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

Good morning. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the MA Financial Group Conference Call. [Operator Instructions] Thank you. Julian Biggins, Joint Chief Executive Officer, you may begin your conference.

Good morning, and welcome to the FY '23 full year results presentation for MA Financial Group. My name is Julian Biggins, and I'm here with my fellow Joint CEO, Chris Wyke. We also have Giles Boddy, the Group CFO; and Michael Leonard, our Head of Investor Relations in the room. We're very pleased to announce another strong operating results for the business with our strategic initiatives progressing well and recurring revenue continuing to grow strongly. Let's start on Slide 8 and the highlights for FY '23. Momentum remains with the business. Gross fund inflows reached nearly $2 billion in FY '23, a record result that was up 27% on the prior year. Our assets under management finished the year at $9.2 billion, up 18% from the prior year. To put in context, when MA Financial listed in 2017 we had $1.1 billion in assets under management, and therefore, have grown at eightfold in just over 6 years. Our gross flows last year were nearly double the total AUM when we IPOed. This very strong growth has only been achieved due to our focus on investing strategically. We believe in investing today for tomorrow. In addition to record inflows, we have seen meaningful change in our distribution channels over this time. In 2023, inflows from domestic sources continue to grow rapidly as did investment from foreign high net worth investors into non-migration funds. Recurring revenue, one of our most important metrics was up 23% over the period, reflecting strong growth in asset management and the Finsure platform. This resulted in a materially stronger earnings composition with recurring revenue growth partly offsetting the expected lower performance fee revenue. Our residential mortgage marketplace is working with Finsure's loans on platform reaching $110 billion, up 20% over the year and MA Money's loan book close to $1 billion. We're also very pleased to see MA Money undertake its maiden securitization in the year, highlighting its ability to deliver capital-efficient growth. Our balance sheet remains strong, and we are focused on running a capital-efficient business. This has allowed us to hold our full year dividend in line with FY '22 at $0.20 per share fully franked. Finally, we have always spoken about balancing short-term earnings with longer-term growth. Investment in growth strategies has an impact on short-term earnings. In 2023, we invested in a number of initiatives, including expanding our distribution channels into Singapore, Japan and the U.S., MA Money, Middle, senior hires in corporate advisory and equities and importantly, growing our brand awareness, which on a combined basis, impacted our underlying earnings per share by approximately $0.05. As significant owners alongside our fellow shareholders, we are confident that this investment will be rewarded in future years. This willingness to invest in growth is a major reason we have been able to grow our underlying revenue from $107 million in 2017 to $270 million last year. MA Financial is in great shape. It has a very diversified and robust foundation and operating metrics are growing strongly and we continue to invest to drive growth in the future. Turning to Slide 9 and our 2026 targets. We first published these targets last August with the objective of elevating the view to the medium and longer-term growth opportunity, which is how we think about the business. This is how we build the business and have demonstrated a track record of investing in strategies that deliver substantial growth over time. All of our targets remain unchanged and the run rate over the last 6 months keeps us on track to deliver on those targets. Corporate Advisory has been impacted by volatile acid market conditions and the EBITDA margin is impacted by both cyclically low earnings in our transactional revenue streams and our strategic investments. We believe that these targets are achievable and are excited about what this holds for the future. Now turning forward to Slide 10. Pleasingly, recurring revenue was up 23% on the prior year, underpinned by nearly $2 billion of gross inflows and a 21% increase in Finsure's loans on platform. The residential and specialty loan book also grew strongly, nearing $1 billion at year-end and has continued to grow post. As we have previously explained, underlying earnings per share was expected to be softer due to both corporate advisory and performance fee revenue being impacted by rising interest rates and uncertain market conditions. Neither of these areas of softness were unique to MA financial in FY '23. And when you consider that we have added over $25 million of recurring revenue in the year, replacing a fair bit of the outsized performance fee of the prior year, you start to sense the real strength of the results. Now turning to Slide 11. This slide demonstrates our ability to materially grow and diversify our business over time. In FY '17, we listed MA Financial and forecast to have $73 million of underlying revenue, of which only $17 million was attributable to recurring revenue streams. Only 6 years later, we're generating $270 million of underlying revenue, with nearly $180 million of that being recurring in nature. That is 10x the amount of recurring revenue that we had at the time of the IPO. We have grown significantly over the last 6 years and we continue to invest to deliver strong growth in the future. Today, we have operations in 6 countries and employ over 600 people directly in addition to many thousands more employed within our various portfolio companies. Recurring revenues are the foundations of a strong and resilient business. We see our FY '26 targets align strategically with the objective of continuing to build recurring revenue base, with a history of delivering in areas that we invest in, such as the migration product, domestic distribution capability, our hospitality business and private credit, to name a few. We are always looking to lead and innovate into the next frontier. Now turning to Slide 12 and our financial results. The headline financial result is obviously down. Although when you take into account the $44 million lower contribution from performance fees in this year versus last, it's a strong result in a difficult market. Recurring revenue increased to 66% of total revenue. That's up from 48% in the prior period. Expenses are down 3% year-on-year despite our significant strategic investment in future growth initiatives. These investments added approximately $16 million to the expense line item. ROE and EBITDA margins were also impacted by our strategic investment spend and cyclically low revenue from our transactional revenue streams, reflecting the uncertainty and lack of market confidence. We increased our working capital facility to $80 million over the period, which provides us with more flexibility to run an efficient balance sheet. And we remain very focused on capital efficiency and having a capital-light model. Overall, we believe the result is a very strong result, reflective of a business growing its recurring earnings through difficult market conditions whilst continuing to invest in growth initiatives for the future. Turning forward to talk more about our strategic initiatives. On this slide, we want to emphasize just how much we focus on investing strategically in the business to build future earnings growth opportunities. The balancing act here is delivering short-term earnings while embracing substantial future growth opportunities. We believe that we find a good balance in this regard. Since our founding in 2009, we have demonstrated our ability to substantially grow and diversify the business over time. Clearly, growth involves forward investments and a lot of hard work. Whilst the timing and impact of growth initiatives can be fluid, our experience is that patients and vision is generally rewarded. Whilst we are excited about all the initiatives, I'll focus on a couple of days that we might not have talked about previously. In FY '23, we invested strongly in the MA Financial brand. The initiative is focused on elevating MA Financial to become a trusted household name. We believe that this will benefit all of our divisions, driving growth and in particular, in growing our number of consumer-facing businesses. We acquired New York-based Blue Elephant Capital Management earlier in the year. This established our U.S. credit platform with a team that has been in business in the U.S. for a decade. Our objective is to leverage their strong track record as investment professionals with our distribution and product development capabilities. The U.S. credit market is the largest in the world, and that's a massive opportunity for us as shareholders of MA Financial. We also invested into a digital distribution platform in Japan, named MA Alternatives Japan. This platform is targeted at attracting Japanese investors into foreign asset management products. Our first product on this platform will be private credit products. MA Financials owns 1/3 of the business in conjunction with our local partners. We've been on the MA Money journey together and are really pleased about it progress with the loan book approaching $1 billion of settlements and continuing to grow quickly. We believe we are on track to contribute $15 million to $20 million of NPAT in FY '20. After a number of years of focus and financial investment, the meaningful price is now within reach. Our Middle Technology business continues to gain momentum as we look to improve efficiency and accuracy in the way home loans are processed and approved in Australia. Middle makes the process of applying for a home loan easier and faster for mortgage brokers and their customers. While still in the investment phase, Middle is rapidly moving towards being a key component in the processing of over $1 billion in home loan applications monthly. Growing user numbers and processing volumes is a key step in building the use of Middle to become widespread across the home loan industry. Increasingly, mortgage brokers on the Finsure platform are routinely using Middle as part of their interface with their individual borrowers. The efficiency achieved using Middle is proving to be a significant time-saving technology for brokers and thus improve the attraction for them to be on the Finsure platform. The combined impact of these investments on our FY '23 underlying earnings per share is around $0.05. However, when you consider the potential upside, it's exciting to think about what additional growth can be achieved. We think this investment is critical to grow the business over the long term and we have a track record of delivering considerable growth for our shareholders. There will be cyclicality to our earnings, some out of our control and over the long term we have demonstrated an ability to build a substantial business capable of navigating difficult markets and delivering strong growth. Now turning forward to Slide 14. The charts on this table illustrate a year where we faced a number of market headwinds. The trend in revenue growth demonstrates the longer-term momentum in the business and our ability to continue to grow revenue. Importantly, a lot of the growth is recurring in nature. The weaker second half results in FY '23 is reflective of some of our strategic investments. MA Money and U.S. credit platform, particularly impacting the second half results by $0.04 per share relative to a $0.01 per share impact in the first half of the year. Now turning forward to the business highlights on Slide 15. Asset Management now contributes roughly 80% of group EBITDA with the other businesses providing diversification and a stronger ecosystem to create value. Asset Management delivered record fund inflows, driving AUM to $9.2 billion with a strong recurring revenue margin of 173 basis points. Asset Management EBITDA was always going to struggle to lap the prior period when we had $44 million more performance fees. Strategic investments in U.S., Singapore and Japanese distribution channels also impacted expenses by approximately $5 million with most falling in the second half. Despite both the performance fee and strategic investments, EBITDA was only down $20 million with recurring revenue representing 87% of asset management revenue, and that compares to only 64% last year. Lending & Technology grew its loan book by 150% to almost $1 billion, driven by accelerating growth in MA Money. Finsure continued its impressive momentum attracting almost 500 new brokers to its platform and growing managed loans to $110 billion, almost double the amount of managed loans that are on Finsure's platform when we agreed to acquire the business in late 2021. It was a difficult year for corporate advisory and equities as was the case for all market participants. The skew of activity remains towards M&A with very little ECM activity through the year. Early signs in '24 are more hopeful, however, we remain forces. It remains an uncertain market. Turning now to our FY '23 strategic outcome on Slide 16. Our strategic priorities have remained consistent over time and we continue to deliver on executing them. Recurring revenues across Asset Management and Finsure both increased materially over the year. Our distribution channels continue to expand and diversify, driving a 27% increase in gross inflows to nearly $2 billion. One of the continued highlights was the growth in our domestic flows, which exceeded $1 billion in FY '23 and was up 81% on the prior period. We are and will continue to invest in future growth opportunities in our business across all 3 divisions. We focus on executing our strategy in a capital-efficient manner. We have demonstrated this through recycling assets from our balance sheet, including the maiden $500 million MA Money RMBS. Our people are important to us. Our compensation ratio will be elevated this year as we face [indiscernible] low earnings. It is critical that we protect and reward our people for the future. We continue to invest in the future in development through the MA Academy. We also met our objectives to build new businesses within Financial. We have global growth opportunities and move people around our business where it makes sense. We are proud of our culture and look to reinforce it as it's so important to our success, and the rebranding exercise as part of this. Now turning to our post-balance performance and outlook. This is on Slide 18. The positive momentum has continued across the group into '24. Our asset management funds have continued to attract strong inflows with $262 million gross raised in the first 6 weeks of the year. We have started our journey to build out distribution in the U.S. credit platform with the appointment of our Head of U.S. distribution. We also launched [indiscernible] the equity for our MA accommodation Hotel Fund with the [indiscernible] in Melbourne acquired for approximately $96 million. The fund will be a multi-asset fund, and we see a significant opportunity to grow in this sector at a time that many assets are selling at material discounts to replacement costs and on attractive yields. Our digital distribution venture in Japan has received its license to distribute product with our first offering to be a private credit fund. MA Money's volumes over the first 6 weeks has exceeded $150 million, and our run rate remains well on track to hit our FY '26 loan book target. In lending and technology, Venture continues its positive momentum into FY '24, including building out a presence in New Zealand. The Middle technology is gaining traction with Finsure brokers and received in excess of $500 million of loan applications on its platform in January alone. We anticipate this to reach $1 billion per month by the end of first half '24. And in corporate advisory and equities, we've started the year well with approximately $10 million of fees largely derisked or paid. Now turning forward to our outlook. We are optimistic about the year ahead, although macro uncertainty remains. In Asset Management, we expect continued growth in both gross and net flows. In terms of recurring revenue margin, we expect there will be some headwinds due to the rising interest rate environment impacting our core real estate and hospitality strategies and the sale of approximately $200 million of Redcape's assets. The FY '23 recurring gross margin of 173 basis points was also elevated due to strong performance from the private credit funds. We expect transaction and performance fees to be broadly in line with FY '23. In lending and technology, MA money is expected to hit a breakeven run rate in second half '24 and remains on track to deliver $15 million to $20 million of NPAT in FY '26. In Corporate Advisory, while we've had a good start to the year, we are cautious about overall market confidence and volatility. We have a strong M&A pipeline and equity markets are improving, although it still remains uncertain, and therefore, we are pointing to the lower end of the target range in FY '24. The year has a long way to play out. And finally, we are continuing to invest in expanding our distribution channels and other growth investments such as brand and MA Money. We believe these investments will represent around a $0.06 per share earnings impact in FY '24 with us due to the first half as MA Money continues to build momentum, and we invest into the U.S. credit platform. We plan to continue to focus on balancing shorter-term earnings performance with an appropriate investment in growth initiatives. As is our practice, we will invest in growth as we see the opportunity. Overall, the operating performance of the business is very pleasing and our momentum over the last few years continues. We're navigating difficult markets to impact the more transactional side of our business, and we're well positioned to deliver strong growth as it cycle terms. Our AUM is expected to grow along with Finsure's managed lines on platform and MA Money's loan book. I'll now go through a few slides in the asset management section before handing over to Chris to briefly pick out some of the key highlights for lending and technology as well as [indiscernible]. Let's jump to Slide 24 quickly before I touch on flows. Clearly, our assets under management have grown significantly over the journey with AUM up 8 fold since we listed the business in 2017 and up 18% over the last year. Private credit has continued to attract investors to a defensive yield, and we've also witnessed strong interest in alternative real estate, both the accommodation hotels and Marina. I believe today, our AUM would be closer to $9.4 billion. Turning forward to flows on Slide 25. When we look at this by investor channel, clearly, domestic flows have had an exceptional year, growing at 81% and surpassing $1.1 billion of gross flows. Only 3 years ago, we were raising just over $100 million domestically, that's a phenomenal outcome. International Non-Migration flows were up a strong 27% to nearly $650 million. Non-Migration flows were subdued as the review of the program continues, and institutional flows were marginally up with a couple of LPs allocating the private credit products. We see the institutional market as a significant opportunity for the group and continue to have more meaningful discussions with global partners. And turning forward to Slide 26. The chart on the left demonstrates the execution of the stated strategy to both diversify and increase gross flows over time. In only 3 years, we have taken our domestic and non-migration international flows from $330 million per annum to $1.7 billion today, nearly a fivefold increase over 3 years, and we see plenty of opportunity for future growth in Australia, Asia and the United States. These numbers are very exciting and demonstrate the asset management business' strength in a market where many are finding it difficult to raise money. It is a very diversified investor base with many products offering tenure certainty. We're continually looking at adapting products or innovating new products to cater for ever-changing market conditions, whilst also having a bias for larger, more scalable funds. I'll now hand over to Chris to talk through the other divisions and close out.

Thanks, Julian. I'll briefly play out some highlights from the lending and technology ecosystem that we've been building over the last 3 years. Turning to Slide 34, a brief review of Finsure. We've continued to see excellent growth within the Finsure business and its market position. This stems from Finsure offering a differentiated proposition for brokers in the value-adding services that it delivers. Finsure broker market share has increased to 16.3%, up from 14.2% last year and excitingly, in FY '23, the platform cracked $100 billion loans under management mark. We closed the year at $110 billion with over 400,000 borrowers on the platform. More broadly, if we see a continuation of the increased activity in the residential learning market, we are optimistic about adding more new loans and continuing the rapid growth in the Finsure platform over the year ahead. Moving to Slide 36. You can see the growth that we've had in our lending activity. The graph on the left-hand side displays the really strong growth that we've achieved, notably taking the MA Money loan book to $829 million. And as Julian mentioned, the current balance of the MA Money loan book sits at around the $1 billion mark. The graph on the bottom right-hand side shows the amount of capital that we have invested in growing the lending business and how much more efficient that capital has been utilized as our growth has matured. We retain our conviction investing into MA Money and remain on track to deliver our FY '26 targets of between $15 million and $20 million of NPAT and a $4 billion loan book. We are investing for growth. Finally, turning to Corporate Advisory and equities, and this has been a more challenging year for the business. As you can see on Slide 40, revenue per executive for FY '23 was $0.8 million. This is below what we have typically experienced and is reflective of the challenging year that 2023 has been for the advisory activity across the market. However, we are seeing improved momentum at the start of 2024, and I'm hopeful that the overall environment for transacting will assist in timely execution and deal closure. However, despite these challenging conditions and consistent with our philosophy of investing in the business for growth we continue to add select teams and new hires to build out the advisory capability. In FY '23, we hired a senior natural resources team late in the second half of the year and head count now stands at around 47 executives. Consistent with our commentary on the CA&E business, we would typically expect normal market conditions to see $1.1 million to $1.3 million of revenue per executive, and our outlook for the year sits at the lower end of that range. Now the remainder of the presentation and the appendices contain a lot more details on our financials. And as Julie mentioned, we're also joined by Giles Boddy, our CFO, who can take any questions on those sections. I will conclude on Slide 46, which sets out the features that define our business and guide our decision making. We are a builder of valuable businesses in large addressable markets. We like scalable businesses powered by unique distribution, we have diversified capital sources and client investor base. We have a strong balance sheet to support our growth initiatives and specialized advisory capabilities aligned to a leading independent global platform. We have experienced management strongly aligned with you, our shareholders. And so on that note, I'll now conclude the presentation and hand back to the operator for any Q&A.

[Operator Instructions]. Your first question comes from the line of Tim Piper from UBS.

Chris, Julian and team, first question, just on the investment that you've called out going into the business at the moment, $0.05 per share in FY '23. I think you called out $0.06 per share in FY '24, if I understood that correctly. Just how to think about that, do we think about $0.06 per share on what the underlying run rate of the business was in FY '23, i.e., without the $0.05 of investment or do we think about FY '23 and then an additional $0.06 per share of investment based on that actual run rate -- FY '23 run rate, if that sort of makes sense?

I appreciate it's a bit convoluted. So what I'd say is the $0.05 represents what we've invested this year, and we've obviously outlined what strategic investments we've made. We see that growing by $0.01 next year to be $0.06 in total and obviously, we've outlined some initiatives that we're looking at next year. I think MA Money, there's a bit of a skew in the second half here in FY '23 to that investment, I think I called out that was $0.04 of the $0.05 roughly in the second half. We see the $0.06 being a bit loaded to the first half next year and then as MA Money ramped into profitability, obviously, that clears that out in terms of headwinds. So does that clear it up for you, Tim or is that still a little bit unclear.

No, that makes sense. I was going to ask you about MA Money as well. Clearly, the origination growth has been very strong and looks to be obviously tracking towards your targets. The revenue for FY '23 at $3-something million, I understand NIM has come back, but I'm struggling to understand that revenue number. Are there some commissions or other sort of line items that's a drag on that revenue number for MA Money? And then it still seems a bit of a way to that breakeven run rate by the second half of this year on that basis.

So the -- we can come back with the specifics around revenue. But -- so it obviously has ramped into the back part of the year and so the annualization impact of that, that comes through. In terms of NIM think is up before we are hitting volume that is a competitive market last year. That is easing a bit, and we've also been looking at our product mix and our pricing and we're pushing into securing funding lines, which we've now done a higher-yielding product in the [indiscernible] sector, for instance, or foreign owners. So we are going to have to work on sort of increasing our NIM, I guess, both the question of product mix and also the broader market, which we are seeing initial signs of the pricing competition that we've seen earlier in the second half of last year easing.

And Chris, just also the additional warehouse is there and so the interest expense in relation to those warehouses also coming through that revenue item as well. And that need to have additional warehouses and we sort of build the book has had an impact on our line as well?

Yes. We -- the conundrum that we face with MA Money around the warehouse is you pay line fees on your warehouse. And what you don't want to do when you're ramping up your business is run out of funding capacity. And we had an optimistic target of going to the term market to do our inaugural securitization, which will clean down the warehouse and gives us a lot more capacity. If for any reason that market was closed or we didn't get the size of dealer way that we wanted, we wanted to ensure that we had sufficient warehouse funding in order to continue writing the increasing volume of the business. As it turns out, the market was not -- the only open for us -- it was open large enough for us to do the largest inaugural RMBS issuance in Australian history, which we did at $500 million. So we ended up having more warehouse capacity than we actually needed. And we took a judgment call on risk is that if the capital is there and the market is there for us, we'll take that capital because our growth profile in body was ahead of schedule. The flip side of that was we incurred more line fees than we had -- than we had probably needed to but from a risk perspective, as the business was growing, we picked a path where we wanted capacity as we're in ramp-up.

Got it. Maybe just one final one. Again, just on the investment, but a bit more specific to the U.S. Where does the U.S. investment piece on distribution, et cetera, fit into that sort of $0.06 per share? And then what are your thoughts around the return in terms of either flow numbers or revenue growth that you think you can generate out of the U.S. maybe in FY '24, '25?

Yes. So what we've got to do in the U.S. is we've got to reposition the fund and the licensing a bit to get the right structure of fund in order to go to mass market but leverage off the 10-year track record that we've got with the team there. So the market is huge and the reality is this year we are going through that process of hiring and ramping up the distribution effort coupled with hiring -- coupled with rescoping the fund and getting a new internal fund structure up. So that is going to take the overwhelming majority of the first half of the year. So the fund flows that we would expect to see would be more skewed to the second half of the year. And that also contributes to the bias of that $0.06 coupled with the MA Money ramp hitting more in the first half of the period.

Your next question comes from the line of [ Alefatani Sortaruru ] from MST Financial.

Just a follow-up question in relation to some of the fund structures and the investment that's been made. So you think about the last year and into -- and your overall net flows, the distribution has been beefed up, U.S., Singapore, Japan. You've already got a very strong track record on the net flows. But can you just elaborate more on the other side, the product side over the next 2 or 3 years? Do you think with this expanding distribution you have enough product -- the appropriate products to distribute into these markets? And can you just also comment on that pathway into all of those markets around the fund structures and the legal structures that are they in place or how long will that take to be in place?

I'll start with the states, and that is exactly what we're doing in terms of beefing up the distribution and risk opting the fun product interval fund structure. And to again, clarify, growth in the U.S. market is not included in our FY '26 targets. So that is -- that will hopefully be in addition and that is going to take us another 6 months put together. It will be one single product in the first instance in the U.S. In private credit in Australia, products that we have on the platform are resonating and growing well. We've gone through a really interesting inflection point this business in the area private credit, where we have had 3 primary -- 3 or 4 primary credit funds that we've had on the shelf, and that's in real estate credit, private credit and structured credit and then opportunity credit. What we've seen over the last 5 years of generating track record on those funds with those funds being on the shelf for investors is that there's an increasing acceptance of us just being able to manage credit. So the trend that we're seeing Australia is rushing out simplifying that where we have -- just in the last quarter on the shelf, a credit income fund, which is a master fund that can be applied to all of those strategies as that will actually feedback from some of the domestic investors that we've had where they don't want to look into the individual strategy so much but just simply give us that money for private credit. So it's actually shrinking the product set, but with a way more versatile mandate. And that's a response that we had to the market last year. I think when you think about it from the distribution side, these are incremental growth, sort of, I guess, adjacencies to what we've got right. So whether Singapore is working very closely with the product for Australia, there may be hedging or different currency sort of angles to the product, but it's the same underlying. And really, when you think about it from whether it's real estate or private credit, these products -- the products actually have a lot of capacity to invest and this is just increasing the sort of, I guess, the breadth of the network that we're marketing those products to.

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

Just a couple of questions. Obviously, the last 12 months has been fantastic in terms of flows into credit products. Just in terms of your product development and your line of sight on the pipeline, what your broad outlook is for credit flows over the next 12 months?

Very much been a continuation at the start of the year. So we see the defensive yield in private credit is remaining attractive. We see investors attracted to it and have a need for that yield. And when the yield sort of 8% or at 11%, 12% depends on where you are in the capital structure. There's a real market for it in a [indiscernible] investment plan. So absent something changing macro or [indiscernible] also we see a continuation of what's been going on in our business for the last couple of years, probably the last 6 years actually, is trust being developed.

Okay. That's helpful. And just I was late to the call, apologies. Just a mechanism on the lower revenue margin that you're talking about in relation to those flows and I'm not sure if you broadly quantified it in basis points, but just the impact and the mechanism that I may have missed?

Yes. We haven't talked about that, and we haven't quantified it. But what I would point you to is, clearly, a good example is where we've had, say, Redcape Hospitality or Redcape Hotel Group where we've sold $200 million of assets. That selling pain is over, we actually bought another asset recently. But clearly, that has an impact on recurring margin where we're not earning fees on those -- that asset class or those assets that were sold, and that's both investment management fees and hotel operator fees. So there's some headwinds through there. Also in real estate, we've just seen some valuations come down and maybe distribution come down. We see a bit of a headwind there as well. And we also see -- the gross margin that we've earned on the credit funds this year has been strong. And we see -- we're going into the market cautiously thinking about whether that can be achieved again in FY '24, but it's early days again. Around the hospitality fund, we made a small concession around fees for the hotel operator fee for this year and really, that's about a partnership with those investors and clearly, it's been a very successful investment for them and a successful venture for us. So we're partnering them as well. So it's a combination of things, I think, I'd say we're sort of going through a [indiscernible] low point in real estate or real estate backed assets and the private credit funds have been definitely strong this year.

Yes. Just to call out in the years ahead, the fee basis in the states will -- is typically lower on a base here as well. So you'll see that blending in overtime but obviously, it should be a new market for us to grow into.

And I think one thing we do try to focus on is sort of that longer-term view, we don't see the fundamentals of that business changing over that sort of FY '26, the target ranges that we provided and that's clearly what we're focused on delivering.

Okay. And just sneaking one last question, just that 6 basis points -- sorry, $0.06 per share of investment. Have you got that in terms of a dollar amount or an EBITDA total impact?

Well, we're not a big issue of shares so it sort of backs off -- I think it's roughly about $12 million, right about right.

Yes. All right. That's helpful.

And similar to this year, I think the only thing, Nick, that you want to keep in mind is probably a little bit of a skew to the first half as opposed to evenly spread over the 2 halves.

Your next question comes from the line of Richard Coles from Morgans.

Could you maybe give us any more detail on the MA accommodation hotel fund, your initial acquisition there? Comfort on pricing, any broad comments you can make on that deal and whether your view on it? Can you also maybe give us some views on the Middle technology, the $1 billion by the end of 1H '24. Just remind us of the fee structure for that sort of build out and what you could earn there?

Yes, I'll start with the hotel and maybe Chris, on the Middle, but we've then we bought an accommodation hotel on exceptional terms, it's $96 million purchase price, so there's a number of adjustments in that, that get us back close to being $90 million. It started at $97 million -- it's a brand-new 7-day sort of 7-night hotel in Melbourne, it's a 4, 4.5 stars. The hotel accommodation space is quite interesting where similar to the pubs, you have both sort of the freehold interest and leasehold interest, so you've sort of got operators and you can own the freehold or you can sort of operate them yourself. So there's quite a few levers to pull. As part of the transaction, we've changed the banner or have changed the operator [indiscernible] and that's released quite a bit of value for equity investors. And as, [indiscernible] yes, if [indiscernible] -- we're delivering that 7nights [indiscernible] we can serve this sort of underwriting low 13% total return. So we're quite excited about the hotel accommodation space. We see Anthony [indiscernible] who heads up that strategy, joined us in July of last year. We're seeing an enormous amount [indiscernible] big market, but it's very underrepresented in sort of the investment management context. So we think we can really carve out a specialization in that space, and it's the right point in the cycle [indiscernible] on Middle.

Yes. So with Middle, just to recap in what is an extraordinarily competitive market being the potential high learning market, what's really, really important -- and that's a market that is intermediated over 70% by brokers. What is really, really important is the ease of information collection and verified information collection and then accuracy and speed of decision-making for the end customer in the lowest cost manner or the underwriters and the lenders. So this is a piece of technology that we have built to solve those problems. And the technology came online last year, and we have marketed that technology to the brokers and we are charging brokers a fairly modest fee, utilize that technology in order to see meaningful flow through this technology infrastructure so that it becomes very, very useful to solve these problems. That technology is sitting on the Finsure platform, and there is a nice synergy there where Finsure is growing its number of brokers quite rapidly, and this is a piece of value technology which adds edge and help the Finsure proposition. So strategically, the key for us was to get this piece of technology actually processing in size. Middle is also open banking certified. I think we're one of a handful of institutions outside of the banks that have achieved that accreditation. And so the ability to have direct to source verified data it's quite a powerful platform. So we need to continue getting the volume up, because if the volume is up it becomes meaningful, and I think we're going to explore further on the year how we look at more enhanced ways to monetize that. But before you can do that, you've got to make sure that it's actually processing considerable volume such that it becomes attractive to folks to look at as a tool to solve problems because you don't have volume, people won't use it as a solution. And we're on that pathway generating that volume and January was a very, very strong month. And I think the current -- as we said today, the content of annualized run rate is about $750 million, and we expect that to get to $1 billion by the half year. So it's a really interesting asset for us that is considerably helping the proposition to growth through the Finsure platform. And as it becomes more meaningful and processes more volume, we can think about other ways to enhance the monetization of it, which we expect to bend our mind to during the year, but we need that volume.

And just one more question. I mean, you mentioned you've actually bought an asset in Redcape. So maybe just a summary of how you see things going there?

I think Redcape, what was a challenging year for all real estate assets last year. I think the path that we followed on Redcape's exceptional in terms of the balance sheet in very good repair, earnings have turned the corner. They have the pubs, they're trading stronger and we've got a clear visibility over the next sort of 2 to 3 years on strategy. I think you have to see liquidity in the pubs to be able to sell $180 million to $200 million at close to book value in the real estate or operating real estate asset class, I mean, it was -- there was a great outcome. I think generally, investors are very optimistic about the growth that's coming through in the business now as we sort of turn the corner of what was a pretty choppy market last year. So I think Chris Anchor who heads up that business has done a great job and I think the investors, as I said, optimistic at the future.

And we have no further questions in our queue at this time. I will now turn the call back over to Julian Biggins for closing remarks.

Thank you, and we really appreciate your time. We understand it's a [indiscernible] day in the market, and we look forward to seeing those folks one-on-one as we go around the marketing program. But thank you and have a good day.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.