MA Financial Group Limited (MAF) Earnings Call Transcript & Summary

Thank you for standing by and welcome to the MA Financial Group first half '23 financial results. [Operator Instructions] Thank you. I'd now like to begin the conference.

Good morning and welcome to the first half of FY '23 financial result call for MA Financial Group. My name is Julian Biggins and I'm Joint-CEO, along with Chris Wyke, who will present the result with me today. We are also joined by Giles Boddy, Chief Financial Officer; and Michael Leonard, Head of Investor Relations. I'd like to begin by respectfully acknowledging the traditional owners of the lands across Australia and pay our respects to their elders, past, present, and emerging. I also offer a welcome to any first Australians that are present on the call today. Pleasingly the execution of our consistent strategy is delivering with a strong operating result announced today and a very positive medium-term outlook with significant embedded revenue growth building long term value for our fellow shareholders. I'll start on Slide 7, which talks to some of the key themes for the half. Record first half fund inflows was a standout for the group with gross flows up 66% compared to the first half '22. Post record date we've processed the further 308 million of applications taking year-to-date gross inflows to 1.26 billion. This is 36% higher than at the same time last year. Asset management contributed approximately 80% of the Group's EBITDA. Consistent flows into our funds significantly offset a lower contribution from performance fees in the period. Earnings quality will be a strong theme of this result as our annualized recurring revenue run rate increased 22% over the prior period. Corporate advisory and particularly ECM revenue was impacted by the volatile equity market conditions, which is an industry-wide headwind. Having launched our Residential Lending brand MA Money earlier this year, our investment in building this new business is showing great promise. Despite the competitive residential mortgage market, we're extremely pleased with the strong growth in the size and quality of our loan book. Overall, the result is very pleasing with strong operating and financial momentum across most of our businesses. As we had previously referred to, the elevated $29 million performance fee contribution in first half '22 was always going to create a high hurdle in the subsequent year. And we're very pleased with how quickly recurring revenue is growing to replace it. FY '23 was always going to be a year of consolidation after growing underlying earnings per share so strongly in recent years, and we believe that the Group is poised for strong growth in FY '24 and beyond, which takes me to some medium-term targets for the Group on the following slide. When we talk about what drives the team, we often talk about building long-term sustainable value for investors, clients, and shareholders. The tables on Slide 8 outlines how we think about medium-term management targets at MA Financial, which underpins the value equation for investors. As you can see, the implied growth embedded in the FY '26 targets is very much in line with what we have achieved in the past, and therefore we believe these are measured targets. Importantly, we have based these targets on the infrastructure in place today as we have built the business to scale. Our FY '26 target for AUM is $15 billion versus nearly $9 billion today. Over the last 12 months we've increased AUM by nearly $2 billion and our flow run rates continue to grow. In regard the gross margin on AUM, we believe that the current margin of approximately 200 basis points is sustainable. This has been demonstrated over recent years, even with a significant change in our product suite, distribution channels, and market conditions. In lending, we've talked about MA Money and its target to deliver $15 million to $20 million of NPAT in FY '26 and the $4 billion loan book reconciles with that target. MA Money has made a lot of progress over the last 12 months and we're very pleased with the accelerating settlement volumes as we progress through the year. For Finsure, the book today is just north of $100 billion with 2,850 brokers. The growth in Finsure's platform has been phenomenal since we acquired it early last year, when the loan book was approximately $60 billion. And we expect this to continue as more brokers join the technology-based platform. Corporate advisory is part of the DNA of our business. And we have a demonstrated track record of delivering consistent revenue per executive over this journey. We'll continue to look at selective growth opportunities as they present themselves. We expect the Group's EBITDA margin to expand as scale delivers benefits. So to summarize this page, we're very excited about the growth embedded in the group and the strategic investments we have made. We believe that there is a strong track record that underpins the outlined targets and significant embedded growth in the business. Now, turning to some of the highlights of the first half FY '23 result on Slide 9. The Group delivered $0.152 underlying earnings per share in first half FY '23. Whilst this was down 13.6% on first half '22, the result was impacted by cyclical factors impacting our transactional revenues in addition to our planned strategic investment in MA Money. Importantly, our recurring annuity revenue run rate was $178 million at the end of June, which was up 22% on first half of '22. The board has declared a $0.06 per share fully franked interim dividend for the 6 month period, representing a payout ratio of less than 40%. Assets under management grew by 20% over the last 12 months, which is a fantastic result. This growth reflects our prior investment in our sales and distribution team and the attractiveness of many of our funds. AUM growth was underpinned by record strong gross flows of $953 million. Loan book growth was 59% over the last 12 months taking the book to $564 million. Finsure's managed loans were almost $100 billion at 30 June, up 18% from the prior period. Corporate advisory fees were down 30% compared to the prior year, which reflects the uncertain macro environment, with all industry participants facing the same challenges. Now turning to Slide 10, and the Group's financial results. As you would expect, our earnings metrics are lower than the prior period first half '22 as a consequence of lapping the elevated performance fees in that period. However, the composition of revenue is much improved. The percentage of recurring revenue as a proportion of total revenue increased over the period to 65% compared to 47% in first half '22. Our strategic investment in MA Money and the market related volatility impacting both performance fees and corporate advisory activity impacted the headline results. On the expense management side, we've been focused on optimizing the operational structure and this has cushioned the impact of the reduced transactional income. The balance sheet was actively utilized over the period to underpin growth strategies and we established a program to recycle some of the balance sheet assets which delivered a further $17 million in cash to the Group post balance date. Turning forward to Slide 11, and our 5 year financial track record. This slide demonstrates that we've grown earning significantly over the last 5 years and whilst FY '23 represents a year of consolidation, it also represents a year of significantly improved earnings composition and a strong foundation for future growth. Turning forward to Slide 12 now and business unit highlights. In regards to asset management, which represents 80% of the Group EBITDA, the results are very pleasing across the division. Record first half gross and net flows were underpinned by strong interest in our private credit funds. Recurring revenue margin was maintained at nearly 170 basis points, despite the change in product demand and distribution channels. We typically aim for 200 basis points gross margin, including all fees and to generate 85% of this target in recurring revenue was pleasing. In simple math, we're currently raising between $100 million and $150 million per month, and for every $1 billion of additional AUM, we generate $17 million of recurring revenue. In lending, the loan book increased 59%, underpinned by MA Money and accelerating settlements relating to the launch of its product suite. Brokers on the Finsure platform increased 18% to 2,846, reflecting a strong interest in its technology offering and its leading market position. Finsure's managed loans also increased 18% to $99 billion over the 12 months to June. Corporate advisory experienced difficult market conditions along with the whole industry. Despite this, the result was robust with timing of transaction closure always being more difficult to predict or execute in uncertain conditions. Now turning forward to Slide 13 and a review of how we delivered against our strategic priority. As I've already mentioned, our recurring revenue base has grown 22% over the prior comparable period underpinned by consistent inflows into our funds and growth in Finsure's fee-based revenue. Gross fund inflows were up 66% compared to first half '22 and this is despite migration flows only representing 4% of gross flows. Executing on our strategy to scale, as evidenced by the acquisition of Blue Elephant Capital Management and investment in MA Money. Both are expected to be future growth engines for the group. We aim to be a capital light business. Over the last 6 months we've recycled a number of balance sheet assets and believe that we have a sustainable balance sheet to fund the embedded growth options in front of us. Finally on people. Our investment in people is an ongoing imperative and the new offices across Sydney, Melbourne, and Hong Kong, all encouraging active participation in building MA Financial. We value our people and training them and are constantly refining how we provide the best environment for our people to thrive. So turning to Slide 15, and the key activity post balance date. We've continued to see strong momentum in the business in the 7 weeks post balance date. Gross flows in excess of $300 million take our year-to-date gross flows to $1.26 billion, net flows are in excess of $900 million year-to-date. The Priority Income Fund exceeded $1 billion in August, which is up $360 million year-to-date. We made 2 senior appointments in asset management with 1 focused on deepening our institutional relationships and 1 focused on the hotel accommodation industry. In lending and technology, Finsure delivered a record July with $3.8 billion of settlements and the loan book now exceeds $100 billion. Whilst there was a strong tailwind in refinancing volumes from the roll off of fixed rate mortgages, we see tremendous growth in Finsure as secondary residential volumes normalize. MA Money volumes have continued to build over the year with the first 7 weeks of second half '23 delivering $132 million of loan settlements. As discussed, we're not immune from a challenging corporate advisory market. However, despite this, the deal pipeline remains robust. And we are seeing an increasing pipeline or bad deal timing and execution uncertainty remains durable. This takes us to the outlook on Slide 16. This slide outlines a continuation of the positive momentum in the business. In asset management we see the embedded benefit of AUM that has been with us for less than 12 months, providing growth in the coming period alongside new net flows. We see a subdued environment for transaction and performance fees similar to the first half and remain focused on managing costs to ensure that scale benefits become tangible. In lending and technology, the residential market will remain skewed to the refinance market until the interest rate market stabilizes which we believe is closed. Investment in MA Money is expected to peak at a $7 million to $8 million loss in FY '23 before hitting a breakeven run rate in early second half '24. Our medium-term outlook for MA Money is for the investment to yield $15 million to $20 million of NPAT in FY '26. In corporate advisory, we're targeting to deliver around the lower end of our $1.1 million to $1.3 million per executive range, reflecting general market conditions. Headcount has reduced over FY '23 and we currently sit at 48 executives. This will probably move up slightly by the end of the year, although not materially so. So in summary, we expect to see a continuation of the strong growth in high quality recurring fees underpinned by growing inflows into our asset management product. We anticipate the variable market for transactional base revenue to remain challenging, although that will subside as the cycle moves to a new phase. Despite the challenges presented in the current economic climate, we're extremely excited about the future prospects for MA Financial. Turning to the divisional updates where I will start with asset management on Slide 18, before handing over to Chris. Slide 18 captures our asset management business on a page, we originate and actively manage alternative assets across 3 key asset classes being private credit, real estate, and hospitality. We have operating platforms and capabilities across several platforms that ensures we are directly originating and actively managing our assets on behalf of our investors. We believe this provides the best outcome for our investors. We are a capital-light asset manager with access to diversified and unique sources of funding, ranging from equity investors to banks, our balance sheet and co-investment capital. We believe we have a unique platform capable of materially scaling our assets under management, whilst delivering strong risk adjusted returns to investors. Turning to Slide 19 and the divisional financial results. The strength of this result is the significant increase in recurring revenue and the maintenance of a strong recurring revenue margin. Transaction fees were up on the prior period reflective of the establishment of the MA Marina Fund and the sale of Warrnambool shopping center. As previously discussed, the elevated performance fee in first half '22 resulted in a $21.5 million lower performance fee being recorded in this period. Overall and taking into account the prior period $29 million performance fee, we believe a less than $4 million reduction in asset management EBITDA is a very strong result underpinned by a significant increase in recurring revenue. To this point, recurring revenue represented 83% of revenue in first half '23 compared to 64% in the prior period. Turning forward to Slide 20, which illustrates the compound growth of 24% per annum in recurring revenue over the last 3 years. Since 2020, recurring revenue has nearly doubled from $79 million to $148 million today, based on the annualized run rate at the end of first half '23. The large majority of this growth has been organic and in recent years the growth rate has accelerated. Turning to Slide 21 now and AUM growth. The benefit of being diversified is clear on this slide with different asset classes offering greater appeal in different parts of the cycle. Over the last 5 years cut-off AUM growth is 18% despite the market volatility. Turning to Slide 22 and flows. It's probably where we should start the presentation given the focus and how positive the result is. Gross flows at $953 million for the period is a record result the first half and up 66% from the prior period. Net flows were up 60%, reflecting the strength of the gross flows and retention of existing investors. Importantly of those investors redeeming over the period, nearly 20% have reinvested their proceeds into another MA Financial fund. Private credit was the main beneficiary of gross inflows attracting $776 million over the period. We see demand for private credit continuing to accelerate, as many investors seek income generating investments, and we're well placed to be a beneficiary. For the other asset classes the increasing interest rate environment and market volatility has meant capital raising efforts have been more subdued, although we had very strong interest in the MA Marina Fund, and the sustainable future fund is gaining momentum. Our international non-migration flow has increased 62% over the prior period as we continue to strengthen our relationships with our private clients and their networks. The institutional mandates were secured as part of the credit program with a large domestic superfund and an international institution investing in our real estate credit fund. The federal government review of immigration continues, and we're hoping of gaining further insights as the year progresses. This slide demonstrates our strategy to diversify the distribution channels and develop scalable product that appeals to both domestic and international market is working. We continue to see opportunities to grow our market share in the markets we're in and we selectively expand into new markets over time, such as Singapore, and the U.S. Turning forward to Slide 23, which is a new slide for our presentation, and shows historical flows. The charts clearly show how MA Financial's distribution channels have diversified over time and continue to grow despite a decreasing contribution from migration products. The slide also shows the growth of domestic flows, which follows the development of our alternative asset strategies. On the right-hand side, the graph shows the growth in gross inflows by channel over the last 4 years. We continue to deliver strong gross inflows from both the domestic and international markets. Turning to Slide 24, which shows the change in our investor base over time, and a more diversified wagon wheel than the prior year. Turning to Slide 25 and some specific commentary around the asset classes. I'll leave most of this commentary for you to read and spend a moment on hospitality. As most of you know, the responsible entity of Redcape Hotel Group posed the liquidity feature for investors due to general market uncertainty. Since establishing Redcape, it has delivered a 16.1% return to investors over a 6-year period net. Over the last 12 months the directors of Redcape have expanded cap rates with the current valuations reflecting a 7% cap rate based on venue maintainable earnings. Whilst operating conditions are variable, the operating performance of the pubs over the longer term have proved resilient and trade above pre-COVID levels today. Over the last couple of weeks, Redcape has contracted to sell 2 smaller venues in Queensland totaling nearly $30 million, both at a premium to book value, which underscores the private interest in community pubs. All real estate assets are going through a period of consolidation and the pubs are no different. We continue to be high conviction community pubs as they generate strong cash flows backed by strong fundamentals and a large land bank in metropolitan locations. Turning to the final slide of Asset Management section before I hand over to Chris. Slide 26 illustrates the significant growth we are experiencing in private credit. This slide captures the breadth of our business and the unique capability we have in-house that underpins the attractiveness of the platform. It's how the entire platform comes together that creates the real opportunity and value. I won't dwell on this slide, although clearly, the AUM growth provides evidence that the funds are appealing to the investor base, and our track record is impeccable at delivering targeted returns. I will now pass over to Chris to talk through lending and technology.

Thanks, Julian. And turning to Slide 28 on lending and technology. The development of our lending and technology business is consistent with our strategy of being a builder of valuable businesses in large addressable markets, which are very scalable. Financial technology platform that we have generates fees and commissions. It also provides considerable data and insight and is very complementary with the growth and development of our lending business in both specialty finance and residential lending through MA Money. This lending business not only generates spread income earnings, but it is also a primary generation engine of investment product for our managed credit funds. The underlying financials of our Lending and Technology division are broken out on Slide 29. Financial Technology experienced strong growth in revenue of 27% over the prior comparable period. As Finsure's managed loans and broker numbers increased over the last 12 months, I'm really pleased with the Finsure acquisition and how the business is growing. Lending platform revenue declined over the last 12 months. Now this is a result of a credit asset being recycled out of our lending business and into managed funds within our Asset Management division as well as higher interest costs stemming from the increases in variable interest rates throughout the year. The expenses of the Lending and Technology division increased over the last 12 months as a result of the investments that we have made in building the MA Money residential lending platform and taking on more staff into Finsure in order to deliver the strong growth that it's experiencing. As such, the overall EBITDA declined 15% over the last year from $8 million to $6.8 million. A more detailed breakdown of the technology business is shown on Slide 30. It's pleasing to note that the Finsure loans managed on its platform have now reached over $100 billion. That's a great result. And broker numbers increased 18% to approximately 2,850. Now fees and commissions are therefore expected to increase as these new brokers mature and generate loan book growth on the platform. Slide 31 graphically represents the growth that Finsure has enjoyed over the past 6.5 years. This is market-leading growth and it demonstrates the value proposition that Finsure adds to the brokers and lenders on its platform. Finsure now has around a 15% broker market share. Moving on to Slide 32, which sets out more details on specialty finance and residential lending business. And as mentioned before, this business is in ramp-up with planned investment to deliver growth. The key performance drivers on the bottom of the page clearly demonstrate the investment that we are making to MA Money. And we've made a deliberate decision to compete with pricing and terms in this competitive market in order to grow our loan book, and it is working. In addition, we have sourced considerable funding capacity to meet this growth. Slide 33 shows the growth that we're experiencing in the MA Money loan book on the left-hand side and the more efficient utilization of balance sheet capital in funding that growth on the right-hand side. As an update, as Julian mentioned as well, I reiterate that we have settled on approximately $130-odd million of loans within the first 7 weeks of this current half. And finally, I'll move on to corporate advisory and equities, Slide 35. You can see the segmental financials that reflect the challenging environment for closing deals within the first half of 2023. M&A as well as ECM activity has been subdued in the first half and predicting when deals will close has been a challenge. By way of example and update, work largely completed in the first half of the year will deliver about $5 million of transaction fees rolling into the second half of '23. And we are seeing early signs of improving market conditions in the second half with considerable momentum in building our pipeline with more mandates continuing to be one. However, deal closure and success does remain uncertain. You'll also notice a small decline in our average headcount compared to last year. This has resulted from a degree of natural attrition and a disciplined approach to managing the platform and costs in this current environment. At present, there are 48 executives within corporate advisory, and we are looking at continued incremental investment in teams and new hires, but we will be disciplined in our approach to growth. On Slide 36, you can see the seasonality in revenue that we typically experience within corporate advisory and equities with a 60% skew to revenue in the second half. As our pipeline continues to build, we expect a similar skew to the second half this year. On that, I'll now hand over to Giles Boddy, our CFO, who will take you through some more details on the financials.

Thanks, Chris for that, and good morning, everyone. Turning to the financials and starting with the Group underlying profit and loss on Slide 38. The Group had a strong first half performance with underlying NPAT of $24.4 million and underlying EPS of $0.152. Whilst there is strong underlying momentum in the business, the headline result was down 13% on the first half '22 due to the impact of elevated performance fees in first half '22 and weaker market activity advisory. Pleasingly, the Group's recurring revenue for the half of $83 million was up over 20% on the prior comparative period. And this reoccurring revenue now comprises just over 65% of underlying revenue, highlighting the strong composition of earnings across the group. Expenses of $83 million were down 14% in first half '23, reflecting tight cost management and the timing of revenue-related compensation in both first half '23 and first half '22. The group's compensation ratio for the half was in line with FY '22 at 49.8%. The combination of strong earnings and strong cash conversion is maintaining our interim dividend of $0.06 per share. Turning to the operating balance sheet on Slide 39. Our operating balance sheet aims to present a simpler view of both our invested capital and true economic exposures. A detailed reconciliation between our statutory balance sheet and our operating balance sheet is included in the pack on Slide 48. The balance sheet strength has really facilitated the exceptional growth in our asset management and lending businesses that was outlined by Chris and Julian. The Group's cash position of $56 million at 30 June '23, was lower than 31 December '22 due to the seasonality of payments following the payment of a final dividend for FY '22 and full year '22 bonuses as well as the acquisition of Blue Elephant and increased funding of our MA Money business. Our $40 million revolving corporate credit facility really enhances the balance sheet flexibility and means we can support continued growth across the business, whilst running cash at lower and more efficient levels. The facility was drawn by $25 million at 30 June 2023 and was fully repaid in July. Finally, turning to our investment breakdown on Slide 40. Our focus in the half was on the ongoing support and investment in key lending and asset management strategies. We continue to recycle our seed and co-investment capital. During the 6 months to 30 June, we recycled and reinvested over $100 million into new and existing strategies. In the investment table, you can see a net increase in lending as we increased our investment capital in MA Money to establish a number of new warehouses, which gives the MA business capacity of over $1.7 billion, an increase in our investment in private credit funds to support growth as well as the acquisition of Blue Elephant on the previous slide. This dynamic nature of our balance sheet and our focus on capital efficiency will continue to underwrite our future growth. I'll now hand back to Julian.

Thanks, Giles. Many of you have seen this slide before, although our simple strategy is applied across our businesses and is summarized on this slide. We've built as a valuable businesses in large addressable markets, and we look to scale businesses with unique distribution capabilities. We have access to diversified capital sources and client bases and a strong balance sheet to support growth initiatives. We have a specialized advisory capability aligned with a leading independent global platform, and our experienced management team strongly aligned with investors. With that, I'd like to close out by reiterating the strength of the operating result as demonstrated by our growth in recurring revenue and the embedded future growth in MA Financial. We've always talked about having a focus on creating long-term value for shareholders, and we're pleased to be able to provide some medium-term management targets to better frame the opportunity for all. With that, I'd like to hand back to the operator for Q&A.

[Operator Instructions] And your first question comes from the line of Apoorv Sehgal from UBS.

I'm just subbing in for Tim Piper. 3 questions from me, please. The first one, just on the recurring revenue streams. Obviously, they're increasing. Any rough targets or guidance around share of recurring revenue as a percentage of total under the FY '26 medium-term targets, please?

I think when you think about what -- sorry, it's Julian here. But when you think about recurring revenue and where we generate it from, currently, we record the monthly fees that we get from Finsure and the base in credit income fees that we get on an annuity basis from the asset management funds business. Over the last couple of periods, that's been growing at sort of 35% per annum. And as those flows come in, we expect that to continue. So the thing about the other fees, the more cyclical fees, I think they bounced around a bit. We've had as high as 100 points of performance and transaction fees in the period. This period is about 30 points. If you look through cycle, I think you can look at that composition of 200 points with 85% coming from recurring is not a bad property.

Next question, just on revaluations. Sort of looking across hospitality and real estate and knowing that real estate is mostly the closed-end funds. How should we think about revaluation movements over the next 12 months, please?

I think the good thing for us around real estate is we're sort of focused on high yielding assets over the journey. So when you think about the shopping centers, which is about $1.9 billion of the real estate portfolio that were required on higher yields and some of the sort of the tighter yields that have paid to the cycle for other asset classes. So we think we see some easing in that, but it's not hundreds of points in sort of 25 points or 50 points here or there. And so therefore, when you think about it in the competition of the whole AUM, it's probably not going to move the dial a heat. In terms of the hospitality, again, they're sort of in the books at about 7% cap rate. The directors of the Redcape Hotel Group have been easing cap rates for the last 12 months. We don't think there's a long way to go there, and we've actually sold some assets at around value. So we don't see this being a material impact in the business. We're not bring to the cap rates moving up slightly at this point in the cycle, but we think our assets are pretty defensive in that sense that they're high-yielding assets, which gives us a bit more color on the rising bond.

And just a final question for me. Just on the asset management OpEx. It was down about 16% year-on-year. How much of that will be driven by variable compensation versus like just efforts to reduce costs?

It's Giles here. So look, talking about those costs in asset management, but also across the group as well. There's a couple of timing items that are coming through. So there's a number of one-off items in first half '22 as well as revenue-related compensation that we had. So -- and that was in the timing in first half '22 and how that relates to the elevated performance fees we had in last year and then also in the first half of this year as well. The overall comp ratio for the half is going at 49.8%, and that's sort of aligned with what we did last year for the full year. I think you think that stays pretty consistent for the full year. So more timing than cost being materially down. It's -- we are very cognizant of building the business of scale. So coming out of the sort of half year results last year, we did have a very close look at the business in terms of optimizing the platform and reducing growth in headcount, but that comp ratio should provide you with a guiding line at 50%.

Your next question comes from the line of Glen Wellham from MST Financial.

Well done on the result and also in particular, well done on all the disclosure within this document, fantastic, particularly the medium-term outlook. This question on your growth ambitions in lending. You've disclosed you've got a roughly 15% market share for Finsure. So just sort of trying to work back to that $4 billion growth target in the loan book. What sort of market shares MA Money getting from Finsure currently? And where does the market share for Finsure need to get to? Or -- and I suppose implied for MA Money as well market share of Finsure to get to that sort of figure just in rough terms?

Yes. But I think it's important to note, Finsure and MA Money is vital statistics for what is a better phrase, are distinct and very separate. So the Finsure business model is about the fee, the service and platform for brokers and being an integrated piece of the home loan volume market, which is, I think, now in excess of 70% brokers. So Finsure as a fee-for-service provision, which sees a huge amount of volume running through its platform. MA Money is separate and distinct to Finsure and it's out there in the market, competing with other nonbank lenders. Its products are indeed on Finsure platforms, but they're also on other aggregator platforms. And it is coming from a standing start. MA money is really from launching properly in February this year. So it is experiencing quite nice growth as it has been a new entry to the market. The residential lending market is, I think, the largest capital market in the country or what are the things largest capital markets in the country side, its market share is absolutely miniscule. And really, it's a question about getting good products on shelf and building a processing engine to tap into what is a growth in nonbank lenders in this country and to see that ramp up over time. To get to that $4 billion settlements per month of, say, $100 million and $100 million and change get you there on that trajectory. There is not a really -- that's not a really meaningful market share number that you can have when you'll see the market settling tens of billions of dollars of loans per month. I don't quite know what the industry number is, but it would be a share fraction of that. So we don't really look at the MA Money comps and market shares and compare them to Finsure. It's part of the same ecosystem being business units to generate income from the residential lending market, but they're very different in nature, and they both compete very separately in the marketplace for the business that they do. So I can't really -- there's not really a meaningful tie between this is what Finsure is doing, so therefore this is what MA Money should be doing, MA Money should stand less than 2 feet.

I think the acceleration we're seeing in the run rate of settlement giving us the confidence that running towards the $4 billion.

Yes. Yes. I mean the MA Money products that are out there in the market for borrowers to consume stand on their own 2 feet and are getting traction because we think they're good products are well positioned.

Right. And just any quick comment on -- is there any pickup in the restructuring work within corporate Advisory?

Not a -- with restructuring, someone somewhere always get something wrong. So there will be things to do. Looking at the macro and where the economy is, are we seeing a general groundswell in activity, not a huge amount at the moment.

[Operator Instructions] And your next question comes from the line of Nick Burgess from Ord Minnett.

I echo our previous statements around the helpfulness of the FY '26 targets. Just a couple of follow-up questions on those pieces. Firstly, in asset management, are you able to help us out with what your broad assumptions are for capital appreciation versus flow for the AUM target in '26?

Yes, sure. I think we've been very focused on sort of net flow is on the rise of $15 billion of AUM. We haven't built a massive advance around any valuation to be honest.

Is there an underlying assumption in that $15 billion of a return to normal in the migration channel?

No, there's limited assumptions around the migration channel.

So that remains reasonably subdued in those forecasts?

It would be subdued to the this year, yes. Really what we use is the FY '23 year as a base year and then think about our growth rates from there in a measured way.

And just a similar question with MA Money. Chris, I take you some of your points from the previous question. Is there an assumption you can help us out with in terms of that $4 billion target, how much in terms of distribution channel that's going to be delivered by Finsure versus how much is going to be delivered by other platforms in the market.

Look, the -- not really the volume flows that we're getting are quite diverse. So we don't necessarily -- we're really basing that of the volume ramp-up that we're experiencing now from other platforms from funds direct and Finsure as well. So it's really across the board.

A couple of questions. Just on the cost base, given your guidance comments around the investment in MA Money in the second half, the overall group EBITDA margin improved. And obviously, given the environment, that's a pretty impressive result. How should we be thinking about the group EBITDA margin in the second half or for the full year, given all of the guidance points that you've given us?

Yes. I think in terms of the group EBITDA margin, you'll see it sort of normalize back to sort of consistent with last year, I think. But it's really timing differences around some of the revenue recognition and durable compensation that's driving a little bit of that. But I would have thought that the FY -- the financial year '23 numbers there or thereabouts, not the half or the full year.

Yes. And what was the full year EBITDA number? Just remind me, sorry, I don't have that in front of me. So we're saying no.

Let us come back to you. It's a little bit higher than the 33%, but let us come back to you.

And lastly, I'm not sure whether you're able to say, but is there a broadly planned time for Redcape to -- when the restrictions will lift on that fund at this point?

I think it's a good question. It's one -- we've spent a lot of time with the investor base of Redcape in coming to this position. So it's a line position with the investor base. In terms of timing, I think we really need to see a bit more out of the macro environment to come out of that, and it's really a decision for the ROE of the Board. The liquidity showing demonstrating over the last couple of weeks that we sold 2 assets that are around book value. The assets perform okay in this market. So we just got to wait and see. And I think the investor base is very much of the view that you have a stable capital structure from which to participate in the future growth of the asset as opposed to put it under pressure. Most of the investors have been with this fund for a long period of time have done very well. And they're largely supportive of the long term for the asset class.

And the asset sales that have been announced so far, broadly, when do they settle?

They're Queensland, so they're subject to regulatory approvals at the minute, but that will take 3 to 6 months to settle right, but it's up to the New South Wales the LGR, but that's the process we would go through the regulator. We have another sort of 3 or 4 assets and the market has been announced around Shamrock, which is something Queensland as well. There's quite healthy conversations going on around sort of some of the smaller assets, so.

Your next question comes from the line of Andrew King from Perennial.

Just a quick one on the '26 targets. How much capital do you think you need to invest to hit those targets from an MA Financial balance sheet point of view?

From the note, so basically we've said that we did we've got enough capital in the business to run this sustainably. So as you know, we see investments, we paid the capital back, we've done rather initiatives, right? So again, we sort of had some other capital recycling that's gone on through the balance sheet in the last 6 months around some of our investments, et cetera. So that's an ongoing theme for the business, and we think we're well capitalized to achieve these sort of targets.

Okay. So pretty capital light to those targets?

Yes.

So rising ROEs in the future?

I hope so, yes.

Your next question comes from the line of Mark Skocic from Kinetic Investment Partners.

King asked one of my questions. So the second question was actually probably more for you, Chris. Given the U.S. is significantly larger than Australia, can you just give us a bit of a [ slide ] for the size of the credit opportunity with Blue Elephant versus Australia?

For sure. I mean, there's really 3 things to mention about the U.S. market and the credit piece. One, as you highlight is the size, it is infinitely larger. So when you look at the amount of credit that we manage in aggregate, in Australia right now, it's around that $3.3 billion mark for the investment strategies that have proved very popular here in the private credit space in the state, it is multiples the size. You could just invest in one specific idiosyncratic type of credit and easily get to $3.3 billion in that in and of itself. And that's the second point about the U.S. market. The nature and sophistication of the credit and how deep certain areas of specialty run within the state, it means that you can have a real point of differentiation asset selection and originations. So it's hundreds of billions of dollars in some very niche and bespoke areas of credit and multiples of that more broadly. The private credit generally is having a bit of an awakening as an asset class, I would say, globally with a lot of managers seeing this space that a space that we've been operationally in Australia since 2017 or '18. And hence, I'll move into the states. And the third piece that, that moves into is the investor base and pool of capital in the states, which is very attractive to us. So not only do we think we can manufacture good risk-adjusted return credit product to our Australian and international investors on both an Australian dollar and a U.S. dollar basis, hedging in the Aussie dollar. We also think with the aging demographic and the first ring colon with yields moving and the macro with the banks in the states we're treating from certain credit markets, we think there's really good risk-adjusted return on piercing into distribution more into the states. And the pool of capital managed in the U.S. is obviously vast. So through that lens of private credit, we're seeing massive upside in terms of total market size, sophistication of product and point of differentiation and the ability to source capital in that market. Now obviously, we only closed on the transaction this year, we're moving some staff over to the states for better and more efficient integration. And so we're going to really seek to ramp that up more next year.

And just a second one, Chris, do you reckon like in 3, 4, 5 years' time, the U.S. credit opportunity to be larger? So obviously, the total of the market is larger. But do you think the business in the U.S. could be larger than Australia just purely from the [indiscernible] market?

I'd like that to be growth everywhere, obviously. But we're starting from a small nucleus in the U.S., but it has got a long track record, which is additive to leverage off to grow. But I really hope we get the U.S. right, the opportunity is vast.

And that does bring our Q&A session to a close. I would like to hand over to our speakers for any closing remarks.

I appreciate your interest in the call today, and we look forward to catching up with many of you on the road in the next week or so. So thank you for your interest.