NZX Limited (NZX) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to NZX' full year results announcement for 2021. With me, I've got Graham Law, our CFO. And over the next half hour, 45 minutes, we will take you through the results. This results, obviously, a little bit different to other than the things that we are announcing an acquisition this morning as well, and we are also undertaking a capital raising to fund those acquisitions. So what we're intending to do is take you through the pack and speak to the result itself, we also want to speak to those transactions that we think are meaningful to our growth and we'll touch on guidance and touch on the capital raise mechanics as well. I'll start off and then Graham will talk us through the financials, and we'll come back to those other aspects later. Please note the disclaimer at the top of the pack. And with that, we will get straight into it. Just speaking to Slide 6 at the moment because that does summarize our results in the May. And I guess the first point to call out is our operating earnings result if we exclude the acquisition costs, which that means that we compare it on a like-for-like basis, has come in at $35.8 million. And that is just above the top end of our range, which we tightened at our AGM last year, that range was $32 million to $35.5 million. So coming in just over the top of the range, we feel is a really good result. We're also announcing a dividend for the second half of $0.031 this year, which will total a final dividend of $0.061 per share fully computed. The other thing to call out, I guess, on this slide is just that the revenue growth, in particular, 12.2% growth in revenue up to $88 million and the important aspect of that is it's coming from right across the business. So one very pleasing aspect of what's going on within NZX at the moment is that the balance with which growth is appearing. We do speak to costs and the slides, Graham will take you through that between the Slides 25 to 29. And we'll take you through that in some detail because it's really important to understand where those costs have changed, where we are investing for growth, where we have laid on cost for improved resilient security and capacity in our technology platforms. And obviously, just in the current environment at the moment, we are suffering from some inflationary pressures and some labor market challenges. So we earn some extra costs to net debt, but we will take you through those later in the pack. Speaking to the right-hand side of Slide 6, people who keep close watch on us will know for many years now, we measure ourselves against these performance metrics, and there's half a dozen of these, which are -- really drive the performance of the business. We came out in 2018 with some 2023 targets, and we hold ourselves against those targets and measure ourselves each year. So if we run through those quickly, and I'll give you a little bit of color on what's going on there. Certainly around the capital listed and capital raise number, $19.8 billion, which is a really, really strong result. So very pleased about it. I think the key thing around that number is across the equity, fixed income and funds markets, we're seeing good numbers. We have 9 new equity issuers come through each year -- or sorry, in the 2021 year. And the more important thing about that is they were using the different channels that we've created to come to market. We have a couple of IPOs. We have a number of direct listings and that is where you come to market, you don't raise capital at the time, but you have been listed, you have some liquidity available for your shareholders, and then you have the option to raise capital later through the market. We've also opened up the channel and made at [indiscernible] listings where if a company does want to list on the ASX a secondary listing back in New Zealand is a very straightforward thing to do. And we had a couple of businesses that utilize that facility. So really pleased with what's going on there, not just in terms of primary capital raise but also in the secondary market. We had 28 businesses in our markets actually come back to the market to raise further capital. We also had 21 new BPOs come through. So all in all, the market is functioning and functioning well. When you focus on the debt market for a moment, very active there, but one of the highlights was the fact that green bonds and sustainable bonds are starting to become quite a normal thing to issue. We've had just over $1.5 billion of new issuance to it. And the interesting thing about that is they're starting to become a bit of a price premium for issuing green and sustainable bonds over other products. So you can definitely see that there is demand for [indiscernible] up here. Stepping through to the next metric that we hold ourselves to traded value, traded value, very strong again at $53.4. That's off the heavy hires of 2020 at about [ $54 billion ]. So again, very pleased with the way that that's held up. We talked last year about a structural change. We thought there was a structural change. And certainly, that's carried on. So pleased with all of that rolling down the list here, data and insights revenue, another really solid year, 8.1% growth in revenue. But underpinning that is we've got more investors, in particular, the institutional wholesale investors subscribing to data to our markets now than we've ever had before. And these are people and organizations right around the world. So that to me says that we're starting to get noticed or notice more and certainly, these investors are committing to us through the data terminals. Funds under management, our Smartshares business grown really strongly, 28.8% growth were up around $6.5 billion in that area. But the key thing here is, again, it's coming from all of the various areas. So the superannuation side of the business, the KiwiSaver piece and the EPS. EPS grew 23%. KiwiSaver grew 54%, noting that, that does include the $385 million that came in for the KiwiSaver [ default scheme ] program. That arrived in December along with 45,000 new clients and also our superannuation business prior to the ASB transaction we're exceeding as the transaction grew 8%. So good growth across the business. We had about $1 billion worth of net new cash come through, noting that as $385 million was from KiwiSaver default. So the growth in that business has remained strong. As far as KiwiSaver default goes we have invested in behind that through the course of 2021 with and from into the range of digital tools, which when you've got a lot of customers they need to interact with, we think technology is the way to go. So we've improved to those tools and they will connect to clients, they will seek some risk profiling from them, they will start -- the tools will start to suggest products. And then obviously, you can execute on that. So the electronic interaction to me is something that our business needs to embrace. It's got applicability not just for the default customers but also the KiwiSaver customers more generally and also [indiscernible] for superannuation clients. So we will see a bit of a transformation to the way we service in that regard. Just speaking of the ASB Master Trust acquisition for a moment, that is about $1.8 billion worth of fund. There's about 17,000 members that have come across with that. The transaction settled on the 11th of February. So the economics are starting to flow. And we've got an integration program, which is over the course of the next 12 to 18 months, where we have services that currently ASB are providing that they will transition across to us over that period. So pleased with that. That money is basically passively managed so the products that we have in our stable will be very, very applicable for those investors. Wealth Technologies had a really strong year, 53.2% growth. We're up over $11 billion at the end of last year for funds under administration and 3 high-quality clients have come on substantial clients and also really pleased about what's in front of the team for pipeline this year. I'm going to talk a little bit about dairy later because it's appropriate to talk about the dairy in the context of GDT. So we will come back to that. If we move through to Slide 7, I guess I've spoken a lot already to the full year 2021 list of activities apart from the bottom line. The bottom line really talks about our platforms and our technology security resilience and our capacity and then also sort of the operational efficiency that we're trying to drive through the business. Really, really pleased with the improvements that we've made this year in that regard. Our uptime for our capital market systems this year was 99.975%. So we had 1 minor outage, which was disappointing, but we're striving to be 100% up in that regard through the course of time. So really very pleased with the advances that we've made there. Also in and around that area, you'll remember we had an action plan to complete for the FMA. And there are 114 items on that. And we've completed the more and on time. So very pleased with that. And obviously, we're continuing to interact with the FMA as our regulator, but they sort of move to more of a BAU regulatory role through the course of 2022. So in summary, I guess, across the 2021 year, we feel we have done a really strong year across the board. We have kept the growth momentum up, again, across all the key areas of our business. We've made some material improvements internally and with our technology platforms. And I guess if you put to one side, the acquisition costs, we've come in above guidance. So all in all, we feel very, very happy with the results in 2021. Moving to the right-hand side of Page 7, I just want to speak a little bit about the initiatives that we've got on the go for this year and beyond. And we'll talk to it in the same way that we are talking to our sort of key metrics. So effectively, the top line, we are running a true origination model for looking for new products, equity, fixed income and fund product. Sarah Minhinnick and the team are very active in the market looking for prospects. And they're also in the market speaking to all of the ecosystem that the supports customers, whether it's the accounting firms, there is the financial adviser through critical corporate advisory firm, the investment banks. They're all really -- and the law firms, they're all really hearing our story, hearing what the New Zealand capital markets have to offer and making sure that, that's out in front of good prospects. So it's been a high priority for the last couple of years to be more productive in that area and will remain a high priority through 2022 and beyond. So a big focus on that. We also have a strong focus on growing liquidity, probably the 2 key things here is we've had some other participants join our market, and that's been driving a whole lot of wider investor flows into the market. We want to continue that, but 2 things or 2 projects that we do want to deliver this year is one. We've got a capability in a new trading platform that was implemented in August last year. index dark, we're calling it, which is a midpoint order book, anonymous midpoint order book. And we've had a range of interactions with the industry around the setting up a bit. We've agreed on an approach and we're looking to implement that later in the year. The key thing around that is it will provide a platform to bring more flow onto the market itself and I guess that's important from manager's point of view because it does mean that they can see on market activity at a much higher level. So we do want to do that. The other one is we're also got quite a wide range of interest from participants, fund managers, investors, market makes clear to come in with us to try and reinvigorate or relaunch the NZX [ 20 ] futures. And it's been a long time since the exchange has had a futures market. We really think that it's an opportunity not to be missed especially when you've got the industry starting to come together on it. So we do see that as quite a transformational thing if we can get it up and running. It's got not just an implication for the risk products themselves, but it does create a halo effect across growth in the cash markets, growth in depository business. growth in stock lending, settlement and clearing. So there is some quite transformational opportunities there. With respect to Smartshares, the focus for 2022 and beyond is really around making sure that we take the value that we've invested in that business already. We've got integrated ASB superannuation Master Trust funds, build those relationships give them to trust what we do and perform from a service point of view, so that's a high priority. We've got to take advantage of our KiwiSaver default investments and also continue to change and automate and improve the efficiency of our operations and client service areas. And the other thing to call out since last year is that we are the first in the region to attain the Asian regional funds Passport certification. And that in itself is one -- is the first, but what it does do is it allows us to sell our product up through Asia on documentation, which is a big we've been already produced. So we haven't got a lot of momentum on that side, but it certainly creates a real opportunity. The progress in Wealth Tech has been solid, as I said before, in 2021, really good, in fact, we want to carry that on in 2022, we've got a good pipeline of clients. And we still believe that our 2023 targets of $35 billion to $50 billion we are on track for. So Lisa and the team are working hard on those projects to transition more, funds under administration onto the platform. It is worth calling out that we are now earnings positive in that business, which is a great milestone, and we're obviously driving hard to be cash flow positive. Lastly, on this slide, we want to continue that maturing of IT capability. We also want to improve our operational automation right across the business and have a really strong platform is core to our right to play, so to speak. We need to be really, really trusted in that area. And Robbie Douglas and the team are doing a fantastic job at really maturing it. And the other aspect there is our risk management approach. We are investing a bit into risk management and really maturing our risk management practices, and it's interesting to see that happening. What I thought we're doing now is I'll just talk briefly to Slide 8, but it's not so much about the sort of the growth track. It's actually about the fact -- well, the key point on this slide is the fact that we've got good momentum. As I said before on the revenue side, good momentum there across the business on the operational earnings slide, good momentum there, too. Graham is going to take us through the numbers, and you'll talk about forward track shortly. But certainly, from our point of view, we've got good momentum, and we're well positioned for growth into the future. Now talking to Slide 9. Again, people who are familiar with our stock would have seen us talk about this previously. But the real point of this slide is to say that when you buy New Zealand or the NZX equity security, you're not just getting an exchange, you are getting an exchange, you are getting growth and funds management. We provide a whole lot of product for investors who can invest in the market is impassive products. And that's broadening the level of participation in the market. We also provide a platform for financial advisers to be as efficient as possible. We focus on those new end-based advisers. And with scale in that platform, hopefully, we can really make it easy for those advisers to run their business. And I guess what we're trying to do is create a mix of products and services that together will help grow the markets and grow participation in those markets. So you don't just get an exchange, you do get these other areas, and we do feel that there is a range of complementary opportunities across what we do. Over the page to Slide 10. You can read this at your leisure, but the point that I want to make on this one is we have now starting to get revenue sources coming from additional areas. And from our point of view, that's really important and improves our resilience. We've become bigger and stronger and obviously more diversified. So that was very much part of the strategy. We're calling our strategy around these complementary opportunities in this growth and integration as NZX 2.0. We had for the last couple of years, and we'll continue to hear us speak to that. So that is all I was going to say as an opener. What I thought I would do is pass to Graham now who will take us through the financials, and we will probably jump to Slide 23.

Thanks, Mark. Before I start, I'll again throw everybody's attention to the disclaimers on Slides 2 and 3. They contain important caveats related information on the vote cover. On Slide 23, the table summarizes the income statement for the year ended December '21. Basically it shows operating revenues up 12.2%. Operating expenses, excluding acquisition costs have increased to [ 10.5%], resulting in operating earnings before acquisition costs being up 4% higher than 2020 to $35.8 million. The acquisition costs related to the acquisition of the management rights of the ASB Superannuation Master Trust and including those, the operating earnings were at $34.4 million, slightly ahead of 2020. I'll break all this time over the following slides. And -- as a note, the detail on the management commentary on business unit, it's in Appendix 1 of this presentation as well as in the management commentary of the financial statements and annual report. The nonoperating expenses include depreciation and amortization, which is higher due to the commencement of depreciation on Wealth Technologies, new client migrations and NZX' new trading system, which went live in August 2021, the Auckland office. As a result, the net profit after tax is down 14.6%, with the operating margin lower at 40.7%. On Slides 24 to 29, I'll provide further graphic on detailed analysis on the operating revenues and expenses. The revenue pie chart on Slide 24 shows that the revenue coming from Smartshares and Wealth Technologies is becoming an increasingly -- increasing portion of NZX' total revenue at around 26%, up from about 21%. The cost pie chart shows that the gross personnel costs have reduced to about 2/3 of the costs with information technology costs rising to about 19% of the gross cost base professional phase is the third cost category at only 5% of cost base. This year concluded 2 waterfalls. The first is on Slide 25. This analysis -- this analyzes the costs into investments for growth, IT resilience and other increases presentation. Basically, we've invested for growth in our markets business with additional sales roles and related marketing costs, we end up bringing new issuers and participants to the market. We've also had the costs relating to the operating of the new carbon managed auction service for the Ministry of Environment. For our financial services businesses, there are additional costs as they continue to grow. Within Smartshares, there is traditional sales and customer service resources to support plans and fund growth and we've had the project resources focused on the acquisition. We've increased IT costs relating to personally the Bloomberg front and middle office operating system, which was implemented in quarter 4 2020. and the initial cost for digital tools related to the new CD profile. Within Wealth Technologies, the 3 new plants added during the year have required additional operational boarding and technical staff to service those new clients. And finally, within Corporate Services, we've added legal, HR and communications resources to support the growth in Smartshares and Wealth Technologies businesses. As I highlighted in last year's investor presentation, incremental IT resilience costs related to the additional IT and risk growth together with additional costs to improve the capacity and resilience of NZX' clearing and settling system banks plus the strength in existing security services and implementation of cyber-defense capabilities and security services. The other costs have increased relating to wage inflation and general inflation, including in particular, insurance costs, recruitment costs and component costs. The second waterfall on Slide 26 highlights all the course of the sort of traditional expense category basis. with operating revenues have increased in all areas except treating clearing fees of very derivatives. Operating expenses have increased, too, with the largest increases in personnel and IT costs. Dropping into a bit more detail, the high-level impacts on operating revenue noted on Slide 27. At the half year, I noted the nonrecurring development revenue arising from the new carbon managed auction service for the Ministry of Environment that have been fully completed. For issuer -- for capital markets origination formerly issuer relationships, the largest factors are annual listing page have been positively impacted the overall growth of market capitalization since the comparable period. Remember, there's the market capitalization of $31 million each year, which drives the annual listing fee for a year starting July and then in June. For primary listings, there have been a higher level of equity and retail debt listings relative to the comparable period. And for second rate issuance is there has been a lower level of equity capitalization relative to the comparable period. These partners are illustrated on the bar charts on the bottom of the business unit detailed slide that earlier in the presentation. It's worth remembering that equity has a relatively higher senior and retail debt and wholesale debt funds. For secondary markets, the securities and trading clearing revenues have decreased as the total value traded here reduced 2.8% relative to the comparable period. There's also been an impact in a higher value -- higher levels of value created and have been over the trading fee cap, remembering that there's a deal in trading fee cap. For dairy derivatives, whilst the number of lots have loss traded fell 15%. The margin fees remained low due to the reduced OCR rate and this has resulted in lower revenue. We continue to have high levels of consulting and development revenue. This arises from a multiyear electricity market real-time pricing project and also the development of the carbon market for the Ministry for the Environment, which is not complete. For Data and Insights, terminal revenue has benefited from higher professional terminal numbers, partly offset by lower retail numbers, which are coming off a high from the comparable 2020 COVID periods. Subscription and licenses revenue increases reflect growth in our cloud value usage and license numbers, which shows our ability to capture license revenue post audit. Endorses revenues were flat in the current year after period growth where we benefited from an increase in funds using indices benchmarks in additional index data clients. Terminal royalty audits and backyard license revenue is at record levels, reflecting a continued high level of audits and the focus on mature customers are appropriately licensed [ throughout the year ]. Connectivity revenue reflects increased connectivity requirements from both market participants and data vendors. For the Funds Management revenue, it continues to grow strongly. Fund based revenue is up 36.6% with strong cash flows and market growth driving some up to $6.5 billion. Member-based revenue increase, reflecting a mix of increased investors or member numbers, a reduction in some -- annual admin fees effective on 1 April and the prior period including its historical pricing provision. Wealth Technologies' revenues, unbased revenues have increased over 100%. As new plans have migrated to the platform June year resulting in the [indiscernible] gain of slightly over $11 million. Regulation revenue has been separated out and includes an internal allocation of our new listing phase and annual participant place. These allocations are set once each year based on the services expected to be provided by NZ RegCo. The high level impact on operating expenses are noted on Slides 28 and 29. For personnel costs, there are 4 main drivers of the increase. Firstly, the headline year-to-year end has increased by approximately 35 FTEs or 13.8%. About 85% of our FTE increase is focused on growth roles the vast majority of which relates to Smartshares and Wealth Technologies. And as I noted earlier, these are for additional sales and customer client servicing roles as these businesses grow. To be more specific, the new Wealth Tech clients that were all onboarded during the year. And for example, Smartshares is the new KiwiSaver default scheme customer numbers. The markets business and the Corporate Services have also seen FTE increases and growth, focused growth in IT resilience related growth then project management resourcing as I have already noted. The second driver was inflation, driven by a highly competitive and tightening neighbor market, which we expect to continue in the 2020. This, in turn, impacted our recruitment costs, which were far higher than normal. And finally, the final driver was a continuing COVID lockdown impact, which we've seen in 2020, which for us, resulted in lower levels of annually being taken up consequently and increased accrued annual lease costs. Capitalization of internal development resources has increased 11.6%, driven by the increased Wealth Technologies' headcount working on new transit creations during the year. Additionally, there has been activity on the new trading system, which went live in August 2021. IT costs were significantly higher than the comparative period due to 4 main factors. Firstly, increased cyber security costs deriving from the improved resilience of NZX' clearing settlement system, plus the modification of existing security services, supplemented with additional cyber-defense capabilities and security services. Secondly, the costs associated with the development and ongoing operation of the new carbon managed action service from the Ministry of Environment, which generates additional revenues I mentioned earlier. Thirdly, the electricity -- energy and electricity market pans third-party specialists support the assist with increased levels of development, which also generated additional development revenue. And finally, Smartshares implemented its Bloomberg front and middle office operating system here in 2020. So full year impact is reflected in the current year numbers as well as investing into digital tools, which are a key component of servicing KiwiSaver default scheme members. There is also an increase in software license and data state and data hosting costs associated with client growth in the data and insights and a technology periods. Moving to professional fees on the next slide. They're comparable to 2020. The current year cost really pay the setup of separate growth initiatives including the very drives partnership with SGX, new KiwiSaver's default scheme, and of course, the development of the new carbon managed auction service. That carbon managed auction service also has ongoing operational costs such as the EEX royalty phase from the underlying trading system EEX partner to provide that service. Professional fees, of course, also includes an ongoing insurance program as well as the royalty other costs which are proportionate to the revenue generated. Marketing spend increased in 2 areas: capital markets originations using additional memberships of memberships and sponsorships of various industry groups to identify listing opportunities and also the market, the exchange. Additionally, Smartshares increased their online advertising to attract new funds. Other expenses has increased with a insurance premiums plus -- compliance costs and nonrecoverable GST as the Smartshares and Wealth Technologies' businesses grow. Capitalized expenses related to cost incurred in all those expense categories, which relate to the internal development activity in the personnel activity. And the acquisition costs related to Smartshares acquisition in the ASB Superannuation Master Trust [ Master Cards monitoring ] rights. Also on Slide 29, I give an overview of the 29 operating costs. I wanted to note the impact of some of the revenue-generating growth initiatives have in the cost base particularly then the need for example customer servicing personnel and IT staff to service the ASB Supervision Master Trust acquisition, which picks up 45,000 or so new members and adding those to just over 30,000 that we originally had on the 17,000 -- Sorry, I said that. We pick up 17,000 additional members through the ASB volumes Master Trust, adding that to the 30,000 that we had before the default then come online and add it about 45,000. So you can see a massive step change in the number of members that we need to service. And then also the new Wealth Technologies' clients that I've already mentioned. There's also a full year impact of the current year growth initiative costs such as the headcount increases that I noted earlier. Additionally, there will be costs associated with the gross initiatives such as the launch of -- relaunch of the NZX 20 equity index futures and the further development of our dairy derivatives partnership with SGX, which Mark has already talked about. These will have an impact on our operating margin, although we do expect the other prove from '23 onwards as we complete the current investment cycle and fully realize the expected revenue uplift. Moving to Slide 30, where the nonoperating income and expenses are summarized. For net finance expenses, the interest income on our operational cash balances less capital continue to be impacted by the low [ CRE ]. Going forward, the interest income will also be impacted by the reduction in the levels of planned collateral, which I'll talk more about in get to the balance sheet. The increase in depreciation and amortization cost relates mainly to Wealth Technologies for further software relations and on the migration of new clients. Also the new trading system, which went live in August 2021 and the open office setup, which is also live from August 2021. As I have noted, the full year impact of these items will be felt in 2022. Together with the new amortization on acquired ASB Superannuation Master Trust management rights from the acquisition did on 11th of February and the date as well as any technology further cloud migration costs. Overall, we estimate that the FY '22 operating earnings if we're in the upper half of our guidance range. These would offset the increase in nonoperating expenses resulting in the '22 net profit after tax being around the FY '21 level subject to obviously the market items material eventual one-offs that I refer to you on Slide 51 to 52 and later when we give full earnings guidance. Moving to Slide 32 on the balance sheet. There are probably 2 key points to note here. Firstly, as always, I point out that the cash balances include balances that are not available for general use and particular, the clearing high has $20 million of risk capital and about $3.4 million of [indiscernible] capital. the Funds Management business has about $3.9 million of working capital requirements under its FMA license and Asian regional passport requirements. The second point to note is the funds held on behalf of third parties, assets and liabilities, which I'll said, each other had these assets are not available for [indiscernible]. These relate to the issuer [indiscernible] deposits, participants' collateral deposits and deposits and funds as part of the clearing services. The reduced levels were led to the mutualized default on contributions being returned to participants with the dairy derivatives clearing transferred to Singapore Stock Exchange in November 2021. Moving to Slide 33. It summarizes the CapEx for 2020. Within the core markets, the new projects where the technology upgrades and enhancements to strengthen both our clearing system and the cybersecurity, the establishment of the open office Capital Market Center and the new trading system. Within the growth businesses, Wealth Technologies continues to provide further functionality and migrate new clients, which we expect to continue into 2022. And Smartshares just to leverage that will total to service the KiwiSaver default members. In 2022, we expect capital to settle back somewhere between 2020 and 2021 levels as we continue to automate the depository business. We place the old [indiscernible] in Auckland and best Wealth Technologies client migrations and enhanced Smartshares schedule trends across its other products. The cash flows are outlined on Slide 34. Operating activity decreased cash flow reflect the lower net profit after tax levels adjusted for the noncash items, such as depreciation and amortization, together with favorable working capital movements. Investing activities reflect the capital expenditure that I just noted in the previous slide, the finance activities merely reflect the dividend payout [indiscernible] anticipation in the dividend reinvestment plan as well as lease payments. At this point, I'll hand you back to Mark to talk about growth initiatives and the equity views.

Excellent. Thanks, Graham. And what I thought I'd do is I'll move through to Slide 36 and touch on this one just for a moment. So as I said earlier in the announcement, we are running NZX 2.0, which things to sort of capital markets, Smartshares and Wealth Technologies in their core businesses, also really trying to take advantage of the complementary opportunities that exist within those businesses. and building a stronger and more integrated organization. One of the things that we do see is scale and funds being something that we can leverage. And the ASB Master Trust acquisition was right on the strategy when it comes to that. So in that regard, we saw an opportunity to purchase scheme, if you like, which was passively managed at a scale for our business. It's exactly what we do. We've got the client support and the have ability to service those clients really well. So we just felt that, that particular opportunity was absolutely being on for us. We purchased that last year for a purchase price of about $25 million. And as I said earlier, we've got to resettle that transaction on the 11th of February, and we've got an integration plan working with ASB over the next 12 to 18 months. So that's being on strategy. I think it's worth now touching on dairy because of the announcement that we made this morning alongside Fronterra and the European Energy Exchange, to take up a third share of ownership in that business. But it's worth explaining that and how that relates to our Berries business. and what our intentions are there. So that's probably best talk to if we jumped to Slide 39. And I'll step back for a moment just to speak to dairy derivatives markets and how they're built. And in many respects, they're built, firstly off the platform of the price discovery in the physical dairy market. So the whole milk at a skilled, the batter and enhanced milk prices that you see, they are discovered, if you like, out of options for physical product. In Fronterra supply a product and visitors would now come in and bid for those products on those options. Next, we are, obviously, price discovery occurs. I think what's -- the thing that's changed there in more recent times is that there is a desire to have more sellers onto that platform and I'll explain it further, but hence the need to broaden the ownership of that business. And I think Frontier has realized that. Layer now that the price discovery of the physical market is the financial market, the rest of the market and we have been working very hard for over 10 years with a huge amount of support from Frontier to grow that market. We have been the fastest-growing dairy market for a number of years. We had a slower time of it through 2021, but lastly because of more benign prices or slightly rising prices in the physical market and the need to manage risk was probably less but also COVID had impacted our ability to get out around the world and market those products. So from our point of view, it was growing really nicely. We were working really hard to bring on more clear and more participants, more end users. And we were challenged with that because we do need to bring these global banks to our market and quite often, there's always a project that is always ahead of it on their project list. So what we've done there is partner with ESG who already have these clears attached to their market. They're obviously well positioned for growth out of Australasia or Asia, the Middle East and they've also got presence of it up through Europe. And into -- connectivity into South America. So there's a perfect partner. They're very aligned on our objectives, actually, we have a real opportunity for our dairy products. And so we've gone into that partnership to break down that barrier of entry for more end users and more financial participants and speculators to join that market. And then the last element of Dairy is the insights and data that we provide to the market, we've got 1 of the best teams around the world, which produce a lot of dairy market insight material, and we sell that all over the globe. So when you think about those layers, you've got the physical price discovery, you've got the financial market and you've got the information. As I said before, Fronterra have invested a lot in establishing GDT, got it to the preeminent price discovery platform for export product. They're now thinking there will be great to have some partners who are very aligned on all of that, to show sort of more independent, if you like, of that entity. Ourselves are obviously a natural part for them. And so as EEX, we are well known to the EEX. As you might recall, we partner with the EEX and the does have an kind of auction platform that we provide the New Zealand government. So they're a great business, a strong business, strong in energy and commodities up in Europe, and we've got great relationships with potential new suppliers. So we make natural partners together. We're aligned on our objectives. And the key thing around getting together on it and taking to an ownership is driving a strategy of probably adding more suppliers to the platform and also increasing the level of frequency around price discovery. The benefits of all of that will actually flow through into the financial market. So more activity around price discovery should actually flow into more activity in the derivatives market. And then obviously, with the distribution barriers broken down and the speculators and the end users coming in, we should be able to execute a dairy derivatives market that will grow to it and fulfill its potential, which could be a number of times the size of the physical market. So we're excited about the opportunity. We think that we've now got the pieces of the jigsaw in place. And we've got every possibility of super fulfilling that objective. So that's the reason to get involved in GDT and I guess a little bit more color on what our plans are for our dairy business. What I might do now is just hand back to Graham to talk about guidance and the final dividend. And then once we've completed that, we'll roll into the equity raise.

So the final dividend and earnings guidance is on Slide 31. So our final dividend -- final and fully [indiscernible] dividend, $0.031 per share, which is compared to the 10 March, bringing the total for the year to $0.061 per share and the dividend reinvestment plan is temporally suspended given the equity raise. For the earnings guidance in [ 7 ], the 2022 earnings guidance, we considered several impacts and landing in this range. The market decreases since the start of the year, the impact they potentially have as they don't revert to the levels they were in December. On our revenues that are driven by market cap that's about 40% of our revenues, particularly annualistic based on these revenue and [indiscernible] revenue. We've also taken into the growth initiatives that we've talked about earlier in the presentation including the expected integration costs for the ASB Superannuation Master Trust of [ 0.5 million ]. I do know that GDT investment will be recognized as an associate. So it's recognized below the operating earning lines and consequently not in the operating -- sorry, in the earnings guidance. And finally, we've also taken into the current levels of geopolitical risk that we sort of see above all at the moment. As a result, we've widened the range, particularly the bottom end and we expect 2022 operating earnings to be in the range of $33.5 million to $38 million. As always, I note that this earnings guidance is, of course, subject to the usual market caveats market movements and caveats that are listed on the slide. On Slide 52, we've reiterated our 2023 aspirational targets, which we set in 2018 together with the key deliverables that work towards that aspirational part and we've now it 2022 targets exceeded our earnings guidance. Again, with the disclaimer and specific the base on our financial forecast, progress towards those achievements -- the achievement of those targets can be monitored within our shareholder ethics, which we publish monthly. Fundamentally, we still believe that it's achievable to get into the 2023 aspirational target range. with the levels of Wealth Technologies for very derivative lots and cost control in new factors to determine where we end in this range as we've outlined in this presentation. I will now hand back to Mark to talk a couple of our equity news.

Thanks, Graham, and we're dancing around here a little bit, so apologies, but back to Page 42. As we said before, our view as an organization and the view of the board is that we need to keep our belt conservatively set. We've purchased the ASB Master Trust business for $25 million. We have mentioned also that we purchased secure GDT for about $12.5 million, and we will invest in capital into that business as well for the growth initiatives. And we're also looking to cap some transaction costs. So what the capital raise is all about is raising around about $44 million through an ROE structure. So we've got a institutional aspect, which is being accelerated over today and tomorrow. The office structure is a 1 for 9 pro rata offer. And on the institutional book build is completed, we roll into the retail offer period, which is over the course of the next couple of weeks starting Monday. The key things for us around this is as I said before, to reset the balance sheet to a gearing level, which was where we were at prior to the acquisition of the ASB Master Trust business. We want to be considerately set. The exchange, you'll note that other exchanges around the world, they had no debt or in many cases, our net cash. So we have an element of debt, which we're comfortable with, that's got some equity like characteristics to it. So we want to get back to that position. So it is for the replenishment of the balance sheet, of the back of those growth initiatives. Key thing also is that fairness for existing shareholders was absolutely at the top of their mind when thinking about the structure. Hence, an entitlement offer right across the board. So there is -- the issue price has been set at $1.42 per share, which is representing a 15% discount to the dividend-adjusted theoretical price of the 2. And that's based on the 16th of February's price. So the details of the offer right through the pack. We've got offer materials that have also been published today. But as you said before, the institutional element, which we've seen strong interest in has accelerated over the next day or 2. And then obviously, the retail piece will follow over the following couple of weeks with a book bill taking place on the 16th of March. So that was from us at the moment, I guess, we are very happy to take questions if there are any out there.

There is a question from [ Brad Lowe ]. [indiscernible].

Just a couple of questions for me. There's obviously a lot in there sort of already. Just in terms of the -- you've called out incremental OpEx in the coming year of $4 million to $4.5 million. So looking at the middle of your guidance range, which is broadly sort of in line with operating earnings this year, it looks like revenue is heading up to sort of circa 92 at the midpoint. Where do you see -- how much of that $4 million to $4.5 million do you see as being related to sort of one-off investments in FY '22 sort of onboarding and the like? And how much of it sort of reverse, do you think?

[ Correct basis, inflationary ].

So certainly, the NZX 20 equity derivatives is a start-up is really a good expenditure that may extend the degree into 2023. But it would be classified as within that sort of one-off bucket albeit across potentially 2 financial years. The other pain in her presentation, the step change in cost for smart chairs, we're bringing on both the ASB acquisition and the KiwiSaver default scheme and then trying to illustrate the number of members that come onboard, but we intend to service those through some operational staff but also 3 digital tools. So they will be ongoing costs. But fundamentally, going from just under 35 members, adding ASB at [ 17 ] in KiwiSaver default at [ 45 ], you can understand why we need some additional operational resources but also how important digital tools are to make sure we leverage the business to make sure that they -- they're serviced appropriately, and we get the right return.

I think the other thing I'd throw in there to, Graham, is we do get some integration costs for the Master Trust business. And I think Graham might have mentioned that they're probably in the order of about 0.8 through 2022. And there might be a little bit that carries over into '23. But basically, you would treat those as one-off as well.

Okay. And just in terms of the CapEx side of things, obviously elevated for reasons outlined previously in sort of alluded to. Where do you see that sort of settling over the next year or 2? You mentioned that it comes back to sort of more normalized levels. I'm looking at the chart and sort of the $8 million to $10 million over the last sort of the preceding 3 years. Is that kind of the level that you expect things to get to in the next 12 months and then beyond?

So I look at CapEx and maybe going forward, I should present in 2 different ways. I look at Wealth Tech separate effectively, everything else. Wealth Technologies is in a land grab phase where clients are being migrated on and we are spending dollars to bring them onboard and set them up on the platform. with that period of land grab finishes, the operational costs and Wealth Technologies was increase the capital expenditure will decrease back to a normal level. Our objective there when we get to a steady step with our regular onboardings is to certainly continue to develop the platform and then it's sort of currently because arguably others haven't done that and suffer because of it. So there would be a reversion in Wealth Technologies back to a more BAU normal level. When that occurs, I wouldn't say necessarily in a year plus time because it depends on how many migrations we have, and we think the pipeline is through into 2023, at least -- and it is revenue generating. So we want to grab a new can because it's sticky in the last more than 10 years. So it's probably a bit longer time frame for that part of the business. The rest of the business -- we are investing in digital tools and Smartshares' area, and that will continue into 2022. And eventually, that will peel off probably in the time period you've mentioned. For the market side of the business, what I'm trying to highlight in that graph is there is a cyclical process as well as an annual renewal is an annual base level of a few million. And then they're cyclical every 3 to 4 years, we have to update or replace either the clearing system and the training system that are on roughly 7-year cycles. They are skewed so that we can manage the workload. But roughly every 4 years, you have 1 of those come in over a 2-year period. So it's important to notice that, that there'll never be a flat component to that cyclical investment because some of it's multi-years. Does that make sense? So if you go up and down always, but if you look at the historic of the markets business, you would expect that adjusted for inflation to these type level.

Yes. Okay. That's fair. Just last one for me then is just around the have a default, I see $385 million of FUM onboarded. Does that represent everything because I know there's some talk of the transition phase, does that represent everything that you're expecting from the each other.

Yes, it does. Everything was completed by the market in December. That's correct. So thing that was transferred. And then obviously, we now are in the business of taking up new default members on a monthly basis. So it has a stream, a forward stream of new activity. But there was everything that sort of shuffled around as the number list changed.

Next question is from [ Kerion Karl ].

Just in terms of the ASB acquisition, are you able to provide any color as to the impact you see that having on EBITDA during FY '22? I guess, at a high level, it looks about a $4 million impact, which should imply guidance minus the acquisition of about $29.5 million to $34 million, which is below that of FY '21. Does that seem in the right sort of ballpark to you?

I mean we've disclosed that $4 million when we announced it, it would, of course, be from the completion deal which was last Friday. So it's not a full year of $4 million. And as well as that, you need to take off the integration cost estimate of about 100. So the number is a fair bit lower, closer to the effectively $3 million, just close to $3 million. There will, of course, be some interest costs associated with the borrowings that we have in place for the -- since the completion of the equity raise. And then I do note that amortization will increase for the accounting treatment both with the signed life intangible assets. Does that help you?

Yes. No, that helps. So you're sort of expecting the rest of the business outside of that acquisition to be relatively flat on FY '21 in terms of EBITDA?

Yes, the way I would describe it, Kerion, is we are in a situation where we've got a number of growth opportunities in front of us that is all landing on the 2022 year. And when you think about the dairy business for these years, we've got the midpoint order book. We've got the NZX 2.0 futures, obviously integrating ASB and hitting the default opportunity as well. We thought very carefully about in is put another way, in a benefit world, you would had those spread out a little more. So your costs, if you like, would be over a sort of an extended period of time as you picking year-on-year. We feel [ carefully ] about do we spread these opportunities out. We try and delay a couple, but the reality is we thought that across the business and markets those [indiscernible] and the end [indiscernible] were things that we just really need to take advantage of now. Likewise, it's [indiscernible] and obviously, the world pieces of land grab. So we have got a situation where -- we've got a level of investment that will come through the OpEx line in 2022. But the track beyond that in 2023 looks really strong. And really, when we discussed this with the board, we all decided that now let's go for it in 2022 with a view that we end up with a really strong mining growth path sort of out beyond that. So that probably is tying into maybe a little bit of the thinking that I'm sort of sensing from you possibly.

We have an e-mailed question from [ Lars ].

Do you want to take that?

Yes. [ Lars ] is asking can you please provide comfort that the dividend per share will not fall supported by your payout policy, flexibility. So the dividend policy is basically the tried and achieve a dividend payout ratio between nearly 110% over time. What we mean specifically about the overtime component as we look back at previous years, and what the opportunities look like, both in the future when we determine what the dividend should be on. So last year, the end payout ratio was just under 98%. This year, it's just over the 110% adjusted for the write-off. Next year, yes, if the profit was at the same level, it would be implicitly higher than that level. And we would look through to FY '23 and the fact that we're still the view that we would be inside that aspirational target range and that would give us the flexibility in the dividend at the level I hope that answers your question.

And I'll add some comments there too, Lance. Certainly, it would be a very, very brave board to make carat the dividend. I don't expect that to occur because I expect to track beyond 2022 to look strong. So I think we can give you that comfort.

Another question from [ James ].

I'm just wondering about the ASB acquisition. The management fee rate on that, is that going to be similar to what we're seeing in Smartshares? Or the management base of the member.

Yes, there have been no change to the management fees there. They are already a passive and best, so they're paying passive fees at this point in time. So there is no intent to change to say it is roughly similar to the equivalent [indiscernible] product. The products that we have because it's passive that's in the same ballpark.

Yes. Excellent. Well, it doesn't look like there's any other questions there, Mark, I bet you can see.

So if that's the case, really appreciate everybody taking the time to listen. Obviously, there's a bit there to consume. Graham and I are both more than happy to speak to people individually to run through any questions you might have digested the information. But otherwise, I really appreciate your time this morning, and we look forward to talking to you again soon. Thank you.