got one final question as well. Just on the growth in expenses for the corporate division. I just wanted to know how much of that is sort of restructuring in terms of allocating expenses versus -- and I understand you would have had to have a lot more people on deck just given the acquisitions that you made and 100% of Lonsec being taken in. Just interested to know, again, like what sort of help you can give us to think about that in the second half there, just the personnel costs related to corporate?

Look, the half-on-half cost should be flat year half-on-half. And to answer your question, I would say half of that cost probably came of the Life business. So in prior periods, we used to consolidate corporate and life as one entity. More headcount growth because we've taken on some acquisition assistance appreciate a much bigger group now like we've got Richard Bell, who's Head of People and culture. We've got a new Investor Relations manager in Tanya. So we've had very good hires there. And that's just to help support the team as we've grown over the last couple of years. I mean we've got north of 300 employees now where a couple of years ago, we had 3 of that.

I just got a couple of questions through from Nick McGarrigle at Barrenjoey. Just on the $2 billion mandate, does that relate to a win announced or contracted in the December quarter?

Yes, that's the one that I was talking about that will be transitioning next month. -- and to be specific, it's about $1.8 billion.

Can you talk through the progress on landing an institutional client in annuities?

I've probably given as much as I can. Obviously, conscious that I'm under NDA, so I can't talk to specifics, but we are down to the final couple of businesses. We've got a very strong proposition, particularly with the partnership with BlackRock. So we feel positive around that, and we'll have some good news to come out over the next few months. But yes, progress is -- we've made a lot of good progress there.

And final question from Nick. Do you remain comfortable with guidance for managed account flows of $12 billion in FY '26, implying around $9 billion in the second half?

In terms of the $12 billion that we spoke to at the start of the year, so that included investment performance as well. So in terms of net growth mandates and investment performance, those 3 things combined, we still think that $12 billion number is realistic for FY '26. And particularly, we're seeing some of the mandates come through now.

Go to Tom Tweedie at Moelis.

Just a follow-up question regarding the flows ex transitions really is what I'm interested in. How do we think about previously won clients to what they should be converting in non transitional flows, kind of your organic flows each quarter at the current sort of run rate?

You want to talk to the normal conversion rate...

Yes, the normal conversion rates haven't changed, Tom. But having said that, we don't really monitor them. So normally when we sign up a client, we know what the FUA is, but we don't track the FUA over time, but we do track the fund coming through that is converting from FUA. But in terms of the client wins that we've had and the existing clients that we had on the book relative to expectation, that hasn't changed. I mean when we first made the investment into Evidential, we did say that from FUA to FUM in the first year is about 20%, 25%. And then after 2 years, the average about 60%, 65%, that hasn't changed. So we still continue to pursue high-quality clients. And I guess that's on the back of very targeted approach in terms of winning new clients. So we don't go looking for any clients. We do target clients that are keen to grow the managed account offering. So based on that, I don't expect the conversion rate to change. But having said that, it's once the clients on board, we don't track it in detail.

And Tom, to give you a bit of an idea, some of our internal metrics, the language that we use in the managed account business is what's in play in terms of FUA opportunity that could convert to FUM. Over the first 6 months of this year, that's increased between 20% to 25%. So that's even on top of what's been flowed through the pipeline and is now sitting on the platform as FUM for Evidentia Group, but we're still seeing that sort of growth of 20% to 25% of FUA opportunity that could convert to FUM over the next sort of 12 to 24 months, which is super encouraging.

So I think that implies sort of what it's been delivering is about $1.5 billion to $2 billion a quarter is sort of the run rate. Is that correct?

Yes, that would be about right.

Yes. And just a follow-up question. Just into -- we've seen a lot of commentary around asset reviews into managed accounts, conflicts there, also comments from labor. Can you just talk us through what the opportunity may be for yourselves being more of an independent managed account provider versus where there could be a perceived conflict and how that might play out?

Of course, I mean, with any sort of regulatory review or legislative change, the devil is in the detail, and we yet to get to that point. I think the nice thing for our business, which makes us a little bit unique perhaps in comparison to some other sort of managed account businesses is that we are vertically integrated. We don't own distribution. We're an independent product manufacturer, and we work with individual advice practices. So we're not a licensee that has its own offering and then obviously, practices that sit beneath that licensee and leverage at AFSL. So I think we're in a much stronger position to be able to leverage some of those regulatory changes around conflicts of interest and things that have been spoken about. There's obviously even changes to the Lonsec business in terms of the MIS, the managed investment scheme and some of the broad strokes that have been contemplated there. And we've got some changes in our processes that we've already gone through in detail, and we know exactly what's required from our end to be able to embed those. But we see regulatory changes an opportunity for us to be able to leverage the independence that we have even further.

From Tim Lawson at Macquarie Research.

Just in terms of the new financial adviser clients, you called out sort of the acceleration in that versus sort of history since you bought Evidence. Can you talk about how much that is sort of the market demand coming to you versus your sort of capability to meet more of the market opportunity?

Yes. So I mean it comes in 2 forms. One is we're out there, obviously, through our distribution team and their relationships, actively trying to source that business or winning off competitors. And -- the other side of that is you get invited into RFPs. Our win rate through those RFPs has probably gone to being over 50% previously. Now it's been over 75% through those RFP processes. So as much as we're sort of getting up to 75 to 80 clients by the end of this financial year, the opportunity for self-licensed clients that have anywhere from sort of $400 million, $500 million of FUA up to about $1.5 billion of FUA, there's still over 300 clients that fit that profile that are self-licensed. So there's still a huge opportunity for us in terms of more managed account businesses to be able to increase and drive our FUM growth.

Are you seeing more RFPs as well as your acceleration in win rate?

We definitely have seen that over the last 12 months for sure.

Question from Jeff at Citi. Just a question on margins. Can you talk to any repricing actions across the managed accounts over the past 3 to 6 months?

We don't compete on margins. I mean we are competitive on pricing, but we do compete on, I guess, the full service that we provide. I mean the Encor acquisition where we have increased our practice management capabilities, for example, further embed this into the various businesses. I mean over time, the revenue margin as a whole might come down for managed accounts, but that's a change in the mix in the sense that in terms of your SMA off-the-shelf products, those are growing. The ones that's not growing as quickly might be bespoke ones where we have higher margins, but with those you get less operating leverage. So overall, the EBITDA margins fees, we don't see any compression at all. And on the headline actual fee charge for the service that we provide, there's been no margin compression and we don't compete on price.

And just a question from Mark at Petra. Are you able to provide some color on the products researched between on-demand and normal course of business?

So to give a bit of an idea of Q2, I think we researched 49 new products, 28 of those were on demand, which was above our internal plan. In terms of the consistency of on-demand products, that has flowed into the second half as well. So it continues to surprise us on the upside. So yes, and that's why you're seeing such a strong set of numbers coming from Lonsec Research.

Pushing up on 10 a.m. Just last question from Jeff at Citi, just on potential M&A. Do you see these as transformational new verticals or bolt-ons?

Look, we look at both to be totally frank. So there's obviously always opportunities within some of the existing assets that we have. And if we see something that's got a clear point of difference, good margins in the business, growing very well, and we see sort of synergies between that asset and our existing assets, we'll certainly look at that. There's obviously different ways of funding that. Those small sort of bolt-on acquisitions, you could look at debt funding those. So the share price doesn't become as big an issue. Obviously, it's come off more recently along with a lot of our peers and IP stocks. In terms of another vertical and something a little bit more transformational, we would have to go to equity markets to be able to fund something like that. There is nothing on the cards at the moment that we see as an opportunity. And of course, that cost of equity right now is a bit more expensive than what it was previously. And we have to weigh up all those factors when we're looking at different assets.

Grant, that concludes the Q&A. I might just hand it back to you for closing remarks.

No worries great. Thanks, Simon. Well, a big thank you to all the support that we've had out there. I know 62% of our shareholder base is in. So I just want to say how much we appreciate that support and trust that they put in the management team and the Board in terms of the execution that we've achieved over the past few years. I think the best of GDG is yet to come. Some of the opportunities that we're seeing within the legislative tailwinds on the Generation Life business the growth in managed accounts. I mean managed accounts probably total size is around $300 billion at the moment. That's set by FY '30 to be $530 billion. And I think that's quite conservative on the assumptions, obviously, taking more than our natural market share around 2x our natural market share of inflows is an outstanding result. And you can see what the numbers look like over the next few years. Terence's point, we don't try and compete on price. We want to have a strong differentiated value proposition when it comes to our products. Lonsec continues to surprise us in terms of the growth and the opportunity that we see there in terms of new products research and other opportunities and other areas that we can move into. In terms of some of the AI, I know that's been a big focus in the media globally at the moment. We're going to have a very, very considered measured approach on that. We're going to make sure that any investments that we make in AI is not just going to see a return on that invested capital, but there is a cultural change within our business that really drives that to be able to maximize that opportunity, both from a defensive point of view, but obviously by having a clear point of difference within our business. We've always been a very innovative business, and we're very much focused on that, very determined to get the results to conclude this financial year and take really, really strong momentum into FY '27. So a big thank you to the Board, the entire executive team and everyone across the group is very, very passionate and loyal in our business and very, very committed to driving the very best outcome for our clients. So thank you very much.