JTC PLC (2N9.F) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to the presentation of JTC plc's interim results for 2020. I'm Nigel Le Quesne, the Group CEO, and presenting with me as usual is Martin Fotheringham, our Group CFO. Once again, we are faced with a virtual presentation, but I do hope on the next occasion we will be meeting in person. The next half an hour or so, I will present my CEO highlights, and Mark will run through the financial review. Then I'll follow-up with a business review of the first half of 2020, including a more detailed insight into the impact on the business of the COVID environment, and provide an update on our recent acquisitions and the M&A market as a whole, closing with our outlook for the rest of the year. Then we'll open up for questions. So if you can turn to Slide 4 and the summary of the trading for the first half of 2020. In general terms, I think we produced solid results with good growth in challenging times. We recognized when we presented to you in April, the year was largely going to be shaped for all of us by the COVID-19 pandemic. At the time we suggested that, although not complacent in any way, we were reasonably confident because of the way the business was organized and managed, we had a good chance of trading in line or close to our pre-COVID expectations. We felt able to say this in the light of JTC's business fundamentals. These characteristics are why we've delivered outstanding results that have led to revenue and profit growth for 32 years and through previous world crises. To highlight a few, we have had a well invested scalable platform. We have the benefit of being well diversified with 6,000 clients in 130 countries, multiple service lines and a presence in all the key locations in the world relevant to deliver outstanding service. We are a cash-generative business with cash conversion in the first half of the year with 108%. And we benefit from a strong balance sheet and recurring revenues of around 98%. Most importantly, this is all underpinned by our unique shared ownership model and the behaviors it engenders, which in many ways, are at their best in a crisis. COVID-19 has brought its challenges, but we are delighted we have managed to call on these attributes to ensure we have met the expectations we set for ourselves prior to the advent of the pandemic. Due to our confidence in the continuing strength and success of the overall business, we've increased our dividend payout guidance from 25% of underlying EPS to 30%, which results in an increase of 41.2% to our interim dividend 2.4p on our normal 1/3, 2/3 basis. In terms of progress made in the first half 2020, we delivered another strong set of results with further revenue and EBITDA growth. Exceeding the target expectations, we have anticipated the net organic growth at 10.1%, above our 8% to 10% range. [ Gross profit ] is 17.9% (sic) [ GBP 17.9 million ], all delivered as of EBITDA margin of 33.3%, which is within our guidance of 33% to 38%. PCS division has once again delivered a particularly strong performance at an excellent margin, and we have continued to see some significant new business wins in the ICS division, including our largest ever win as a group. Managed to complete the acquisitions of the Sanne PCS business, which was completed on the first of July, and NES Financial, a tech-enabled fund services business in the [ United States ]. Though these acquisitions were quite different businesses, we are pleased with both, which I will return to later. We also added a small lift out in the U.K. to add registrar services to our capabilities and established a presence in Dublin, Ireland for the first time. Whilst remaining active in the market, seeing a number of further potential deals as the M&A market returns to life. Generally, we've taken the opportunity presented by the external environment to focus internally and to introduce a revised operating model into our fund services practice of the ICS division, supported by greater reliance on technology to deliver efficiencies. In the short term, this had an adverse effect on the ICS margin, but once implemented over the next 6 to 12 months, we are confident that efficiencies will be found in servicing this growing book, providing a more scalable platform and working model for future expansion. After significant move to upgrade premises in London, Amsterdam and Cayman in 2019, we've continued this into the first half of the year. The commitment to a contemporary new office in Luxembourg, bringing the whole Luxembourg-based team together for the first time since 2018, and taking further space in JTC House, Jersey to facilitate further growth. We've also added to our most senior executive team with the appointment of Michael Halloran, CEO of NESF into the new role of Head of Group Technology Strategy, signaling the increasing importance of technology to JTC and our sector. As mentioned in April, JTC's unique approach to shared ownership received global recognition by featuring as a core case study in the Harvard Business School MBA program. This accolade highlighted JTC's key differentiator and the competitive edge it brings, which has manifested itself in the positive attitude, dedication and collective spirit shown by the team through the pandemic. I would like to take this opportunity to thank the whole team for their support in what has been a difficult period for us all. So in essence, in the first half of 2020, we've once again enhanced and improved upon our financial performance. We've delivered net organic growth of 10.1%, which is particularly pleasing in the circumstances. We've made 2 acquisitions in lockdown, added further to our group talent, range of services and geographical reach, while accelerating improvements to our infrastructure in relation to our organizational construct, technological capabilities and premises, all in line with the expectations we have set for 2020 and prior to the pandemic. We turn to Slide 5 and on to the financial highlights, where we have achieved period-on-period revenue growth of 15.2% to GBP 53.7 million. Underlying EBITDA growth of 11.2% to GBP 17.9 million, a reduction of 1.21 percentage point in our EBITDA margin from 34.5% to 33.3%, which is still within our range and primarily due to the funds practice reorganization, which we have instigated. Our annualized new business wins were up by 45.8% to GBP 8.6 million, which now includes the NESF figures. Our pipeline at the period end was 28.3% higher at GBP 42.6 million. More generally, we currently estimate our win rates in both divisions to be above 35% in the mandates where we have visibility. We are certainly seeing more mandates, and the mandates themselves are larger in nature, all achieved in spite of the anticipated and inevitable slowdown between spring and early summer. Looking forward, we see period-on-period future revenue from these new business efforts of GBP 80.2 million, up 44.1% over the same period last year. And I'll now pass over to Martin for detailed financial review.

Thank you, Nigel. Good morning, everyone. We have a lot to be pleased about with our H1 trading. Organic growth was 10.1% in the last 12 months. Cash conversion was 108% so far this year. With new business wins at GBP 8.6 million in the period, and so far, we've completed 2 acquisitions this year. The core business performed particularly well. However, EBITDA did fall in the period, albeit remaining within our guidance range, and the NESF trading was adversely affected by COVID. As I go through the next 10 slides or so, I'll address all of the above in some more detail. If we turn to Slide 8 in the deck. This is the summarized income statement. As I've said, there were a lot of things in H1 [indiscernible]. Revenue increased by 15.2%. Underlying profit increased by 33%. Underlying EPS increased by 25%. We saw excellent performance in the Channel Islands, in Cayman and in Netherlands. However, the EBITDA margin fell back. This remained within the guidance range, with PCS continuing to outperform. NES has been impacted by COVID, and we'll talk more about that in a moment. I'll also talk about what's been happening in the core ICS business as we go through the slides. Now if we can turn to Slide 9. And here and in the next couple of slides, I wanted to give you some more detail about what we've seen in H1 with respect to trading. So Slide 9 is a revenue bridge. This shows that in the last 12-month period, we won GBP 13.1 million of new business, and that would split 44-56 between existing and new clients. That was consistent with what we expected in a lockdown. As we anticipated, we'd see relatively more activity from existing clients. We have had a very strong run with winning new work from new clients. A couple of GBP 1 million-plus mandates in there. Indeed, one of these was initiated and won during lockdown. Still on the subject of wins in H1, we won a total of GBP 8.6 million of new work, GBP 1.9 million of that has been recognized in our results to date. At the end of June, our pipeline was over GBP 40 million, with a couple of very large mandates included in it. And of those mandates, we are mid RFP as we speak. I will come to attrition in some more detail in a moment. So if we could turn to Slide 10. This slide has some new analysis, which we wanted to share with you, providing some additional detail on organic growth and attrition and where that comes from. If we look first at the organic growth, at a group level, we reported 10.1% growth over the last 12 months. If we dig into that, we can see from the chart here at the top of the page that PCS has delivered 11.8% and ICS 8.9%. We've had a very strong contribution from both divisions. PCS, in particular, has done extremely well and this speaks volumes to the work the team has done to increase mandate sizes as well as securing new clients. We strongly believe that both divisions are extremely complementary, and that having both gives us confidence in our ability to be able to meet the guidance levels year-on-year. I think if you look at the graph, you can see that this amply demonstrates this. Let me now turn to the attrition. Here, we share historic data in the tables at the bottom of the graph, and we also show how the split between end-of-life and non-end-of-life is made up for both divisions. Whilst our last 12 months attrition did increase from 7% at the end of 2019 to 7.6% at the end of June, this was entirely due to an increase in end-of-life structures. 97.5% of non-end-of-life revenues were retained. That compares to 97.4% at the end of December. Within those non-end-of-life losses, there were no new losses greater than GBP 50,000 in the first 6 months of 2020. Having lifted the lid on revenue, what I'd like to do is now turn to EBITDA margin and ask you to turn to Slide 11. Traditionally, we expect to see our business improve the EBITDA margin in H2 relative to H1, as the graphs on this page demonstrate. The margin for the core business in H1, excluding NESF, was comfortably within our guidance range. We're conscious that the PCS margin is significantly ahead of the ICS margin and indeed that the core ICS margin has fallen back to the levels we saw in 2018. When we last presented, we said that we would be addressing this. I think it's fair to say that we've been hampered in implementing the plan to reorganize the division as we're conscious of the need to keep client service at normal levels. And that to embark upon such a program with all of our staff working in isolation would potentially introduce unnecessary risk to the business. We do have a plan and are poised to commence it, but we believe that for the long-term benefit of the business, it's better to start this once the outlook is clearer. The 30 June figures include 2 months of NESF trading. Due to COVID, NESF lost money in that period. This was due to a number of factors. First, the business model has been built on AUM, interest rate-related revenues. We knew this before we signed the deal, and that we needed to move this to the JTC time and material billing basis. We didn't expect that the impact of COVID would necessitate this happening immediately. We have been, and we continue to work through this with the NESF management. So the impact on the NESF business was that they lost $4 million of annual revenue in the space of a couple of months. In a high fixed cost business, you'll understand the impact this will have on the bottom line. Second, NESF was configured for growth. And that growth was put on hold in H2. We have a highly focused sales organization geared to signing up new funds. Sectors that the funds that NESF typically win are in markets that have been impacted by COVID: real estate, construction, hospitality and retail. We subsequently restructured the business and cut the cost base until such time as the investment activity restarts again in the U.S. Finally, continuing political uncertainty in the U.S. is causing investment inertia. However, we do believe that this will prove to be an extremely good deal for JTC. Nigel will restate the investment thesis in connection with this deal. However, suffice to say, we are confident that once the pause button has been released, that we will see significant returns from the U.S. market. I'm conscious I've spent some time on these last couple of slides, and therefore, I propose to quickly move through the slides that we've included on the divisions. Slide 12 summarizes the ICS divisional performance. I've already explained that what we've seen in H1 and what we're doing to address this. Likewise, on Slide 13, this summarizes the PCS performance. I would like, though, just to pause for a moment and reflect upon a division, which has delivered double-digit organic growth and an EBITDA margin above our guidance levels. We were very pleased to complete the acquisition of the Sanne Private Client business at the start of July. This is a very good business and one that we believe will be a very good deal for JTC. I'm now going to move away from trading and pick up on the balance sheet, cash flow and leverage. Slide 14 shows our balance sheet. Nothing has fundamentally changed here since we last reported. We have a high value of goodwill and intangible assets as a result of our past acquisitions. Every 6 months, we test the carrying values for impairment, and I'm pleased to say there are no impairment indicators at the present time. Slides 15 and 16 look at the cash flow of the business. Slide 15 is a summary of the cash flow statement. As you all know, we're a very cash-generative business. We are asset-light. In H1, group cash increased by GBP 6.6 million. Slide 16 focuses on cash conversion. We reported in the RNS that we delivered an extremely strong H1 performance with 108% cash conversion. The graph on this slide shows it's typical for us to perform more strongly in H1. This is because of the timing of the billing cycle for a number of the services we deliver. It's normal practice for us to raise a number of annual invoices in January and February and collect them shortly after. This drives a high H1 cash conversion. You'll also see from the table that by the time we get to the year-end, the annual cash conversion typically drops back towards the guidance levels of 85% to 90% that we provide. Let me finally move to the last slide in this section. Slide 17 shows that at the 30th of June, the leverage under our bank covenants was 2.1x. So there's significant headroom in this covenant as [ the cash ] threshold is set at 3.25x. Adjusting this to a pro forma leverage level to take account of the full year trading for acquisitions, our leverage was 2x. We maintain our guidance target of up to 2x pro forma EBITDA, but we do note that there are a number of attractive acquisition opportunities available to us. Nigel will touch more on this in a moment. Our banking facilities expire in March 2023, and we have currently GBP 35 million available to us within these facilities. For the right deal, and I do stress that it has to be the right deal, we believe it will be commercially right and fiscally prudent for us to utilize these facilities and priority to issuing and raising equity. We recognize this may lead to a short-term increase in our leverage to being closer to 2.5x, but given the headroom we have available and the cash-generative nature of the business, we believe utilizing lower cost debt that we've already paid for is the right thing for the business. I shall now hand back to Nigel, but we'll be happy to take any questions you may have after he's finished.

Thank you, Martin. Now I'll take you through the business review for the first half including a more detailed insight to the challenges presented by COVID-19 and how we have adapted our business to meet these. We also look at how we see affecting the wider landscape, including a look on the potential effects on the M&A market. We'll also provide an update on the acquisitions we made in the first half of the year, NES Financial and Sanne. As usual, I will finish with a view of the outlook for the rest of the year. Starting with the group overview on Slide 19. At group level, we can compare and contrast the performance of the 2 divisions. With Private Client Services going from strength to strength and Institutional Client Services growing at a good rate, but with some margin regression. We reorganized the funds practice and introduced the revised operating model. The divisions are in different stages of their natural cycles. PCS having all aspects aligned at present, which is reflected in its ongoing success and the margin it's achieving. Whereas with ICS, we are seeing good performance in the corporate services practice and an opportunity to proactively improve the performance of the funds practice in terms of the operational efficiencies to improve margin and drive scalable growth, what I would describe as planned maintenance within the indicative group margin range. As a result, this temporary reduction in the margin is not of undue concern to us. Regard to new business and as anticipated in April, we have seen more activity in the existing book as clients reassessed and adjusted strategies as a result of the pandemic, driving more work from existing clients, which was double the same period last year. It also anticipated a fall-off in new business as the world went on hold. This was as expected with a slowdown between April and July, in particular. Our performance was strong, however, on the back of an excellent first quarter and that large Institutional Client Services win in the second [ quarter ]. Group remains fully committed to all of our service lines and both of the institutional and private client markets. The opportunity for growth in both divisions remaining strong, as well as providing a degree of diversity through business cycles and ensuring revenue resilience. We see the funds in trust company markets as complementary and symbiotic for reasons indicated on the top left-hand corner of the slide. Finding that the proximity of the markets and their interdependency is increasing, it's our view, we are well placed to increase market share in both and become a leader in each. Looking forward to the second half of the year, we will look to consider further acquisition opportunities and also focus on an orderly and safely manage return to work over the global footprint at the appropriate time, continue with the reorganization of our funds practice and with the integration of the NESF business, utilizing the technological capabilities it brings to the wider group. In the following slide, we've listed the data that [ draw ] on the effect of the pandemic on our business. It challenges both current and ongoing and some of the potential opportunities it may present. As I mentioned earlier, in spite of COVID-19, we've been able to deliver on expectations in the first half of 2020. That is not to say that we haven't or won't be presented with challenges, many of which are ongoing and would have applied to all of us. As demonstrated earlier and as we observed in previous crises, the group's existing client base was more active post COVID. Clients reacting to ensure their present arrangements were robust or in need of review or change as a result of the pandemic itself, the effect on the financial markets and the likely global recession to follow. Predictably, we saw projects and fund launches put on hold, particularly affecting the U.S. market. Now an inability to meet face-to-face will slow down and hamper our direct engagement, which is particularly important at the outset of the relationship. For example, this may have led to the fund book transferring at a lower level than we had anticipated, some of the NESF challenges Martin has alluded to. Looking forward, however, we would expect a general acceleration in reviews of business configurations, leading to an even greater desire for leaner working models, propensity to outsource becoming even more prevalent and likely to proliferate into more and larger mandates. From experience, world events of this nature also tend to lead to a flight to quality and tendency from clients to use larger established businesses with strong balance sheets to manage their affairs rather than smaller boutique operations. Our cash collection was strong, which implies in a crisis, the quality of advice and service provider would win out over the marginal cost savings from a [ sub-optimal ] service. Turning to operations and employees. As I've already mentioned, our shared ownership structure and the behaviors it engenders gives us a very special culture at JTC, excellent organizational health. It ensures that the business was supported in all jurisdictions and at every level. Group platform transitioned seamlessly to working from home. Our business continuity team, drawn primarily from our operational heads, did an excellent job. Logistical challenges of delivery and messaging across the global offices. Our internal focus on the operational model of the funds practice is well advanced although our ability to implement some of the early stages have been hampered by travel restrictions, the limitations it places on direct communication, training and team reorganization. [ Price has led ] to new daily reporting and more frequent interaction between senior management and has driven greater cohesion across the global network, improving upon our strong group culture and consistency of messaging. I believe the ESG agendas grow more important post pandemic, in particular, the social aspect for both individuals and institutions. This is positive for JTC, as we have always looked to promote these behaviors throughout our history. More specifically, for our clients, we have been developing solutions for tracking and measuring ESG and impact investing with our NESF colleagues to widen our existing relationships and attract new ones in the U.S. and ultimately, across our global footprint. So now on to M&A activity. JTC remains a popular acquirer with a good track record, as we have described previously. We are, however, disciplined in our approach with less than 5% of the businesses we assess ultimately being acquired, always favoring -- we always favor a 2 plus 2 equals 5 outcome. The key, of course, is knowing what not to do. After a general slowdown over the summer, the market appears to have reignited a significant amount of potential acquisitions appearing both on and off market. As we see it, these are a combination of those that were on hold following the arrival of the pandemic: returning to the market; an acceleration of intention by others, potentially factoring in a long session; and then larger, more strategic opportunities being suggested, primarily contemplated by adviser community as the market continues to consolidate. Our recent observations are that as a result of this glut of opportunities, a general reluctance from historic acquirers to reengage as they remain internally focused and view the immediate future with uncertainty. We may see a softening in pricing. There may also be some larger deals -- large deals presenting themselves in the near future, as the industry continues to consolidate at a reasonable pace. Rest assured, we are poised and ready to find the best opportunity as they arrive. With this background, [indiscernible] takes us through to Slide 21, which reviews our progress with the acquisitions made in the first half of 2020, NESF and Sanne PCS. Starting with NES Financial. You will recall that from 2017, we've been looking to get a foothold in the alternative fund administration market in the United States for our Institutional Client Services division. Being frustrated in this regard by the quality and pricing of the opportunities we have seen, this underdeveloped market as advisers tend to understand the opportunity and introduced M&A pricing, which was driven by the scarcity value of the businesses rather than their fundamentals. A separate group [ at ] exercise, we were very keen to accelerate our incremental introduction, technological enhancements business-wide, acknowledging the increasing influence of technology on our industry and ensuring that we were a leading tech-enabled organization. As a result, we were delighted to complete on the acquisition of NESF in April, which is a specialist fund administration business based on the East Coast of the United States in Boston and has its core competence in developing fund-related technologies from its space in San Jose, Silicon Valley. Transaction was at a reasonable price relative to the United States market. It was an all-stock deal, aligning the capable and experienced U.S. management team of the group from the outset. We're pleased with the progress we have made in the first 4 months in spite of the challenges brought by travel restrictions. And we are certain we already have a good cultural fit with our strategies for the U.S. business and group technological development completely aligned. On the downside, however, as Martin's already explained, the trading in the NESF core business has been adversely affected by the pandemic. We are pleased, however, with the adjustments they have made -- management have made on short notice in the U.S. and how the team are assisting at group level with the development of client portals in both divisions, introducing client onboarding efficiencies and assisting with evolution, the evolution of our private and family office offering, Edge 2. We are confident, therefore, in spite of some of these early trading headwinds, we have acquired a good business and the wider strategic advantages we have added to lead the group in better shape for the future. By comparison, the virtual Sanne acquisition, which was completed on the 1st of July, has been easier and more straightforward in our home jurisdiction in spite of the exercise being carried out in lockdown. Book has transferred -- [ book of transferred ] was 20% smaller than we had originally been led to believe, but the deal dynamics allowed us to adjust consideration accordingly. Despite this, we are pleased with the team, the client base is of good quality and the price we paid was reasonable. All in all, rest assured we'll make a success of this acquisition, delivering growth at an excellent margin. 2 teams have already physically been scheduled for a week or two now. So we're looking forward to building on the cohesion we can create between the former Sanne team and the award-winning JTC culture. In summary, as we've indicated in the past, the acquisitions we make as a group are often motivated and achieved with different outcomes in mind, but always driven by our long-term growth strategy, being the best business in our markets. These 2 deals are quite different. Sanne is routine, easier to integrate and immediately earnings enhancing in our home and mature markets. NES Financial is a different prospect and driving more strategic and long-term goals in the fields of technology and in the developing U.S. market. And [ while some ] short-term headwinds trading are a disappointment but not of undue concern when viewed holistically and with our long-term goals in mind. And so finally, looking forward to 2020. We all have to acknowledge that we are still living in unprecedented times, and the pandemic itself and its longer-term effects are still unraveling. And finally, turning on to our key takeaways on Slide 22 and looking forward to the second half of the year. We have all had to acknowledge that we are living in unprecedented times and the pandemic itself and its longer-term effects still unraveling. We need to live with COVID-19, and its repercussions will run long into 2021. Forecasting the effect of this on JTC and its business community still remains difficult. That said, we do believe we have a very robust and defensive business and should, in relative terms, continue to be protected. We should be well placed to capitalize on opportunities arising out of this world event. As a result, we remain cautiously optimistic for the second half of the year. But as we have mentioned, the timings and the contributors to success may be different than anticipated. Thank you for listening and for your ongoing support. We'll now be happy to take your questions.

[Operator Instructions] And therefore, our first question comes in from the line of Robin Savage calling from Zeus Capital.

So my question is about ESG and responsible investing. Could you talk about -- a little bit more about the way JTC has approached responsible investing and their involvement prior to the acquisition of NESF? And could you perhaps talk a little bit more about impact investing and the way in which impact investing has increased in the U.S. as well as responsible investing increasing here in the U.K.?

Thanks, Robin. I think JTC -- I guess, the best way to start that answer is, as you'll appreciate from our shared ownership credentials, we've always believed in having a business that as many people as possible benefit from by virtue of their ownership stake. And so that's really where our route of responsible behavior's around, as an organization, to start with. And then, of course, we've built on those over the years, and we just are -- tend to be appropriate in every respect of the whole ESG agenda in many ways. Think -- and historically, that manifests itself in probably being a leader in the renewables space sort of starting sort of 10, 15 years ago. With regard to NESF -- that is one of the attractions of the acquisition of NESF. And there are plenty of them, to be clear. Their involvement in the opportunities-owned arena, where funds which have incentives in the form of tax breaks for ultra-high net worth to invest in underdeveloped zones across the U.S. So that is -- that, for us, is a very attractive prospect because it plays into that sort of social agenda in a way that we're very comfortable. And in terms of sort of what we're doing in this area at the moment, obviously, the market itself has slowed down significantly, as Martin alluded to by virtue of the pandemic, which is probably what you'd expect with a relatively new market out there. But we've been sort of working with Professor Howard Buffett, who's the grandson of Warren Buffett and Professor at Columbia University, to work on a sort of proprietary impact rate of return framework, which we can apply to opportunity zone funds, but actually much wider than that to any fund that we work with. And indeed, not necessarily funds they can apply to family offices and the like as well. So that's going on in the background. We're working very hard at sort of bringing that round and bringing it to the market. Obviously, we'll start with that in the U.S. for the most part, but look to roll it out across the whole group at some stage in the future. Does that cover it?

Okay. The next question comes in from the line of Eoghan Reid calling from Berenberg.

It's Eoghan here. Firstly, well done, a really good set of results, which has clearly been managed through a difficult time. And I guess I have 3 questions, if that's again, I'll wrap through them and let you answer them. But firstly, you thought that the NESF becoming Head of Technology Strategy. I guess it would be good to hear what's on his or her agenda for the first sort of year in JTC, what are the things that they would like to achieve. Secondly, on the M&A, you kind of talked about prices dropping, but alluded to some larger deals in the near future. Any color on, like, I guess, how big those deals are? Are those what you would consider transformational? Or are they sort of NESF type in terms of each head into a new market? And then lastly, thinking about your H2 organic growth, so the 8% to 10% guidance you talked about over 10% in H1. Do you expect organic growth to drop-off in H2? My expectation would be that attrition rate will probably slow down or lower in H2 as well. So is that -- meaning that organic -- gross organic growth is also going to decline and you have sort of an 8% to 10% range. Appreciate that's quite [ cumbering ] to explain, but any color on those 3 points would be great.

Thanks, Eoghan. I guess the best way to think of the -- well, first off, the appointment of Michael Halloran. He's a very experienced technology professional, and bringing him on to our Board was the first significant move for the group as a whole. I think -- so technology features in every conversation these days as opposed to being something that we might have got around to as a business. So that was the first acknowledgment for us as a group. I think of this in 3 buckets. The first one is improving the client's experience. So these are what we're working towards. And that's really -- adds to the stickiness of the clients by virtue of providing portal type capability, both in the institutional and private client markets. I suppose Edge 0.1 was -- 1.2, I should say, was the first step in that direction, which obviously we embarked upon ourselves. And so 2 things there, really. It should make our existing client base stickier in the first place and more dependent, probably give us the opportunity to upsell around the business itself and should attract more clients in the fullness of time. Whether it's -- I don't believe it's a revenue driver in its own right, but that's our view there. Obviously, it brings efficiencies to processes and use of some sort of robotics within the business, which should drive greater profitability. So we spoke a little bit about what we're up to in terms of improving the margin in the funds practice. And there's a big part to be played with bringing efficiencies in that regard. And then last but not least, I'm picking up slightly on Robin's question before. I think the measurement of impact investing and how we could do it and the wider market that actually opens should drive, obviously, new relationships and could be a revenue driver in its own right. So we sort of got a defensive element. We've got a new revenues element, and we've got an efficiency element. With regard to M&A, yes. So there's an awful lot to look at. I guess when we look at in -- if you talk to the segment that smaller deals, in my view, we're probably moving -- smaller deals do have a habit of taking as long to do as much larger ones. So our view is we're probably aiming off some of the smaller deals we see in the market. That doesn't mean more, like, lift out opportunities we won't take an opportunistic stab at because that suits us and is in our DNA in any event. Then if I go up to the some sort of medium-sized deals, as we would call it, which, I think, has accelerated slightly in the more recent times, as I alluded to. So we can see some very attractive opportunities there. As I've said in the presentation, the reconfiguration and rethinking of people's businesses, which has started in any event, but it's probably been accelerated by COVID-19. And has meant that I think there will be opportunities arising out of this, which are sort of bank discount type or acquisition-type opportunities. It's sort of the same thing. It's almost driving the organic growth in the business as a whole, actually. So we have [ various ] scenario -- we've got 2 very similar things where we've got a client-related instruction on the one hand, which is very, very similar to an acquisition we made a couple of years ago. So -- all of the difference between the 2 is 1 bank has decided to sell and the other 1 decided to hang on to the fundamentals, but outsource the whole of the operations of that business. So we've got those sort of ones in there. Then, as I mentioned, I think the adviser community are very keen on playing, as we might call it here, Star Wars and sort of deciding who might be best to merge with who, which clearly is something, I think, that may well happen in the market, whether that includes JTC or not. It would have to be absolutely right for us. And we'd be protecting our culture as a significant part of that. But that's really in the background. But if the right one's there, then the right one's there for us. And then actually, there's a couple of quite big transformational deals, but ones that were tuck-in happily under the JTC banner, sort of big and untapped businesses, which, again, we've got visibility of. So it's never quiet in that area. We are a popular acquirer. There's a couple of deals we've seen where we've been -- how can I put it, [ new hold ] on staying in a process, and we've been chased very closely to want to keep us in. So that's where my comment and our comment comes from I think we might see some softening in pricing as the next few months roll out. And then organic growth in the second half of the year. Well, we're -- based on what I can see sort of 6 weeks in, we're actually ahead of the run rate from the previous 6 months. So we're pretty comfortable that we should be able to keep the run rate up. There's some very big mandates that have gone out there in the last several weeks. And looking at our win rates, I think we've got a reasonable chance of -- if 1 or 2 of those lands are being ahead of where we were or ahead of where we were in the first half. So quite excited about that, too. So not necessarily thinking something is going to fall away, but definitely not complacent about it.

The next question comes in from the line of Robert Plant calling from Panmure Gordon.

When you presented last time at the full year results, you had said that NESF was going to be a very useful bridgehead in the U.S. to do more deals. Can you talk more widely about the U.S. acquisition opportunity? And in particular, you mentioned the U.S. business you were tracking are focused on tax compliance real estate, is that still being tracked?

Thanks, Robert. I'll just pick it up and Martin probably needs to chip in. I think there are -- we're well aware of at least 2 or 3 deals in the U.S. actually, which would enhance our offering, obviously. I think what we've been doing, however, is concentrating on stabilizing the business we've got for obvious reasons. So at least 2 of those are sort of on hold post COVID in any event. So I think there's a chance in the fourth quarter that we may look at 1 or 2 of those businesses to see whether they're right for us. The tax-driven, or the business with the tax compliance and fund administration together, from our perspective, it's still quite difficult for us to get our arms around exactly what we're buying and for how much, so without putting too fine points on it. So that one sort of slipped down the priority range, but it's not impossible, and we've got a great relationship with the business.

Yes, there's opportunities there, Robert. And to Nigel's point from earlier, one of those is one that has chased us again and are keen to engage with us. So I think there's plenty of opportunity. I think it's in both divisions as well. It's not just on the institutional side. We've actually seen some quite interesting private client opportunities, quite small, but nonetheless, would be nice fold-ins to what we've already got. Our PCS business in the U.S. has done extremely well. So we can see that there's quite a good runway for growth there as well.

The next question comes in from the line of Vivek Raja calling from Shore Capital.

Can you just hear me okay?