NZX Limited (NZX) Earnings Call Transcript & Summary

Good morning, everybody. and welcome to NZX's 2022 First Half Year Results. Most people will know me, but I'm Mark Peterson, and I'm here today with Graham Law, our CFO. And in the background, we've got Simon Beattie, who's our Head of Investor Relations and Communications. Graham and I will take you through the results this morning, I'll lead off with the key elements and Graham will step us through the financials, after which we're very happy to take questions. [Operator Instructions] Before we start, please note the disclaimer at the front of the Investor Relations pack as the statement applies. Just a few opening remarks from me before we get into the detail. Over the last time we spoke, clearly, the global economy and with this financial markets across the world, we're in a different mode. Geopolitical risks, higher inflation, rising interest rates have impacted asset valuations and coupled with supply chain issues and the continuation of tight labor markets are generally causing and creating challenges for all businesses. All that said, NZX has achieved a really solid result for the first 6 months of 2022. We continue to make progress against our strategy across all areas of our business. And whilst we may not have achieved across every measure in this half, over a 5-year period, we are still positively moving forward across all areas that we measure ourselves. We also received a positive review from the FMA in their annual market obligations review for significantly improving our IT risk and resilience capabilities. With this as backdrop, our financial result for the first half has held up well, and I'm talking to Slide 4 of the Investor Relations pack. Our operating earnings, excluding acquisitions and integration costs, was $17.6 million. And including acquisition and integration costs, it was $17.4 million, which was up 2.8% on the same time last year. Revenues totaled $46.2 million, which was up 8.8% on the same time last year, and this was driven by increased revenue from listing activity, dairy derivatives, data and insight, funds management and wealth technologies. Our operating margin was 38.1%, which was down slightly on the second half of 2021. Remembering that we had a step change in costs in the second half of last year due to that investment in technology risk and resilience. Our modest lift in costs this half over last year has largely been driven by personnel costs. Remaining competitive in these labor markets is meant to lift, much like all businesses, and we do have our annual salary adjustment around in February, which has flowed through into these numbers. Net profit after tax was $7.4 million. We will pay an interim dividend of $0.03 per share on the 23rd of September to all shareholders who are on the register as at the 9th of September. And we are reaffirming our full year operating earnings or EBITDA guidance to be in the range of $33.5 million to $38 million for the full year. I'm sure everybody is very familiar by now with the approach to describing our results where we break the business down into our 6 biggest drivers, our performance and opportunities for growth. And once again, these are outlined on Slide 7 to 12, and we will take you through these now. I'm speaking to Slide 7, which is all around capital raised. As mentioned earlier, our environment has changed, which has flowed through to listing activity. We welcomed Ampol, the Booster Innovation Fund and the Southland Building Society to NZX markets. Total listed securities has lifted to 339, up 4 since the beginning of the year. Our mix of capital listed and raised has changed again this half but has remained strong with $9.4 billion of capital listed and raised over the first 6 months, and this is up 28% over the first half of 2021. There has been a big swing to debt listings, with $6.3 billion of primary and secretary issuance and secondary market equity raisings totaling $2.1 billion. There was also another $1 billion raised across our listed fund products. Often, the debt market becomes very active when the environment for equity is a little challenged, and this is what has happened here. I would like to remind everybody that we have a very healthy debt market, and it is a real strength of NZX especially given the various types of debt instruments from simple corporate bonds through the regulatory capital instruments. The economics of the debt market for NZX is also good. Our pipeline for further listing activity is healthy. We expect the debt market to continue to grow strongly, and we would continue to be surprised that we didn't see more regulatory capital issued. The fund market has been steadily growing, and we expect this to continue. And the companies we speak to continue to realize the benefits of public markets and having access to capital. We have a number of companies that are preparing for listing. However, the right market conditions is an important factor for these companies to come through. We are expecting both the IPO and direct listing channels to be utilized. On Slide 8, I now talk to our secondary markets traded value. And again, the macro environment has also posed some challenges for this side of our business. But pleasingly, aside from the very busy COVID years of 2020 and 2021, it is one of the best half for trading volumes that the company has actually had. And you can see that on the graph on the page. Value traded for the half totaled $20.8 billion, which was down 23% on the same time last year. Trade numbers are down 12% and the proportion of wholesale and retail trading value has remained largely the same. Positively, our depository assets have grown 6.1%, and we don't see the growth slowing. We have a strong depository proposition, and we continue to market this to major custodians. Equity index futures and the midpoint order book venue are the 2 liquidity development areas of focus for us through 2022 and 2023. Turning to Slide 9, talking about our data and insights activities. Another half year of good growth in our data business, the business has a compound average growth rate of 7% over the last 4 years. And revenue for the half was $9 million, which was up 4.2% and that is without much audit and fee revenue. We do expect several audits to be finalized in the second half. Professional terminals and data license numbers continue to grow, which has a strong signal that interest continues to grow around the world at NZX. Turning to Slide 10, on dairy derivatives. We are seeing very positive signs for our dairy derivatives business. With the partnership of SGX in full swing and the partial acquisition of GDT alongside the European Energy Exchange and Fonterra completed, all the ingredients are in place for us to deliver on the opportunity we have. We have seen the activity and open interest levels rise strongly. Lots traded is up 42% on the same period last year, and open interest is up 71%. Together with SGX, so far, we have more than tripled the number of firms clearing this market. And both sales teams from NZX and SGX are working extremely well together and are being successful in adding more and more end users to the market from all over the globe, but particularly from Asia. GDT has delivered the first project as part of its strategy to increase auction flows. The GDT Pulse was launched on the 9th of August. This now means that there are weekly price signals from the physical market rather than just fortnightly options as it was previously. The more frequent the price signals, the more information there is to assist the decisioning of derivatives markets users, which should assist growth in trading activity. The objective of us having a stake in GDT is all about being at the table with EEX and Frontier as we build out the preeminent global dairy option platform. With the strategy focused on increasing the number of sellers and more frequent auctions, it will become a very effective platform for processes to sell product. And as a result, there will be greater depth and frequency of physical price discovery in the dairy markets. And as mentioned before, this will flow through to our derivatives market activity. Our globally dominant price research agency has 3 layers: physical price discovery, risk product markets and data and insight. These businesses are becoming globally important and command very healthy valuation multiples, and this is what we're building out. We are more optimistic than ever in what we are creating in our dairy markets business. Turning to Slide 11 and speaking to Smartshares. Despite the market conditions, we actually had a good performance from Smartshares in the first half. Notwithstanding the fallen market values, the Smartshares operating earnings of $6 million excluding the acquisition and integration costs, is 25.7% higher than the first half of 2021. This has been positively impacted by the acquisition of the ASB Superannuation Master Trust business. Funds under management at the end of June totaled $7.55 billion, up 15.5% from the end of last year. You will see on Slide 11 the breakdown of our growth. Clearly, the ASB superannuation business has contributed strongly to that growth, although 2.7% of the growth came from net cash inflows, which totaled $180 million over the period. Now the market returns did knock us back 14.9%, although July saw some of this clawed back. Our focus in Smartshares has 3 limbs. Continued growth in the business down the various channels, superannuation KiwiSaver and ETFs, improving operating efficiency and gaining operating leverage, and the integration of the ASB Superannuation Master Trust business on to the Smartshares operating model. We are very optimistic about what is in front of us for this business over the short to medium term especially given what we have in our pipeline. Slide 12, Wealth Technologies. Operating earnings was $500,000 for the half year, which is up nicely from the same time last year and continues the positive growth trend. Funds under administration totaled just under $10 billion as at the end of June, which was down 10% from the end of last year largely due to market impacts. Our adviser business clients did have a positive net cash inflows over the period, but market returns, as I mentioned, deliver negative 11.5% impact. The focus of the business is in 2 key areas: through the client transition activity, and we're on track for a significant transition in the second half of this year and becoming cash flow positive as quickly as possible. Client prospects remain strong, and there are a mix of large opportunities and more medium-sized financial advisory firms. We remain confident about the scale and ambition that we have previously laid out, it might take another year longer than originally planned. Slide 13. Just speaking quickly to our regulation team. We remain pleased with the new model for regulation. If you recall, our intention was to create structural separation between regulatory and commercial functions of NZX and thereby creating a clear perception in the market on where the boundaries lie, and we believe this is continuing to be achieved. Slide 14, just speaking to our people. I can't be more proud of our people over the last couple of years. And this half hasn't been an easy 6 months. The team has really hustled for everything that we have delivered. Our staff engagement levels have taken another step up, which is really pleasing and speaks to the culture that has been created. However, we continue to run staff turnover levels at twice historic average, mostly due to younger people looking to go offshore or being offered more money elsewhere. We are finding recruitment being -- we are finding recruitment is very competitive, and it is flowing through to salary levels, but we are changing our strategy. We have some highly experienced and specialized staff and important roles, and we're looking to put more younger staff alongside these people where we can train, develop and offer opportunities and promote from within. This also assists in reducing key person risk. We are continuing our commitment to closing our gender pay gap, which currently stands at 15%, although this is almost a structural gap, and we have to get better at promoting more women through to managerial and leadership roles. Currently, my senior leadership team is 40% female. Lastly, I would like to call out that Felicity Gibson, who leads our clearing and operations business was chosen by the World Federation of Exchanges to be on the Women Leaders list for 2022. It's a fantastic recognition for Felicity. I'd now like to hand over to Graham to take us through the numbers in more detail.

Thanks, Mark. Before I start, I'd like to draw everyone's attention to the disclaimer on Slide 2, which contains important caveats with the information we like to cover. Starting on Slide 16. This provides a summary of the acquisition of the management rights of the ASB Superannuation Master Trust, which completed on the 11th of February 2022. The acquisition drives further scale in the Smartshares business. Smartshares is currently responsible for the client relationships as part of this transaction with the investment administration and investment management and registry services, all due to be migrated during 2023. And the current period of the acquisition has contributed approximately $1.8 million to operating earnings and approximately $0.7 million to net profit. Slide 17 provides a summary of the acquisition of the 33.3% stake in global dairy trade, which completed on 30th of June 2022. The transaction provides a sustainable foundation for NZX's dairy derivatives business with the potential to evolve GDT to be a truly global auction platform. Given the acquisition there, there is no impact on the income statement in the current period. Moving to Slide 19. The table summarizes the income statement for the half year ended 30 June 2022 with comparatives for both the first and second halves of 2021. Overall, operating revenues increased with higher revenues from only listing fees, dairy derivatives, data & insights, funds management and wealth technologies business units being partially offset by reduced levels of securities trading and securities clearing revenues, energy consulting revenue and audit and back dated license revenue. Operating expenses have also increased noting that compared to the second half of 2021, the increase is largely due to personnel costs, where the annual pay review becomes effective from 1 January each year. The operating expenses also reflect the fact that we've completed our IT capacity and resilience improvement program, including strengthening cybersecurity. And that was completed in mid-2021. And also, we have not commenced any new investments for growth in the current period. This has resulted in operating earnings before acquisition and integration costs being $17.6 million, which is 1.0% lower in the first half of 2021 and 2.2% lower than the second half of 2021. The acquisition costs related to the acquisition of the management rights of the ASB Superannuation Master Trust resulting in the operating earnings after acquisition and integration cost being at $17.4 million, which is $2.8 million (sic) [2.8%] higher than first half of 2021 and 5.4% lower than the second half of 2021. The nonoperating expenses include in net finance costs. These are lower -- at a lower level as interest income on our various cash balances has been positively impacted by the increasing interest rates. The depreciation and amortization is higher. This was in line with our expectations, as I outlined in our last investor presentation. It reflects the full 6 months of depreciation and amortization on items capitalized during 2021, such as wealth technologies, new client migrations, the IT improvements to improve the IT resilience, Smartshares KiwiSaver default scheme digital tools, and the new Auckland office. Additionally, there's amortization of the management rights from the ASB Superannuation Master Trust acquisition, which commenced in February. As a result, the net profit after tax is $7.4 million, down 3.2% in the first half of 2021 and in line with the second half of 2021. Operating margin is slightly lower at 38.1%. In Slides 20 to 29, I'll provide detailed analysis and on the operating results by business unit. And these waterfalls on Slide 20 and 21 show high operating revenues and costs have moved by business unit with the current period's operating earnings being compared to the operating earnings for the first half of 2021 on Slide 20 and the operating earnings in the second half of 2021, Slide 21. Slide 22 provides the same information in the table format with the slides thereafter providing detailed analysis, and I'm about to talk through those. Now I will focus on the main changes in revenue and expenses. So moving to Slide 23. This summarizes our market business. Overall, the markets business operating earnings were $20.4 million, which is 0.5% lower than the first half of '21 and 6.6% lower than the second half of '21. So for capital markets origination revenue, annual listing fees have been positively impacted by the overall growth in market capitalization since the comparable period. Remember, it's the market capitalization at 31 May each year which drives the annual listing fees. Primary listing fees in the period have been driven by equity and retail debt listings and secondary issuance fees in the period have been driven by equity recapitalizations and retail debt issuances. It's worth remembering that equity has a relatively higher fee rate than retail debt, than wholesale debt and finally, even funds. For the secondary markets, the securities trading and clearing revenues have decreased as total value traded and cleared reduced 23.3% to $20.8 billion. This was partially offset by lower levels of value traded being over the trading fee cap. For dairy derivatives, revenues increased in line with the 42.1% higher lots traded. We have seen -- we've been seeing this uplift since the commencement of the SGX strategic partnership from mid-November 2021. Consulting and development revenue is lower mainly due to the comparative period, including one-off revenue relating to the development of the carbon managed auction service. For Data & Insights, terminal revenue has benefited from higher professional terminal numbers, partially offset by lower retail numbers. Subscription and license revenue benefited from continued growth in clients non-display application usage and ability to capture license revenue streams post audit. Audit and backdated licensing revenue reduced due to lower level of audits being completed in the period, but we do expect a large number to be completed in the second half of 2022. And finally, both the number of index client -- the index data clients and the connectivity requirements from market participants and data vendors have remained constant across the periods. For the markets business personnel costs have increased, driven by a combination of the average number of FTEs, wage inflation and lower levels of capitalization. Relative to the first half of '21, the average number of FTEs has increased due to the additional roles recruited during 2021 including in the securities IT team to deliver technology solutions and increased trading and clearing system capacity and resilience and to maintain market stability. And also in secondary markets, product resources to support growth in the depository business and the dairy derivatives business. Wage inflation is being driven by a highly competitive and tightening labor market, which we do expect to continue. And capitalized labor levels are lower as the new trading system went live in 2021. IT costs related to the trading and clearing system, license, hardware and software maintenance costs, energy electricity market, systems, hardware, software and maintenance costs as well as other fee costs. The energy carbon market system's ongoing support from external providers for the carbon managed auction service. I do note that in 2020 -- the first half of 2021, the comparative numbers did have some setup costs for that service. And also in there, our NZX shares of the IT costs under the SGX NZX dairy derivatives strategic partnership. And we also have all our software license costs and data fees associated with our customer management data platforms. Professional fees include the annual assurance program, the terminal royalties on audit fees and ongoing European EEX royalty fees associated with the carbon-managed auction service as well as likewise, ongoing fees associated with the SGX/NZX dairy derivatives partnership. Marketing costs include capital markets origination teams membership of various industry groups that identify listing pipeline opportunities, their direct marketing campaigns. And other expenses include travel, statutory compliance costs and all recoverable GST. Depreciation and amortization related primarily to the trading and clearing systems with amortization on the second phase of the trading system up geared commencing from September 2021. Moving to Smartshares on Slide 26. Overall, the operating earnings were $6 million, excluding one-off acquisition and integration costs. This is 25.7% higher than the first half of '21 and 34.7% higher than the second half of '21. The largest impact is from the acquisition of the management rights of -- from the ASB Superannuation Master Trust, with the contribution to operating earnings before acquisition and integration costs being around $1.8 million. FUM-based revenue continues to grow in line with the increased average FUM in the period. Member-based revenue has increased reflecting a mix of increased investor numbers acquired during the ASB Superannuation Master Trust acquisition and a reduction in some annual admin fees charged to members effective from April 2021. Smartshares personnel costs have increased driven by the average number of FTEs, which have increased -- been increased to support the continued growth that includes project resources for the KiwiSaver default scheme implementation and also for the ASB Superannuation Master Trust transition. Resourcing for that transition is expected to increase the head count further, as our integration activities and the transition from ASB to Smartshares continues over the coming period. Capitalized labor and overhead reflects the activity on internal systems at this point. IT costs include software license costs for Bloomberg front and middle office operating systems and new licenses for KiwiSaver digital -- KiwiSaver default digital tools. Professional fees include internal audit, legal tax advice. Marketing spend relates to advertising, printing and distribution costs, with printing and electronic communications costs rising as we comply with KiwiSaver default obligations. Other expenses include nonrecoverable GST, which will increase as the business grows and statutory and compliance costs. And then the acquisition and integration costs related to the ASB Superannuation Master Trust acquisition and integration planning. The nonoperating expenses relate to amortization of Smartshares IT, software and infrastructure assets with the increases relating to amortization on both the ASB Superannuation Master Trust management rights amortization commencing from February 2022. And on the KiwiSaver default digital tools related storage capacity and resilience upgrades, which commenced later in 2021. The Wealth Technologies business is summarized on Slide 27. Overall, the operating earnings were $0.5 million, which is higher than the comparative period. Funds under administration base revenues have increased in line with the average FUA, which is a combination of migration of new clients onto the platform in 2021, negative market returns in the period and positive cash flows. Wealth tech personnel costs are driven by increased average number of operations FTEs. Head count at any point in time is dependent upon the level of platform investment, including migration activity required for current and future clients and on the operational services provided to current clients. The head count has been increasing as new plants have been or in the process of being migrated on to the platform. This is expected to continue as current clients migrate additional FUA and future additional plans are won. Capitalized labor and overhead reflects continued product development and the client migration activity. Other expenses were mainly related to information technology, data hosting, data feeds and software license costs, which increases are new clients are onboarded. And other expenses include travel, compliance costs as well as nonrecoverable GST. The nonoperating expenses are mainly amortization of wealth technologies capitalized platform development and client migration costs. These are amortized over 5 years commencing from the migration completion date, which is aligned with the administration fee revenue commencing. Intangible asset amortization will continue to increase with the continued product development and cloud migration activity in the near future. Corporate service functions are summarized on Slide 28 and includes the Board, CEO, Investor Relations and office costs as well as legal finance, IT, HR, communications and project management support functions, which are provided across all business units. These costs are currently not recharged to the business units that I've outlined previously, with the cost only being recharged to the NZ RegCo business. Corporate services personnel costs have increased driven by higher average number of FTEs reflecting the resources employed in 2021 to support the growth across the business and the level of project activity as well as additional IT development, IT resilience and risk resources to address the FMA Action plan. IT costs related to the centralized IT services and software costs, including cyber defense capabilities and security services, which have been modified and strengthened through 2021 and the full cost not being recognized in the current period. We'll continue to enhance our security services and security testing program. Professional fees include internal audit fees, annual conflict review, corporate governance reviews. Other expenses include, amongst other things, external audit fees, insurance premiums, directors' fees and statutory and compliance costs and the largest driver of the increase in this area is insurance premium and compliance costs. Nonoperating expenses relates mainly to amortization of centralized IT infrastructure and the depreciation of office fixtures and fittings plus the [ takers ]. The increase relates to the commencement of amortization on those IT improvements we completed in 2021 to improve our IT resilience and the depreciation of the new Auckland office and associated right of use assets, which commenced in August 2021. Slide 29 summarizes NZ RegCo, which is the regulation function that is structurally separate from NZX's commercial and operation activities. Regulation phase related to chargeable time spent by the NZ RegCo team on various different parts of the business, be it issue in regulation, market conduct service, participant compliance or market surveillance activities. Additionally, NZ RegCo receives an internal allocation of annual listing fees and annual participant fees. Regulation expenses relate primarily to personnel costs. These are driven by wage inflation for specialist qualified lawyers. Other expenses mainly related to the smart surveillance software, the independent director fees and the internal cost allocations from corporate services. Moving now on to our balance sheet and cash flow. Balance sheet is on Slide 31. There are 3 key points to note. Firstly, the cash balances include balances that are not available for general use. Specifically there, the clearing house has $20 million of risk capital and $2.9 million of quasi-regulatory capital. And then the funds management business is $2.5 million of working capital requirements under its various licenses. Second point to note is that funds held on behalf of third party, both assets and liabilities offset and hence, these are not available for general use. These really to issuer bond deposits, participants' collateral deposits or deposited funds. The reduced levels related to the mutualized default fund contributions being returned to participants when the dairy derivatives clearing transferred to the Singapore Stock Exchange in November '21. Final point to note is the impact of the 2 acquisitions. The ASB Superannuation Master Trust and tangible management rights have been recognized in the other noncurrent assets category. The global dairy trade investment is recognized as an investment in an associate and the net assets have increased on these acquisitions through the funding that was raised through our equity raising. Slide 32 summarizes the capital expenditure. This year, this investor presentation have split the CapEx graphs into 4 to illustrate the various patterns that I usually talk to, and these graphs are all on the same scale to show relativity. For trading, clearing and energy systems, the CapEx levels depend on the specific systems life cycle. Currently, there are no large cycle -- large upgrade projects underway, and we're only automating parts of the depository system. For property, plant and equipment and other software, this relates to the normal life cycle replacement for IT equipment. In 2021, we established a capital market center in Auckland. And the current year, we're erecting a new Auckland ticker later in the year as well as expanding the Auckland office. For the growth businesses, wealth technology is our largest area for CapEx and the business continues to develop its product offering and migrate new clients, which we expect to continue in the medium term. Smartshares has delivered digital tools to service new KiwiSaver default scheme. There will also be further digital tools and automation requirements as we integrate the ASB Superannuation Master Trust into the business. Cash flows are summarized on Slide 33. Operating activities. Decreased cash flows reflect the lower net profit after tax adjusted for noncash items, such as depreciation and amortization, together with working capital movements. Investing activities reflect the 2 acquisitions as well as the capital expenditure that I've just noted on the previous slide. Financing activities mainly reflect the equity raising to pay for the acquisitions as well as dividends paid are net of participation in the dividend reinvestment plan and also lease payments. Moving to Slide 35. Our fully imputed final dividend is $0.03 per share, which will be paid on the 23rd of September 2022. The dividend reinvestment plan is available for the interim dividend and the shares will be issued at a 1% discount, which leads me then into the 2022 earnings guidance. NZX maintains -- is maintaining its full year, our full year 2022 earnings guidance. The range is $33.5 million to $38 million. As always, I note that the earnings guidance is, of course, subject to the usual market caveats that are listed on the slide. And so for me, that concludes my part of the presentation, and we'll probably now open it up for questions.

First question is from [ Grant Lowe ].

Can you hear me okay?

Yes, we can hear you fine, Grant.

Great. Great. So a few questions around wealth tech. And I guess where it's all going to is just around the comments that the plan is to get to cash flow positive as soon as possible. So just trying to understand what that means. In terms of the FY '23 original plan to get to 35 to 50 funds under administration. When you say that might take a year longer, should we be resetting our thinking around 35 at the end of FY '24?

It's a little hard to put exact dates on it, Grant. We've got a really strong pipeline there. And we know we're going to be very active through the course of next year. It could drift into 2024 before everything has transitioned. That's our current thinking. But I wouldn't expect it to take all of 2024 to get there. Graham, I don't know whether you want to talk about the cash flow side of that.

Yes. I mean the cash flow side is dependent on bringing on more FUA. So they go hand in hand, one follows the other. What we've always talked about is we're in a period of time where we're obtaining new clients. And we've got to invest in the migration capability. We had previously thought that there'd be a natural transition from CapEx personnel to OpEx personnel. We're not seeing that. We've had to retain the OpEx personnel as our business has grown and operations team has grown. We've had to retain the capitalized -- the CapEx people to migrate new clients on board. That will continue. And at some point, we'll end up at a steady state where we're not migrating new clients, and that will also have an impact on achieving the cash flows.

Got it. So I see in the half, roughly looking at the chart there, roughly $4 million of CapEx in the half. Should we expect that similar sort of level over the next 18 months per half?

As we migrate large clients, yes, I would expect that.

Okay. Cool. And just in terms of the comments around significant additional FUA added in FY -- in the fourth quarter of this year. Are we sort of talking $5 billion to $10 billion sort of level? Or would that be a reasonable assumption?

No, it wouldn't be that high, Grant. It's the -- it would be the first tranche of sort of a bigger piece.

Got it.

So no, it wouldn't be in that order, do you want to get into FUA?

Well, just it's the more complicated aspects of the first tranche. So it's a lower number. And then you [ include ] tranches. So it's in the order that we're going in with this particular client.

We get into more simpler transitions after this first one. So it's...

Yes. Okay. Right. And then -- yes, so when you talk about the -- through the substantial FUA to be added from late 2023. Is that a different plant? Or is that more of the same?

A bit of both, Grant, there's certainly the follow-on business from that existing client. But actually, what we're seeing and market conditions is playing into this. Our proposition is being seen really, really strongly across the adviser community, and we are getting quite a bit of inquiry. We're also in a position where we're taking on not so much sort of the ramp of advisers' businesses but effectively the new business straight away, and we might come back to that run later. So we're seeing a mixture of activity, both large and small or small or medium size. And the medium-sized business is pretty vanilla. So we don't need to do any major work to the system in order to be able to handle it. So it's coming through in both areas, really.

Great. Okay. Just turning to the fund management business. You referenced some additional costs in terms of integration for the ASB acquisition. What sort of scale are we talking? Are these like $160,000, I think, in the half. What would we expect going forward?

Yes. Look, what we quoted at February's presentation was in the range of roughly $1.6 million through '22 and '23. That number has been firmed up. An element of that will, of course, be CapEx as we sort of enhance systems to take on board the additional FUA from an investment management and investment administration and registry perspective. So it's spread across '22 and '23. There will be operational cost increase on top of that. At the moment, the operation of those 3 aspects has been undertaken by ASB. And yes, it's flow through that in our revenue line, whereas what you'll see is a transition from it being net in the revenue to being in our cost base. So that is additional. So there will be a movement in that respect, too.

Really what you're saying is that...