Iress Limited (IRE) Earnings Call Transcript & Summary

Thank you for standing by and welcome to the Iress Limited 2024 Half Year Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Marcus Price, CEO. Please go ahead.

Thank you very much for the introduction. It's my pleasure and, in fact, a privilege today to present the midyear results for Iress on behalf of the team here. It's been a terrific 6 months as we work through our transformation program, and we're going to deliver some very strong results. I'm joined today by our Deputy CFO, Julia Wong; our CFO, Cameron Williamson, is unfortunately unable to join us today due to a family emergency. And I thank Julia for standing in at relatively short notice. Today, we'll be covering the progress on the Iress transformation program, which is delivering strong results ahead of schedule. We indeed, we pre-released our results on July 22 for that reason. There's a lot more to come from transformation. We've still got the last leg of the journey on the table. But today, as a result of the strong performance, we will be upgrading our guidance. Getting into the details. On the July 22, we announced an expectation of our adjusted EBITDA for the year in the range of $65 million to $67 million. I'm delighted to report that the earnings for the half came in at $67 million, the top end of the range, 52% uplift. Operating leverage improved markedly with margins up 760 basis points. And the balance sheet has improved -- balance sheet leverage is within the target range of 1.2x now. That is as a result of a significant program of debt reduction. In the last 12 months, we've reduced our debt by $240 million, which is what's driven that reduction in leverage. But it's also reduced significantly our debt servicing costs, which are down more than $10 million. As a result, obviously, we're very pleased with all of those outcomes. The full year -- sorry, excuse me, what we will be doing, we'll be returning our dividend as a result of that, we are within the target range in our capital management plan and we will be returning to a dividend, a full year dividend for FY 2024, which we will announce in February. Our full year guidance will be upgraded by a further 9% from the May update after adjusting for the MSO sale. The new guidance for adjusted EBITDA is in the range of $126 million to $133 million, which is a significant increase on the May guidance of $122 million to $132 million. Note that this is after adjusting for the sale of the U.K. mortgage businesses. Our second half focus is on completing the transformation program and driving future growth. The transformation program, which we've been undertaking for the last 2 years continues to deliver good results. The pro forma results demonstrate the strength of the businesses and it's contributed across a number of areas. Pro forma revenue growth is up 4%. This is as a result of new pricing frameworks, the uplift of our commercial teams, product enhancements and innovation, in particular, some strong leadership driving improved performance out of the U.K. division. On the cost side, pro forma costs are down 4%. The cost-based reset has continued and it's really as a result of disciplined cost management, which is also coming from our transformation work. We've certainly been able to streamline the operating model. We've had a pro forma FTE reduction of 11% since June 2023, and importantly a 2% reduction in nonwage OpEx, particularly pleased with that given the high inflationary environment in which we're operating in. The result of that, of course, is a pro forma margin increase from 15.5% to 21.7%, 620 basis points. Transformation is delivering disciplined cost management and driving margin expansion. Going on to the divisions. APAC Wealth, one of our main divisions, we've got very resilient revenues. Against headwinds, I must say, there's been ins and outs in the market over the 6 months, but we have strong growth in earnings, $66.6 million in revenue, up 3%. Adjusted EBITDA up 36% at $25.2 million. Adjusted EBITDA margin up 930 basis points at 37.8%. And one of our important, I guess, efficiency metrics, if you will, revenue per FTE is up 27%. What is driving this are new pricing frameworks, largely, and 11% OpEx reduction. We are increasingly also reinvesting back into these core products. Moving on to trading and global market data. Resilient revenue, again, a feature of the Iress core businesses. Despite softer trading environments, and we've been able to deliver improved operating margins from a lower cost base. So revenue in this group, and remember, this is a blended business of trading applications and market data. So, revenue $101.5 million, up 1%. Our adjusted EBITDA up 56% at $22.2 million. Our margin, again, up 780 basis points at 21.9%. And that revenue, that efficiency metric I mentioned earlier, which we talked about in Wealth is up 19% at $0.32 million per FTE. What's driving it? It's upgraded sales capability. Some new business wins, and again, offset by some industry consolidation and lower trading volumes. It's still been a challenging environment for the trading business, and we're still seeing lower volumes and not so many IPOs. We were able to achieve a 9% reduction in OpEx though, which is quite significant in a business like this. And we are increasingly also reinvesting into product delivery and in particular, some new cloud-based technologies. Superannuation is a business that's performing below our expectations, and we certainly is a business which we continue to review. I think it needs to be said that this business was starting further back from the other core businesses. It had more structural disadvantage at the outset. And so, transformation is still hard at work in this business. The revenue is down 7%, $26.5 million. Adjusted EBITDA negative $3.6 million, adjusted EBITDA margin negative 13.5%, and revenue per FTE down $0.1 million. This, of course, is the first half performance. The current performance of this business is actually better than this, as we've already taken significant actions with this business, and transformation is hard at work. We've taken actions on both the cost side and on the revenue side, and we do expect to see an improved second half performance. We appointed our new CEO, Sam Wall, just recently. He starts in a few weeks and we're continuing to review this business to think through how we can improve its performance. The U.K. has been a good news story for Iress in this half, with a significant turnaround under some strengthened leadership. You'll see some very strong operating metrics here with revenue up 11%, $70.7 million. Adjusted EBITDA $13.1 million, up 90%. Our margin, which is crucial up 770 basis points to 18.5%. Revenue per FTE up 29% at $0.18 million. The thing which is pleasing there apart from the results, some of which have got some FX in them, but really it's in the field where we're seeing the benefits here. We're seeing a U.K. business turnaround executed through the leadership of Harry Mitchell, who we deployed to the U.K. late last year, you'll recall. It's the margin enhancement and, in particular, the confidence in the field. We've re-signed 3 marquee clients with GBP 43 million of revenue, $84 million over the next 5 years. Some of those were contracts which were frankly at risk. We've been able to certainly secure them, but also expand them. So, it's more about the confidence we have in this business and the fact that we're seeing some green shoots through better leadership and some infield validation of that. Canada and South Africa. We focused here on empowering, really local management to improve performance and we've seen that. Revenue up 5%, $34.8 million, adjusted EBITDA similarly up to $8.4 million, up 55%. Adjusted EBITDA up 780 basis points to 24.1% and revenue per FTE up 36%. It's just really to do with people in the field working hard and local management driving results both on the cost side and the revenue side. So, focusing on earnings in these businesses with empowered leadership is certainly delivering results. Financials, I'd like to hand over to Julia Wong now, our Deputy CFO to take you through some more detail on the financials.

Thank you, Marcus. I'd like to now take you through what's a really pleasing set of financial results in line with those preannounced. I'd like to call out the metrics to focus on, on this slide. We have adjusted EBITDA up 52% to $67 million, NPATA up $17.2 million from $4.5 million. Underlying profit after tax is $33 million, up $18.2 million from the corresponding half. Leverage post mortgage sales landed at 1.2x, well within our target range of 1 to 1.5x. This, in combination with improved cash flows, will enable the final dividend for 2024 to be reinstated. I'm now on Page 12, which shows reported and underlying profitability. The first half '24 reported numbers are not directly comparable to the prior corresponding period due to the asset disposals. Our pro forma results exclude Platforms and Pulse from both 1 half '24 and the first half of '23. Pro forma revenue is up 4% and pro forma costs down by 4% as outlined by Marcus. What is important is that, all key metrics, adjusted EBITDA, underlying NPAT and EPS have improved as a result of the benefits of strategic actions taken to restructure and transform the business with cost reductions across all key areas. Moving along to Slide 13. In February, we committed to deploying a disciplined and transparent framework for reporting a cleaner set of results. The items excluded from adjusted EBITDA relate to M&A and transformational costs, which include one-off redundancies, separation costs, and external consultants costs only. M&A expenses are higher in the first half of 2024 due to the activity in divestment -- related divestment of the Platforms, Mortgages, and Pulse businesses. Transformation costs are trending at the same level as the first half of 2023 and represent elevated levels of activity. The transformation program completes in December with final expenses to be incurred in the first half of 2025. Ongoing commercial and cost management disciplines are now embedded in the business and are expected to continue post completion of the transformation program. The next 3 slides provide more detail on the drivers of growth in the business on a pro forma basis. We'll remind you that the pro forma numbers exclude Platforms and Pulse. Mortgages have been included for the half given the sale only completed on the 1st of August. This revenue bridge shows the growth contribution from the businesses that continued in the half. Mortgages revenue accounted for $1.8 million of the uplift shown in the U.K. pro forma number and the first half revenue from mortgages was $19.5 million. Moving along to costs. The cost bridge shows that the bulk of the operating expense reductions came from a decline in FTE arising from the restructuring activity taken through 2023 and which has continued into the first half. Mortgages expenses increased by $2.7 million within the pro forma expenses. The first half expense for mortgages was $14.9 million in the first half of 2024. Cost of sales and wage OpEx were down 2% in a high inflationary environment. The final bridge on Slide 16 is for adjusted EBITDA and shows the significant margin improvements across all business units with the exception of Super where we continue to optimise the business and assess options. Mortgages EBITDA movement between the first half of '24 and the first half of '23 contracted by $0.9 million. Its contribution to the first half '24 result was $4.6 million compared to $5.5 million in first half of '23. I'd like to reiterate here, jaws are positive with pro forma revenue up 4% and pro forma expenses down 4%. Slide 17 shows delivery of a stronger and more stable balance sheet. And what is most pleasing is the improvement in cash flows in the first half of 2024 compared to the prior period. This, in combination with cash generated by divestment of the noncore businesses, has enabled a $240.6 million reduction in net debt. And delivered leverage ratio of 1.2x back within the target range, which building the foundations for the reinstatement of final dividends at the end of 2024. Moving along to our upgraded guidance. Our previous guidance of $122 million to $132 million included mortgages in the U.K. Platforms and Pulse for a full 12 months. These divested businesses contributed $21 million adjusted EBITDA in the prior guidance at the midpoint. The midpoint of the prior guidance was $127 million. We are now upgrading the prior guidance by 9% on a pre-asset sale basis to $138 million at the midpoint of the range of $135 million to $141 million. The upgraded guidance on a post asset sales basis is given at between $126 million to $132 million with a midpoint of $129 million. This includes adjusted EBITDA of $12 million from divested businesses up to the point of completion. The uplift in the upgrade is driven by improved outlook for Super in the second half as alluded to by Marcus on the back of contract renegotiations and continued cost control across all areas of the business. The debt reduction of $240 million from $375 million to $135 million at the 1st of August will have the impact of reducing our interest charge by over $10 million on an annualized basis. We will start to see that benefit to NPAT from the 1st of August. I'm going to now hand you back to Marcus.

Thanks, Julia. I think we're obviously very pleased with the progress of transformation. You're seeing it in the numbers, and we've realized some benefits ahead of schedule. There's still work to be done. We're 18 months into a 24-month program. It's 3 quarter time. And we've already taken actions even in this half that we know are going to benefit and flow through the results at the end of the year. So we feel confident in our guidance forecast and feel pleased that the program is delivering the results we expected. We are also exploring growth vectors as well. We're looking for new growth vectors for this business and we now have the opportunity to do so. We've got strategic reviews underway to drive product development and look for new revenue growth throughout the group. Most importantly, I think when we think about transformation, whilst we talk about the formal part of the program concluding at the end of this year, the disciplines and the operational muscles that have been built through this process are going to continue. We have been able to develop a new, I guess, approach in Iress in one sense, in that we are focusing on earnings, cost management, and revenue, increasing our operating leverage and we expect that to continue into 2025. We intend to continue the same -- internally the same processes that have driven these great results into 2025 and beyond. I'd like to thank you for your time today, and look forward to seeing you in meetings over the next few days.

[Operator Instructions] Your first question is from Bob Chen from JPMorgan.

Just a few questions for me. Obviously, there has been a pretty good transformation program that has been undertaken and it looked like cost out is running a little bit ahead of plan. Following the completion of this plan, I think you've got some commentary there that there will be a continued focus on costs. Like do you feel like most of the low-hanging fruit has been dealt with now and it will be harder to get incremental costs down?

Thanks, Bob. Look, I think that's -- well, certainly there has been some pretty significant resets, if you like, in the cost base, but what we're finding is this continued incremental efficiencies that we can gain. I don't think we're all done on cost. I think there is more to be gained. And you saw even the reduction in nonwage OpEx in the first half just from really rationalizing contracts. I often reflect on this, Bob, it's a business that has really focused almost entirely on top line revenue growth as its driver. Increasingly internally we're now focusing on the capacity to generate earnings, which includes a cost -- matching revenues and costs with the structure. And you can see that with the divisional P&Ls, signaling those things internally and our focus on earnings. So I think there's more to come on that, honestly, and I believe we can continue to expand our earnings as a result of cost discipline and revenue growth.

Marcus, and just for the U.K. business, we saw you signed 3 contracts there, or contract renewals there. Can you talk a little bit about the terms there. Are they on better pricing terms or tenures?

I might introduce Harry Mitchell, who's on this call, who will be also on road show for those on the call. He can perhaps comment on that.

Yes, thanks for the question, Bob. These contracts are renewal of blue-chip clients that are currently within the U.K. portfolio. They were at risk, those clients of departing Iress some time ago, so we've secured them. The terms are based on the fact they are a minimum revenue lock-in over the period of 5 years across those 3 contracts, with the ability to get some upside growth as those businesses grow their businesses, we'll share that revenue growth as well.

Okay, great. And then just a final one on APAC Wealth. I think there's some commentary there around new pricing frameworks. Can you talk a little bit to those new pricing frameworks and how that might benefit the business longer term?

I think -- well, I guess, one of the pieces of work we did in transformation was looking at the way in which we've traditionally contracted our work. And we found there to be a long history of very, I could say, divergent pricing methodologies throughout the group. What we found is, we are looking to standardize those and produce more replicable, and I guess, consistent frameworks. We think there's quite a lot of uplift there over a period of time with our clients. And we also want a fairer and more, I guess, equitable pricing arrangements across the entire group. So that's a long-term program. I mean, obviously, contracts don't come up for renewal every day, but we're actually going to work through those in a disciplined fashion over a number of years around properly structured rate cards, properly structured commercial terms that are consistent for all clients.

The next question is from Nicholas McGarrigle from Barrenjoey.

Just a question around Super. It seems like there was quite a reshuffle between recurring and nonrecurring revenues in that segment. And, obviously, the losses in the second half were less material in the first half '24 versus second half '23. Can you give us a kind of state of play on the Super business?

Super business is -- I guess, the recurring revenues are the license revenues, Nick, and we certainly believe contractually they are in a separate category. And that's where we're doing a lot of work with our contracts at the moment with our clients. The nonrecurring tends to relate to new programs and new pieces of work with clients. And often it's existing clients who are expanding or combining portfolios, perhaps bringing another fund into their orbit and things like that. It tends to be -- the nonrecurring revenue is replicable but lumpy, if I can say that, because we tend to find that all funds do something in the course of 12 months or any 12-month period. So, it's not as predictable. It can be driven by commercial factors outside of our control, for example, funds merging or funds being acquired. And so, we -- it's harder to predict, I guess. But the recurring revenue component is license related and is highly predictable.

Okay. And I just noticed that, that went down significantly on the prior period. Was that particularly kind of working through some client losses and then some of the new client wins are more in the nonrecurring for the time being?

Yes, exactly. And we did actually exit some funds in that period as well, ones we actually did not want to -- we didn't feel we could commercially service in a way that we wanted to. So there has been quite a lot of restructuring going on in that business.

All right. And then just on the U.K. Wealth business, can you talk through the terms under which those 3 agreements were renewed? Is it kind of with a view that pricing is better or the scope of the relationship is broader? Just to give us a sense of are they kind of maintaining existing revenues or is there upside?

Sorry, Nick, go on. I'll ask Harry Mitchell to respond to that.

Yes, thanks, Nick. They are recurring revenue contracts with a floor, so that's the minimum revenue that will be achieved. And clearly, there's licensing in there for use of the applications. And as the more users are on-boarded into those businesses, then the license revenue will increase accordingly.

All right. And then just in terms of status, maybe you sort of -- you mentioned 3 quarter time, can you give us a sense of what does the final quarter look like in terms of initiatives across the business, both top line and cost?

Well, we continue to work on the cost side. In fact, there has been some cost work done even in July, particularly in the Superannuation business, which I think we've already referred to. Our nonwage OpEx programs continue. These are, as I said earlier, operational disciplines, which I think have been not as highly developed in Iress as they needed to be. And so, we're finding a lot of success in continuing to drive down those sort of vectors. On the revenue side, we've certainly got significant contract renegotiation going underway in Superannuation, but also as I mentioned in Wealth and other parts of the business as well. So those 2 levers continue. We're also working on a bunch of new product initiatives, which they probably won't turn up in the results in 2024, but they're certainly looking to drive new revenues in '25, '26 and beyond. So, transformation is a 3-legged beast where we had work on the cost side, work on the revenue side for existing franchises and looking at new growth opportunities.

The next question is from Cameron Halkett from Wilsons Advisory.

Just 1 question around the U.K. It continues to perform, in the last result, there was rumblings from the company that perhaps that would actually be taken out of the Managed Portfolio. I'm still seeing it as part of the Managed Portfolio to date and there's no further commentary around its status. Can you just provide an update about how you're thinking about U.K. Wealth going forward?

Well, we're certainly delighted with the performance of U.K. Wealth, and the team there have really done a great job and tribute to Harry for his leadership over there. In terms of this sort of concept of Managed Portfolio, remember, it was really about empowering local teams when they were not particularly in the offshore markets. And we've seen the benefit of that. I guess, at the end of this year we'll be in a position at the end of that transformation period to really do away with that concept in a way, and we'll be having more to say about which parts of the business we see going forwards at the end of the year. But yes, that sort of concept was something that was useful at the outset in terms of doing the resets, and I think it's getting to the end of its usefulness to be honest.

Okay. Makes sense. And then just turning back to Super. Can you just, I suppose, elaborate on some of the difficulties here recently? Is it more of a issue around costs needing to come out that's taking a bit longer-than-expected? Or is growth just started to come by in this sort of last 6 to 12 months? And how far is Iress willing to go on the strategic options that have been mentioned? Could that even include divestment?

Yes. Look, it's a tougher business, to be honest, and it's a business that's got headwinds in one sense, in that -- in servicing clients you've got a regulated asset. And we found ourselves in a situation of having to work pretty hard to get to compliance. And to what we regarded as the right level of activity with that business. So there has been what we called remediation. We mentioned it last time, which was necessary just to get us back to square one. And the business, as I said, was starting from behind the 8 ball. So the cost side -- we had to delay, if you like, our cost work in order to make sure we were -- that we we're in a regulated asset doing the right things. The second part of the -- and I think we're through that. I think the next part was on the revenue side, got very long-dated contracts and some of the commercial terms in there were just simply no longer really relevant to the portfolio, and working that through with clients is going to take time. We've done a little bit of that already, but it's going to continue throughout '24 and '25, and we seek to get a reset with our client group around that. In terms of the long-term future of Superannuation, look it's still an attractive sector. We're still 22% of the non self-managed FUM of the industry, $680 billion on the Acurity platform. It's a significant business. We have had some interesting developments as well on the Wealth side here, where we are able to provide advice tools to Superannuation funds. We'll talk a little bit about that on the road show as well. So, I guess, there's a number of elements still going on in terms of the strategic evaluation of Superannuation business. It's a business that does need work. We're working through it. It's still under review.

Yes, since you've just prompted me, you're on it. Where is Iress at with its exposure to digital advice given from what I'm hearing, industry funds are ramping up procurement in the space. Does Iress have a solution in market?

We do, and indeed it's live with one of our Super funds. And it's actually done extremely well in a very short time. So we're quite pleased with it. We think there's more to come there. It's still, I would regard that almost at an experimental stage in some respects. We're still working through with the Super funds what wealth advice looks like for them. I think the entire industry is working through that. It's obviously a significant opportunity. But it's going to come down to the firms that are most capable of, a, having knowledge and being able to deploy in the sector, and b, adjusting that offering into the Superannuation context. So we are working with that. We're partnering with Super funds to do that. We're seeing good progress. Again, it will take a little while for those sort of growth vectors to start showing up in financials, but we're seeing green shoots there.

The next question is from Brendan Carrig from Macquarie.

Maybe just quickly on the revenue growth, specifically for APAC and trading and market data, sort of flattish to low single digits there. Can you just talk to the moving parts given that you would have put price increases, I think, it was sort of mid-single-digit price increases there? So just trying to get a handle on sort of what was price-led. And if there was any customer losses or repricing or letting customers go that drove maybe a less than price increase revenue top line growth?

Interesting question, one that we certainly are dwelling. When you're an incumbent, the size of Iress in an industry like this, those are always the factors you think about. We have very, very high recurring revenue. So 98%, I think in both of those businesses actually. And what we do is, each year we get a -- we have a price increase, you always get churn in that and we trade those 2 off. We also get new client wins as well. So it's a -- I'm not sure how to answer the question in one sense, in that we have a little bit of churn every year. We didn't see -- we saw sort of the traditional level of churn. This year, we put through a price increase around 4.5%. But, of course, that was around CPI. And not all of our contracts, by the way, necessarily are adjustable. So it's quite an amalgam, quite a chimera, if you will, when you look at the revenue line between, I guess, pricing-driven expansion, some wins and the net -- and net some churn. That's what it really adds up to. But frankly, this year has been a pretty usual year for Iress.

On that comment then, Marcus, then, is that the type of revenue growth you would expect? I would have thought that you would probably hoped for a little bit more revenue growth going forward. Is that a fair comment?

Yes, I think we'd love to see more revenue growth. Always top line growth is highly valued. We do need to see some more of our initiatives come through from transformation, and we've got a focus on that. But yes, look anything 4.5%, 5% sort of growth if we can get to that sort of range, I think it would be great growth. And if we can deliver cost efficiencies, even in the 1% to 2%, you can generate earnings growth around 8% or 9% pretty comfortably from this business for quite a considerable period. And our focus is on that earnings growth vector as well, looking at both the cost and revenue side.

Okay. And then just on the guidance, just a few clarifications. I think previously the tech uplift expenses sort of they were in the adjusted EBITDA. Can you just confirm that those tech uplift expenses have now all been absorbed into that adjusted EBITDA guidance that you can provide?

That's a really important question. Absolutely, we do not -- that below the line charging does not exist here anymore. The charges which are under the line for adjusted EBITDA are exactly the ones we mentioned, which are transformation-related costs in M&A expenses, redundancy, and the project costs, the third-party project costs associated with transformation, they are the only items that go out of the adjusted EBITDA line.

That's clear. And then I think, Julia, you mentioned that, there was $12 million of contribution from the divested businesses. I was just trying to reconcile that number. I can say that the U.K. divested ones had about $6 million of EBITDA in the first half. So I just wanted to try to back out what the contribution was from those businesses in the first half that won't reoccur in the second half and then, obviously, going forward in that exit rate guidance.

So the $12 million is the actual number that's been realized both from -- it's not just the Mortgages business, there's also the Platforms business and the Pulse business in that $12 million. And that's the -- like a year-to-date number, given that Mortgages was complete on the 1st of August.

Okay. So if we're looking at FY '24 guidance, we take out $12 million and then that sort of forms the exit rate guidance, which has not been changed?

Yes. Well, no, actually, if you take out the $12 million from the revised upgraded $129 million, you take the $12 million out, you get to $117 million, and you compare that to what you had previously.

Okay. And then the exit rate guidance, any reason for sort of no update on that? Or is that just how should we think about that exit rate guidance number post asset sales today?

Yes, look, the exit rate was a concept we developed at the start of transformation to set our expectations internally, it was largely an internal target. We wanted to communicate to the market what we were trying to achieve from transformation. It's become a proxy for 2025 guidance, and it's become quite a complicated number. Also with all the bridging we had to do, we were ending up with, frankly, a very complicated deck, which no one really would appreciate, I don't think. So what we're doing is, focusing on our 2 principle metrics for guidance, which is adjusted EBITDA and NPATA, and will produce the guidance for 2025 in February 2025.

The next question is from Simon Fitzgerald from Jefferies.

Just firstly, you've had your feet under the table now for a little while and you've probably seen how unique the Iress business can be at times. I just wanted to ask you to cast your mind back to the rule of 40. Just sort of thinking about the APAC Wealth would have got there. Trading global markets still a little bit behind and Superannuation, there's got to be a lot of work to see that, that would get there, and they're the components of your core portfolio. I appreciate that you've changed your EBITDA methodology, so that would have put you a little bit behind. But do you think now that the rule of 40 is not as suitable to Iress as you may have thought coming into it?

Yes and no. Look, it's tough to get to a rule of 40 business when you've got such established franchises. But I think the focus for me, it's still quite relevant, because at the end of the day, we're focusing on the 2 drivers of rule of 40, which is margin and growth. And I can't think of 2 better things to be focusing on. So in terms of the metrics and things that we're using internally to drive performance, those are the metrics. So in that sense, we're still driving towards rule of 40 outcomes. By the way, I think Wealth is close. I think if you look at the trading business in its own right net of market data, it is also a rule of 40 business. It's largely brought down by the blending together of a market data franchise, which is a much lower margin and commodity business. And I totally agree with you that Superannuation has got a long way to go, but it also has potentially the best -- has growth potential as well. So, yes, look, I still think the metric is useful. I think it's worth pursuing, mainly because the elements that drive it are so relevant to the business.

Yes, fair. I've just got 2 more questions here. You mentioned also in terms of being the incumbent, in terms of pushing sales growth. I remember one of the things you spoke about earlier on in the piece was having a modulated view of different components that customers could tack on. Is that a challenge, being an incumbent, that they may be very well seen as services that you should be providing anyway?

I think that's absolutely right, yes, absolutely. It is difficult to do that. But it's also part of that resetting the expectations of an Iress in the market. And part of the new pricing frameworks that Harry is introducing through the Wealth business are looking at how we can reset just expectations around things like discounting and what you get -- what are freebies and add-ons and so forth and what are not. And getting more disciplined and crisp about that gives us the opportunity to introduce new options, new modules and so forth into that business that will actually create incremental revenue. Increasingly also, particularly in the Wealth business, we're looking at new products that may not necessarily be those that come from advisers. There are other parties in the ecosystem of Wealth that has prepared to potentially purchase products from us. And we're certainly looking at a number of initiatives in that sort of space. And as an incumbent, when you look at the overseas businesses such as ours, like investment in the U.S. or [ Orion ], they have quite a broader range of clients than just advisers in their ecosystems and we're certainly looking to develop along those lines as well.

Yes, very helpful. And then just my last question on the EBITDA guidance post sales $126 million to $132 million. Can we just clarify, does that include 1 month of the U.K. Mortgages business? And then in terms of the stranded costs, $3.3 million, I just want to confirm that's the right number to look at in terms of those stranded costs and that it's included. But also just want to know how quickly do you think you might be able to burn through that, in terms of the stranded costs there?

We might take that in 2 parts. Well, actually I'll take it, if you like. So Julia and I are just debating who should answer that question here. We -- it is 1 month of mortgages in there because the deal concluded on the 1st of August. On the stranded cost side, we've already done quite a lot of work and that's what I was alluding to earlier, on the cost side, there is work to remove costs in the core and in the U.K. as well. So there has been already adjustments made to that. They don't appear in the first half, of course, they're second half effects. And we did mention that earlier in the call. The stranded costs are always a continual. You never quite get to the bottom of that bucket and we're continuing to work there. There's a lot of restructuring going on and reporting resources back to the Australian enterprise as well that were previously in the U.K.

The next question is from Scott Hudson from MST.

Marcus and Julia, just a couple of questions. Firstly, just in relation to the Superannuation business and, I guess, recent mergers across the industry. Are there any funds that have been acquired that are currently on Acurity? And, I guess, as a result, is any risk to any of your existing revenue from some of those mergers?

Not really. We've got -- we're actually more acquiring than de-acquiring. And I think given that industry consolidation favors those of the incumbents such as ourselves, we tend to find that -- we tend to accumulate not de-accumulate. The funds we've lost have been ones we've deliberately exited, frankly, ones we did not feel we were best placed to service. So, what we're finding is, our incumbent funds are doing a lot of work as in bringing other funds or sub-funds into the Acurity platform. And that's -- you can see the work going on in the nonrecurring revenue side, which is a fair lead indicator for funds coming on or component funds, sub-funds coming into the Acurity ecosystem. So, yes, there's nothing out there that's of that nature that you've described.

I guess, your comments in relation to the Managed Portfolio and eventually that sort of structure not being relevant going forward, does that also include the South African and Canadian businesses or you're still looking to potentially divest those?

We certainly look -- I wouldn't say divest, don't forget divestment doesn't equate to manage. Manage was a way of setting up teams who are empowered to actually do the best for that business in their markets. And we've seen the effects of that. It can also be, as you know, something you can use if you do want to go into a divestment. We are reviewing all of that portfolio. We're at 3 quarter time in transformation. By the end of this year, we'll be in a much more informed position as to what we're going to do with every single part of the group. But you shouldn't infer that something in managed equals for sale. It's not. In fact, those businesses are more likely to continue than not in many cases. And so, yes, we'll probably include that concept in February. And we'll have our final word on which parts of the group we want to continue with, yes.

And then just in relation to the reinstatement of the dividend. Is there any, I guess, policy that you're setting in relation to that dividend policy going forward? Or is that still to be decided?

No, no, it's absolutely -- we -- Cameron and he would have more to say if he were here. We put out our capital management plan, which talked about the components and how we think about dividends and how we'll continue to think about dividends. Essentially, if you want to sort of in a nutshell, it's about maintainable NPATA. We want to be maintaining -- paying dividends out of maintainable earnings. So as our earnings expand, we expect our dividend to expand.

The next question is from Olivier Coulon from E&P Financial.

Just on the repricing opportunities you were talking about in Super. I mean, is that on the software side? Or does that also include what remains of your administration business?

A little bit of both, but it's primarily on the software side. Some of our software contracts are very, very long-dated, 15 years old. Some of the contracts have not been reviewed in that time period. And so, there's quite a significant opportunity to restructure those contracts in a way that's more suitable for our clients and which better reflects our cost to serve them.

Yes, okay. And then, I mean, there has been some discussion about stranded costs. So I just surprised at the size of the indirect expenses, which I presume is what you characterize as stranded costs in that appendix on Page 28 for the managed other, which would, I presume, be the Platform business. I mean, was there an element of one-off noticed in that number? Why has it jumped up so much from the PCP in the second half run rate?

I'll ask Julia to look at that. It sounds like quite a detailed question. We might want to take that one on notice, Bob. Just do it one-on-one, unless Julia can do something off the cuff there.

Yes, I think we'll take that one on notice.

Yes. Would we mind? We'll get back to you directly on that one.

Thank you. There are no further questions at this time. I'll now hand back to Mr. Price for closing remarks.

Well, thank you very much. It's been obviously an interesting ride at Iress as we've worked through this transformation. I really want to thank the people who've supported us, including the team at Iress who've done a great job in producing these results. Our customers who've been so loyal to us, as you can see, through our applicable revenues, and also the shareholders who stuck with us through this. I'd like to think we've delivered a great result here. I think we have. I think there's more to come. And as Iress focuses on earnings, I'd like to see us really regain some of the market confidence that we franchise that this really deserves. Thank you for your time.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.