Insignia Financial Ltd. (IFL) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to Insignia Financial's Full Year 2024 Results Conference Call. [Operator Instructions] I'd now like to hand the conference over to your speaker today, General Manager of Markets, Andrew Ehlich. Please go ahead.

Thank you. Good morning, everyone. Welcome to the Insignia Financial FY '24 Results Announcement for the 12 months ended 30 June 2024. My name is Andrew Ehlich, General Manager of Capital Markets. I'd like to begin this morning by acknowledging the traditional custodians on the land on which we meet. In the spirit of reconciliation, Insignia Financial acknowledges the traditional custodians' recovery throughout Australia and their connections to land, sea, and community. We pay our respects to the elders past and present and extend that respect to all Aboriginal and Torres Strait Islander peoples today. Presenting today's results are Scott Hartley, Chief Executive Officer; and David Chalmers, Chief Financial Officer. There will be an opportunity to ask questions at the end of the presentation. I'll now hand over to Scott to begin. Thank you.

Thank you, Andrew, and good morning, everyone. I'm pleased to present our full-year results for FY '24. We saw a strong growth in NPAT, up 13.6%, driven by a net reduction in operating costs of $24 million as we pursued our strategy to simplify our business and reduce costs. Just unpacking the headline a little. Net revenue was up slightly by around 1%, driven by markets and offsetting a small decline in revenue margins and the impact of divestments. Our cost-to-income ratio improved from 75% to under 73%. Whilst this is still too high, we do have a strategy under way to reduce costs and will today be announcing an acceleration and increase of our cost out target. Net profit after taxes of course, adversely affected by previously announced transformation costs and provisions related to the remediation of legacy issues acquired largely with the acquisition of ANZ Wealth. As you all have noted, we did not pay a final dividend this year. The IFL Board acknowledges that the dividend cost will be disappointing for some of our shareholders, but it is prudent for us to strengthen our balance sheet to enhance strategic and capital flexibility. In terms of deliverables this year, when I joined in March, it was important for the business to continue delivering its FY '24-'26 strategic initiatives, that are critical to our future. I'm pleased to report the successful completion of several of these strategic initiatives. Firstly, optimization. We exceeded our FY '24 target cost optimization for the re-optimization benefits of $71 million, resulting in a net cost reduction of $24 million. Secondly, the simplification. We successfully completed the largest single wrap migration in the Australian tactical industry, and we migrated over $38 billion from MLC Wrap to the Expanded platform. We have already started to see the benefits of this migration in the scale efficiencies it has delivered. In terms of our portfolio, we have successfully completed a multiyear restructured advice from loss-making to EBITDA positive. This position will be further enhanced in our FY '25 results given the separation of our license business from its advisory. The Rhombus Advisory created a unique and innovative partnership model. Our relationship with Rhombus Advisory and Godfrey Pembroke has been strengthened by our strong support in their successful separations to advise their owned and led businesses, which I strongly believe is the right model for furthering the professionalism of the advice industry. Insignia had a significant opportunity in it to retain the growth platform funds and administration within these 2 advisory businesses, in addition to growing [indiscernible] from the broader [ verified ] market. [indiscernible] and have joined the Rhombus for given we retained 37% to remain connected and supportive of the success of Rhombus Advisory business moving forward. With the completion of our advisory structure, including these separations, we will focus on building stronger relationships with Godfrey Pembroke and Rhombus Advisory and growing the profitability of our wholly owned and operated advisory businesses, Shadforth and Bridges. Our other '24, '26 strategic priorities remain on track for completion in this financial year ahead of schedule, creating space for our 2030 vision and strategy that we presented earlier this year. In addition to '24, '26 initiatives already announced, we will also be accelerating cost optimization. We are extending our cost optimization program, and David will talk through the increase of the cost reduction target, which we aim to achieve ahead of schedule. In July, I announced our new executive team. These experienced executives bring a deep industry knowledge experience and a strong track record in growing wealth businesses and in leveraging technology to transform customer experience and business models. We are now in the process of cascading and embedding the new operating structure to further drive accountability and efficiency. Also, simplifying our Master Trust platforms is critical as it represents half of our revenue and costs. We have commenced a review of the Master Trust target in state and we'll communicate the outcome of this review later in the year. This review will not slow the pace of Master Trust simplification as we have to complete successful separation from NAB before we can simplify and transform. In terms of flows, platform flows, during the year, we saw the successful migration of MLC Wrap to Expand, as I mentioned. Ahead of this migration, we saw disruption in our flows to MLC Wrap as some buyers just lost patience with the delayed migration. While it's pleasing to see the improved flow since migration, we remain cautious in the medium term, the trajectory of the advice side due to the expected one-off loss of a small Super Fund admin agreements and FUA-related to it and historic divestment. Workplace flows remained resilient during the year, delivering positive net flows. While we didn't win any new corporate mandates, we did see consistent inflows from the existing book pointing to sustained organic growth. In terms of our management, the large outflows from direct capability were almost entirely driven by institutional investors rebalancing fixed-income and global equities. It's pleasing to see the strong performance of our default MySuper options. 3 of our MySuper default options achieved top 10 performance over 1 year in the SuperRatings SR50-MySuper survey. Insignia's largest MySuper option, the MLC MySuper growth has delivered performance in the top quartile over 1, 3, and 5 years. Also important to note the recent placement of $1.2 billion of MLC private equity via a new U.S. secondary, post the attractiveness of MLC's alternative asset management capabilities to the institutional market. In terms of advisers, this slide talks purely to Shadforth and Bridges. We have seen strong year-on-year growth across adviser and client metrics, including an increase in revenue per adviser due to strong new client growth and higher fee income. This growth has occurred despite the rightsizing adviser numbers and rationalizing unprofitable clients, predominantly in the Bridges business. I'd now like to hand over to David, who will take us through to details of the financial results.

Thanks, Scott, and good morning to everyone on this morning's call. I'd like to start a review of financial performance with a summary of the group's results for the 12 months ended 30 June 2024, selling the group revenue at $1.39 billion, a 0.9% increase on FY '23 revenue. To understand the drivers of this uplift, we need to look at the performance of each of our segments. So firstly, platforms where revenue was up 0.9%, with the increase in average funds under administration of 4.9%, offsetting margin decline from the planned strategic repricing that occurred both in FY '23, therefore having a flow-on impact into '24, and new pricing changes made in the FY '24 financial year. Asset management saw a decline in revenue of 6.1% or $13.7 million. The main driver of this was a decrease in the revenue associated with the divestments of JANA and the restructuring of that relationship in FY '23 and [indiscernible] Limited in early FY '24, plus the impact of reduced private equity investment fees to [ Neles ] also executed inside FY '24. Our advice business had slight revenue year-on-year, but with a significant change in composition with a number of divestments throughout FY '24 to realign our advice business around our professional services businesses, Shadforth on BridgeS. The Rhombus Advisory business at our advice which was our advice licensee business was partially divested on the 1st of July 2024 and deconsolidated from that point, but its results are included in the FY '24 results for advice. And finally, the Corporate segment contributed $17 million more revenue than FY '24, the majority of which was due to one-off gains on the investor dividable worth limited and several smaller businesses as part of the restructuring of advice. Moving now to operating expenses, which were 2.3% lower than FY '23, representing a net reduction in OpEx of $24 million from the optimization program commenced in early FY '24. As indicated in the first half results, the realization of these savings were back ended into the second half of this year with first half OpEx being essentially flat on PCP. As a result of the revenue uplift and cost decreases, FY '24 EBITDA was up 10.8% to $381.3 million, and underlying net profit after tax up 13.6% to $216.6 million. And while speaking of taxes, it should be noted as the unpaid effective tax rate, which was just over 31% in the first half of '24, has normalized for the full year at just over 28%, which is more representative of what we would expect in the future. However, while unpaid increase, it's important to acknowledge that the statutory losses were minus $185.3 million as against FY '23 statutory profit of $51.2 million with the FY '23 outcome helped by a $43 million gain on sale related to PET Limited. There are 2 key drivers of these statutory losses. Firstly, remediation expenses of $232 million; and secondly, transformation and separation expenses of $243 million. A reconciliation of the adjustments between NPAP and NPAT are in the appendix of today's presentation. Turning over to the next slide now. Let's take a look at the drivers of the improvement in the full-year NPAT with this slide showing a bridge from FY '23 to FY '24. As I cover when talking about segment performance, net gain on divested businesses from a revenue perspective was $10.3 million higher than FY '24, albeit the after-tax contribution from these investments for the full year was only $2.2 million, thanks to the CGT payable on the proceeds of the IFF limited divestment in the first half '24. This benefit was offset by the loss of $19.3 million of ongoing revenue from the investments made across each of those periods. Our margin reduced by $32.7 million, mainly due to 3 planned product repricing in the Platform segment. The first being the flow-through of Expand repricing and rate card alignment from early FY '23. The second being pricing changes as a result of the transition of MLC Wrap to Expand completed at the east of this year; and the third being the impact of legacy trade-offs from closed products in OPC that were migrated to the temporary products at a lower margin from the 1st of July 2023. Offsetting these declines were increases in revenue driven by higher funds under management administration. Our average FUMA grew by 3.2% during FY '24 with market returns more than compensating the net outflows of $3.4 billion plus pension payments of a further $3.7 billion. The last one to call out on this page is the net OpEx exchange of $24.2 million, which I'll now step through on the following slide. So the $24.2 million is made up of the net result being an increase in salaries of $24 million, consistent with our typical annual salary increases. And these were offset by gross savings of $68 million in optimization savings, noting that while total cost savings was $71 million, there is $3 million of procurement savings recognized in net revenue. The other costs increased by $19.8 million, mainly driven by the investment in cyber and governance expenses, consistent with the FY '24 guidance given 12 months ago. Turning to the next slide, stepping through now the progress on the strategic initiatives announced in July 2023. These initiatives, which include separation from NAB, the restructuring of our advice business, the transition of MLC Wrap to Expand, and funded the cost savings were originally forecast to cost $265 million to $285 million over the FY '24 to '26 period and generate gross cost savings of $175 million to $190 million. Having delivered the first year of that plan as forecast, we've now decided to accelerate the delivery of that program can stay in 2 years, FY '25 and '26 to being fully complete in FY '25, which has the effect of bringing forward both costs and benefits. In addition, we've identified additional $30 million of cost out of benefits, which will require an increase of spend of $35 million to cover additional costs associated with realizing those savings. Importantly, on the right-hand side, we will now track this program on a net OpEx reduction basis rather than talking about gross savings. And on the right, you see how the gross savings in FY '25 will translate to a $60 million to $65 million decline in net expenses, which forms part of our guidance for FY '25, as I'll come shortly. Importantly, the FY '25 plan allows for additional ongoing investment in our proprietary Wrap platform and additional marketing spend to support the MLC brand. The next slide gives an overview of corporate cash and debt facilities with net debt of $371 million as at 30 June, and available funding of $599 million from corporate cash and undrawn facilities as at the same date. Senior leverage was 1.1x net debt-to-EBITDA, consistent with our comments back in February about leveraging declining in the second part of the year as second-half free cash flow improved. Also set out here on the expected pretax funding requirements for FY '25 and '26, which includes remediation. The net cash investments being realized required to execute the strategic initiatives in '25 that I outlined on the previous slide and the refinancing of the subordinate loan notes, which matured in May of 2026. Moving on to the next slide to focus on free cash flow. There was a significant improvement in free cash flow in the second half of FY '24, with free cash flow of $112 million in the half, representing a $193 million improvement in the first half, which was negative $81 million. And for the full year, free cash flow stood at an increase of $32 million. Having generated $351 million of cash NPAT, the main uses of that cash, as I outlined earlier, were the strategic initiative programs and the cash costs associated with remediation in FY '24. Importantly, despite the significant cash spend on remediation and the strategic initiatives, there was minimal change in debt across the year, with the spend being financed by operating cash and corporate cash on the balance sheet. Turning to the next slide. As Scott mentioned earlier on dividends, the Board has elected to pause the payment of dividends and declared no final FY '24 dividend. As a result, total FY '24 dividends are $9.03 being the amount declared at the first half of '24 results. As Scott covered, the rationale for this approach is primarily to strengthen the balance sheet. Our senior leverage is the lowest it's been for some time at 1.1x net debt to EBITDA and being towards the bottom end of our titrate makes sense given both the opportunities we see, the cash required to complete remediation, and potentially downside risk in equity markets. We'll be providing a capital management update at the Investor Strategy Day in late calendar '24, where we'll give more detail around future capital management strategy. The next slide is a quick check on FY '24 guidance and where we landed relative to the 4 aspects of guidance we gave last year. We better exceeded guidance on both net revenue margin and group EBITDA margin. Our spend on strategic investment was in line with guidance as well as the delivery of in-year gross benefits of $60 million to $70 million. The next slide sets out some information on revisions we are making to our reporting segments for FY '25 to align reporting with the new operating model. So moving forward in FY '25, we'll report 5 segments: Master Trust, Wrap, Asset management, Advice, and Corporate. Master Trust and Wrap are [indiscernible] platform segments, while the composition of the advice segment will change significantly following the deconsolidation of Rhombus Advisory from the 1st of July this year. We provided a split in the tables on the page of pro forma FY '24 revenue for Wrap and Master Trust, showing revenue, FUMA, and net flows. For the Advice segment, we will report both the professional services revenue, principally Shadforth and Bridges, which makes up $146.7 million of revenue in FY '24, and other revised revenue, 28.2%, which is made of paraplanning self-license and other ancillary services. There's still work going on in the allocation of overheads across all segments and how we will allocate the former platform segment cost base between Master Trust and Wrap. So we'll provide an update to the market ahead of the first half '25 results once these allocations have been finalized. Moving on to the next slide. Finally, to FY '25 guidance. Starting with net revenue margin, we expect that to decline from 46.2 basis points in FY '24 to between 42.5 to 43.3 basis points. While over recent years the declining group net revenue margins has been primarily driven by product repricing, in FY '25, the changes relate more to the reshaping of our portfolio with the deconsolidation of Rhombus Advisory and the loss of one-off revenue from divestments, contributing a significant amount in terms of that top line revenue decline. To highlight this and in light of the new reporting segments, we're providing a more granular view of guidance for FY '25. We expect Master Trust's net revenue margin to decline from 54.5 basis points -- sorry, from 56.3 basis points to between 54.5 to 55.2, Wrap revenue margin from 29.6 to 28.7, and asset management from 24 to between 23 and 23.5. The best way to look at the adviser business for '25 is to look at expectations relative to the performance of the continuing business, which excludes Rhombus Advisory and other divested assets. And we do expect to see a decline in legacy ancillary revenue but growing the underlying professional services side of the business in Shadforth Bridges. Finally, on the corporate side, we expect to see a decline of the one-off revenue associated with the gains in FY '24. Turning now to expenses. Now on an earlier slide, we expect group OpEx to fall from $1.11 billion to between $947 million to $952 million, a decline of between $60 million to $65 million. And with guidance coverage, that covers the inclusive financial section. So back to you, Scott.

Thanks, David. So when I joined 6 months ago, I took time to meet with and listen to our stakeholders, including our Board, team members, shareholders, market analysts, regulators, and key customers on where the opportunities lie for us in the business, what we're doing well and what we could be doing better. I believe we have solid foundations upon which to build and deliver sustainable future profit growth and competitive compelling propositions for clients and our members. As a diversified wealth management business, we have a unique combination of capabilities across the wealth management value chain, which provides us with a competitive advantage and economies of scope and which positions us to deliver to a broad range of customers. Our proprietary technology is built on contemporary technology where we can control our priorities, enjoy the low cost of change, and speed to market, instead of having to wait in a SaaS provider's queue. Also, our Wrap service model which is anchored on single-point resolution, is industry-leading and a game changer for advisers who use the Expand platform. We have a strong multi-manager investment capability, which has delivered competitive returns. Our employee advice business, Shadforth and Bridges, are point of differentiation and revenue diversification. These businesses will enjoy strong tailwinds from demand for advice and any changes to keep any fits to the government's proposed GIR changes. In terms of brands, there is strength and recognition in MLC. Our primary consumer brand will benefit from investment to further build awareness in both the adviser and direct customer talents. In terms of opportunities, while the business has strong foundations and capabilities, there's also room for improvement, which presents significant opportunities. While we have strong sustainable positions across the value chain, but while we have yet to realize the scale benefits of these positions due to our complexity, which leads to [ utications ] and a high-cost base. There remain significant opportunities to reduce our unsustainable and our competitive cost base. The new operating model centered around 4 dedicated business lines are led by executives focused on specific customer segments and competitive landscapes, allowing detailed strategy to drive profitable growth and enhance customer satisfaction. This new structure provides pretty lines of accountability, enabling more effective entirely decision-making to achieve greater efficiency and cost-effectiveness and improved risk governance maturity. With 2 employee advice businesses and a large superannuation business, we are looking forward to the opportunity to do more to meet the advice needs of our cats. Our capability across the value chain and the government's response to the quality of advice review should enable us to improve engagement, drive improved retention, and enhance our proposition to attract new clients. There is also the potential for it to improve adviser efficiency and allow us to serve a greater number of clients. We understand that we should be seeing more details on Tranche 2 of QAR towards incoming ways. If delivered well, it should make advice more accessible to all Australians. There's been a lot of work done and in signing to bring 3 cultures together and I found it to be a very welcoming and inclusive culture. As we continue to simplify the business, we will free people up to focus on delivering what matters, but we want to build an environment that supports our people to be as effective as possible in supporting our business cohorts. So that finishes the presentation, and now I'll turn to our full year '25 priorities. We remain committed to completing our FY '24 '26 strategy in 2025 and accelerate initiatives which I previously outlined and which I want to reiterate. Firstly, I'm boarding a new executive team and embedding the new operating model by December '25. Net cost reduction of $60 million to $65 million represents a $35 million increase above the top end of our savings range presented last July. MAP separation program is tracking on plan and green. Our Master Trust target end-state review has been underway since May and making rapid progress. We're continuing to enhance Wrap functionality with $80 million of development costs baked into Wrap's operating costs, which was previously below the line. MLC is a go-forward brand for Insignia's products and services other than professional advice that is provided under the brands of Shadforth and Bridges. We refresh reposition and invest significantly from our MLC brand. A significant uplift in our data and digital marketing capabilities will enable us to significantly improve customer experience and engagement. And finally, we will provide more detail on some of the more meeting topics above and our strategy more broadly to achieve our 2027 vision at our Investor Strategy Day later this year. With that, I'll hand back to Andrew, please.

Thank you, Scott. We will now hand over to our operator to take calls on the line.

[Operator Instructions] Our first question comes from the line of Andrei Stadnik from Morgan Stanley.

Can I firstly ask just around the below-line items. The FY '25 commentary is very clear. But how should we think about FY '26? Should we be thinking that there should be very little if anything below the line in FY '26?

It's David here. I think based on the plan that we're working to at the moment, which is that FY '24, '25, '26 plan moving through, that would be right. So based on what we know today, I think that's a reasonable expectation. We talked about remediation of which the provision we hope and expect will be the final one. So that's a reasonable assumption for '26 based on what we know today.

Next question comes from Nigel Pittaway from Citi.

So first of all, just the 60 million to 65 net decline in costs that you're expecting in FY '25, how much of that does relate to Rhombus and the [indiscernible] businesses? I mean I appreciate you said you've not done the cost allocation yet, but it's a pretty important piece of information. So can you just sort of give us a bit of help with that, please?

Sure, Nigel. So based on what we have today, and you're right with the caveat around cost allocation and those sorts of things, I think about the cost out, if I think about the current segments as being roughly sort of 60% for advice, now that is split between the consolidation of Rhombus in addition to cost savings associated with the retained business, 30% in platforms and the balance in asset management based on the currency that is helping out.

Right. Okay. So that's the way to split the $60 to $65 million across like that. Okay. Very good. Secondly, then, I mean, obviously, the dividend cut has seemed to have surprised a few people. I mean -- and again, noting that you said you'll give us an update on capital management strategy later. But I mean, do you think this is a one-off cap? Or do you think there's going to be a requirement to sort of continue this into next year?

Look, I think it's too early to say at the moment. We purposely called it a course and made reference to the fact that we haven't changed our dividend policy. But I think if you look at particularly the timing of what we expect from some of the spend in FY '25, we expect a significant amount of remediation before in the first part of '25. Likewise, the bulk of our strategic spend is on the first part. And typically, just as this year, the benefit of the cost out tends to be weighted into the second half. So I think what that would have done if left unaddressed is potentially seeing leverage increase in the first half beyond our sort of appetite. I spoke to the fact that we're thinking of that market as well. But importantly, because there are further cost-out opportunities, we want to be able to execute on those. And to execute on those also tax funds. So I think it's too early to really give you a view as to how long that pause will be. But that's a bit, I guess, the rationale for what we saw in '25 cash requirements.

Okay. And then maybe finally, I mean, you did flag that you were cautious about flows and advice. Are you, therefore, reasonably confident that you've spent the outflows in platforms? I mean, obviously, the fourth quarter seemed to suggest that. But in terms of that move to the MLC Wrap, are you pretty confident that those outflows are now over? Or would you expect sort of further outflows as time moves on?

So Nigel, it's Scott here. I didn't talk to this in my opening remarks. We remain cautious on platform flows because we have some known one-offs that are ahead of us. So there was the Super Fund admin arrangement, which we expect will terminate in the coming 12 months. But I would say that we're continuing to see positive underlying flows, and that's encouraging, but we just remain cautious at this point.

Sorry, that comment was more platforms than advice.

That was the platform's comment, not an advice comment.

Next, we have Anthony Hoo from CLSA.

First question, just picking up on the earlier question around the dividend cut. Can you tell us more around the reasoning because if I look at your normal operating cash flow, looking at your undrawn debt facility, you would have -- on the face, it looks like you would have had enough to cover the known outflows into remediation and also the cost of your program, cost program. Can you tell us -- is it really just about you want to pay down debt? Or are there any other cash requirements that are coming up that you see coming ahead?

It's David here. [indiscernible]. I mean what I would say is that going to early comments around the timing of spend, so a lot of the spend, as I said, is weighted to the front part of the year, benefits to the back. And so while certainly the facilities are there to do that, we are mindful of our leverage. And we understand that different investors take a different view in terms of leverage. But I think we've been consistent that we're pleased with where we are at the moment in terms of the lowest it's been in some time. So we've seen has been personally a more prudent approach. Secondly, we need to have the flexibility there so that, again, if there are future opportunities that come up, and we need to be able to execute on those without putting further pressure on the balance sheet. So that's the way I sort of think about the dividend decision.

Okay. And my second question was on the advice business. This business saw a small loss in the second half of the year. Previously, you talked about a target for a $10 million NPAT run rate. Can you tell us where your upturn that and then also give us a split between Rhombus and your retained business in the second half in terms of profitability?

So I think on your first question. Look, it takes you around about $10 million. So $10 million was the number we were guiding to on an annualized basis. I think to be fair, it can be maybe a little bit less or something like that. One thing to note, when we talk about divestments, the one-off gains of any investments are captured in corporate, but the reduction in revenue is [indiscernible]. And so that's one of the reasons why for the first half of the year, I guided that we expected there to be a decline in the second half of the advice business. As we sort of executed through there's been a lot of movement in that business as we've really been setting it up. So I would say a little under the $10 million, but probably circa $8 or something about sort of order of magnitude. The split in the second half, I don't have suitor you in terms of Rhombus versus the other parts of the business, not on a half-on-half year. But as I said, it's Rhombus, a lot of those savings are also back-ended as sort of noted earlier. So that's probably the best I'd give you on that one.

Well, I guess I was just more wondering about going forward into next year, because once Rhombus is split out or spun-off. How do we think about the underlying profitability of the ongoing business?

Yes. So Rhombus, I would think about it as being, if we look at the cost base for advice in FY '24, which is $202 million. About 75% of that we expect to remain in the advice business going forward.

Okay. And on the revenue side?

We've given the revenue. So the revenue with the go-forward business is 146.

Our next question comes from the line of Andrei Stadnik from Morgan Stanley.

Look, can I just ask a question around the current position in terms of product and firm numbers? So I think back in the end of FY '22 start of FY '23, I think you showed that there were at that time, 6 platforms, 9 firms, and 4 Wrap licenses. Can you give us a comment on where those numbers stand today?

Yes. So at the moment, the only change to that -- the most rig numbers we gave is really the isolation of the Wrap platform. So the number of ROCs has not changed. I don't have an update for you a number of products, but the key simplification since the date you mentioned, is really the migrating the MLC Wrap into Expand. So there's a single Wrap platform. There hasn't been any further consolidation on the Master Trust side of things. So that's the remaining opportunity on Master Trust.

Okay. So in other words, as potentially at the moment around 5 platforms are being used across Wrap and Master Trust.

Yes.

Okay. And so that's a bit of a…

As Dave said, Wrap has been consolidated over a couple of white-label arrangements that we have. The opportunity for further consolidation is in MasterTrust.

And what's your approach on kind of owning versus renting? Is there an opportunity to rent more in external technology to expedite the process and life in the CapEx spend? Or do you think it is very important you own everything?

No, I think it's -- what's the right answer depending on the business. Obviously, with Wrap, we have proprietary technology, which we're very happy with, that's contemporary, arguably leading most modern technology in the country, so very comfortable with that. Master Trust, quite happy to rent and we're exploring those options as we speak to firm up the end state for that platform.

[Operator Instructions] Next, we have Lafitani Sotiriou from MST Financials.

Well, I kick off with the one-off expenses or one-off items going through. Can you just remind me on the definition of what is your hurdle for what's included and what's excluded? So I would have thought gain on sale would have been excluded from NPAT, there's over $400 million in one-off cost that's being included. Can I just follow up on one of your earlier answers? Is it expected that in financial year '16 -- sorry, financial year '26 onwards that any one-off project spend will be included in NPAT? So some of the projects that you're exploring at the moment around Master Trust, will you be including that additional spend in the NPAT line?

Yes. So take the order. So we work on a $10 million threshold in terms of NPAT. So there are a couple of ways of looking at it. The divestments this year are a bit unusual in the reasonably small in nature, spread across several divestments. And there was a large one-off tax loss in the first half associated with those investments. So at UNNPAT level, when you put them all together, there's only a $2.2 million NPAT benefit in the year. And that's the reason we've given all that information because we respect that there's always an elder judgment, and we don't have adjustments. So we provide the numbers, but that's the approach we've taken. And as I said, it's because the cumulative impact was only $2 million of NPAT that we've used the treatment the way we have. To your second point around FY '26, look, the answer I think is it depends. So what we said 12 months ago was that the strategic program that we set out, being the 3-year program of spend, '24, '25, '26, now convinced its '24 and '25. The star we knew that was the extensive of adjustments below the line. What it's too early to say, given we're still doing the work ahead of Investor Day is what would be the treatment for any -- should there be any large project going forward, how would that be treated? And it's too early to know what that would be yet. But certainly, we are working towards the same commitment we had 12 months ago, which is to absolutely minimize the number of the lower-line adjustments and get back to a much closer alignment between NPAT and UNNPAT.

Just moving to my second question. I just wanted to better understand the margin decline guidance within the Platform business and also funds management for FY '25. I guess there are 2 components, right? There are some one-off shifts, changes that have occurred that are resulting in lower margins, and there's also a mix shift change. If we sort of think ahead to the financial year '26 onwards, would you anticipate both of those dynamics flowing through? Or would you just suggest there are some mix shift changes that will impact the margin from FY '26 onwards?

Based on what we know today, it's more mix shift. So that's what we would expect going forward against the '26 offers.

And I just wanted to clarify 2 things. One is on the net flows in the fourth quarter. And based on your previous guidance, you said about a year ago, it was expected that net flows would be worse in the June quarter than what they came through and they weren't. Can I just check, were there any sort of freezing of redemptions as you work through the migration? So was it sort of an artificial number for us to understand? Or was it all still open for people to redeem and make changes as they typically will?

So if there was a blackout period during the migration, I can't remember how that went. I think it was in weeks. I think it was weeks, not months. And that was lifted, obviously, close migration. And to be frank, I was expecting further redemptions post-migration. And that was very much muted as you can see in our fourth quarter flows. So yes, there hasn't -- we're not sort of backing up by any redemptions or holding off any of that. So it is what it is now, it's [indiscernible].

And can I just clarify earlier on, you said there was a Super Fund admin arrangement that's termination coming in within 12 months. What is that? And how much of -- what's the quantum of that?

So it's a store Super Fund. It's $1 billion to $2 billion, so it's quite more.

I see no further questions at this time. I will now pass the conference back to Scott.

Okay. So I guess I'd just say thank you. Thank you for your time today, and we look forward to catching up around the ground over the coming days and we'll close the conference there. Thanks very much.

This concludes today's conference call. Thank you all for participating. You may now disconnect.