Perpetual Limited (PPT) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to Perpetual's Full Year '21 Results Briefing. My name is Marisa Zammit, Head of Investor Relations. Before we begin today, we would like to acknowledge the traditional owners of the Gadigal people of the Eora Nation as the custodians of this land, recognizing their connection to land, waters and the community. We pay our respects to Australia's First Peoples and to their Elders, past and present. We would also like to extend our respect and welcome to any Aboriginal people who are listening in today. Presenting today are Rob Adams, Perpetual's Chief Executive Officer and Managing Director; as well as Chris Green, Perpetual's Chief Financial Officer. There will be an opportunity to ask questions at the end of today's presentation. I'll now hand over to Rob.

Well, thanks, Marisa, and good morning, everyone. Thank you for joining us today. 2021 has been a truly transformational year for Perpetual as we focused on executing our growth strategy. Our business today is markedly different with greater capability and growth potential than the one I reported on just 12 months ago. Turning first to our key results for FY '21. We delivered total revenue of $640.6 million, up 31% on the previous year. Underlying profit after tax was $124.1 million, up 26%. Net profit after tax was $74.9 million, down 9% on the prior year due to one-off costs associated with our acquisitions. And our return on equity rose to 15.8%. This result was driven by a full 12 months of Trillium contribution and 7 months of Barrow Hanley; higher performance fees as a result of improved relative investment performance; renewed growth in Perpetual Private, known as PP; and continued strong performance in Perpetual Corporate Trust, which I'll refer to as PCT. This result has enabled our Board this morning to declare a fully -- a final fully franked ordinary dividend for the second half of FY '21 of $0.96 per share, which represents a payout ratio of 76%. This brings the total dividend for the full year to $1.80, up 16% on the prior year. Before I take you through the detail of the results, I'd like to outline some of the key highlights for the year. Our strategy to build a global asset management business, adding world-class investment and distribution capabilities is well underway and is starting to deliver results. We have evolved from a primarily Australian-focused business with around $28 billion in assets to become a more diverse asset management business now approaching $100 billion in total assets under management, having added 32 new investment capabilities to the group over the course of the year. Our strong FY '21 financial performance reflects our increased scale, delivering a significant uplift in earnings with contributions from our existing businesses as well as from, of course, our recent acquisitions. All of our operating divisions made good progress during the year. Our newest division, the newly created Perpetual Asset Management International, has $76 billion in assets under management through the recent acquisitions. 100% of Perpetual Asset Management Australia's funds outperformed their benchmarks over the financial year as markets finally turned back to value. Perpetual Private has had its eighth consecutive year of net inflows, finishing the year with record funds under advice of $17 billion. And Perpetual Corporate Trust has again had another strong year, now having delivered a 10% compound annual growth rate in underlying profit before tax over the past 10 years, 10% CAGR over 10 years. We enter FY '22 with confidence and positive momentum across all of our operating divisions. We have a strong balance sheet, a strong and trusted brand and a unique combination of businesses that are well positioned to deliver quality, sustainable growth. FY '21 was a year of building that positive momentum across each of our businesses. Perpetual Asset Management, which includes both our international and our Australian asset management divisions, delivered total revenue of $304.8 million, up 76% on the prior year. Total group AUM for the year grew by 246% to $98.3 billion, of course, driven by the acquisitions. Perpetual Private delivered total revenue of $183.8 million with funds under advice ending the period, as I've mentioned, at $17 billion, up 19% on the prior year. PCT has delivered a consistent year-on-year growth, as I described, in the past 10 years and this year delivered total revenue of $134.9 million, up 7% on the previous year. Funds under administration in PCT were $922 billion, down 2% primarily due to an expected drop in bank RMBS issuance. However, the strength in the nonbank sector was a key driver throughout the year. Perpetual truly does have a unique combination of businesses. We have one of Australia's strongest brands in asset management with world-class, globally relevant capabilities ready for growth. We have Australia's premier high net worth -- true high net worth advisory firm. And we have a corporate trust business that is the industry leader across all of its core products and services. The acquisitions of Trillium and Barrow Hanley have provided us with a global opportunity for growth in asset management for the first time, with the newly created division of PAMI contributing 29% of the operating revenue for the group. Over the year, we have delivered further growth across the group's nonmarket fiduciary businesses, in particular, through PCT, which as I mentioned has had another record year. This is a unique combination of best-of-breed businesses positioned well for growth. I'll now move to Slide 9, which steps out our distribution path -- I beg your pardon, our transformation path. Slide 8. So while the financial scorecard is encouraging, I'd like to focus on the progress and intentions of our growth strategy. It is the disciplined execution of that strategy that is driving our results. To me, one of the standout features of our last 12 months was our successful execution of our stated strategy, laying a great platform for the future. We are transforming our business from being a diversified yet domestically restrained financial services company with a reasonably traditional and somewhat limited product suite servicing primarily Australian clients to now being a business that has an array of globally relevant investment capabilities with substantial capacity. We have made real strides in building our global distribution capability to support and drive that future growth. Our operating model has evolved to now support a growing global business across all key functions, including our governance and risk management frameworks. Today, through our recent acquisitions, we now have exposure to all key global markets with a global presence diversified by geography, by channel and by asset sector. Into the future, we will continue to lead in key segments in our advice business, and we will further extend our corporate trust business through unique digital solutions. And across all of our businesses, we will leverage our ESG strengths to build further scale and opportunity to take advantage of this increasingly powerful global mega trend. The execution of Perpetual's transformation to growth is well underway. Perpetual has a proven track record of adding complementary acquisitions and service offerings to deliver scale and additional capability throughout the years. In more recent years, we have deliberately stepped up that focus as we've extended the reach of the firm, opening up new growth horizons across our businesses. In 2018, we acquired RFi Roundtables to complement our products and our services in PCT. In 2019, PP added risk specialist Priority Life to improve our focus on cross-sell and insurance. In financial year '21, we have significantly benefited from our acquisitions of Barrow Hanley and Trillium, and we are now truly a global asset manager with global reach. We've since attracted world-class investment managers to launch a new concentrated global equity capability for Trillium, and we will add more capabilities to both businesses over time. Our most recent acquisition of Jacaranda Financial Planning, which we announced just last week, it's a high-quality financial planning business with funds under advice of $915 million that will gain real leverage from PP's existing business infrastructure, enhancing their already strong growth profile. This transaction is in strong alignment with our clearly stated strategy of bringing the industry's best advisers to Perpetual. Transformation to growth is underway for both Trillium and Barrow Hanley. Trillium is a unique business with an unmatched heritage and potential. Our partnership with Trillium presents a perfect synergy. Trillium, by their own admission, were underinvested in marketing and distribution and in building a global presence. Perpetual needed truly world-class investment capabilities and was investing in distribution. Today, through our investment in our global distribution capability, a contemporary rebranding and adding new investment capability, Trillium is delivering very strong results and is making a material contribution to Perpetual. Trillium delivered record flows in FY '21 with assets under management at $7.7 billion, an increase of 37% in A dollar terms or 50% in U.S. dollar terms. Trillium is perfectly positioned to grow. In Barrow Hanley, we have acquired a business with a storied brand built over 40 years of successful value investing, well known in the U.S. and having invested in world-class global capabilities primed for future growth. This highly rated brand was in need of global distribution strength and with -- and a parent with balance sheet strength and a desire to invest in growth. In the 7 months since the completion of the acquisition, we have appointed Barrow Hanley to manage Perpetual's global equity fund. We've actively marketed their global capabilities to the Australian retail and institutional markets. We have repointed their U.S. distribution team to gain leverage from Perpetual's growing team in the U.S., and we worked on new product initiatives together. Since our acquisition, supported by extremely strong relative investment performance, Barrow Hanley flows, whilst in net outflow, are performing well and are in line with our expectations. Into the future, we see Trillium and Barrow Hanley evolving into truly global asset management firms with their core capabilities sold around the world to institutional and intermediary-led clients. We will help them build a strong presence in all key markets as we expand our global distribution reach. We will seek to add new investment capabilities by team lift out or through bolt-on acquisitions, as we have already done with Trillium. I am confident that the future of both Trillium and Barrow Hanley looks extremely bright in partnership with Perpetual. Our international expansion is driving scale and growth with now close to $100 billion in assets under management across multiple asset classes, channels and regions. Through our ownership of Barrow Hanley and Trillium, we have significantly expanded our range of world-class investment capabilities, all of which have substantial capacity for growth. Through our expanded global footprint, approximately 75% of total assets are now managed outside of Australia. We have built a global distribution presence with key appointments made throughout the year. In the U.S., we now have a team of 38 distribution people reporting to Perpetual's head of U.S. distribution. In the U.K. and Europe, we now have offices in London and Edinburgh with the newly established Trillium concentrated global equities team based in Edinburgh and distribution based in London. Our new head of European distribution recently commenced, and we've opened an office in Amsterdam, which will be the base for our expected future growth from across that region. In Australia, we've refocused our distribution team. We've improved the channel specialization through key appointments throughout the year. As you can see, we now have a distribution presence in or coverage of all major developed markets, and our global team is active. The team is engaged and building our pipeline. The core of our strategy is ensuring that we are well positioned for sustained growth. A key driver of our future growth globally will be our ESG capabilities. ESG is now clearly mainstream, and it's undeniably the dominant global mega trend and a mega trend that I believe will be a permanent one. We have purposefully built leverage to this growth driver across the Perpetual group. Throughout our 135-year history, built from strong foundations as a trustee company, Perpetual has had an enduring commitment to ESG. Over the years, we've continued our evolution, integrating ESG factors more deeply into our investment process and adding more products and capabilities. To have Trillium now as a key part of Perpetual is significant both for the growth that we have already begun to evidence and that we can continue to generate for them, but also for the expertise that Trillium brings to help advance our own thinking on sustainability across Perpetual through their deep specialist experience built since 1982. Barrow Hanley have been managing ESG assets for more than 35 years and have a proprietary ESG score applied to every security they own. It's a core component of their process. In PCT, we act as a fiduciary for a range of ESG firms that expect this sector to grow. And in PP, our client allocations to ESG-related categories are amongst our fastest-growing. ESG permeates through all parts of perpetual and has done for many decades. It's now time for us to bring that heritage and that focus to the fore. Our focus on sustainability across the group comes through in a myriad of ways, and this next slide highlights the breadth and depth of our activities across environmental, social and governance pillars. All parts of Perpetual are actively involved in ESG and on our focus to help in building a sustainable future for all of our stakeholders. As we have previously outlined, our strategy seeks to build on the foundations of our core businesses to deliver sustained quality growth over time and focuses on 3 strategic imperatives: client first, future fit and new horizons. We have made strong progress in executing on our strategic imperatives throughout the year. We've put our heads down, and we're getting the job done. Putting our clients first is our constant focus. And in FY '21, despite the difficult climate, it was a year of positive delivery to our clients. Pleasing, we received an overall Net Promoter Score of plus 44 for the year, second consecutive year that our NPS has been above plus 40, and this is reflective of the ongoing strength and the trust that is evident in our client relationships. We've made significant ground on our future fit pillar, building an agile operating environment as our business globalizes and embedding programs that support and empower our people to deliver within clear frameworks. And in new horizons, as I've said already, it was a transformational year for the firm with our acquisitions, new investment capabilities, products and services setting us up really well for FY '22 and beyond. I'll now hand over to Chris, who will take us through a more detailed review of our financials.

Thanks, Rob, and good morning, everyone. Our results, as Rob has highlighted, reflect significant investment over the last 12 months and improved financial results. Over the year, we have delivered on our stated strategic objectives, and we are now a global business operating in 4 continents with a growing proportion of our revenue generated outside of Australia. Over the last 12 months, we successfully completed 2 international acquisitions and grew our global distribution footprint. We also continued to grow our traditional PCT businesses of DMS and MFS as well as investing in further solutions in data analytics solutions. We successfully launched a new product in PAMA, which has already been well supported. And just last week, we announced the acquisition of Jacaranda Financial Services, which adds scale and capability to our high net worth advice business in PP. Our balance sheet remained strong, and we delivered a final fully franked ordinary dividend for the second half of $0.96, representing a payout ratio of 76%. That resulted in a total FY '21 dividend of $1.80 with a full year payout ratio of 82%, which is in line with our policy to pay between 60% and 90% of UPAT on an annualized basis. Operating revenues of $640.6 million were $150.1 million or 31% higher driven primarily by PAMI with a 12-month contribution from Trillium and 7.5 months from Barrow Hanley. Higher performance fees in PAMA, growth in PP and continued strong performance in PCT also contributed. This was partially offset by net outflows in PAMA. Total expenses of $469.4 million were $118.5 million or 34% higher, obviously impacted by the operating costs of Barrow Hanley and Trillium, investment in global distribution, higher variable remuneration partially offset by the operating model benefits that flowed through in FY '21. Underlying profit of $124.1 million was 26% higher due mainly to the additions of Trillium and Barrow Hanley, contributions from PP and PCT offset by a lower contribution from PAMA that was primarily due to net outflows and distributions. Significant items totaled $49.2 million and included transaction and integration costs associated with our offshore acquisitions, noncash amortization of our acquired intangibles, unrealized gains on our financial assets and accrued incentive compensation liability. As a result of the one-off costs of acquiring and integrating Trillium and Barrow Hanley, NPAT was $74.9 million, down 9%. Earnings per share on UPAT was 6% higher, and return on equity on UPAT was 15.8%, 80 basis points higher than FY '20. Now let's look at our segment performance in a little more detail. PAMI UPBT of $40.7 million was driven by the contributions of Barrow Hanley and Trillium and the build-out of our global distribution team. In PAMA, the decrease in PBT of $13.4 million was driven by net outflows, product repricing and transition costs for our new custodian and administrator partially offset by higher net performance fees and higher average equity markets. In PP, PBT increased by $2.5 million or 8% driven by increased funds under advice driven by success of the adviser growth strategy. It also included the full year contribution of Priority Life, higher average equity markets and continued expense management. This was offset by reduced nonmarket revenue from lower interest rates and the economic slowdown affecting Fordham and its transactional revenue. In PCT, we saw continued PBT growth of $5.1 million or 9% with strong contributions coming from both DMS and MFS. In addition, there was continued investment in the design and development of digital platforms in data analytics solutions. In Group Support Services, we saw higher expenses of $3.3 million, predominantly related to distributions on the 25% employee-owned units in Barrow Hanley as well as interest from our increased borrowings to support the acquisition of Barrow Hanley partially offset by distributions and realized gains on financial assets. The tax impact on the above resulted in the year-on-year movement of $6.1 million and UPAT for FY '21 of $124.1 million. The 3% increase in underlying expenses resulted from higher variable remuneration, continued investment in PP and in technology costs associated with the migration of our custody platform partially offset by annualized benefits associated with our operating model review. PAMI added 31% to total expenses, including the operating expenses associated with 12 months of Trillium and 7.5 months of Barrow Hanley. In addition, the build-out of global distribution, distributions on those employee-owned units in Barrow Hanley and interest charges from our larger syndicated facility contributed. Together, underlying expense growth and PAMI expenses added 34% to total expenses. As I advised in November, the definition of UPAT has been revised to take into consideration recent acquisitions and to reflect associated changes to the group's operating cash flows. NPAT has been adjusted for 4 types of significant items. Those that are material in nature and in Perpetual's view do not reflect normal operating activities, for this period, that included transaction and integration costs relating to Trillium and Barrow Hanley of $32.1 million; noncash, tax-effected amortization of acquired intangibles was $13.6 million; tax-effected unrealized gains on financial assets was $6.7 million; and accrued incentive compensation liability increased by $10.2 million. Cash decreased marginally over the year, mainly resulting from the additional cash required for Trillium and Barrow Hanley seed funding for new strategies. We have strong free cash flow of approximately $100 million despite deploying $22 million in CapEx, mainly on technology initiatives. After paying dividends totaling $72.4 million and purchasing $7.6 million of stock on market to satisfy our long-term employee incentives, result in net cash generated prior to acquisitions and seed fund investment was $184.1 million and resulted in an increase of $20 million over the period. We funded the acquisition of Barrow Hanley through an equity raising of $270 million and borrowings of $169.2 million through our new syndicated loan facility. Other acquisition costs paid in the period were for earn-outs and deferred compensation for Trillium, Priority Life and RFi Roundtables. We applied a net $44.6 million in cash to invest mainly in Trillium and Barrow Hanley seed funds. And total cash was $147.1 million at the end of the year. The balance sheet remains strong with low gearing and headroom for investment into new growth initiatives. Our debt-to-capital ratio is 15.8%, well within the 30% limit we impose upon ourselves. The increase in liquid investments reflected an increase in seed fund investments in Barrow Hanley and Trillium strategies. The increase in goodwill and other intangibles was predominantly due to the acquisition of Barrow Hanley. The increase in borrowings reflected the drawdown of $170.3 million through the new syndicated loan facility partially offset by $4.3 million of capitalized debt costs. Despite the equity raise completed in November, both EPS and return on equity have improved by 6% and 80 basis points, respectively. And we remain on track to deliver greater than 20% EPS accretion within 12 months of the acquisition of Barrow Hanley. As previously noted, the FY '21 dividend of $1.80 was 16% higher than in FY '20. Excluding PAMI, we expect expense growth of 2% to 4% on FY '21 total expenses. This includes the costs associated with the recently acquired Jacaranda Financial Group. Looking to next year, we expect PAMI expense growth in the region of 15% to 17% on FY '21 total expenses. This will include the annualized impact of Barrow Hanley, so the extra 5 or so months, and the costs associated with product expansion and the continued build-out of global distribution. Significant items in relation to transaction and integration costs and amortization of acquired intangibles will range between $35 million and $39 million after tax. The IFRIC agenda decision on the treatment of capitalized cloud computing arrangements as an intangible asset will be assessed by us this half and adopted by 31 December. This may result in expensing some costs that were previously forecast to be capitalized. Any costs currently capitalized that are required to be expensed will be taken to retained earnings and will not go through the P&L. If changes resulting from that IFRIC decision are material, we'll obviously provide an update in that regard in our next quarterly update. Rob will now take us through the divisions in more detail, but I also refer you to the detailed financials on each division in the appendix and to the OFR and financial statements, which are now available on the website. With that, back to Rob.

Thanks, Chris. As Chris mentioned, I'll now comment on each of our divisions, focusing on what we've delivered in FY '21 and our priorities for FY '22. The newly established PAMI saw a total AUM of $73.6 billion at the end of the period, generating revenue of $139.2 million and an underlying profit before tax of $40.7 million. As I mentioned earlier, Trillium's AUM finished the period at $7.7 billion driven by a record year of net flows. Barrow Hanley's AUM was $66.1 billion, an increase of 10% since the acquisition just in -- back in November. PAMI entered FY '22 with positive momentum in performance, pipeline, product development and flows. We will continue to add additional investment and distribution capabilities to PAMA -- PAMI with plans already underway to introduce a suite of Barrow Hanley, Trillium and Perpetual UCITS funds to serve U.K., European and Asia-based clients. We are currently also evaluating the potential for -- in the U.S. for intermediary distribution opportunities for Barrow Hanley, and we're well progressed in the development of some exciting new products with the Barrow Hanley team. Turning now to PAMA. PAMA saw AUM finished the period at $24.7 billion, producing revenue of $165 million. UPAT fell 24% to $42.2 million driven by net outflows over the period and prior period distributions. Our investment teams in PAMA delivered strong relative investment performance for our clients across all asset sectors over the year. Our Australian equity team remained focused on their value approach, benefiting from a shift towards value stocks that occurred during the course of the year. Our credit and fixed income funds delivered another strong year of performance, as did our multi-asset and global technology teams. Whilst it was disappointing to see continued net outflows during the year as a whole, our strong investment performance, combined with the launch of a number of new contemporary strategies over the year, helped to deliver positive net flows for the final quarter of FY '21. We also successfully completed a $30 million equity raise for the ASX-listed Perpetual Equity Investment Company. Whilst recent years have been challenging for PAMA, we entered into FY '22 with a renewed sense of positivity. We will be expanding our range of listed strategies with the launch of a suite of active ETFs later this year. We will be refreshing our positioning and promotion of our capabilities through new marketing campaigns supported by our improved channel focus, which will include our retail investors. Strategically, we will be looking to add additional investment capabilities both organically and via acquisition. Moving now to PP. PP has had a solid year, finishing the period with a record level of funds under advice, as I've mentioned, at $17 billion. Total revenues were flat for the year driven by lower nonmarket revenues, whilst underlying profit before tax rose 8% to $35 million. Net flows for the year were again strong, totaling $783 million, which included just over $400 million generated by our adviser growth strategy. Our new family office capability was established during the year, enabling additional service offerings for ultrahigh net worth clients, and it's already generating positive activity. Our community and philanthropic teams delivered a strong result with philanthropic funds under advice of $3.3 billion, up from $2.7 billion the prior year. PP saw strong momentum in the fourth quarter, and we expect that momentum to continue into the new financial year spurred on by the acquisition of Jacaranda. Our successful segment focus will continue, expanding now to include the aged care sector. During the year, we will be focused on improving adviser efficiency and demonstrating improved operational leverage across the business. And finally, to PCT. PCT saw another year of strong financial delivery in FY '21 with revenues rising 7% to $134.9 million, driving an increase in the division's underlying profit before tax of 9% to $63.8 million for the year, whilst we continued to invest in our digital platforms, which demonstrates the operating leverage this business has. Managed Funds Services completed 143 transactions during the year and added 43 new clients. And Debt Market Services completed 89 securitization transactions, adding 22 new clients over the year. Our investment in new digital solutions led to the development and launch of our fiduciary intelligence cloud-based solutions, helping to streamline our monitoring activities, information access and flow with our clients. MFS continued to demonstrate the valuable role that a responsible entity plays during the sale of the Vitalharvest Freehold Trust as it went through a competitive bidding process. The process delivered an increase of over 70% above the pre-offer trading price for unitholders. As we look to FY '22, we are likely to see an increased activity from the banks who are expected to once again access funding through securitization markets, and we're already evidenced that in the first quarter of this new financial year. We will continue to invest in new product solutions to support our clients through PCT's data and analytics business with planned launches underway for the first half of this year, which are already generating positive client interest. I thought that it would be helpful to briefly demonstrate the breadth and depth of client activity across PCT and the quality and the diversity of our client base. In MFS, we have a broad selection of quality clients, both global and local, covering a range of asset sectors. And in DMS, we've seen strong activity particularly in the nonbank sector. It is this client base that continues to show how satisfied they are with the products and services that PCT provides them with, best evidenced through our industry-leading NPS in PCT of plus 58. So from that quick divisional run-through, I hope that you can see that each of our divisions are well positioned as we head into FY '22. Our priorities for FY '22 is to continue to execute our stated strategy in order to drive sustained quality growth. As you can see from this slide, across our 3 strategic pillars, which means -- this will mean that our client-first approach is driving continued positive product and channel development, improving our interaction with our clients and their access to our information and driving service excellence. We will ensure that our focus on ESG across our businesses is well understood and it's accessible to our clients, both existing and prospective. Under our future fit pillar, we will continue to invest in our infrastructure and our frameworks that support our growing global business, and we'll invest in programs that support and empower our people. Finally, we'll remain focused on new horizons for Perpetual, taking advantage of the current market environment, the opportunities that it presents us with and the key strengths that we have across our businesses. We will accelerate the build-out of our global distribution team and the supporting infrastructure it requires across the U.S., the U.K., Europe and Asia. And we will continue to invest in new product and channel development for Trillium and for Barrow Hanley, both organically and via bolt-on acquisitions. Across all divisions of Perpetual, we will continue to have an active pipeline of inorganic opportunities to add further capability and growth potential to the firm. Now moving to summarize. As I've said, FY '21 was a very important year for Perpetual. It was a year in which our unique blend of best-of-breed businesses demonstrated their resilience. It was a year in which we have transformed the growth prospects of the firm, emerging as a global asset manager with substantial capacity for future growth. It was a year in which our ESG heritage was enhanced through acquisition and organic growth. And it was a year where the trust that our clients hold in our brand name came to the fore. These facts combine to leave Perpetual in a strong position as we enter a new financial year. Each of our businesses has positive momentum. And whilst our operating environment presents constant challenges, we will remain focused on the disciplined execution of our strategy and delivering improved operational leverage. We entered the 2021-'22 financial year with a renewed sense of optimism and confidence in our ability to deliver strong outcomes for our clients, for our people and for our shareholders. Thank you for your time, and I'd now like to move to open up for questions.

The first question is from Elizabeth from Jarden.

I have 2. Maybe the first one, if we could start on costs. So obviously, you broke down the cost guidance between PAMI and ex-PAMI, but the overall range is quite large. I was just wondering if you could give us some color on what are some of the things that need to go right or wrong in order for you to sort of fall at the bottom end or the upper end of that range, particularly given your cost guidance sort of stepped up twice over the last 6 months for FY '21?

Sure. Thanks for the question. On an underlying basis, we've included the Jacaranda costs in our 2% to 4% guidance and that will flow through. I think the bigger item is obviously the PAMI in the 15% to 17%. A lot of those costs come through on the annualization of the Barrow Hanley cost base going from 7.5 to 12 months, the annualized impact of the investments we made in distribution last year and that makes up the lion's share of that 15% to 17%. But there is incremental growth in distribution, and we'll continue to invest in those areas where we think there is the potential for strong earnings growth. And the other area to keep in mind is the 25% employee incentive scheme, it's not a noncontrolling interest, but it's not a bad way to think about that 25% of Barrow Hanley. As that business grows and becomes more profitable, the distributions in that business to that 25% holding will grow with it. And so that can swing the number around a little bit as well. So I think the -- whether it's the upper end or the lower end of that expense range will be driven by how quickly we make incremental investment into the business. We've now got, for example, 5 people in our Edinburgh office poised to launch our ESG concentrated fund. That will be launched into Europe, and we'll be deploying distribution resources to assist in that. We've only just appointed our head of European distribution, and the speed of the rollout there will also [ implement it ]. So I think the short answer is what will drive us to the upper end of that is further incremental investment particularly in distribution offshore.

Elizabeth, did you have your second question? Or was that it?

Sorry, I did have a second question. On the -- it rolls quite nicely into it. On the distribution team, obviously, you've made a significant amount of investment in '21, and there's obviously some more to come through. Just wondering how well progressed we are in -- as you build out that team in total, where are the numbers and where would you like the overall staff to get to as well?

Yes. Thanks, Elizabeth. Yes, it's not just a numbers game. It's about delivery ultimately. I think the strides we made in the last 12 months have been important. We have a presence, as I said, in each of the key markets. I mentioned that our teams are actively engaged in building activity and pipeline. And I think in many ways, we see how we go from there. Our suspicion is that because of the resonance of Trillium, the resonance of Barrow Hanley, the performance delivery of the team and the quality of the product, I suspect that we will be investing more, not less, over time, but only when we see success. So certainly, in my experience in distribution over the last 30 years, it can get to a point where it becomes formulaic, but we need to prove it up first. So we have the framework in place. We have the senior hires in place. Once we start to get delivery, if we think the prospects for growth can be sped up by improving -- by increasing our team size and coverage, we'll do that, but we want to prove it up first. So there's no sort of final target, perfect team size. I think it -- there are so many factors at play. But yes, we'll do it incrementally.

I think we'll take the next question, and that's from Matt Dunger from Bank of America.

Yes, Marisa. Can you hear me?

Yes. Thank you.

I just wondered if I could ask about PP, the nonmarket revenues. You flagged the economic slowdown as the driver of these going lower. Can you explain this and -- in the context of what needs to improve to see an improvement in nonmarket revenues? I know you've previously talked to the lower face-to-face meetings for advisers. But can this bounce back?