Iress Limited (IRE) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the IRESS Limited '20 Half Year Results Announcement Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Andrew Walsh, IRESS' CEO. Please go ahead.

Thanks for joining us this morning for the presentation of IRESS' first half 2020 results. My name is Andrew Walsh, CEO of IRESS, and I'm joined this morning by our CFO, John Harris. On today's call, we'll provide an overview of performance of the group and segment level. John will also provide further detail on the financial results, and we'll have an opportunity for questions at the end. Before I turn to financial results, I'll briefly touch on how IRESS is successfully responding to COVID-19 on Slide 8. At the beginning of the pandemic, we resolved with our Board that paramount consideration would be the health and well-being of our people and ongoing client servicing. I want to pay special mention to the entire IRESS team who've worked tirelessly over the past 6 months to ensure that our clients and users could also successfully adapt to the environment. Our software and internal workplace technology has made a rapid and smooth transition to remote working. This was no accident, with prior investments and focus, ensuring strong cloud capability and a consistent way of working globally. Our clients have relied on us as an essential partner during this time. We've been well placed to meet all of their changing needs with very positive feedback. Superannuation funds in Australia is one client group that has needed heightened and fast software and system change at this time. The early access to superannuation being one example of that. Those in equity markets are another group. At the height of market activity in March, we supported daily volumes in key markets with more than double the busiest day of 2019. Financial advisers have sought greater assistance to transition from face-to-face ways of working to digital and online, including deploying online cloud portals and electronic digital signatures. Our continued investment in leadership in cloud has also demonstrated its importance with heightened demand for cloud transition at this time. While COVID-19 has had a very direct impact on our mortgage business in the U.K., as previously communicated, and may impact the timing of some projects. It has not had a material financial impact on the group in the first half. It is worth noting that mortgage projects are back online. And in fact, 2 lenders went live in the last week. We have a strong pipeline of opportunities and tender activities across our key segments. Overall, IRESS' business fundamentals remain strong. Our revenue is more than 90% recurring and demand for software continues. Our cash conversion and balance sheet are strong. Turning to Slide 9 and 10. On a constant currency basis, at the group level, operating revenue was up 11% on first half '19. Revenue growth reflects strong underlying performance in Australia as well as the positive contribution from recent acquisitions, QuantHouse and O&M. Segment profit was down 3% on the previous corresponding period, reflecting the inclusion of recent acquisitions and the short-term increase in annual leave costs following the onset of COVID-19. Excluding these 2 factors, underlying segment profit was up 2%. I'll talk on the individual segment performance in more detail. Reported NPAT was down 14% on the first half '19, reflecting the impact of operating losses that have come through acquired businesses and annual leave impacts. Excluding the impact of these items, underlying NPAT was, in fact, up 4% on pcp. Our business fundamentals remain strong and strong cash conversion, high recurring revenue and conservative gearing levels. Our completed capital raise of $175 million has also significantly strengthened our balance sheet to allow flexibility to take advantage of opportunities as they arise in this environment. The interim dividend is $0.16 per share, in line with the first half of 2019. This is paid on the high level of equity base following the capital raise and is covered within operating cash flow. Further detail is provided in the next slide that John will cover later in the presentation. On Slide 12, there are 3 key areas that IRESS has always focused on and which we continue to focus on and drive organic investment priorities as well as acquisitions. We're focused on automation across all our client areas. An example is in Superannuation, where our automation focus has helped secure foundation -- superannuation funds as well as driving strong tender activity. Our 2019 acquisition of QuantHouse to expand in data is performing strongly with monthly profitability achieved during this half as well as the realization of planned cost synergies. Our acquisition of BC Gateways in January this year supports all 3 of these areas, and our acquisition of O&M in the U.K. in March supports data and connectivity, strengthening Xplan with pension and investment data for the purposes of automated advice comparisons. Demand for Xplan continues as financial services businesses seek advice software that meets regulatory, business and client demands. Our investment in user experience is being recognized by clients and prospects, and we've seen high number of advisers choosing Xplan and structural change in the Australian financial advice industry continues. Open integrations, cloud and product development underway in the area of business intelligence will also build on these strengths. Further detail on progress against these is also covered in Slide 13. Our proposed acquisition of OneVue covered in Slide 14 will further enhance IRESS' capabilities in these areas. OneVue's position in the administration of funds, superannuation and investments, combined with our strength in software and data will help drive innovation through technology. We see good opportunities for software and services to bring advice and investments closer together. I'll now talk through each of the segments starting to APAC on Slide 16. Operating revenue and direct contribution in APAC were both up 11% pcp. This is pleasing performance. Financial advice and superannuation revenue grew 15% on the first half, which was led by 20% growth in superannuation and 14% growth in financial advice software. Growth in superannuation reflects recent client wins and the uninterrupted delivery of key superannuation automation projects in administration to clients. Advice growth was driven by the continued transition of advisers to independent licensees choosing Xplan along with demand for software more broadly to support digital client engagement and increasing automation and compliance and oversight. Trading and market data revenue remains resilient, and we are seeing continued growth in demand for data solutions, particularly following our acquisition of blockchain provider BC Gateways, and the increasing relevance of data analytics software that we can deliver into superannuation. On Slide 17, in the U.K. and Europe, total revenue was up 16% on pcp, reflecting stable underlying demand, combined with a positive contribution by QuantHouse. Direct contribution was up 4% pcp. Underlying revenue was down marginally against the second half '19 as a result of some delays to projects. The margin decline reflects our targeted investments and short-term increase in annual leave over the half. QuantHouse revenue was up 10% on pcp, reflecting strong sales and deployment momentum. Xplan now represents 30% of underlying U.K. revenue, reflecting growth in new and also existing clients. This is up from 27% since the end of 2019. Talk about mortgages now on Slide 18. Operating revenue and direct contribution in mortgages was down 22% and 31%, respectively. There was a visible impact of COVID-19 on client projects, where local market restrictions saw the U.K. market -- lending market effectively shut down for a period. This significantly impacted lending volumes, lending overall and the timing of client decisions. Those projects that were impacted have now all reinstated and 2 lenders, in fact, went live on MSO last week very successfully. Delivery momentum remains high with a strong client pipeline. The transition to recurring subscription revenue continues for mortgages, with recurring revenue accounting now for 46% of total mortgage revenue in the first half. This is up from 31% at the end of the first half in '19. And over the coming year, based on existing projects and pipeline, we expect that the proportion of recurring revenue to continue to increase as clients move to production. In the near term, we expect this at 70% of total revenue. Given the direct impact during the first half, this continued progress is really pleasing and delivers on a long-term strategy to move mortgage revenue from services through to product based and recurring. Over 2 years ago, we saw an opportunity to extend MSO to Australia and provide the mortgage lending software to lenders in this market, capitalizing on the wave of new entrants to Australian banking, such as neobanks. As we covered it in the AGM in May, we've assessed this against other priorities at this time and the cost and benefit of that opportunity and have decided not to continue this business in Australia. There's no material financial impact as a result of this decision. It does not impact our U.K. mortgage software business where we see continuing strong opportunities. Turning to South Africa on Slide 19. In South Africa, operating revenue and direct contribution were up 2% and 3%, respectively. Revenue increased amidst challenging local trading conditions and economic environment and also with cost pressure amongst brokers. Retail trading momentum is increasing following successful viewpoint deployments to several brokers, including the largest online stockbroker in that market. Meanwhile, our increased scale has seen improved margins in South Africa. Turning to Slide 20 in North America. Operating revenue there was up 45% on the first half '19, reflecting a positive contribution from QuantHouse. Direct contribution was up 25% and QuantHouse is providing a role broadening our market data capability and expanding opportunities there. Underlying revenue was down marginally, reflecting lower nonrecurring revenue in this period but stable underlying recurring revenue. I'll now briefly touch on ongoing cost discipline across functional segments on Slide 21. We continue to make targeted investments, including our opportunity in superannuation in Australia and opportunities in the U.K. that includes market making and the delivery of Prime. Reported costs grew by 19%. On an underlying basis, costs grew only by 4%. This increase was heavily contributed by costs acquired during the period. We continue to focus on scale and operating efficiency across our business. I'll now ask John to provide some more information around the financial aspects of the result. Thanks, John.

Thanks, Andrew. I'll start on Slide 23. As Andrew has provided detailed commentary on the revenue and segment profit performance, I'll focus on the items that sit between segment profit and NPAT. Share based payments increased to $10.4 million in the first half of 2020 as a result of the previously announced changes to IRESS' remuneration strategy for all employees. We continue to expect share-based payments will be in the order of $20 million to $22 million in 2020. Net operating items, nonoperating items, rather, of $1.8 million in the first half is primarily the costs associated with the integration of QuantHouse, which continues to progress well, costs associated with the acquisition of BC Gateways and O&M and the proposed acquisition of OneVue, and upfront costs associated with IRESS' cloud implementation. Operational depreciation and amortization remained largely in line with prior periods, while acquisition-related D&A increased marginally as a result of the amortization of intangibles acquired as part of the BC Gateways and O&M acquisitions. The increase in interest expense reflects the amortization of costs associated with the recently renegotiated debt facilities. Reported NPAT decreased 14% from pcp, reflecting losses from acquired businesses and a short-term increase in annual leave expense, following a sharp decline in leaves taken by people following the onset of COVID-19. Excluding these items, NPAT on an underlying basis increased 4% from pcp. Our effective tax rate was 25%, which is largely in line with prior periods. Turning to Slide 24. As Andrew has said earlier, our fundamentals remain strong. Cash conversion was exceptional at 134% in the half. This reflects a short-term increase in annual leave accruals and some delayed payments of VAT and other taxes in the U.K. and Australia to take advantage of COVID-19 stimulus measures introduced by those respective governments. The unwinding of prepaid insurance costs and prepayments made in the second half of 2019 that were associated with our move to AWS also added to cash conversion. Excluding these items, cash conversion still remained very strong at 110%, which is above our usual operating range of 90% to 100%. This reflects an increased focus on timely receivables collections, an increase in upfront subscription fees following the completion of client projects and normal fluctuations in the timing of client projects and billings. Our net debt declined substantially to $48.7 million, and our leverage ratio decreased to 0.3x segment profit, reflecting the proceeds of the equity raising we completed in June, to add strength to our balance sheet and provide funding capacity for emerging growth opportunities, including the proposed acquisition of OneVue. The main drivers of balance sheet movements reflected the impact of the equity raising on cash and debt, while the increase in current liabilities reflects the deferral of VAT and other tax liabilities in the U.K. and Australia that I referred to earlier as well as the increase in employee leave liabilities. And finally, the increase in noncurrent assets reflects the acquired software goodwill and other assets who were brought on to the balance sheet as a result of the BC Gateways and O&M acquisitions. Further details of how we have accounted for these 2 acquisitions can be found in Note 3 of the financial statements. I'll now hand back to Andrew to provide a 2020 trading update.

Thanks, John. The Board has reaffirmed IRESS' medium- to long-term growth strategy. And we continue to make decisions for the medium to long term. And in that context, there are a few comments that we'd like to make. We continue to focus on the balance and then the balance of needs of all of our stakeholders, including continued focus on the health and well-being of our people and service provision to clients. We are strategically positioned to benefit from the necessary investment in technology by financial services organizations, and we believe that this investment will be accelerated through COVID-19. To capitalize on this, IRESS is continuing to invest in 2020, including inorganic options. Alongside this investment, however, we are also diligently controlling short-term discretionary costs and retaining our focus on operating efficiency. We withdrew our 2020 earnings guidance in April as a result of the broader uncertainty around COVID-19 and the economy. Pandemic restrictions are continuing to lift to a number of our markets, however, some remain in lockdown. The risks, including the second and third waves have proven real and remain high. The broader impact on health economically in those markets which we operate is no more clear than it was for us in April. And for this reason, we're not in a position to provide guidance statements. Our business model is predominantly recurring subscription revenue, and that has demonstrated its strength and resilience in the first half. The quality of our client base is also evident in cash flows and debtor position, which have been unaffected. In addition, we make the following comments on trading. Our first half revenue growth in financial advice and super reflected client wins in super that we announced towards the end of 2019 and revenue growth across a broad base of clients. In some cases, adjustments to institutional arrangements due to resizing and wealth will occur during the second half. And as a result, we don't expect the second half revenue to be in line with growth in the first half. We're participating in a number of significant tenders to superannuation funds. And if these are successful, they'll positively impact revenue in '21 and beyond. If COVID-19 is to have significant impact on performance in the U.K., it's likely to be on the timing of new opportunities and the commencement of these. Pipeline opportunities do remain fulsome. In June and July, however, we did see some slowing in the timing of these flowing through with our sales pipeline. While the implementation -- client implementations in mortgages paused during the first half, 2 lenders have gone live on MSO in the last week, and these will positively impact the second half. Other clients have also reestablished implementation plans. So in summary, we've responded well to the challenges of COVID-19, and our strategy is highly relevant to the current environment, and we continue to invest for the medium term. We've seen strong benefits from previous acquisitions, including Superannuation and QuantHouse as well as the ongoing resilience and demand across all of our operating segments. We're seeing continued demand from clients and prospects during this half and the fundamentals of IRESS remain in good shape. Thanks for listening, and we'll now hand to the operator for questions that you may have.

[Operator Instructions] Your first question comes from Naveen Patney from Evans & Partners.

Just a couple of questions. The first question was just on the U.K. You noted in your comments that you expected APAC revenue to be lower in terms of sales half-on-half. Just in your commentary on the U.K., you talked about the sales pipeline slowing in June, July. So I was just interested in, should we think about U.K. revenue where we sit today to be potentially lower half-on-half as well?

So Naveen, as you'll appreciate, it's difficult for us to provide guidance statements, and we've kind of tried to outline the acquisition on that -- in that statements that Andrew has made in the deck there. What we're seeing is that the outcome in the second half is dependent upon the timing of projects that we're happy with the pipeline, and it's harder for us to predict when they will land and therefore, whether the revenue is going to hit this year or in future periods. So in that context, I'm not able to provide you any more than that, Naveen.

Okay. All right. I understand. And mortgages, so it looks like if we sort of extrapolated -- obviously, you provided an April trading update and extrapolate the last couple of months, it looked like things that had improved quite a bit in the last couple of months, and as you spoke about implementations reestablishing. And obviously, you mentioned 2 lenders going live with MSO in August. So just thinking about second half, should we extrapolate the last 2 months as sort of a useful indicator into the December half for the mortgage business? And is there a potential for growth in mortgages versus in the second half versus pcp?

Well, clearly, the 2 lenders that have went live will contribute to the second half. And as we've said, we've reinstated projects that had been paused during the first half. And so hopefully, that answers your question, Naveen.

I think probably worth adding to that is that we're pretty delighted with what's happened in mortgages in the bounce back from what did occur during the first half. And to have those lenders go live, turn off other systems and turn MSO on so quickly after how dramatic the stop in that market was as a result of COVID is pretty impressive. And that's reflected in the recurring revenue. There is a dynamic of project revenue as well as the recurring characteristic that comes through those numbers. But as we said, those new lenders and pipeline will contribute to growth in the second half against the first.

And on QuantHouse, I think, Andrew, you spoke about sort of reaching month-to-month profitability in the first half. So I was just interested in how we should think about profitability in the second half in terms of contribution from QuantHouse.

So when we talked about QuantHouse at the beginning of the year, we said we would expect it to be profitable for the full year. And reaching that milestone of month-to-month profitability is an important step in achieving that goal. You can also see, Naveen, on Slide 27 of the deck, where we provide a bit more detail of QuantHouse in a -- in its broader contribution to the group. So when we talk about month-to-month profitability, we're talking about the QuantHouse business itself, but we also have the positive benefit coming through of the synergies, cost synergies as a result of the combination of the 2 businesses. And those synergies, combined with the performance of QuantHouse in the first half led to a positive contribution to segment profit. And as that business progresses through its plans, we would expect that month-to-month profitability to continue.

Yes. And I think the other point to note is the revenue growth against pcp that was of quality. And revenue continued to grow over the first half, and in fact was stronger in the second half of the first half. If you don't mind the confusion -- confusing references.

Yes. Okay. So in terms of segments -- I didn't see that initially. So the segment profit for QuantHouse about $600,000 in first half. So what was it in the June half?

For what was the month of June, we haven't broken that out, Naveen.

Okay.

But in June, the underlying business was profitable, and then you had the contribution of cost synergies, which will be enduring and contributing to that. And clearly, over the first 6 months, all of that has added up to a positive contribution. But the 6 months would have included a number of the earlier months where the business of QuantHouse was still at loss.

Your next question comes from Russell Gill from JPMorgan.

A handful of questions. Just on the outlook and guidance. Look, you talked about your business model with high degrees of recurring revenue, and you've got pretty good insight to what your customer base does. You only really have 4 and a bit months to trade at the end of the year. In your first half results, despite all these challenges, has sort of come in there or thereabouts without sort of government stimulus and a few things like that. Why is there an aversion to providing earnings guidance for the year? It just seems a bit strange given all the recurring dynamics that you pointed through, through the presentation.

Yes. So our guidance, Russell, is very focused on growth. And as we've said in all of our previous periods, that growth is dependent on the timing of client projects. And so in the current environment, we have seen, particularly in mortgages, some movement in the timing of projects. And as we called out, we saw some timing movements in June and July and other parts of that business. So in that context, it's harder for us to predict which half a project will land or a client opportunity will land, and that makes it harder for us to then predict what the growth will be for the year. If our confidence in the underlying business remains high, our confidence in our strategy remains high and our confidence in our pipeline of opportunities remains high. What we are struggling to predict with the certainty that guidance statements would require is when those opportunities are going to land, whether it's in the next half or whether it's in the half-half following.

Sure, which I fully appreciate. But none of those projects, I mean, even as a group would be material to a full year result number though, would it?

Well, in combination, Russell, we -- in combination, they are. And so that's -- if none of those landed or if the timing of those got pushed back to the -- towards the year of end, then clearly growth would be less. So we could -- conceivably, we could come out with a very wide range of guidance, which I don't think is any more helpful. But what we're saying is it's harder for us to predict when those projects will land. And that's why we're taking this position. Clearly, as the year unfolds, then we'll have more certainty. But at this point, we can't make that statement.

Okay. Cool. Just if we could switch to the Australian advice business. The first half growth was very strong at plus 10%. There the benefits that you got, which might be, I guess, one-off or potentially structural around COVID-19, so you could charge more or add different modules because people are working from home where there are some COVID benefits that came from your Xplan business?

No, I don't think that result is COVID-driven.

I think, it's things that underlying driver of what's happening in advice in Australia that contributes to that result. We have been going out of our way to make sure that the transition for clients has been as seamless as we could make it for them as they transition, and we have been very interested in what we can provide to help them operate digitally, and we have not been looking -- that's been our first focus. We haven't been looking to benefit from that commercially. We believe that, that we'll be rewarded appropriately in time for what we're delivering to clients. We have seen uptake of Xplan to support businesses at this time, whether that is by module or by decisions that have been made by groups or also the tools that we can use to operate. We have also prioritized some things that will be beneficial in this environment that would have been further down our road map, but we haven't been looking to extract in the current environment.

And I guess, Andrew...

In fact, in some cases, we've made digital tools available without charging in the short term. So it's actually gone the other way.

Sure. And Andrew, maybe just a commentary in the trading outlook, you made the comment around advice in Australia and resizing of wealth. Can you possibly just talk through your thoughts on the advice market. The back end of this year, there's been -- it looks like an acceleration of advisers leaving the industry in the second quarter. Based on adviser rankings, there's been a fair acceleration in that second quarter, whether it be COVID-related or not. And then the exam deadline, which has been extended out at the end of 2021. A lot of people in industry see that as a potential tipping point for existing advisers that need to reexamine themselves or meet the criteria and a big turnover for advice and advisers in the marketplace at the end of 2021. Can you just talk through, I guess, the number of the advisers, how Xplan has positioned your business model based on headcount or access decline and how you see that transition over the next couple of years?

Not a small topic, Russell, but an important one. The -- I think the number of advisers that get thrown around in headlines is distracting. I don't actually think that, that translates to the number of advice businesses or how they operate. We believe that going forward, there will be more reliance on technology. And that is true regardless of what happens to adviser numbers. While authorized advisers might move around, I don't believe that, that is directly correlated to what happens at the advice business level. And I don't think that they're just -- those businesses are just going to shut the door because of qualifications. In fact, there have been high success pass rates in those examinations. And so we expect that people will do what they need to do or continue to operate their business and meet the requirements legally to give advice around that. So I think that they're slightly separate. There is a level of churn that occurs in advice numbers in any case, and we deal with that all the time. What we've seen occur over the last 18 months even -- perhaps even longer is heightened transition of advisers between licensees. And that is continuing. And in fact, based on what we see, we are not seeing a significant decline in volume usage or software demands because of what some of those adviser numbers -- adviser number headlines are doing.

Okay. And then -- and just on that commentary when you're saying resizing of wealth in that second half, because it was a very strong first half. Do you still expect the Xplan business, I guess, to grow in the second half -- second half on second half? Or is it -- it's just obviously a lower growth rate in the second half?

It will moderate the annual growth rate 2020 to '19.

Perfect. And then just 2 final, I guess, administrative type questions. In your cash flow statement, there has been an increase in the CapEx line, presumption is around AWS project and the like. John, can you possibly talk through the capitalization of expenses, what that looks like this year and going forward?

Yes. So as you say, Russell, some of that AWS cost does go onto balance sheet. We have got some projects running in the U.K. around office space, which kicked off pre-COVID-19. And so there will be an element of CapEx coming through the second half in relation to that. The kind of scale of that is similar to the CapEx that was involved in the Sydney and office -- Sydney and Melbourne office refixed a couple of years ago. But other than that, Russell business as usual on the CapEx front.

So the way we should be thinking about it is, I guess, a doubling of the first half and then as AWS comes off, obviously, you might not have these many property expenses that, that number should normalize and come down over the coming years?

Over the coming years, yes, well, the -- a refit of an office is something that happens in the short-term and happens infrequently, and the U.K. office is really the last of that. And so once we finished this year, we would have refreshed that property portfolio, and I wouldn't expect that to repeat. AWS will continue beyond this year, but we'll not be enduring once we have fully moved onto that cloud provider.

And then on the share based payments. Thank you for the guidance on FY '21. Just so we can get a feel for how, I guess, the modeling around share based payments work, what are your thoughts, I guess, on that line item as we move through '22, '23 and beyond?

Yes. When we talked about that in February, I would expect that to stabilize after this year. And effectively, it would then grow beyond that in line with the number of people and our salaries and wages rather than the step-up we've seen over the last couple of years, which is due to that structural change in the program itself.

So it won't come down at all. It's basically -- the $20 million a year is effectively new base for the business?

What I'm expecting is that the number of people in our business and the cost of salaries and wages will catch up to that. So we won't see a visible decline, but we'll see a pause, and then it will start to resume growing in line with headcount after that.

Okay. And then you also called out, I guess, normalized for annual leave expense. Am I right in saying that because effectively no one took annual leave this last 6 months, and therefore, you've got a higher provision on the balance sheet? Is that what it is?

That's correct, yes. So the cash flow doesn't change. We pay people the same amount every month, but way in which that's accounted for means that more of that is flowing through the P&L as dollars and wages expense because people were at work rather than on leave during the first half.

Sure. Just a future liability.

[Operator Instructions] Your next question comes from Jules Cooper from Ord's.

Just if I could, Andrew, pick up on the comment, and I know we sort of discussed it already, but just to sort of flesh it out a little bit more. When you say you're expecting some adjustments to the institutional arrangements due to the resizing and wealth to occur in the second half, are you talking there to some large contract renewals coming up? And then potentially, those contracts being rebased lower on usage and volume within those clients? Is that sort of how I should read that?

Yes, that's right.

Okay. And is that -- when you look at -- you've mentioned over the last 18 months that has been a feature in the industry. Is this sort of the start of that occurring so that we'd sort of expect to see that headwind from some of your larger customers as they come up from renewal being a feature now and that hasn't been over the first sort of 18 months of that -- the transition playing out?

No, I don't think that it's exclusively this half, but some of them will occur in this half. And they're not necessarily based on renewals. They're based on a relationship with clients that identifies that they've changed significantly. And so we're responding to that with them around what they need and how they want to leverage technology going forward. But there are some that will flow through in this half. And so the comparisons will be reflected financially.

Okay. And I don't think you can look at it as a headwind in isolation. I think what we're saying is that we're seeing growth in that business. And so you need to look at the other side of that, Jules, as well.

Yes. Yes.

And particularly, the net of that has been positive to us.

Right, and following the adviser is essential.

Your next question comes from Scott Hudson from MST.

Just a couple of quick clarifications. Andrew, did you say that you'd expect lending recurring revenue streams to get up to 70% within the near to medium term, did I hear that correctly?

Yes. So that won't be in the next half, but with client deployments underway and the short-term pipeline, we expect that in the near term.

And in relation to your comments around the investment in technology being accelerated due to COVID. Could you potentially just comment on the competitive landscape in the Australian markets? And I guess, how COVID is maybe -- if COVID has had any impact on that landscape?

There have been pressures on smaller providers that have been looking for more funding. In one case, one wanting to receive a share. So there is an impact flowing through. And we haven't made decisions to retrench people. That's happened at other vendors. And the financial strength that we provide in the ongoing reinvestment, in fact, a further investment in a number of areas is something that our clients have relied upon, and we've provided a stable delivery environment. So I think that, that is showing through. I think it's contrasting for sure, Scott.

And in terms of the -- I guess, your sort of incumbent position, net investment in technology, does that inherently drive a greater uptake of modules across the sort of the Xplan client base?

No, I think that in a situation where an advice business or any client for that matter has the ability to enable components efficiently in some cases for rapid response, I think we're well positioned to support that and service that. And so that does translate through to more modules being used. And as John said, there are some cases where we've been offering that for free in the spirit of assisting those clients, and we, in time, will be compensated for that appropriately, but things like managing oversight and compliance in this environment. There are many advice networks in the world that rely on site visits to adviser practices to look at physical files, like, that's dead. And the need for digitizing that and the need for systems to be able to oversee data and manage that in a compliant framework is just mandatory. Some of these things might have been optional in the past, but a data-driven and effective oversight of what's happening in advice delivery or fraudulent attempts at withdrawing from superannuation or trades balance, lots of examples, they're just not optional to not be data-driven and at scale. So those sorts of things make just a lot of sense. And what we are seeing is lots of interest in people playing with data and building their own tools or warehouses. Those things are as much products that need ongoing investment as anything. It's not just about setting up a database that will serve you till the end of time. These things are important around how we -- how data is secured in them, how they're scaled, how value comes out of them and analytics drive potential automation. So all of those things hang off being able to invest and deliver those things at ease.

Has there been an acceleration in demand for Lumen?

Yes. Well, I think there are 2 things going. Yes, I would say that. Though I think that there are also many situations of people needing to respond to the priorities of what's happening in their business. And for many, it's been how do we work effectively at home and how do we digitize what we've got. And so I think there are some steps that need to happen first for a business to get data in order and data at quality in order to see the benefits of something like a big data tool for compliance. And so many of the conversations we're having with clients is about data integrity, data quality so that you can get the benefit of data-driven oversight. And that has happened first. I think that there are boundless opportunities in data for the efficiency of advice and the safety of advice, and very similar applications in super.

And just last 1 in relation to superannuation tenders. Does the, I guess, success with clients to date, is it making it easier for you to -- I guess, for other superannuation funds to be more open to your solution?

I don't think it's a question of super funds being open to automation and technology being a center of future strategies. So no, that's not linked directly. I think that's just the truth. Our progress and the decisions that have been made by super funds to automate the way that they operate is really significant in putting some evidence in front of those that might be making those decisions. We're still in the process of delivering to ESSS and Guild. And so that is probably the proof point and the success story there. But we have other success stories for clients that use our systems and get high levels of automation, and there are quality reference points all over the place.

Got it. Lastly, and then just -- sorry, one last one on the -- I guess the outlook. Your previous, I guess, pre-COVID guidance talked to a very heavy weighting to the second half. Am I reading your comments, Andrew and John, that given the uncertainty around timing, you can't, I guess, guarantee such an outcome through the remainder of the financial year?

Yes. So what we're saying, Scott, is that it's harder for us to predict when those opportunities are going to land. So that's right.

[Operator Instructions] The next question is a follow-up from Naveen Patney from Evans & Partners.

Within APAC, we don't often talk about it, but trading and markets data revenue 6%, not extremely high, but it's probably the highest level of growth we've seen in years. You've spoken about benefiting from the work from home dynamic and elevated trading volumes. Just thinking about how we should think about that dynamic this half, obviously, work from home is continuing, trading volumes seem a bit lighter, I think, into July. So just interested in net-net, how should we be thinking about that segment this half versus last half?

Yes. So that year-on-year is more driven by the QuantHouse acquisition, Naveen.

Okay.

So we don't directly benefit from trading volumes. We've got a subscription model and you'll see that the first half '20 versus second half '19 was around 1%, which is more in line with those historic trends.

Yes. But still characteristically resilient, Naveen, in that business.

Sure. Okay. And the Tilney Smith & Williamson merger is quite big in the U.K. in terms of what's happened there. I was just interested in -- if you provide some comments in terms of what that means for you in terms of projects? Does it mean more work for you? And if so, is there a time line on how we should think about that?

Yes, it's very, very significant. We're working with the team there around what technology platform serves that joined business. The -- that's a good example of a project that hasn't -- or that acquisition wasn't confirmed by the FCA in the timeframe that they expected, or we expected. So that's a good example of something that has taken longer as a result of COVID. But we're heavily engaged in what that means and involved in the team.

Okay. So -- okay. So should -- I'm not sure how many advisers or funds under management Smith & Williamson has versus Tilney. Is that how we should think about the opportunity there? Or is it too early, too hard to tell at this stage?

So there -- we're not remunerated based on the asset value. The -- there are more advisers that will use our software. The -- there's a lot of work to happen before those businesses come together and to only deploy their strategy on the Tilney & Smith -- Williamson deploy the strategy across those businesses. And so I expect that there will be work involved in doing that over the coming 12, 18 months, Naveen. So there will be phases for which users come on board and phases for which work will be done before all users can be on board. So I think it's a significant extension of a really successful deployment.

All right. And just one last question for me. Just in terms of OneVue, I realized the transaction hasn't effectively occurred yet, but how should we -- I know the accounting of OneVue is quite different to IRESS in terms of capitalization of expenses and what have you. So how should we think about once it comes online? How it impacts your segment profit versus product and technology costs and CapEx and all those items?

Yes. So when we announced the deal, we talked a little bit about that. And we talked about what their results might look like in our hands, Naveen. And as you say, they have capitalized a significant proportion or they capitalized internally generated software, and we have not done that to-date. We have -- we don't do that. And so clearly, in our hands, the EBITDA outcome will be different. And as we said at the time of announcing the deal, that would be more like flat on the EBITDA line as opposed to the EBITDA profit, which they have reported.

Thank you. There are no further questions at this time. That does conclude our conference. Thank you for participating. You may now disconnect.