Praemium Limited (PPS) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Praemium Limited FY 2021 Half Year Results Briefing Conference Call. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Mr. Michael Ohanessian, CEO. Please go ahead.

Good morning, and welcome. Thank you, everybody, for joining us today on Praemium's first half F '21 results. I will go through a very, very quick business highlights overview very quickly before I hand over to Paul to take us through the numbers. I'll then do a bit of a deeper dive looking at the 2 business segments that we have, Australia and International, before we take questions at the end. So without further ado, Paul, can we go to Slide 5, please. Obviously, the major highlight for the half was the acquisition of Powerwrap. Praemium has been around for 20 years. We've done 3 small strategic bolt-ons overseas, but this is our first Australian and by far, our biggest transaction. And I'll spend a bit more time on this a little bit later on, but suffice to say we chose to do an off-market takeover process. It was a friendly on both sides and the support of the Board, the management staff, its key shareholders and, of course, our clients as well. That transaction went pretty well at a pretty tough time, particularly as the mail was very slow during COVID. But we got there in the end, and we're very pleased with that outcome. And from that acquisition, you can see the dramatic impact it's had on our business. We now have $34 billion in FUA, which is a massive increase from where we were this time last year. And if you look at the inflows on the left-hand side, you can see the big impact that Powerwrap had on our business, and we're delighted to have them on board. We are, we believe, stronger together. And Praemium today has got the kind of scale that we need, we think, to really succeed in this fast-evolving wealth market. Whilst all that was going on, we continued to do a lot of development, particularly through COVID. We're very proud of our product and technology people for the ongoing development they do. We are global. We are agile. Our velocity is high. And through all of that, we continued to evolve our capability and our product. And what you don't see on this slide, which I think is just as important, is the effort that we've put in to strengthen our resilience. And one thing we've learned from this pandemic is that everybody had to change, everybody had to adjust. And we believe we already had a very strong infrastructure, but we believe that coming out of 2020, we're much stronger than we have ever been. And with that, I'll turn to Paul.

Great. Thank you, Michael, and good morning, everybody. I'll start on Slide 9, which gives the financial highlights for the half. And you can see from the graphs and from some of the metrics that we've seen an improvement in all major categories across this half, with a 21% increase in net revenue, which is represented with the graph in the top left-hand side; a 9% increase in gross margin in dollar terms; a 5% increase in underlying EBITDA; and 113 increase -- 113% increase in net profit. The execution of our strategy continues to deliver results. And despite challenging conditions, we are reporting, as you can see in the graph at the bottom, our 14th consecutive half of profit growth. If I turn to Slide 10, you'll see this is showing our complete results. This half includes the trading results from the acquisition of Powerwrap, with 4 months of results included from September 2020. Now these results are reported within the Australian segment, which I'll touch on in the next slide. But overall, in terms of the numbers, as I said, net revenue was $31.6 million, an increase of 21% and underlying EBITDA was $7.3 million, an increase of 5%. Now this profitable growth was achieved while we continued our investment in sales and marketing, and you can see at the sales and marketing line, that was up 24% to $6.9 million. And despite market volatility during the half and the impact on margins from the integration of Powerwrap, which I'll touch on on the next slide. If we look at EBITDA to NPAT, you'll see there's a number of callouts in relation to the Powerwrap transaction. Obviously, acquisition and restructure costs of $1.6 million, $1.2 million of that was related to the Powerwrap transaction. And you'll see in the FX and other line relates to a $4.5 million revaluation of Powerwrap shares that we owned prior to announcing the takeover. You'll also see our depreciation and amortization increases this half. There's 3 components included within that: software intangibles of $2.4 million and obviously, the lease incentive, which is a newer standard from last year of $800,000. Now but overall, you can see NPAT of $3 million being 113% increase for the half. Now if I turn to Slide 11, you'll see we are reporting our Australian segment results. As I mentioned, there's 4 months of Powerwrap results, and that is included in platform revenue. It should be noted that Powerwrap, as a customer, used to be in our Portfolio Services line. So there is some commentary at the bottom just because we're moving revenue from pre-acquisition to post-acquisition. But overall, our revenue growth was 28% for the half. Platform revenue, you can see was up 52%. That's including Powerwrap platform revenue of $6.9 million. Now Portfolio Services is reported to be flat. But however, again, that included the Powerwrap revenue as a customer in last year's numbers. If you look at the underlying result, Portfolio Services revenue is up 9%, and that's off continued VMA portfolio onboarding, and obviously, some positive growth in VMAAS, which has been a strong contributor for us. Now the integration of Powerwrap has impacted margins due to its high net worth client base and the inherited cost structure. Now remember, Powerwrap was a loss-making business reported for F '20. But obviously, we've been able to report a positive contribution for Powerwrap, which I'll touch on in a second. If you look at Praemium's underlying business margins, however, they are consistent with prior periods. So our average platform basis points was 26 for the half, but that is broken down between Praemium of 34 and Powerwrap of 21. Gross margins, again, average was 75%, but Praemium's was 79%, which has been consistent with prior years, Powerwrap's of 54%. And our EBITDA margins were 33%, Praemium's of 36%, which is below the last reported half, predominantly due to, obviously, declining platform revenue during the COVID period but also continued investment in sales and marketing, while Powerwrap's EBITDA margins were 26%. So overall, a good result, but I suppose more importantly, it positions the business for growth in the second half and beyond. The investment in sales are now starting to generate results. As I mentioned, we're very pleased to report a positive contribution from Powerwrap of $1.8 million, and that's obviously from the implementation of synergies, which are flowing through into cost savings. If I turn now to Slide 12, we'll go through the International results. You can see, again, revenue has been weathering global volatility. Overall, net revenue is down 2%, but similar to the last half, if you break up the core components, our platform revenue is increasing. It's up 20%, and that's off the back of increasing inflows and increasing FUA, which is up 24%. At the same time, our fund revenue, which relates to the outflows from the Smartfund Protected product, is down 55%, which is why the overall platform revenue was down 8%. Our planning software continues to grow from new WealthCraft clients and from new -- the conversion of Plum clients to WealthCraft. But despite the decline in revenue, we've been able to deliver improved operating leverage. Expenses, you can see, are down by 7% from operational efficiencies. And the overall result is a loss of $600,000, which is a 41% decrease. But I think more importantly, if you break it out between the U.K. segment, it was a loss of $200,000, which does include the first half R&D incentive, but it is a 72% improvement in the loss compared to this time last year. And Asia segment, which is our WealthCraft product center, a $400,000 loss, which is a slight increase on the prior year. If I turn to slide -- just move to Slide 13, you will -- we'll talk through quickly our cash flow. I suppose we're pleased to report continuing cash flow positive generation despite incurring a number of costs relating to the acquisition. You'll see that net operating cash flow was $2.2 million. That is net of one-off cost of -- acquisition costs of $1.6 million. You'll see in the investing cash flow line, the acquisition was a positive $1.2 million in cash flow because we did acquire $14.6 million from Powerwrap as part of the takeover. Our R&D CapEx was $3.4 million for the half, which is a combination of Australian and U.K. projects, but also Powerwrap projects, obviously, that have been capitalizing R&D for a number of their projects as well. And you can see the financing cash flow line, we've drawn down our $15 million loan, which we'll then -- we'll be paying down over a 3-year term. Final slide for me on Slide 14 is just a quick overview of our balance sheet. You'll see that we still have a strong balance sheet. Cash reserves, with the inclusion of Powerwrap, is now $28.9 million. Our regulatory cash, given Powerwrap is also a regulated scheme, is now $12 million. You'll see obviously, a sizable increase in intangibles related to the goodwill associated with the Powerwrap takeover. And our franking credits continue to build, $13 million. And there are some tax losses that we are now reviewing. There's around $10 million to $12 million of tax losses with Powerwrap, still to be determined how much of that can transition across as part of the acquisition. And with that, I will hand it to Michael.

Thank you, Paul. So we're on Slide 16 now. In terms of the key drivers for Australia, it's been a pretty interesting half for us. 116% increase in net inflows for the business. Our FUA, platform FUA, is up 132%, obviously helped by Powerwrap. And just in terms of portfolio numbers, and we're showing you for the first time the custody and non-custody numbers, this excludes some of our institutional clients, but you can see, again, a 13% increase in portfolio numbers. The next slide is really -- talk a little bit about the industry. I guess this is probably not news to any of you, but I think it was just worthwhile showing some of the key numbers here. And the Hayne Royal Commission is really changing the advice space. Margin squeeze because they've got more overhead, more compliance, more due diligence to do. Product commissions, the grandfathered product commissions, are now pretty much gone and the whole idea of conflicted advice is yesterday's story. And of course, we're having now Brexit. And you can see down the bottom there, the continued loss of advisers from institutions. So not only have we seen a 25% decline in the number of advisers in the industry since Hayne, but we're also seeing a continued march of advisers from the institutions. Now what does that mean for platforms? So it means that we're now going to have a smaller cohort of advisers. Those advisers are progressively looking for alternatives to the institutional platforms, platforms that are tech savvy and independent and capable and agile. And so I think firms like Praemium and some of our peers are very well placed. And just to give you a sense of how things have changed so dramatically, if you just take the 12 months to September 2020, the challenger platforms, which we mentioned on the bottom here, are up 34%. And in that same period, institutions are down 10%. Now remember, that 10% is on a much bigger number than what we're talking about for the platforms. And as you can see, Praemium obviously had a very big year, if you like, with a 100% increase in our FUA, thanks largely to Powerwrap. Thank you, Paul. So let me come back to Powerwrap. I'll spend a bit more time on Powerwrap. It really has, I think, given us a seat at the table as a scale player. We're targeting $6 million of cost synergies in the new financial year of '22, which we're still very confident on. Although as I said before, we think that better technology and better [ relation ] with our clients, we think, will generate good revenue synergies as well. And overall, one of the great things about bringing Powerwrap into our world is that we really are, we think, the platform of everything. We can handle assets that are off platform, that's always been our core skill. That's how we started as a company 20 years ago. Our platform itself is very strong. We have a large addressable market, as you know. And adding in Powerwrap, which is arguably the only independent open architecture platform designed specifically for the private wealth market, I think, really rounds out the Praemium proposition. So we're very excited about it. We've had great support, great feedback from the clients of Powerwrap as well. And I think everyone is looking forward to how we now evolve the products over this year. And by the way, there are new regulations coming in later this calendar year called the DDO, or the design, diligence -- sorry, distribution -- design and distribution obligation. Thank you, Paul. And so we will, in one step, define the integrated solution of Powerwrap and Praemium at the same time as preparing for the new set of regulations that are coming in later this year. I want to talk a little bit about VMA. As you can see here, I want to talk specifically about VMAAS. We've been doing VMAAS now for 3 years. And what's really interesting is we've done some research with a third-party firm. And what we've discovered is that about 22% of wealth is off-platform. Now on-platform on is the most efficient place for wealth to be because all the assets are in one place. But a serious chunk of wealth sits off platforms, and it is a huge pain point for advisers. Think about how it is for yourselves when you've got money on a stock broking system, money in a bank, money in a time deposit, money with a fund. It's very, very hard to manage and monitor your investments. This is a great strength of Praemium. And by taking our software, which is very, very good at non-custody, with all the day feeds we've got, with all the analytics we've got, the corporate action capability we've got, our time machine, and so on, we are very, very good at delivering accuracy, be it on tax, or performance, or whatever it might be. But we're now adding the administration because there's not a lot of choices for advisers when they're trying to find an efficient and highly accurate and with a strong analytical capability for assets that are off-platform. And you can see the dramatic growth we've seen in VMAAS. We think that there's a lot more to come. Our growth over the last 12 months has been 20% up in portfolios and 85% up in revenue. And we think the opportunity in this space is big, and we think we are now at scale, and we think that we can really ramp this up. So let me talk a little bit about the International business. Again, in terms of dashboards, our FUA is up 31%. Our pension schemes are up 52% for the year, which is fantastic. Our portfolio numbers are up 28%. I'll go to the next slide. Let me spend a bit of time on this. I think this is probably of great interest to many of you. We've shown this slide before, this is the update for the half. And what you can see here is a tale of 2 stories. On the one hand, you see the Praemium Smartfund range in decline, and they're almost gone there. You can see that on the bottom right-hand corner graph. The amount of money we now have in the Smartfunds is down to GBP 31 million. We expect that to ease away over time. And it will stop being a headwind, if you like, for us, with negative revenue. Meanwhile, the platform is growing very, very strongly. You've seen it in the inflow numbers and you're seeing it in the growth of our FUA. We believe that as that headwind fades, as the growth of platform revenue outpaces that fund decline from the GBP 31 million and it will go to 0 at some point in the near future, we believe that we are on track to get this business not only profitable, but hopefully strongly profitable with very good operating leverage going forward. Thank you, Paul. We continue to win awards internationally. I think we said we were going to put some effort into raising our profile, raising our awareness, showing people what we're good at. And you can see more and more wins. Now again, the international adviser guys have appointed us Best Platform of the Year again. I think it's the third year in a row we're winning awards for innovation. I think most importantly, though, is the lang cat. They do independent research on all the 21 platforms in the U.K. We consistently rank in the top 3. Overall, we are ranked second. We are ranked #1 though in overarching features, #2 in proposition and 3 in service. So we're very proud of that. And it is having an effect on what advisers think. And remember, this is actually based on what the advisers say, it's not necessarily what the lang cat says. Thank you, Paul. The last one for international. I think the momentum speaks for itself. If you just take the last 2 years -- and remember, it's been the last 2 years where we really had this strategy of trying to grow our business, of telling our story. And you can see there's been a step change over the last 2 years and again in 2020. I'm very proud to say that we continue to have great support from the discretionary fund managers coming out of the U.K. We have an increase of 29% of them over the year. I'm also pretty happy with what's going on with WealthCraft. The cross-sell with WealthCraft and the total was very strong with the 58% compared to 52% last year, whilst WealthCraft itself is growing, and it grew 14% in terms of client firms in this half. With that, let's go on to the summary on Page 26. Thank you, Paul. So we have 2 years into our growth strategy. I think it's important to remind ourselves of the journey that we've been. Our narrative has been that we wanted to go from being a niche SMA platform into a full platform. We did that exactly 2 years ago. And from there, we've been measuring our march forward in terms of gaining market share. And the Powerwrap acquisition was a very, very important acquisition for us. It's uniquely accretive. Remember, they use the same core technology as Praemium. And so we believe that when we put this together, we're going to have -- this is one of the once in a generation growth transformations and great acquisitions. Our SaaS leadership continues. We continue to invest in SaaS. Other firms are likewise seeing the opportunity here, given just how much money sits off-platform. We believe we continue to sustain our advantage in non-custodial reporting. And the opportunity now for our clients, particularly our existing SaaS clients as well as new ones, to outsource the administration to us, we think, is a really exciting opportunity. And I think over the last 3 years, particularly with VMAAS, we've demonstrated that we can do this, and we've got the scalability now. Also on international. It's been a long road. It's been frustrating for many people that we haven't made it profitable, but I don't believe we are that far away. What you see now is 4 consecutive halves of a much higher level of inflows. And we believe, based on particularly the sales we've had over the last 6 months, that we could have another step up in terms of our growth rate. So we're very excited about that. And we believe that as the U.K. market, [ total ] market, continues to change and evolve, that we will stand out as one of those few firms that have their own technology and has the best technology. Thank you, Paul. And finally, let me just talk a little bit about how we see the future. For the International platform, we see further expansion of the DFM platform. To give you a sense of it, there's over 100 DFMs in the U.K. We continue to bring more of them on board, and we've got some exciting new ones coming on board. And they are a very important channel for bringing business to our U.K. platform. In the offshore platform, a [ flat platform ] market, because of regulation changes, advisers can't make the same kind of money by flogging insurance products into their portfolio bonds like they used to. And so all of the offshore advisers, we're seeing it in Asia, we're seeing it in Dubai and places like that, they are now having to make a switch from the old world of product flogging to the new world of strategic advice, fee-based, on a platform. And Praemium, as the best platform internationally, we are winning a lot of new business. And a lot of the time, we're also getting the WealthCraft account as well because to the extent they've got legacy assets with insurance companies, the WealthCraft system gives you that data feed and gives that visibility to the advisers. Now in terms of things that we think will also improve our efficiencies, we are introducing changes around our pension book. And we're also now adding a bit more admin support from our Yerevan office, which has always been traditionally more of a technology center but progressively now and started with VMAAS, we're doing some of the admin support there as well. For the Australia platform, obviously, Powerwrap is a major driver of growth. And we believe that the proposition itself, we think, is the best in class for the private market in the independent space. We think as we bring our technology, our front-end, our sales capability, our client service capability and so on, we believe we can really power up the Powerwrap proposition. As I said, we've been working on growing our business for the last 2 years. So we're still relatively new, if you like, in having a full-service platform. And I just want to say, just to remind people, we are still early in our journey and the progress we are making is very, very encouraging. And as I said, we see great opportunity. If you think about the amount of money that we report on, if you like, from a SaaS perspective, that is well over $100 billion, in the hundreds of billions. And so the market potential there for us on VMAAS, we think, is massive. In terms of drivers, we plan to do most of the integration work this calendar year. Obviously, we've got the DDO obligations to do as well, but our plan is to get a lot of that integration work between Powerwrap and Praemium done in this calendar year to realize synergies and to deliver a better product to the market. And we think that for our noncustodial admin on VMAAS, we believe there are more efficiency gains to be had as we scale this up and as we get better and better on it. But so far, after 3 years, I'm really encouraged by the way that was going. And with that, I think we then turn to questions.

[Operator Instructions] Your first question comes from Danny Younis from Shaw and Partners.

I've got 3 questions and maybe a clarification at the end, too, please. My first question is around the impact of margins from the integration of Powerwrap. So with gross margins 54%, EBITDA 26%, your revenue yield of 21 bps, should we view that as a bottom? I mean, clearly, there's likely to be some sales and marketing investment going forward and more [ cost-out ] synergies to come. How should we view those metrics going forward? Is that a bottom for you guys?

Danny, Paul here. I think as you said, we've inherited a business that last year was loss-making. So obviously, we've called out synergies, which we're well progressed on. But obviously, we still have significant synergies to come. So in terms of gross margin and EBITDA margin, yes, we would think we're kind of at the bottom range, as you say, and we would expect that to improve as the synergies flow through.

And similarly, with the revenue yield that 21 bps, because I think previously, they've been about 22, 23?

Yes. I'll just jump in here, Danny. I think one of the things that's changed over the year, of course, is the interest cash margins have declined, I think, for everyone who [ collects ] that kind of fund. So I think that's probably a permanent change, unless interest rates never change, which nobody perceives.

Okay. And going to the international business, this is a perennial question that seems to come up. I mean you've talked about it's been a long road, you're stepping up the growth rate, you're clearly making inroads there, particularly in the U.K. with the losses coming down. And now you're talking about an inflection point. So the 7% expense reduction that you've put through, are they permanently locked down? Or are they likely to change going forward? And given the Smartfund exit happening, it seems like you're approaching breakeven probably closer rather than later at this stage.

Yes. I think -- I mean one of the large cost savings has been travel. And we've had a bit of a disadvantage on travel because if you think about where our people are, we have people in Hong Kong, Dubai, Jersey and U.K., but our clients are in Singapore and now Japan and South Africa and so on as well. So we -- in the past, to win that business, we've had to have some people do some pretty unproductive travel. All of that stopped now, and yet we've still found a way to sell and support our clients. So I suspect that we will, when all this is over, that we'll have a little bit more on the travel cost, but I think it will be more productive. In other words, if someone is going to fly from Dubai to Hong Kong, they'll have 10 clients to see instead of 5. So I think that, that's a big part of it. And the thing is, clearly, the platform itself has a lot of operating leverage. And the area where we're spending money is on client support, implementation and sales basically. And we've done that aggressively through 2020 for the international business. In fact, we added probably 6 or 7 or 8 people in Dubai alone just because of the demand that we're getting all over the world. So where we are adding costs, it's usually to drive growth.

Excellent. And just on the R&D CapEx of $3.4 million, can you split that across the Praemium business, platform upgrades and new product development? I mean, previously, you've talked about ESG, now the adviser portal in the U.K. Where has that spend gone, and how much of it was Powerwrap?

Yes, Danny, Paul here. In terms of Powerwrap, it was just under $400,000 for the half. But if you go back to Slide 13, sorry, Slide 7, I should say. Obviously, we've got a long list of ongoing development. So as you said, we've launched a number of either products or functionality. ESG, you've touched on, but we're obviously continuing our platform enhancement. So but in terms of overall R&D CapEx, Praemium, if you look at last year, capitalized around $5 million and Powerwrap was around $2 million. So $3.4 million for this half is kind of in the range. So we'd expect that to be a more reasonable number going forward.

Okay. And just a clarification. I think Powerwrap I originally had consolidated from the 2nd of October, but it looks like you've included another month in there from September. What's the actual date that you integrated Powerwrap?

Yes. So there's actual control and there's accounting control. So under the accounting rules, they've deemed it as when we took 50% of the acceptances, which is the 4th of September. But in terms of practical control, Danny, you're absolutely right, it was October. We didn't pay -- cash in shares until the end of October. But -- so there is an accounting quirk for 1 month, but it has allowed us to take an extra month.

Your next question comes from Nick Burgess from Ord Minnett.

A couple of questions. So that 24% increase in sales and marketing you mentioned, a little bit more color on that. Is that all based in Australia?

Nick, Paul here. No, no, it's not. Predominantly in Australia, yes, but as Michael said, we've been adding some support people in Dubai to support the International business. And we've added a couple of people in Hong Kong, Dubai and U.K. from the sales perspective. But obviously, most of it relates to the full impact of bringing on the sales team in Australia that we've done over the last 6 to 9 months. So obviously, that's been flowing through, but there has been an incremental increase in the International business as well.

Okay. And so the -- just on the synergies of the Powerwrap business. So the $6 million, where do you add it? At the end of the half, or is that today in terms of what you've achieved versus what needs to be achieved?

Yes. Look, in terms of -- on an annualized basis, of the $6 million, we're probably about halfway there. And obviously, that's relating to more back-office corporate-related costs, management duplication. I suppose the next half is, as we've called out, more supplier integration and then some of the more IT architecture heavy, heavy lifting projects, I suppose. So yes, so halfway through, but obviously, we're earmarking the remainder in the next, as we said, towards the end of F '22.

Yes. Okay. And Michael, just on the U.K. So can we potentially get a little bit more of a timeline from your perspective on the International business and profitability? I mean is it reasonable as we sit here today that it hits breakeven in the second half, do you think?

You mean second half of F?

This year, yes.

Okay. Well, we've got to remember there's the U.K. and then there's Asia, which is, I think as Paul said, was minus 400. That's largely development people [ see all that ] WealthCraft products. So if you're talking specifically about the U.K. and not the Asian part, I can't give you a forecast as I answer that now. But what I do know is this, and that is that the momentum that we have with the business today is [ chalk and cheese ] from 2 years ago, much better than a year ago. And remember, COVID really was a challenge, particularly for our U.K. advisers, who obviously had a pretty tough time of it. But as they went through a tough time through the middle of 2020, our offshore advisers didn't seem to be as affected actually. And so when they came back in December, you saw December was just this roaring quarter for us. Now whilst all that was going on, we've been adding a lot of new clients to the platform. And one of the reasons that I'm nervous about making projections is simply this. When you get to a certain size in terms of number of clients and inflows and so on, [ and so ] you get a certain size. The variance in terms of what you expect from quarter-to-quarter doesn't change much. But we're still too early for me to say, Okay, I've got a pretty stable, knowable, bankable kind of new business introduction. So we're just focusing on continuing to build this up. All the evidence is that this is not a one-off quarter, half year, whatever it might be, it's demonstrably a different momentum. And as I said, our sales efforts are proving to be quite successful because you get the sort of [ historations ], right? You get the sort of, "Oh, you're doing well. Why are you doing well? I should have a look." And they have a look and they like it. So I think 2021 will be the year, I think, where -- give me 6, give me another -- give me 2 or 3 more quarters, Nick. And if it sort of looks like the momentum can really accelerate from here, which I believe it can, then I'll be much more comfortable saying, Nick, that's the date.

Yes, I can understand that. Can I just finally just ask a question -- that same question slightly a different way. Let's assume that the fourth quarter momentum that you saw in the U.K. business, in particular, is sustainable or sustained. Are there any, outside of business as usual, are there any costs or any investment that you want to put in that business, let's say, over the next 12 months to take it to that -- or to see that momentum improve? Are you happy with the shape of the cost base now?

No, no. We're happy with the cost base, cost base is fine. But if you take the operate - if you exclude all the increase in client support, sales, implementation and so on, our cost base really hasn't changed much. We just reduced some travel costs. That said, and I've sort of highlighted 1 or 2 options here. But there's a few initiatives that we've got in mind that will restructure certain parts of our business that we think will give us further efficiencies through this year. And there's a few elements -- because you've got to understand, in the Praemium world in the U.K., we've got quite a lot of regulated entities. So we've got some opportunities, I think, to reconfigure some of those through the year, which would give us some cost efficiencies. But it's the revenue uptick, I think -- all things being equal, if we held the line on cost, and we can go to the next level of growth, then I think we're a different business. And then profitability is just inevitable. I mean I think profitability is inevitable in any event. But we're not looking to just go across the line, we want us to become a highly accretive, highly profitable business in the same way.

[Operator Instructions] Your next question comes from Lafitani Sotiriou from Bell Potter.

Michael, I particularly liked your tagline that you'd like to power up the Powerwrap acquisition. But more specifically, there are comments around being a platform of everything. Now are you able to go into a little bit more detail? Are you thinking -- now that you've got control of Powerwrap, are you looking to have one interface for all the underlying platforms? Or do you want to add a little bit of color?

No, absolutely. It will be one interface. So when we talk about interfaces, we talk about our adviser portal and our investor portal, that will really work with the Powerwrap guys, yes. So part of the heavy lifting IT architecture support [ were to ] -- needs to be done before we can make that work. And once we make that work, it will just work. Meanwhile, Powerwrap have built their own interfaces. One, I think, is a reasonably known, it's called the Hive. Fortunately, that's being built off APIs, largely from Praemium. So we think we can refactor that reasonably easily. We hope to get that done this calendar year as well. And once those things are in place, then some of the great capability we've got, like artificial intelligence, will then work for the Powerwrap clients. Our ESG capability, which really works in an SMA model, clearly, will work for the Powerwrap clients because we're going to move them into our SMA. So a lot of the innovations that we have, we absolutely will bring to the fore, and everything that clients have now in the Praemium world, the Powerwrap world will have as well. And our plan is that we're going to deeply integrate it because it doesn't make sense for us to think about it as 2 platforms. Because in effect, it is already -- there's always been one platform. It's just been architected differently and people have added on things in different ways. So now we're very excited. It's a very unique opportunity with -- particularly now with DDO coming for us to stand back from it, which is actually what we're doing now, to stand back from it and try and imagine how far we can take this and make it awesome. So when we talk about the platform of everything, whether you're a high net wealth client, or retail client on-platform, or you want noncustody, or want a noncustody with admin, whatever it might be, the Praemium system works, and it does it in a way that's sort of smooth, if you like, and ubiquitous. So we're very excited.

But it's a rough timing, too?

Sorry, sorry. What?

Is there a rough timing as to when you expect that to sort of be in place?

It's not a rough time, it's October this year when the DDO comes into effect. And so the platform, as I understand it, will become both distributors and issuers of product. So we have to work through that. So actually, the timing for us is very fortunate because we want to do this deep integration with Powerwrap . But we have to, like all the platforms and fund managers, we have to do this DDO, where you've got target markets and so on. We have to do that at the same time. So we're very fortunate that we're actually getting to do both those things at the same time. Otherwise, we end up doing one thing and then having to do something else. So we think 2021 will be a year where we get all this in place. And then I think we've got the best platform around.