NZX Limited (NZX) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to the 2024 full year results call for the NZX. As most of you will know, my name is Mark Peterson, Inside Chief Executive; and I'm here with Graham Law, NZX's Chief Financial Officer. Sorry about the slight hiccup there. We had an issue with the way the presentation was being displayed on the call, but we should be back on track now. Graham and I will take you through the results. I'll lead off with the key elements of this result and some broad comments, then Graham will step us through the financials, after which we'll be obviously happy to take questions. And as per normal, with these calls to ask a question, please raise your hand. [Operator Instructions] Now before we start, please note the important notice on Page 2 of the Investor Relations pack, as that statement applies to all content and comments made by us during the call. Just a few opening remarks, if I may. As we mentioned in our half year results, we were starting to see activity levels lift in Q2 and 2024, and we were hopeful of this improvement continuing through the course of the year as the inflationary environment continued to be brought under control and interest rate step down further, I'm pleased to report that capital markets activity levels continue to lift Global asset prices performed well, and we had good client growth, particularly in Smartshares or [ Smart ] as it's now known, as well as Wealth Technologies. This has meant NZX's has posted a strong financial result for the year. Earnings, excluding integration and restructuring costs were at $48.5 million, up 21% on the prior comparable period, and this is close to the top of the revised guidance range of $45 million to $49 million. If we include the integration and restructuring costs, earnings were $47.2 million, up 21.3%. Reported NPAT was $25.5 million, up 88.1%, and the underlying NPAT, which excludes the accounting adjustments relating to the QuayStreet Asset Management earn-out and the partial energy goodwill write-down was $18.3 million, which was up 30.1%. We've declared a fully imputed final dividend of $0.031 a share. Dropping into the component parts. Revenues were $120.8 million, up $12.4 million or 11.4%. And this was driven by a few components, and I'll run through these quickly. Capital markets revenues were up $2 million or 3.3% off the back of that increased market activity, and particularly the recapitalizations and trading levels they've lifted. Smart revenues were up $7 million or 19.1%, reflecting the growing funds under management. NZX Wealth Tech revenues were up $2.9 million or 42.7% on the back of new client transitions. And I note that our annual recurring revenue is at the 31st of December '24, totaled $10.8 million, up 50%. This means that Wealth Tech achieved one of our long-standing goals of being cash flow positive from external client activity at the end of the year. Expenses were $72.2 million, up $4 million or 5.8%. We continue to be disciplined with costs being controlled closely across the group. Most of the cost change has come through the smart business, and it relates as explained during the half year to seeing the full year impact of the integrations of ASB Superannuation and the QuayStreet acquisitions. Across the business, our technology platform continues to operate reliably. Our risk management function continues to advance in maturity. Our staff engagement scores had another record and the oversight review by the FMA released in the middle of the year was positive in its assessment. We were pleased with our results, showing positive [ jaws ] with revenue lifting 11.4% and costs up 5.8%, which has translated to an improvement in operating margin from 37% to 40.2%. As I mentioned, Graham will take us through the financials in more detail shortly, and he has added some nice waterfall diagrams into the pack on Slide 17 and 18 that break those movements down. Speaking; to Pages 5 to 7, many of you will recall us rearticulating NZX's growth strategy at our recent Investor Day in November last year. We reiterated our 3 businesses, Capital Markets, Smart and Wealth Technologies were all targeting greater scale and operating leverage. For capital markets, we are looking to round out our product range and scale up. And I'm pleased to say NZX Dark was delivered in 2024, and we continue to work towards relaunching our NZX20 index futures in mid-'25. And as most of you know, we've been working with the government to ensure New Zealand's capital market settings are as competitive as possible. The focus of Smart was to continue the strong organic growth and deliver the operational efficiency program. And for Wealth Technology, our plan is simple, keep winning new clients to scale up the business. We talked about the benefits through the NZX Group and having our businesses supporting one another, particularly Wealth Technologies paring Smart. We also discussed the fact that cash flow for the group will grow faster than EPS growth, given the amortization of the capital investment we have made into the Wealth Technologies business, and this will flow through the P&L over the next few years. And the following update from the various business areas should be viewed in the context of these key themes that we made at the Investor Day. The business highlights have been laid out on Pages 9 through 14 of the pack. And starting on Page 9. $15.8 billion of capital was listed or raised over the course of the year. $5.2 billion of it was secondary equity raisings, $8.3 billion of it was debt issuance and approximately $1.9 billion was of funds. This was a complete reversal from the first half of 2024, which was down 11.5% compared to the prior comparable period to now being up 11.6% for the year-on-year numbers. The changing environment has clearly played a major part in activity levels picking up but the results prove the point that the market is there, particularly for large transactions. And if the economic environment continues to improve, we are cautiously optimistic when we look forward into 2025. The announcement from the New Zealand government prior to Christmas on the proposed changes to a number of regulatory settings this year has been well received by the market, improving our settings to be more competitive and efficient against other markets without lowering market quality or negatively impacting [ bank fee overlay ] and transparency is important to New Zealand. This is a positive addition to the outlook. Moving to Slide 10. It was a similar story for trading and clearing. The first half of '24 was a continuation of the very soft levels in '23 and was down 8% on the prior comparable period. However, as the economic environment started to change, this flowed through to a pickup in activity across the second half, resulting in a full year growth of 22.9% on '23. We are again cautiously optimistic going into '25 that activity levels will continue to strengthen. NZX Dark, which launched in June '24, is performing very well and better than expected with 5.24% of the on-market traded activity going through NZX Dark venue. 2025 year-to-date, NZX Dark is traveling at 6.6% of all on market activity. And these steps are well up on our business case, which had 2% as the planned level. Assets in custody and our depository remained at $7.8 billion, but we are working hard to attract more global custodians to our proposition, which is cost effective and more market efficient for those custodians. Again, we are cautiously optimistic for 2025 in this area of our business. Our work on relaunching the NZX20 Index Futures continues and NZX is on track to be ready at the end Q1. Our efforts and attention then focus on onboarding the trading and clearing firms and testing the connectivity and technology. Our view on timeline at this point is launching around middle of the year, but it is dependent on the pace at which other parties can operate at. Our dairy derivatives market on Slide 12, has seen volumes continue to lift, up 15.3% over the year, and that's actually with a slow start to the year. I'd also like to note we're off to a good start in 2025. Revenues in 2024 were impacted by reduced interest margin fee level that we share with the SGX and this was due to a change in the interest forward -- interest rate forward curve, which our fee level has set from. Unfortunately, the reduction in margin fees was not totally offset by the lift in trading volumes. The partnership with SGX is strong, and we are now attracting more market makers into the product and with additional financial market flow providers. And I would also, as I mentioned earlier, off to a good start in 2025 GlobalDairyTrade underlying profitability remains strong, and we continue to work with our shareholder partners with Fonterra and European Energy Exchange to lift volumes. We remain positive as to what is possible for this business as it implements its strategic initiatives. Moving to Smart on Slide 13. The business had another period of strong funds under management growth from $11 billion at the end of December 2023, we took the business through to $13.5 billion at the end of December 2024, which is up 22.6%. And this has jumped further to $13.8 billion at the end of January this year. Outlined in the investor pack is the split between net new cash, which came in at $800 million for 2024 and the market return growth, which totaled $1.7 billion for the year. Investment performance and our diversified funds and our QuayStreet suite of products has been excellent compared to the market. Key milestones achieved this year include the strategic lines that we now have with iShares. The products launched this year continue to see solid inflows, and we seem to have hit a sweet spot with the Bitcoin and Gold ETFs. We rebranded to Smart in October 2024 to reflect the business' growth ambitions and the broad range of products and services that now offers. It's about simplifying and streamlining the Smartshares and the SuperLife brands under 1 family, Smart. The rebrand has initially focused on the ETF product range that will roll out to Smart Kiwi and Smart Super in time. As we discussed at the half year, we continue to see good growth momentum in the cash inflows to the QuayStreet and Smart products from the Craigs Investment Partners network. Accounting standards require us to assess the progress towards these earn-out targets. And notwithstanding the growing inflows, we need to be formulaic in our assessment, which has resulted and an accounting adjustment being made, which flowed through to the NPAT line. We remain confident the partnership with Craigs will deliver everything both parties [ swore ] at the time of the acquisition. Momentum has just taken a little longer to build than we both initially thought. Behind the scenes work continues towards shifting the platform that sits behind the QuayStreet and Smartshares KiwiSaver and superannuation product range, and we're going to move that to Wealth Technologies, as you know. This will have a range of benefits, including reducing external cost to suppliers, leveraging the modern platform capability we have within the group, opening up new product opportunities and lowering the technology risk profile in Smart, and obviously delivering further cost synergies once the current smart platform has retired. We spoke about this at the half year and mentioned this won't be a quick piece of work. But it will deliver significant benefits and further operating leverage, and we are making progress. Turning to Wealth Technologies. I'm very pleased to be able to say that new client transitions continued through the second half of 2024. We have laid that out on Page 14 of the investor pack and our client transitions that have been achieved through the year and the client activity that is in front of us. We've also translated that into the ARR through the course of that period. Wealth Technologies is now cash flow positive from an external plant perspective. We do have 2 sprint teams that are working on the Smart work. Wealth Technologies has had a standout year, and we're delighted with the business progress. We set ourselves some challenging targets and have delivered. As previously mentioned, over the last couple of years, we have made ARR a higher priority than funds under administration or FUA is not all for is worth the same to us. Notwithstanding FUA reached $16.2 billion at year-end, up 40.4% and looking forward, the pipeline remains strong, which is a testament to the people, the product and the client service that is being provided. At the end of January, FUA reached $16.4 billion, and there is a significant plan transition onto the platform in late February with a steady stream of transition plan through the course of 2025. We continue to manage our costs appropriately against these opportunities we have. However, if where the opportunities arose that it makes sense to invest further to onboard them than we would. Client transitions are always managed in conjunction with the client and their current supplier and to some extent, around annual cycles, tax being one of them. This sometimes impacts the planned timings that we have at a point in time. Our people in running the business in a responsible manner have always been 2 of the highest priority areas for NZX. Our staff engagement levels had another record high across the group. Our staff turnover continues to operate below target. Our gender pay gap compares well against other financial services businesses. However, we are focused on bringing great gender and diversity balance to the more senior levels of the organization and we are lifting the focus on staff development across the organization to help achieve these objectives. Our operations, technology and risk teams continue to deliver accurately, safely and within toll risk tolerances. And we've set our operating responsibility vision is one which creates value, while delivering a positive impact to society and the environment. And we have the ethos integrated into the way we set strategy and operate the business. Thank you for that. I will now pass over to Graham to take you through the financials in more detail, and after which we are more than happy to take questions. Thanks.

Thanks, Mark. Before I start, I'd like to again draw everyone's attention to the disclaimer on Slide 2, which contains important caveats relating to the information that I have to cover. The income statement for the year-end of December '24 is summarized on Slide 16 with further explanations on operating revenue, operating expenses and nonoperating expenses provided in Slides 17 to 20. Additionally, detailed analysis on our operating results by business unit is provided in Appendix 1. I'm going to provide some detail on the slides that we have here. Moving to Slide 17. Our operating revenue increased $12.4 million to $120.8 million. I note that NZX's diverse revenue sources can be seen in [indiscernible] for the financial statements. The main drivers for the increased revenue were first and Smart. There are several factors influencing Smart's revenue, including the impact of acquisitions, the unlocking of related synergies and some one-off revenue changes. I'll go into these in a bit more detail about later. Secondly, Wealth Technologies reflects the increased ARR from new clients. And finally, the markets business has seen improvement in the key metrics later in the year. Operating expenses, excluding acquisition integration and restructuring costs, increased $4 million to $72.2 million. The main drivers for the increase being Smart, again, there are several factors at play here, and including the full year impact from the QuayStreet acquisition and the ASP integration impact, that I noted in the full year 2023 investor presentation. For other business units, our focus on cost control offset, wage IT and general inflation increases. Overall, this results in operating earnings before acquisition integration and restructuring costs, increasing $8.4 million to $48.5 million. I'll now breakdown the operating earnings by business unit, which is summarized on Slide 19 in a bit more detail. Again, further details provided in the appendix on to this presentation. Starting with the markets business, we're operating earnings before restructuring costs increased by $1.9 million. The main factor driving increases in revenue, where in the capital markets origination revenue. It increased due to higher levels of primary listing and secondary issuance for both equity and retail debt. Remembering that equity has a relatively higher fee rip when that retail that on wholesale debt and finally on funds. That increase was offset by the annual listing fee, including the internal allocation to RedCo decreasing, which reflects the net impact of the contraction in the equity market capitalization on growth in the NZX at market capitalization. Remember, it's a market capitalization at 31 May each year, which drives the annual listing fees for the year of July -- period of July to June this year. In secondary markets, revenue increased driven by higher levels of trading and clearing value, partially offset by higher levels of uncharged value treated, i.e., where a treated exceeds -- the treated value exceeds the fee cap that we have in place. And there were higher levels of registry transfers and OTC settlements. The segment markets revenue decreased in dairy derivatives. It was adversely impacted by margin phase normalizing in line with global future interest rate curves, which outweighed the higher level of logs treated. And in contractual and consulting revenues for the Electricity Authority, Fonterra and the Ministry of Environment they decreased in line with contractual terms on the level of consulting activity. The information services revenue increased, which is a mix of lower levels of professional terminals, higher-value licenses, more of those and a significant backdated indices revenue. Market business expenses were relatively flat only increasing $0.1 million. Net personnel costs were $0.5 million lower due to a combination of restructuring of several teams resulting in reduced headcount, offset by a transfer of a few roles for Corporate Services. There was a reduction in energy contractors in line with the reduced level of consulting and development revenue. And there was increased capitalization relating to the activities of NZX Dark the S&P/NZX20 Index Futures projects. IT costs were higher due to trading and clearing system inflation-related price increases and the nzx.com upgrade infrastructure running cost. Professional fees were lower at lower levels, particularly for audit fees relating to the packeted revenues. Moving to the Smart business. Headline operating earnings have increased by $3.1 million. However, there are 3 key factors, all of which I've previously indicated that are making the year-on-year comparison and Smart Business complicated. First, there were significant one-off revenues relating to the prior year financials. Secondly, there are the key straight revenue and expenses for only part period as the acquisition occurred in February 2023. And then finally, there were synergies unlocked by the ASB SMT integration of transition services, i.e., investment management, investment administration and registry services, which occurred in late August 2023, which resulted in a gross-up of the P&L, the revenue, the transition service costs were no longer incurred against the fund-based revenue and cost smart having employed additional FTEs to perform all services when existing teams. Adjusting for these factors to get a like-for-like comparison shows the operating earnings, excluding acquisition, integration and restructuring costs were estimated to be about $2.9 million or 15.6% higher than the comparable period. The remaining increases in operating revenue beyond these factors reflect the fund-based revenue continuing to grow in line with increased average fund, which is a combination of positive market returns and positive net cash flow, as Mark has already discussed on Slide 13. From a cost perspective, increased personnel costs for wage inflation on additional resources into compliance, middle office and business analyst goals. Professional fees, including legal and tax advice related to smart new fund structure and new funds launched in 2024. Marketing costs include the marketing campaigns for those new funds that were launched during the year. And other costs include costs that increases the business growth such as nonrecoverable GST statutory compliance costs, like, for example, the FMA levies, which increases from levels increases. Further operational efficiencies will be delivered in 2025 with the mature Smart operations, including the cloud portal and registry projects as well as the fund structure simplification on rationalization. Now moving to Wealth Technologies business, where operating earnings increased by $3 million, this was a combination of revenue increasing by just about over $2.9 million and the expense is decreasing slightly. Wealth Technologies administration revenue through this revenue fees increased in line with the increased average, which is a combination of clients being migrated on to the platform through 2023 and '24, positive market returns and positive net cash flow, including those from new clients. Those were discussed earlier on Slide 14. Development fees and deferred income reflects the levels of customization specific to client requirements some of which is paid in advance and for accounting purposes recognized over the life of the client contract. Wealth Technologies net personnel costs were lower, reflecting a combination of gross personnel costs being higher. As previously indicated, our head count has been harder to accelerate the migration velocity of additional FUA the current client, which was noted by capitalized labor and overheads being higher, reflecting both the continued product development and plan migration activity and the fact that 2023 was at lower levels, reflecting the effort to migrate clients from the legacy platform, which was closed in the first half of '23 onto the new platform. As indicated on Slide 14, the remaining migration of Wealth Technologies' current contracted clients will add further to the annual recurring revenue, the timing being dependent on client strategic priorities, relative to their timing and their migration resource commitments as well as the client's current platform provider supplying data in a timely manner. This timing as well as win for the new clients will also drive the CapEx profile on the timing of the amortization bubble, which I'll explain further on Slide 37, and we'll discuss it later on. For corporate functions, the operating expenses were held at the same level as 2023. This reflected increased personnel costs due to the transfer of market business and one new policy role. The impact of restructuring of some IT times in late 2024 on the benefit of that will be more in 2025. They were offset by reduced professional fees and other cost savings relating to legal fees and some nonrecurring cost savings. And finally, NZ Redco, we're operating earnings after internal revenue and expense allocations were $0.4 million better than 2023. This was driven by regulatory fee generating activity levels being slightly higher than 2023 and lower personnel costs due to lower average number of employees in the year. Operating expenses on Slide 20. The acquisition integration and restructuring costs related to in the prior year, some component of acquisition costs related to the QuayStreet acquisition. The integration costs related to both QuayStreet business and maturing with Smart share systems and operations. These costs represent the incremental one-off external costs net of capitalized internal costs. Maturing the smart operations will be ongoing. Restructuring costs related to the capital markets and corporate services teams, restructures in late 2025 to offset the impact of changes in the Fonterra contract from early 2025. The financial benefit of these structures will largely be seen in the coming year. Net finance costs, which are at a higher level due to the inclusion of full year period of interest on the debt funding of the QuayStreet acquisition as well as our subordinated notes in industry being reset for 5 years in June 2023 full year impact of that coming. So we have benefited from interest income on our various cash balances being positively impacted by higher average interest rates through '24 relative to '23. The depreciation and amortization is higher in line with our expectations, as outlined in previous investor presentations. That mainly reflects health technologies increased amortization relating to new clients migrated in both 2023 and 2024. We continue to expect further increases as migration to continue and new clients join Wealth Technologies platform. In previous investor presentations, I preferred to this pattern as amortization bubble where the amortization profile lags the CapEx profile by a few years. On results and future free cash flows initially rising faster than NPAT increases. I provided more detail on this impact in Appendix 1, including an indicative CapEx amortization profile. And I specifically note the profiles time will be later occurring if Wealth Technologies continues to win new clients. Amortization has also increased for a full year amortization of QuayStreet management rights. The share of profit and losses of associates relates to our investment in GlobalDairyTrade, GDT, As indicated previously, GDT's 3-year expansionary strategy -- strategic plan is expected to result in NZX's share of the profits of associates being low until GDT strategic initiatives successfully mature. Specifically, GDT has recently commenced an upgrade to the auction platform with the upgrade OpEx being incurred through to 30th of June 2025. This will impact NZX's share of profits of associates in the short term before delivering efficiency gains in the medium term. The accounting adjustments related to 2 things: Firstly, the change in fair value of contingent consideration relates to the decrease in the fair value of the QuayStreet ear-out provision to recognize that the reassessment of the probability of achieving net fund inflow targets by November 2025 is reduced. The criteria for the 3 tranches of the R&I are detailed in our financial statements Note 6. The second tranche was finalized at $3.2 million and paid out in January 2025. The third tranche has a high hurdle before any earn-out is payable. But at this point, the historical inflows do not underpin that this hurdle will be achieved. We will again reassess the earn-out probability at the half year. And the second factor is a goodwill write-off relating to a partial write-down in the energy contracts and tangible assets to recognize the current year renewal pricing terms, the reduction in the number of energy contracts during the current term. On a prudent expectation on the terms of a successful rate tendering in 2027. The effect that tax rate is lower than the statutory 28% due to a combination of nontaxable items particularly the accounting adjustments, partially offset by accounting versus tax valuation differences on the share of associates being that of taxation. Overall, this has resulted in a net profit after tax being $25.9 million, up $11.9 million, which is nearly 8.1% on 2023, and the operating margin is up to. Normalizing the net profit after tax reaccounting adjustments, the net profit after tax would be $18.3 million, up $4.2 million, which is 30.1% on 2023. As I noted earlier, further detailed analysis on the operating results by business unit is provided in Appendix 1. The balance sheet is noted on Slide 22. The key points to note here are, first of all, the cash balances include balances, which are not available for general use, including the clearing high $20 million of risk capital on approximately $3.1 million of working capital requirements under the Financial Market Infrastructure Act and the international organization of Security Commissions principles. And also in the smart funds management business, where there's $3.2 million of working capital requirements under the FMA [indiscernible] license on the Asian regional funds transport. The second point to note is that funds held on behalf of third parties, both assets and liabilities of said and hence, the assets are not available for general group please relate to issue a bond deposits, participants collateral deposits and deposit funds. And the final point is on the disclosure of noncurrent interest-based liabilities. The subordinate that notes next election date is not until June 2028. And the acquisition loan facility has at year-end $22.5 million drawn. Subsequent to year-end, the additional $3.1 million will be funded through that for facility. The bank facilities were renewed during the year, and they now expire in February 2027. Slide 23 summarizes our capital expenditure and the 4 graphs all of the same scale that show relative starting top left and working away clock-wise. The trading and clearing and energy systems, the CapEx levels depend on specific systems like life cycle. At present, there are large-scale upgrade projects underway and we have enhanced our trading system for the S&P NZX20 Index Futures on automation of upholstery systems. For property content equipment, in 2024, CapEx was related to the refitted Wellington office to low retrenchment to one tool. The other software relates to the normal life cycle replacement for IT equipment and software as well as ongoing enhancements to NSX's technology architecture. For the growth businesses, Smart continues to enhance systems. Maturing a smart operations model will require further enhancements to the plant portal, CRM, digital tolls and registries. Some of which will be capitalized but most of which will be OpEx. And finally, Wealth Technologies is our largest area for CapEx and business continue -- as the business continues to migrate new clients and maintain its product offering. We continue to expect this level of CapEx for a few years. As the contract with new clients and further prospects are migrated to the platform. Slide 24 summarizes the cash flow for the year. operating activities and increased cash flows reflect the increase in net profit after tax adjusted for noncash items, such as the accounting adjustments, depreciation amortization on the GBT earnings, offset by working capital movements with higher levels of better prepayments and accrued income at year-end. Investing activities reflect the capital expenditure that I've just noted in the previous slide, with the previous years relating to the settlement of the QuayStreet acquisition. Finance activities mainly reflects the dividend paid net of participation in the dividend reinvestment plan. The other financing accretes related to lease payments and the previous year related to debt raised to pay for the QuayStreet acquisition. Overall, in future years, after Wealth Technologies completes this migration of new clients and CapEx settles at the more normal level. We expect cash flow to rise faster than NPAT increases due to the Wealth Technologies amortization bubble, which I have explained in the appendix. I do note that the exact timing of that amortization bubble is impacted by future new client migrations. Specifically if new clients are won, then the amortization level is deferred until they are their migration is complete. Moving to Slide 26. Our full year final -- full year final fully imputed dividend of $0.031 per share, which will be paid on the 2nd of April 2025. The normalized dividend payout ratio was within policy. The dividend reimpairment plan is suspended for the final dividend all shareholders elected to participate in the DRP will receive a cash dividend. This leads me to our 2025 earnings guidance. Our NZX 2025 operating earnings before integration costs are expected to be in the range of $49 million to $54 million. As always, I note that the earnings guidance is, of course, subject to the usual market caveats that are noted on the slide. Earlier, we laid out the 2025 strategic priorities, numerical targets, on expected dependencies that feed into this earnings guidance they were on Slide 6. I specifically note that these are not financial forecasts. Progress towards achievement of those deliverables can be monitored within the shareholder metrics that are published monthly. That concludes our presentation, and I'll now open it up for questions.

Thanks, Graham. Happy to take questions now. It looks like we may have a question just making sure that we can get this coming through properly. Dave Storms, you can ask your question. Dave can you hear.

Can you guys hear me? Hello.

Yes, we can. Yes, far away, Dave.

Perfect. Perfect. Just wanted to start with Wealth Tech. You have that chart on the Wealth Tech slide that breaks out near-term versus long-term migration dates. I'm just wondering if that could help -- that's like.

Sorry Dave. Back to Slide 13. 14 I think it is, isn't it?

14, correct. And just hoping you could kind of break out maybe quantify what a typical near-term personal time migration looks like. And if there's anything more that could be done to shrink some of those lead times I'm assuming it would just be a matter of head count at this point. But if there's anything else very curious there.

Yes. We've got a mixture of clients in front of us, some large, some small, some medium and in between. And through the course of the year, what we're seeing in terms of client transitions is a mixture of those. The key thing for the migration timing where there are a couple of key things, really. One is how complex or simple their businesses; two, it's how much data they want to take from their old systems and bring into our system, so they get the historical picture. Through sometimes you've got to work around annual cycles like tax, as I mentioned earlier. So the landing of that timing is a mixture of all of those things. It's not so much sort of one thing that we can do to accelerate. It's really what ourselves and the client can do to suit sort of their business and to some extent, making sure that we can get this data off the old providers. So from our point of view, we are working very, very closely with these customers to make sure that they get on to our platform as soon as they practically can. There are some things that -- some clients are prepared to take a little bit more risk than others, but we just have to work with that. So I guess my point, Dave, it's not all in our camp and to some extent, relies on sort of the goodwill of both clients and ourselves.

Just to extend that last comment and more tend to be specific. We are dependent on the capacity of the client for user end user testing, and we are also dependent on the current plant current supplier for provision of historical data and their time lines and capacity to provide that. So there are some external dependencies there that we can't control.

Understood. That's very helpful. So we should kind of expect to see a stabilization in both Wealth Tech growth as well as Wealth Tech CapEx just with how much [indiscernible] is out of your control?

Yes. Certainly, what we see on the slate for this year is another very busy year and some progressive clients coming on right through the year. And as I said, some modest size. When I talk about that, I'm talking a couple of hundred million. [indiscernible]. The medium-sized clients are sort of more in that sort of $700-odd million range. And then there's obviously some very big ones as well.

Understood. Very helpful. Just a couple more for me, if you don't mind. I did have on NZX Dark. It sounds like it's running really strong right now. Any sense of what the ability to maintain this current performances. This is just a new product in the market for you guys and has strong up a lot of excitement? Or is there more to that story?

No, we see it. Dave, we see it being quite consistently used. It's a feature of most other markets around the world where they will have a lit venue, which is our standard trading venue as well as an anonymous midpoint trading venue, which is what Dark is. So it's a standard feature in other markets. We -- I guess, when we built the business case on it, anticipated potentially a slower transition on to it. But the market's really embraced it, which is great. Whilst I talked about the averages certainly this year being around that 6%, 6.5%. Last year was sort of building, so it was more in the 5s. We've had days there where on market activity that's flown through Dark and that can be as much as 10% to 12%. So we're seeing good use. It's a feature that's here to stay. We see it in time being liquidity enhancing because it does give options for investors, especially larger investors to leave larger orders in the market without that information they could fill the potential for information leakage. So no, we're feeling very positive about it. The other thing, too, is when you look at the pricing structure for our trading fees, that has got a bespoke pricing fee on it. So that's actually enhancing for us as well.

Understood. Very helpful. Just maybe 2 more quick modeling questions, if you don't mind, it was another year of working capital growth. Is there any thoughts on uses or ability to put any of this to work? Or just maybe just your thoughts there?

I think as we said in the Investor Day, we're starting to see the rise of sort of cash flows. We'll obviously work very hard to continue that trend through the course of '25. And that really just gives us options. So we haven't decided on what those options are. But certainly, we're starting to think about it through the course of this year. But I wouldn't necessarily want to say any which way that we would use that cash just at this point but we do have options.

Understood. And then just one more. I appreciate the guidance and laying that out. I just want to make sure there's no weird seasonality things we should be aware of for the year should it look like previous year's breakout between what happened in second half this year?

Yes. Well, typically, second halves are usually more active than first half. That's typical seasonality, not as stark as what we saw in '24, though '24 was quite the unusual year given the fact though that we were coming off a very low base in '23. So we're probably going to normalize a little bit, but typically, second half is always a bit more. I think it just comes down to coming holidays, a number of holidays through the 2 halves, there's more working days in the second half and generally, when you're coming back off a summer break in New Zealand, there's a bit of momentum that needs to be built.

Yes, we'd expect -- financially, we'd expect same patterns. The only thing that springs to mind is the one-off indices revenue that we got in the first half of last year. It's the first time we've ever got any one-off revenue in indices. I would really not expect that to be replicated.

Grant, we're just going to take Grant Lowe, just going to take you off mute and then you can ask your question.

You can hear me okay?

Yes, loud and clear.

Thank you for the presentation, very comprehensive as always. So just a couple for me around the guidance. So I think normally, you guys are pretty conservative in the -- at the start of the year for good reason, given market uncertainty or whatever at the start of the year. But the guidance is pretty strong at sort of 6% up at the midpoint. Can you give us a breakdown of where that uplift comes from obviously, there was some annualization of Wealth Tech in your recurring revenues sort of as a December exit point, et cetera, et cetera. So if you could give us a rough breakdown and then also what you've assumed for market cap and market returns?

Yes, we've got a page on fundamental assumptions. If you could you've gone to Slide I think it's 6.

Yes. You've got those metrics there. I appreciate. I haven't had a chance to sort of analyze those in my [ language] at this stage.

That's totally...

So At a really, really high level ground markets. As a generalization, slightly better volumes would be the assumption within value traded and cleared, there is an anomaly in the current year valued and traded around record rebalance base that may not occur in 2025. And the way the December AIA transaction was it was doubled but the way it was done. So there's a few anomalies in the 2024 number. And so that just looks flat. In reality, we think it was a uptick. But market continuing to come off of auto at a relatively prudent rates. Smartshares has benefited in the year from the markets increasing. So there is a major -- there continues to be a major growth out of Smart fund management revenue. Wealth Tech, we see a year where we're continuing the momentum of last year something similar with the ideal for us. In terms of our assumptions around market returns, we take a 10-year view of life. And when we set the guidance for the year, we tend to say it on long run average return net of tax is our approach. We don't try and pick the market. I like to have to tell people, I wouldn't be in this job if I could. So yes, we tend to look through the cycle and some years, it will be better. Some years, it will be worse.

Yes. Brian the market returns -- so just coming back to the earlier part of that question. I guess, if I rephrase that slightly, so you've done 48 points some in the in FY '24. And then midpoint of guidance is $51.5 million, sort of a $3 million uplift in broad terms, which business segments do you expect that to come from assume a large chunk of that $3 million is Wealth Tech?

I mean I think same pattern is 2024 is the expectation. The markets business does have a couple of headwinds. I've alluded to the Embassy one-off revenue. We've never had a one-off revenue in there. It was a surprise. It -- it's unlikely to occur again. So we see lower levels of audit revenue. We do have an impact from Fonterra changing to being on the main board, which we've offset by restructuring inside the capital markets business. So maybe not as much of an uplift in capital markets as it could have been if those 2 factors weren't there. of continued strong growth in Smart and something similar coming out of Wealth Technologies.

That's great. And then just around Wealth Tech, I appreciate the step away from or focus more on annual recurring revenues, which is good. It makes sense. Just do you have an idea at this stage, I appreciate it depends on client timing, which you have discussed in detail. Do you have an idea of exit ARR for FY '22 now at this stage?

Yes. Turning to Slide 14.

We've got a week table there.

We got a week table and there's a bit of -- there's one component that we're pretty comfortable that will occur in the current year. And then we've got one of the migration date still to be determined, but some of that can occur in the current year, but we just don't have a fully anchored yet.

I did see that table. Is that -- so one way to read this would be the 10.8% at FY '24 are most likely the $1.6 million happens this financial year and in some of the $1.8 million...

Correct. In May I'll caveat it we are dependent on client capacity and their current supplier and providing...

I think you're right, Grant, in the way you're thinking about it, though, that $1.6 million, we're treating with a high level of certainty, the $1.8 million, obviously, slightly less level of certainty, but we're trying to give you a feel for the back that's is. Okay. Kieran, I'm just taking off. So Kieran, you can ask your question in just a moment. Kieran?

Thanks for the presentation. Grant has actually asked a couple of my questions. I just have the one. Just in terms of your required investment into the Smart platform. Can you talk a little bit more to the scope of the improvements there and just give some guidance around what you expect it all to cost and sort of the timing of those costs?

Do you want to talk to the Wealth Tech?

Yes, sure. I suppose when you look at the CapEx graph, you can see that we haven't really been investing into that business. It's been focused predominantly on Wealth Technologies. So there is a little bit of catch-up a feel in this business, and it will tick the guts for the next 2 years, if not slightly more. Primary thing Kieran integration of the QuayStreet business requires us to move off previous owners transition services, which is largely driven by registry and client portal. So it would be fair to say that the smart businesses portal is certainly not market-leading, would be we're proving it. And we want to get to a point where we're standard at least to the market, if not enhanced. So the portal is important. It's also important for ensuring efficiencies of growth on user self-service going forward. And behind that, then it's the registry, and we have 4 registries. We had 6 a couple of years ago. We're down to 4. SMART is not a registered provider per se. There are -- the Wealth Technology business can assist in providing the software for that lab business rather than the software being smart, so forth. So there is a move to move onto the Wealth Technology platform where possible and enhance the offering in that way. That will take time because fundamentally, the Wealth Technology business is in a period where external clients they're grabbing a few of those at the moment. So it's trying to balance out the new client scheme there with the smart business moving over. In terms of quantum, look, it could be -- it will be -- as we move in, it will be a higher level. in total, maybe up to $2 million in the 25 year and possibly something similar in the year after as we anchor where we go from there. That will include that type of level that will include the full rebranding and more of a push in the marketing effort for the Smart business. We see a significant opportunity within relatively low in our marketing efforts. So I'm sort of including everything that we might consider doing there, whether it's considered one-off or end up being recurring as we spend more on marketing, and we haven't approached that discussion yet.

That's helpful. So just, I guess, to summarize that then with Wealth CapEx holding fairly steady state for the next few years. Would you expect CapEx to be up just a couple of million dollars in FY '25?

No, I actually expect it to be slightly lower. We won't have the Wellington refit in there, and we're trying -- everything else should be at roughly the same levels. It will be more through the incremental cost on Smart will be more of a oriented, but we obviously capitalize where we can. So fundamentally, if you're moving from an in-house system to the externality the Smart then, a lot of the smart activity will be expensed. Yes, there will be a component of Wealth Tech activity that will be capitalized. It's currently capitalized that we'll look to see Wealth Tech look to be at the same level.

And that smart OpEx will come through at a divisional level as opposed to falling into corporate?

Correct. Yes. Yes. And we said because it's non-BAU, nonrecurring, we will [indiscernible].

I guess just one add-on question to that then. Is it fair to assume you're taking the same stance on growing that smart book organically while this process is underway as opposed to looking to make more acquisitions?

Yes. I mean we've been consistent well, we still remain consistent in our views here on that. The focus is organic. We've got good momentum, net new cash is good. So we'll keep the hammer down on all of that. And as Graham said, the operational improvements really give us the scalability and the automation that we need there. That's not to say you wouldn't look at an opportunity if it came along. But obviously, it's got some high hurdles that would need to meet the need to be very consistent with our strategy.

And Kieran, I always look at everything. I'm not looking at anything at the moment, just so is complete [ clarity ].

No. I'm being told that there are no further questions. So on that, I really appreciate people listening in this morning. Obviously, through Simon Beattie, Investor Relations Head, and Graham and I, very happy to take questions directly afterwards. I certainly appreciate everybody's time. Thank you for your contributions and have a pleasant day.