Ninety One Group (N91) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the presentation of Ninety One's results for the 2023 financial year. Thank you to our clients, shareholders, regulators and the people of Ninety One for your support and commitment over the last year. This was not an easy year. I will start with the business review. And including a summary of the results, then Kim, our Finance Director, will present the financial review. I will then cover growth opportunities and provide an outlook for the business before taking questions. [Operator Instructions] Here are the key messages. This was a solid financial support -- performance supported by cost discipline. Globally, we faced headwinds from interest rates rising at the fastest pace in 40 years, compounded by geopolitical upheaval. The result was obviously a risk-off environment. In the U.K., we experienced indiscriminate sell-off of risk assets because of the stress in the LDI market. In the final quarter, to top it all, we saw a range of bank failures in the U.S. And for Ninety One, this has been a period of extensive client engagement. While risk aversion among asset owners over the reporting period muted demand the quality of engagement gives me confidence for the future. Our real long-term value driver is investment performance, and we have delivered on this front. Our strategy has remained consistent and aligns with the long-term structural opportunities we see in the market today. Our people are committed and motivated and our collective ownership continues to increase. We're in the business of long-term value creation through successful investment and enduring client relations. As usual, I remind you of our long-term track record. Over time, we've shown the ability to invest successfully, meet client demands and needs and gather assets and grow revenues. Ninety One is a resilient business with a relevant product offering for the future. It is also important to remind you of the business model. Firstly, we're a specialist active investment manager. We are capital light and cash generative. We are not capital centric, but people-centric. Ours is an organic client-focused results-driven business. In today's world, we must also be technology-enabled. Over the last year, we felt the need to explicitly include this in our business model description because tech is evolving faster than ever before. The potential for efficiencies in our business is enormous. This does not imply overambitious tech budgets. We simply intend in the most disciplined and coordinated way to apply the most relevant and available tools. Ninety One is clearly differentiated from its competitors. Ours is a business that has grown organically from an emerging market into the mainstream of global investment management. We draw confidence from our 32-year history, which is one of resilience, originality and growth fueled by an owner culture. We're proud of our emerging market heritage, which represents not only our past but also the world's future. Finally, we believe we have superior client reach when compared to other midsized active specialist managers due to sustained investment in our regional client group presence. We are a purpose-led organization. You know that. By being a better firm, investing better and building a better world, we can deliver on our purpose of investing for a better tomorrow. So let's go to the numbers. Our assets under management stood at GBP 129.3 billion on 31 March 2023, representing a 10% decline from the prior year. Average assets under management during the financial year was GBP 134.9 billion, representing a 3% decline on the prior year. Net outflows accelerated in the second half of the financial year, resulting in a full year number of GBP 10.6 billion. We are disappointed by this outcome. We believe the acceleration in the final quarter was client specific and driven by risk aversion due to the volatility of the preceding period. This was not caused by client unhappiness with Ninety One but by market conditions. Investment performance was better than the year before, with an improving trend, 1-year firm wide to outperformance stood at 57% and 3-year firm-wide outperformance stood at 71%. Adjusted operating profit fell by 10% to GBP 206.7 billion. At the same time, by controlling our cost, we managed to post an adjusted operating profit margin of 32.7%. Basic earnings per share were lower by 19%. A large part of this decline reflects the profit from the sale of silica and the share scheme net credit in the prior year. Kim will cover the financial results in more detail, but I will just mention a 10% reduction in adjusted earnings per share, which reflects the underlying performance of the business. The market and business conditions were extremely challenging. The mood was decidedly risk off over the period with flow takers being money markets, developed market fixed income, alternatives and solutions. These are not areas in which we operate. Putting this result into context, we cannot ignore the dramatic rise in interest rates in response to a sharp rise in the rate of inflation. The causes of the latter are many. The rise in interest rates from historic lows has highlighted vulnerabilities in the system built up in the era of cheap money, which we experienced after the 2008 financial crisis. The LDI squeeze in the U.K. had a direct effect on our flows as clients scrambled for liquidity by selling risk assets often indiscriminately to meet margin requirements. The sharp rise in long-term interest rates also created new demand for liability matching, thus shrinking the risk pool further. The bank failures in the U.S., which started in the final quarter of the year, were the result of business models not being able to cope with rapidly rising interest rates. Disruptive geopolitics, including Russia's war in the Ukraine have further depressed the risk appetite for emerging markets. The regulatory burden has continued to increase. It would be reasonable not to expect a simple extrapolation of these factors into the coming year and years. Although still challenging, we will be dealing with a specific impact of higher interest rates on each of our investee companies or issuers. Bottom-up analysis will really matter. This should be a better market for active managers. We continue to believe in the resilience of our business and the soundness of our business model for the long term. After a number of years of growing assets under management, we suffered a decline in the first half, driven by the GBP 3.2 billion of outflows and a market drawdown of GBP 8.4 billion. In the second half, the net outflow number accelerated while asset prices showed a modest recovery, resulting in the year-end number of GBP 129.3 billion. So the second half of the year drove the bulk of the full year outflows. Our client concentration risk is low with no client representing more than 5% of assets under management or 4% of revenues. Nevertheless, 3 clients drove more than half of the reported net outflows this year. This was driven by their desire for derisking or reallocating. It is important to highlight that they still remain clients. We have also seen substantial currency and market movements. Had we shown this picture in U.S. dollars for the last year, you would have seen assets under management up by more than $20 billion in the second half and closing higher than at half year-end. Clearly, we don't report in dollars unlike many of our peers. This is just to highlight the foreign exchange impact on our business. We are working hard to reverse the accelerating outflow trend recorded here and indeed turn that into inflows. Much of this was driven by equities. Part of that was LDI, part with tactical client reallocation and part related to the demand decline for U.K. equities, which is structural. The -- this overwhelmed the inflows during the year in global quality, sustainable and natural resources equity strategies. Emerging market fixed income was recorded as a risk asset and net outflows were driven largely from sovereign strategies. As with the prior year, net inflows in our South African platform business were positive. We maintained positive inflows in South Africa during the first half. However, at the end of the financial year, all our client groups were negative. In summary, Asia Pacific net outflows were driven by a small number of one-offs as a result of client reallocations. It was a similar story for Europe and the Americas Client Group. There were reductions in risk exposure, no -- but not client terminations. U.K. net outflow were largely as a result of the fallout in LDI related sell-off of risk assets to meet margin calls and the further derisking of defined benefit plans. In the Africa Client Group, the fund platform inflows were offset by larger net outflows from fixed income strategies. These outflows have most -- that I've described were mostly in the institutional market. Institutional clients made big calls during the year, all were tapping into the liquid investments for cash considering the high exposures to less liquid asset classes, such as real estate, private equity and private credit. The adviser market has been far more stable. These clients tend to hold during periods of volatility. Performance remains solid and competitive in the long term. Investment performance improved in the year. This leaves us pretty well positioned for new business when markets turn. During the year, we have also strengthened our CIO office and the technology and quantitative resources at the disposable -- at disposal of our investment teams. There was a turnaround in mutual fund investment performance, and this trend is worth mentioning. At Ninety One, our mantra in this space is sustainability with substance. We have been advocating for an inclusive and fair transition. And at the IMF and World Bank Spring meetings this year in Washington, there was a change in tone. There is now significant momentum behind the concept of transition finance. We are working to develop frameworks to support decarbonization and we are supporting heavy emitting companies to transition. We are expanding our range of sustainable strategies in anticipation of structural demand growth. Ultimately, we also have to implement our own transition plan and focus on how we run our business and our scope 1, 2 and 3 emissions. We don't just expect portfolio companies to do this. We have to do it ourselves. Here, we remind you of our transition plan targets and our progress. This is a process and not an event. And we are making progress. More of our investee companies are developing science-based transition pathways by 2030. There is a continued reduction in our scope 1, 2 and 3 emissions. Two new sustainability strategies have been launched in the last 15 months with more in the pipeline. And finally, there is continued engagement with multiple stakeholders on a fair and an inclusive transition. We are on track to meet our targets of 50% to finance emissions with SBTi aligned transition pathways, a 46% reduction in scope 1, 2 and 3, Category B of Scope 3 reported emissions by 2030, while remaining active advocates for better disclosure and more ambitious climate finance solutions. Most important is the culture and of course, the mindset of our people. This is a people business. We have committed and motivated staff who have worked very hard over the last year. We have been disciplined in headcount management. Our clients, however, expect more for the same fee, which maintains upward pressure on headcount numbers. We showed this year that our variable costs are truly variable. Kim will share the numbers later. We are deliberately building an intergenerational business and continue to support our people through these challenging times. Finally, we have further increased our staff ownership which is now 28% and aligns with the interest of our staff and shareholders. I will now hand over to Kim to take you through the financial review, and I will then cover our growth opportunities and outlook at the end. Kim?

Thank you, Hendrik, and good morning to you all. After a challenging year. I am pleased to present a set of robust financial results for the year ending 31 March 2023, and the highlights are as follows: adjusted operating revenue decreased by 5% to GBP 633 million; adjusted operating expenses decreased by 2% to GBP 426.1 million. This resulted in an adjusted operating profit of GBP 206.9 million, a decrease of 10%. I will go into more detail on these figures over the next few slides. Then considering adjusted net interest income for the share scheme, net expense or credit last year and the one-off gain on the disposal of silica in FY '22. Ninety One profit before tax decreased by 20% to GBP 212.6 million. The effective tax rate for the period was 23%, marginally down from the prior year of 23.1%. The above factors resulted in profit after tax decreasing by 20% to GBP 163.8 million. So it points to bring to your attention. The interest expense on our lease liabilities for our office premises of GBP 3.6 million for FY '23 as reported in adjusted operating expenses. The share scheme net credit of the prior year has reversed our share scheme expense. This is owing to our lower variable remuneration and a resulting decrease in deferred bonuses being awarded as shares in the current year. The adjusted operating profit margin decreased from 34.7% to 32.7%. And our adjusted EPS shows a 10% decline, in line with the fall in adjusted operating profit. So this slide provides further details on the adjusted operating revenue, which decreased to GBP 633 million. Management fees decreased by 4% to GBP 607.7 million, and this was predominantly driven by the decrease in average AUM from GBP 138.6 billion to GBP 134.9 billion, a 3% decrease. The average AUM decline results in the fall in management fees, along with the decline in the average fee rate to 45 bps from 45.7 bps. This rate was 45.2 bps at the midyear, reflecting a slower decline rate. Again, this is due to a change in the mix of strategies owned by our clients. However, we do continue to have pressure on fees and with the client mix changing, we'll guide cautiously to this being marginally down in the year ahead. Performance fees continue to decrease from the high levels seen in FY '21 and '22, although still a positive contribution at GBP 19.4 million. This was largely due to outperformance in the -- in relative benchmark investment strategies in the current period. Again, we do not foresee this materially changing in the year ahead. Shares on profits from associates was up on the prior year and was a small contributor to adjusted operating revenues. As was the addition of other income of GBP 4.5 million, which is a mixture of FX gains on earnings recognition and operating interest. The next slide shows the buildup of adjusted operating expenses year-on-year, and I'll spend a bit of time actually on this slide. At the half year, we were conscious of the pickup in operating expenses. And this was mentioned in November, we reviewed costs to see where reductions could be made. Starting with remuneration, which fell by $18.9 million or 6%. This is now -- and now is at 65% of our cost base. We show fixed remuneration increasing by $11.2 million, of which just under half is linked to inflation-based increases. The balance reflects a continual investment in our teams, including headcount growing on an average of 2%. But importantly, variable remuneration fell in line with the decline in operating profit by GBP 30.1 million. We've always been clear, both internally and externally and is now evidence here that this is variable and will flex alongside the results of the business. Variable remuneration remains at over 50% of employee remuneration and this resulted in compensation ratio decline to 43.5%. Now looking at business expenses. These increased by GBP 11.5 million or 8%. It is higher than what we wanted, but lower than where we were at the half year. The business costs had increased by 13%. But all our costs have increased, except for promotional. We've analyzed this at -- and at a high level, being able to break this increase down as follows: inflation-linked impact of GBP 5.8 million, for those costs that are actually impacted by inflation; FX-linked impact of GBP 3.5 million, which is mainly the USD-based expenses; one-off costs in the year of GBP 3.5 million; travel costs normalizing post the COVID impact of GBP 3.1 million; and then finally show what we would regard as cost management or reductions of GBP 4.4 million. The year-on-year split of these expenses remained relatively unchanged from the year -- from last year other than travel, which obviously increased and promotion which decreased. And the largest expense here remains the client and retail fund administration. Looking ahead, we're expecting the business expenses to increase with inflationary pressure, noting there's nothing material planned in the year ahead. So the slide is showing the business expenses and total expenses as a percentage of average AUM in basis points over a 7-year period, so covering the period both pre and post the listing in March 2020. And the single message here is the consistency of total expenses as basis points of AUM as the business has grown and developed. We've attempted to maintain cost discipline and achieve some operating leverage, but this has been challenged as indicated on the previous slide. While fixing the rebar remuneration, total expenses have only marginally increase relative to AUM, but importantly shown the downward trend from the high seen back in 2017. However, the business expenses basis points of average AUM have returned to levels last seen around 2020 as a result of the impact of inflation and FX on the GBP cost base. So to summarize here. This is an analysis of the absolute movement in adjusted operating profit from FY '22 to '23. The adjusted operating profit for FY '22 was GBP 230.4 million. Management fees have decreased by GBP 25.1 million. Performance fees have decreased by GBP 11.7 million. Other income items, such as FX gains and operating interest increased by GBP 5.9 million. Notably, employee remuneration decreased by GBP 18.9 million. And as discussed earlier, business expenses increased by GBP 11.5 million, resulting in adjusted operating profit of the GBP 206.9 million for FY '23. So my final slide summarizes the Ninety One capital position at the end of the financial year. Ninety One's qualifying capital was GBP 314.6 million at the end of the financial year. And in line with our dividend policy, the Board has recommended the final dividend of 6.7p, taking full year dividend to 13.2p per share, a decline of 10% in line with the fall in adjusted earnings per share. After this dividend payment, there will be an estimated capital surplus of GBP 137.2 million, and this is resulting in the capital coverage of 219%, slightly up on the prior year and in line with the conservative view of capital retention while paying out less than 100% of after-tax profits. This remains above the 200% coverage we have been targeting in line with the current market environment, we are comfortable to hold this position. Any intention to extend our dividend payout ratio in the future years will be discussed further with the Board. In line with these proposals and the capital buffer, we remain committed as ever to our capital-light model. And furthermore, at this time, there's no plans to increase the number of shares in H2, not to encumber the balance sheet with any debt. Thank you. I'll now pass back to Hendrik.

Thank you, Kim. [Operator Instructions] Despite the current climate, we see substantial long-term growth opportunities in global and international equities, emerging market equities, emerging market fixed income, specialist credit and sustainability-related strategies. So taking those let's work on how they can drive growth. So emerging market equities have been underperforming for some time now. And trust me, that will change at some point. Emerging market credit is an underappreciated but growing asset class. Substantially -- sorry, and of course, emerging while credit has actually been an excellent performer, which hasn't been noticed. Sustainability and impact investing will keep growing. This is structural and will be with us for the long term. As part of our ongoing assessment of opportunities, we have actually done detailed work on the addressable market. Our real opportunity easily exceeds 15% of the total global market for professionally managed assets, which has been estimated by Mackenzie to be approximately USD 120 trillion. But for the purpose of proof, we have identified specific categories where we are already active to show you that we have real plans and not just dreams to grow. We conservatively estimate an immediately addressable market of approximately GBP 7 trillion for the investment competencies summarized on the previous slide. These have been developed organically in our business over many years. We have a varied market share across these ranging from insignificant to about 2.5% -- just over 2.5%. There is much scope to grow. In all these areas, we have credible track records and recognized market positions. In summary, if we stay focused, articulate our differentiation well and deliver competitive long-term performance, we can create substantial growth. As an example, our global franchise strategy has been ranked third in terms of attracting net flows in the global large-cap equity universe. That's from investment. Over the last few years, we have shown that you can grow in certain categories when the opportunity is there. With the right application, track record and time in the market, we can develop several scalable global leadership positions in large categories. This can add substantially to shareholder value in years to come. We've had a single-digit number of strategy launches and closures in recent years, showing a careful balance between innovation and product discipline. Even during this year, our newest strategies, again delivered positive net inflows. This proves the case for continued innovation. To summarize, this has been a tough year. Market conditions have not been supportive. However, we have a relevant skill set for the long term. We are competitive and our investment performance is solid. We have deep client relationships and superior client reach given our scale. Our team is motivated and committed. So our foundations are solid, our multi-decade track record as well as our culture, team spirit and will to win give us confidence for the future. Looking ahead in the current financial year, we've seen a stabilization of conditions. We have not yet witnessed a decisive change in risk appetite among clients, although we've seen signs of that among certain asset owners. Our working assumption is for market conditions to remain challenging. We will focus on execution and avoid distractions. We are confident in our ability to deliver in the long term and give our shareholders the results they deserve. Let me end with a quote from Marcus Aurelius. "you have the power over your mind not outside events. Realize this, and you will find strength." Thank you for listening, and now we can -- we are open for questions. Lots of hands. Right. Kim, let's go stand here. Where are our pens? To make sure we can take that. So we're starting with Hubert in front.

Hubert, 3 questions. I think, 3.

Yes, 3.

I'm writing it down this time.

It's Hubert Lam from Bank of America. So 3 questions. Firstly, I thought the slide was interesting around your -- the growth opportunities that you said. So it seems like that you think you have the capabilities today to still grow in these areas. So how do you kind of compare that? How do you compare that to trying to diversify into other areas especially considering you had outflows over the last 6 months? So how do you think about staying the course and diversification? That's the first question. Second question is also on flows over the -- how do you see flows over the next, I guess, 6 to 12 months? Do you think the worst is over, considering you had some one-off impacts in LDI over the last quarter, concentration around 3 clients? Would you say that it's going to get better compared to last quarters? And the third question is for Kim, given a chance. On the operating margin, it was 32.7%. Considering it was a tough market last year. Would you consider that to be the floor that we would expect going forward?

Thank you, Hubert. I think your first question is the question. So there's this massive depression on active investment management. And we've had a risk on investment management. Why? Because there were no flows or very limited flows and clients have been -- asset owners have been diversifying heavily into illiquid spaces, right? And so liquid assets were the banker, we were the bankers for the rest of the industry for the private equity and other. That is already in because you are going to see some accidents as leverage starts to bite and people realize that you actually have to mark the true market and people realize that they need liquidity from time to time. So there's going to be a shift. I think that structural shift is starting. It's not going to happen this year because the money is tied up and new flows have to be generated and jobs have to be created. So I think there's going to be a rebalancing in the thinking. Our view as a firm is we are not going to chase the markets that took the flows yesterday and the year -- decades before now at great expense. What are we doing? We're saying in the public equities and emerging market debt lane, we're adding sustainability and a widening product range in sustainability-related products and developing our credit platforms because we've got some very well-developed emerging market credit platforms, which will go into private as well as public. And there's an intersection between sustainability, emerging markets and infrastructure financing, which is going to be a sweet spot for a long time in the world economy. We are positioning for that. But in our mainstream categories, we believe the bar is getting higher. If you have a long track record, you've been around and you perform you're going to get the flows because the market is going to become more discriminatory. And that's what we're going for. So the trade-off for a capital-light business, you've got to be capital-light and nonvolatile as we're slightly more volatile. But if we deliver and if we have the human potential and technology to deliver and written, the gains are substantial. So I would say there's a huge amount of option value in our strategy. If we don't execute well enough, we will fail to realize that option value and the bet a shareholder takes is do they think this team with its 30-year track record and its culture and its human component has the ability to capture that. But we're staying focused in our lane because we think the focus is actually -- and actually, we're trying to focus the business more on clear growth opportunities. Even though we have other parts in our business, which may win money in the near term, such as multi-asset and others. But we're not bearing into the solution business or into the winners of the last decade or 2 because we think you're just going to be whiplashed. If you go there now, unless you've got very deep pockets suspend. So that's question one. And I think it's a really important question because that identifies and defines as dialogue. Let me just -- I see David McCann looking at me. Let me just say the difference between us and a small single product boutique. Now that's another great position to be. I sit there with a single product is that we have reached to large asset owners wherever they are. And what we're really in the business with is building 100-year relationships with 100 large asset openers and asset platforms. And over time, making their life easier, not all the time, sometimes having low allocations for them, sometimes higher allocation. So that's the strategic essence. On the flow in the coming year, Hubert, you know we never make predictions. But what I can tell you is I think the one offs, the sort of extreme -- unless, of course, the U.S. default, okay? I can't guarantee. I think no one in the room can even imagine what that will do to the world. But unless that happens and unless there's a nuclear war, I guess we've reached the stage where extreme behavior and risk adjustment or risk reshaping of risk in portfolio has happened and normal allocations will resume, which will be better for us. The experience we've had since the beginning of the year was that of a more stable market. Although, very importantly, clients take longer to make decisions. They postpone them. They've also had -- because of the impact of last year on their financials, there are also some management changes in our clients and asset owners, which slows down decision-making process. So I'm not predicting back to Goldilocks world in 3 months, understand that. But I do feel there's a much more stable and sort of sensible allocation process as opposed to a reaction to extreme market events. Interest rates went up 10x last year in the U.S. Just think about it. It's enormous, that impact. And it's going to work through, but it's -- that shock has now been absorbed. So I would say, if it's as bad as this year, I'm going to -- I'm really going to look stupid next year, and I'll not even show up here. But I don't -- I really don't know, but the indications are that it's a more stable normal market. Kim, you can deal with the last question.

The last question, I mean, obviously, operating margin is a factor both the top line and the bottom line. And Hendrik talked about the top line, which is your flows, holding on the fee rates, which is, as I noted, we're not seeing the sort of drop off as we see in the past, which has been a full bit. From a cost perspective, there's a big chunk of those costs that are still fixed. Yes, we've shown that we can fix that variable. We spoke about last year, we've done it. We've not had any sort of mass exiters walk out. There hasn't been sort of -- some sort of nature reaction in the business as a result of that. We basically process at internally very early on, both internally, as I said, we mentioned externally. So we will still be challenged from an operating margin point of view with a fixed cost base. If we're going to hit the game with inflationary pressure, we're looking -- we've analyzed that quite closely. We know where these figures are. And again, with the sort of the USD base, but we're not seeing any material. We have some one-offs. We had the last of the COVID sort of travel costs coming through, which hit us. So we don't have a target. We like to try to keep it somewhere between the 30% and 35%. We're sitting in the middle there at the 32.7%, which is something we were comfortable with.

May I just add something to this? We want to be on the front foot in this negative market. So what we're not doing is optimizing to margins and earnings targets, there are opportunities in the world. Right now, there are -- there is a lose talent in a number of organizations. There are regions which are currently producing lots of money. For us to be kind of totally conservative and not go for that and build next -- growth for the next 5 years would be wrong. So we will take bets, and we will invest in our business and we will actually invest as if we own 100% of the business. I know we only own 1/3 and a lot of people on the rest. But we think like people owning 100% of the business. And that means from time to time, you actually don't play to the next quarter's dividend. Just yesterday, I had a long conversation with the Board about that, explaining to them this is what they can expect. And so we will be opportunistic but only in the areas we have identified as growth opportunities. Not -- you're not going to see us tomorrow starting sort of life sciences business out of nothing, which we haven't got any credibility that you won't see. So we can't guarantee much. Who's next? We have these guys, here and David on the right.

Hendrik, Paul Bryant, Equity Development. Two on the sustainability investing opportunity. You -- the transition finance features quite prominently in your opportunity. It seems to be more prominent discussion in South Africa, U.S. compared to Europe. But I'm curious to see if that translates across your clients, is there a difference in interest across geographies in that space?

I think that's a very astute observation, a very good question because I've hinted there without talking too much. And in -- unlike in banking, when you start a new idea that you go to clients that respond quickly. If you're an investment banker, you can get it done, go to corporate, you do a deal. In the asset management world, where we have a heavily intermediated channel consultants, boards of trustees, advisers. It takes long for new categories to take off. Now we know how successful Brookfield and Macquarie have been on the transition equity side. But a lot of that was dealing with existing asset owners who are already in that space is wanting to go. In the sort of more traditional end of the market, there's been a long conversation, which initially started with decarbonized all portfolios and then pretend the world is going to be better. Well, we will now realize we've actually got to take the businesses we have and make the decarbonize. That would need finance, both equity and debt. That is the opportunity we're talking about. That GBP 4 trillion a year of which one has to go to the emerging markets. Those are massive, massive numbers. With returns at the end, if you do it, all massive destruction if you don't do it. That space of transition finance is something which you'll hear more about as you go to cop, you'll hear it becoming a normal mainstream discussion point. The banks have already moved. You'll notice they talk about big parts of their balance sheet being part of that, but they don't have enough balance sheet. It's the $120 trillion that I showed you that has to participate. That is the unquantified growth opportunity that we have been pursuing now for the last sort of, I would say, 5 years without showing much detail. We hope to start showing you some real results, but the education investment has been massive. The meeting, the potential regulatory and market risks of being associated with green washing is -- those are massive. You've got to be very careful. So we've really been digging deep foundations for something I'm quite excited about, but I have no proof points to say it's starting to happen. Sensis transition finance will become a very important part of finance. Ninety One will be a player in that at scale, but you've got to wait. So I can't make any promises. I can't make short-term promises. But what I do know it's going to happen. Question is who's going to capture it and how? And I think we are positioning our existing skills where they're relevant to contribute to that. And that's as much as I can say now. But I think there'll be more news at sort of interim and at the year-end stage. But remember, everything we do is organic. So it takes long. We start building these foundations, global quality equities that we spoke about, the global franchise strategy, which is now a very substantial flagship strategy. That was 0 15 years ago. It was 15 to 20 years ago. It's kind of a dream. These things take a while. And -- but I'm very excited about that opportunity as an addition to the sort of traditional betas on which we add alpha. And we don't think those traditional betas are disappearing as I showed you with the $7 trillion, which I could easily have shown pounds, which is almost $10 trillion, which I could usually have made $20 trillion, if I wanted to impress you. But I was -- we were really focused on what is there now and today to capture. In that $7 trillion, there is 0 for transition finance. Okay. Rahim and then David. David, you're last because you gave us a hand report card today, but...

I think we've got the question on that line first.

David, go first. Rahim hasn't got the speaker. GI've it to David now.

David McCann from Numis. I just wanted to touch on that -- on the new -- on the new growth channels that you've articulated the product. You obviously already answered some questions on this. I just wanted to get a sense of what proportion of your existing business those 4 areas would really represent just so we can get a sense of the bids that might grow what proportion of your existing book is it? And of the balance, which is obviously the more mature or even declining book. Just so we confirm that how that is kept balance?

I wouldn't put the balance as a declining -- a very good question. I wouldn't put the balance -- I would say about just over half, half to 60% is facing in those spaces. I would say the other half to 40%, a bit less than half, half would be in low growth base. So 1/4 of the business is in generally lower growth spaces to -- and you don't need genius to work out which they are, but lower growth. 1/4 is a version of but not in the sweet spot where we think it will grow that much. So 1/4 has good beta that could get positive flow, like, for example, in areas such as -- in our case, we have to compete very hard for multi-asset mandates because we don't do a solutions business. We have a very good multi-asset team. They will win. But winning at the same scale as those growth areas is going to be a challenge for them, but we want them as part of our business because they're a strategic part, they inform us about the entire asset spectrum. They understand how our clients think because they think like our clients, and they grow. But they're just not in a growth sweet spot like solutions, like the low-margin solutions because we actually take responsibility for the alpha as well. I think given the dynamics at the moment in the South African economy, we can't expect that part of money to grow as fast as it used to grow, but it's a good part of around growing. We have a great business there. And we don't think that business is going to go into decline, but it's not going to grow as fast as the areas I've shown you. And then there's always certain styles of products that you do, which become less fashionable even if your own believe the least fashionable, clients might believe, which is why I leave that quarter open for call it, I wouldn't say run down, but less gross. And what's interesting in this business, some of those older strategical offerings that may not be in huge demand, value has not been in demand for 10 years. But they may come back. So you keep them because they're profitable, they don't cost you anything, but they don't necessarily grow at that point. So in a focused asset manager, you have a few things extra. What we try to do at Ninety One is not to have too many of these because then you have a [indiscernible] proposition. And then you're going to talk to a client and the client doesn't know what you stand for. So what we're saying very clearly, we stand for a few areas. That's our opening game, but that's what clients know us. But if they know us well enough, they may say, "Well, can you do that for us?" And we say, yes. But what we don't do is go the traditional not only broad waterfront approach. We don't think that is going to work unless you're a retail or a mutual fund or ETF manager in a large market, which we are. We talk to people who any day of the week can pick amongst 20 or 30 suppliers for anything they need. And therefore, they deal with the suppliers they trust and the ones who have done well for them in the past and who are very clearly expert at what they do. And that's what Ninety One wants to stand for. Now knowing had we started in the U.S. 30 years ago in a scale market, we would have been known for 2 or 3 things, and we would have bothered with the rest. Having started in a small emerging market where we had to deal with the waterfront, we also had to find out and then it come to the U.K. when actually just at the point when risk taking in institutional market was imploding. I mean, interestingly, we arrived there when the market was kind of over. The -- we had a broader base to start from, and slowly, slowly, you're narrowing it down and slowly, slowly, you're becoming known for something and you extinguish yourself with your long track record. That's the process we've been through. I think we're pretty clear now. And we have a very clear proposition to large clients, which is why the bulk of our assets are in the growth space, but there are some parts where growth will inevitably be lower or fashion would dictate or customer client demand will dictate that there wouldn't be that much, but we run them profitably. We don't run things at a loss or less. We think they are growth prospects. So where do we invest at the moment? Specialist credit sustainability, we're investing heavily. We're investing heavily in the technology backing up our investment teams to make sure that can be more efficient. We're not investing in sort of quick sort of new ideas, which may or may not come off.

And just a follow-up to that -- on the newer areas, what did the flows look like, let's say, over the last year? Perhaps if you want to exclude any one-off that you also mentioned. And then just also thinking, looking forward, what would good look like? Would this be kind of a talk range of like 5%, 10% in those areas in isolation? Is that the kind of number we should be thinking about?

Well, I think the new areas held up pretty well, not all of the new, the growth areas, et cetera, emerging markets, which are clearly marked as a growth area, held up pretty well in this year, okay? So even in this year, they've been strong, except where clients took off largely, you saw now a large equity risk at scale that just took it all they didn't want it. Those were not either good or bad, they were just the risk was taken off. I would see the sustainability growth. You can go look at impact these results and that there's demand. We have got an equity-centric offering, which we're adding data-centric products to the equity centers and was a little dampened towards the end but did okay. The global equity side, I think, in -- particularly around the quality style, there's a big opportunity for us, particularly out of the U.S. We've seen in the last quarter of the financial year, where people have been knocked by so many risks and then came the U.S. banking thing. There was a hold on liquidity and a hold on allocations. I think we'll be able to tell you at half year whether those allocations are structural. And then, of course, we're also reinventing some of our existing platforms with good track records to make sure they are client facing and they are client need facing. So I think at half year, I can give you a sense. But my -- the newer areas and the areas I've identified have clearly had the better of the client experience, subject to the fact that there was significant equity risk down-weighting and there was significant caution on emerging market fixed income, and you've seen Ashmore's results as well that tells you the same story, Yes. Rahim?

Hendrik, there are some questions off-line.

Yes. Yes. Eva, let these ask first, and then we go off-line.

Five minutes.

It's Rahim Karim from Investec. Two questions, if I may. Hendrik, you talked about the structural decline in U.K. equities. I was just wondering if you could perhaps elaborate on that a little bit more on what you might be doing internally to rightsize that business? Is that required? Or if it's just a -- it was more of a relative comment than an absolute one.

We've obviously been reducing some cost there, but also focusing. We've got a very exciting U.K. income and U.K. Helfand, U.K. sustained. We just won a prize last night for the best U.K. sustainable strategy, but we haven't seen flows, okay? So we are focusing the U.K. equities for the remaining market, but we're making sure we match the opportunity with investment. We think we're going to be one of the survivors. We don't think that's going to drive -- ultimately drive a firm -- the full value of the firm. It will add value, and we're probably close to the bottom. But it's just -- and as we have been consolidating in wealth managers, they are also building more international portfolios for their clients. I think one of the travesties is how U.K. Inc. actually short sold its own equity market and not keep developing it. And I think we're all in room are, in a sense, victims of it because you need equity to finance your own developments. You need your businesses, you need -- you can't keep active vision here as a prisoner. You need to have lots of new active visions developed by an equity market, which gives the right kind of valuation, there's enough money behind it. So I think that's a challenge for the policymaker. That's above my pay grade. But I would say there's still a large pool of money here. And for that pool, we're going to complete in a measured and in a specific sense. But what we've done, we, for example, had U.K. products across some of our equity platforms. Remember, we are skills-based platforms. We're narrowly down to 1 platform and made the others focus on either global or emerging markets because there was more money flowing there. So I think we've done that. There's no reengineering to come. That's done.

More questions?

My second question. You talked about the investment in technology. Perhaps give us a sense of how much you've been spending on that and how we should think about the efficiencies coming through? Is that a support to the underlying margin? Is that kind of the forward slight degradation in revenue margins going forward. I mean how should we measure the success of that technology investment?

It -- firstly, Kim can talk about the spend. We haven't really gone with the checkbook. It's more the mindset.

Yes. I think you measure it in performance. It's not a financial impact. The cost that you see -- the system spend you're seeing is really what is where the investment is. We spoke about this last year. And there's always a danger, we see technology-enabled investment spend, that shouldn't be translated. I think Hendrik mentioned earlier as an increase in what you're actually seeing currently being predicted or in the figures that you see right now. So I think what we're rather seeing as an internal efficiency, and if anything, an improvement of the processes.

So I think you can just -- if you look today, for example, our investment managers, the screens they have, the cashboard they have, do the -- does it allow them to operate with fewer analysts than in the past? Yes or no. Does it enhance their visibility of what they do? Because remember, our clients have also been -- a lot of our spend has been to keep up with our clients. Our clients want to say, I want to know real time what's going on. When you have an insurance company in Germany with 20,000 people in the U.S., checking you, and you've got 3 people on this side of the fence or 30. You've really got to then have the systems to be able to deal with them. So one thing we can assure you is we have the systems and the pipes to plug these asset owners in and to meet their demands. That excludes a whole lot of boutique land, which cannot even start competing with them. So we're there. And that spend is annual and continues. Of course, the AI benefits and their data, but we are very cautious of going into the sort of promise that we're going to reinvent the way we do things. It's a marginal efficiency, and it's keeping up with your client. And then, of course, we've really been focused on the investment front office, where we've created and over the last 3 years, a team internally that develops the systems in a standard way across all our teams. So we don't have all these packages bought where our data cannot be looked at through in a comprehensive and aggregate way. And of course, RFP, I mean the AI revolution is going to really help with basic, RFP basic marketing stuff, basic compliance checking and all that, that's coming. But that's not going to put us at an advantage to anyone else. We'll just be there with the good people. And we actually have a session after this with our staff about explaining it and what we can do. But it's not a big spend. I mean, Kim, it's a few million extra. It's not...

Well, it's basically we're not seeing a pick -- I'm going to try to make a there's not a pickup in expense when you're doing a model going forward, and efficiency.

We got the outside. 2 -- Piers, you guys and then 2 outside. Go for it.