Praemium Limited (PPS) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Praemium Limited HY 2025 Results Presentation. [Operator Instructions] I would now like to hand the conference over to Mr. Anthony Wamsteker, Chief Executive Officer. Please go ahead.

Thank you, and good morning, everyone. Nice to see so many people online and interested in the Praemium Half Year Results. David and I look forward to presenting an update on the business and then taking some questions after we finished. Obviously, this presentation and the results themselves have been loaded to the website, and I encourage those of you who have access to the ASX website to follow along with us, although, of course, the slides will also be up as we go through. At Praemium, we acknowledge the traditional custodians of country. We pay our respect to the elders, past and present. I draw your attention to the disclaimer on Page 3. Whilst I won't read it, it's a very important background for the presentation that we're about to go through. As I go to the agenda, you can see there what we're going to cover, and I won't dwell on that. We'll just get straight into it. But as I've said, I'm delighted to be joined again by David Coulter. Unfortunately, this is the last half year or the last results presentation that David and I will do together. I think everyone will be across the announcement we made today that David is going to be leaving Praemium, which is disappointing for me at a personal level, but we obviously wish David very well going forward, and I'll say a bit more about that at the end. Going to the business highlights, the highlights for the half year. If I could just start off with this observation. I think many people on the call, perhaps most people on the call will have joined calls like this before. I've said previously that we get the opportunity to have presentations of this type of nature, a business update or a company update about 7 times a year. There's 4 quarterly releases, there's 2 financial releases and there's the AGM. What you will notice is that for a number of years now, we've been relatively consistent in the sorts of things we focus on. And we have said that one of the things we try to do is set our strategy as a long-term strategy, we try to quite disciplined about looking at the market and where we think it's going and our own strengths and opportunities to meet the needs of those market conditions, and that should lead to a longer-term strategy. So what we start to see if we're doing that right, is that the results that come through half-on-half or indeed when we present at the quarter should reflect the way we're executing on a strategy that is relatively well known amongst our close shareholders and the analysts who follow us. And so I think what we see this half is when you look at those numbers, I think a relatively impressive set of numbers. We're comfortable with where the business is tracking, and we're comfortable that they reflect that we're starting to see the results of executing on that consistent strategy. One of the things that's very important to us is revenue growth. Again, I'll talk a little bit more about that later, but we're pleased to see the very strong revenue growth and the translation of that into underlying EBITDA. The other thing is you've got to have the right product. And so of course, we're delighted to have launched our new core product in the overall range spectrum and so -- and starting to see that the funds under administration in that platform growing. So very happy with the growth. And finally, of course, the business is owned by the shareholders, many of whom are on the call. We, as always, thank you for your support, and we're conscious of our duty to as the opportunity arises to return money to shareholders, and we've been able to do that again in the last 6 months. If I go to the next slide, I did talk about the product, and it's very important that our product meets the needs of our target market, which, as you know, from our strategy is the high net worth advice segment. We were successful in the most recent investment trends survey that just came out to retain our overall rating of #3 in the market overall. We were #1 in the 2 categories that we value the most highly. And so that was a very good outcome for us. And we were #1 in 18 subcategories. Overall, the platform, again, quite pleased about that. It was actually marginally above 89%, but we've rounded it here 89%. If I then go to the strategy, which I did talk about, and people have seen these 5 columns in the past. And so those columns, we've narrowed the focus this time. The 5 categories are product operations, service or customer service, superannuation and acquisition opportunities, which sometimes had slightly different headings, but we've just been a bit more precise this time about what the actual area of focus is and then use the bullet points to talk about what we've been up to in the last half year in each of those areas. And so whilst I won't go into them in detail, needless to say, with the launch of Spectrum and the repricing of scope, we are very happy where our product suite is at the moment. We're never going to rest and say there's no further improvements needed, but we are very happy that we've now got the comprehensive product suite that we need to meet the needs of our preferred segment in the market. Operations, we have again been very busy behind the scenes somewhat. Obviously, operations are often seen a bit more behind the scenes, but we're very excited about the progress that we've been making. There's 2 continuous improvement programs that are always underway in operations. One is Lean Six Sigma, and we've had some good wins there, and we continue to be pleased that that's the improvement methodology that we've chosen for our business. But we are extraordinarily excited like everyone about the potential for AI already and going forward. And we're very confident about some of the initiatives that we're running. There's a few AI pilots running in our business at the moment, and AI will deliver a range of improvements for our business and for our customers. So very pleased with the focus of ongoing improvement in the way we run our business operationally. Service, we have always said customer service is crucial to what we do. Once again, I don't hesitate to say when we target the high net worth market, we're conscious that high net worth individuals are used to having the best service in whatever they do. They're used to doing business with enterprises that have got a very high Net Promoter Score, whether it be the cars that they drive, the restaurants they dine at, the entertainment that they look at or the holidays they go on or whatever. We have to aspire to be #1 in customer service because that's what the demand is and we're pleased with the progress that we've been making. And we're also pleased -- we're very confident with the way we survey our client base. There's always ad hoc surveys available to people in the market and anecdotal feedback, but we've got a very disciplined process of surveying our customers, and we've recently completed that. We tend to do that at least once, sometimes twice a year. We'll certainly be doing it twice a year this year. But part of the reason why we value the work that we do on that front is because it's so good at telling us this is what you need to do next to continue to drive the customer service up. So that remains and will always remain a very important area of focus. Superannuation, I don't need to tell anyone on the call the wonderful success story of superannuation in Australia and the ongoing continuous growth that, that delivers. And whilst we've got a lot of superannuation money on our platform, a lot of that's from self-managed super funds, which you would expect when we target the high net worth segment. But we do feel that we're probably underweight in terms of our retail superannuation offering. So the work that we're doing there is to say, as we continue to grow, the retail superannuation offering, which is marginally under 10% of the total assets on our platform should be significantly higher than that in a proportion of the total assets. So we have to improve the overall offering. Whilst self-managed super funds will always be the preferred vehicle for high net worth, people. There is a significant demand for the retail superannuation offering, and we're going to make sure that our offering is completely consistent with the bespoke type of services that a high net worth individual would expect. And on the acquisition front, we continue to be very pleased with how OneVue is going. We always get asked, so before we get asked, we will say that we do have a few files open at the moment on some new opportunities, some in the same line of business as we do now and some that are related to what we do and would represent synergistic improvements in the total desktop offering that we give to our advisers. So having mentioned OneVue and for 2 reasons, it's always of interest to our shareholders how it's going, but it's also a good discipline for us to say we don't lose sight of the fact that we need to finish the execution of that transaction, and it is tracking to plan. We recently issued the first earn-out statement. OneVue was owned. That was because the way that the earn-out is calculated, it's below the $3 billion threshold at the 15th of January. We expect that it will remain that way. But part of the reason for that is that our emphasis has been on ensuring the relationships are commercially sustainable, and we feel that the full is going to land in a place where all of the relationships that stick with us for the longer term on the Praemium product suite and technology will be just as commercially viable as the rest of our business, having recently undergone an exercise in repricing. And then the final slide for me before I hand over to David is you've heard me talk many times about our stakeholders. And so we've taken the opportunity this time to just put this slide together about the various stakeholders in our business, our people, our clients, our shareholders and the broader community. Again, it's a detailed slide, and I encourage you to look at it. And if there are questions about what we're doing there, we would welcome those questions. But needless to say, all 4 stakeholder groups are very important to us and the way we run our business, and we don't think any business can be successful unless you achieve good outcomes for all 4 stakeholder groups, and that remains our focus. So with that, I'm happy to be handing over to David. And David, I look forward to you walking us through the financial results.

Thanks very much, Anthony. Thanks for those kind words at the commencement of the presentation as well. It's a great set of results that I've got to present to shareholders, analysts and other stakeholders today. I'll start with the group results overall, but I won't dwell on them for very long. And the reason for that is that they're colored greatly by the inclusion of OneVue in one of the halves, but not in the first half or the prior comparative period. But running through it quickly, you've got outstanding revenue growth. You've got reasonable discipline on costs, and you've got a good drop-through to EBITDA at the bottom line. We've got a reconciliation to the detailed OneVue contribution, the detailed ex OneVue contribution as an appendix to the pack, and I'd encourage you to look at that. Also the statutory financials in the operating segment note go into a lot of detail about the various contributions from OneVue ex OneVue. Turning, however, to the group results ex OneVue, just having a little delay on our slide carry forward, I think, today, focusing on what has happened within the group ex OneVue, noting that OneVue is essentially at run rate as was established for the second half of the 2024 financial year. Anthony, in particular, has been very consistent that the aim of the Praemium business is to run revenue at double-digit percentage growth and constrain cost growth to something in the order of, I'd say, 10% or lower. And we've been able to achieve that now consistently across 3 halves. The platform margins have improved because we've repriced. We've had good organic growth, and we've had very kind tailwinds from markets admittedly, but revenue growth on platforms up 12% on the last half and on 23% on the prior comparative period. Our portfolio services business, and we'll have some detail on all of these. We're expecting there to be significant second half tailwinds as we reprice the scope product. It's stable to the prior period, and it's up significantly on the prior comparative period. As we've grown portfolios, although I did note, and we'll get into this in some of the other slides, we had some rationalization on portfolio numbers from one of our major clients. On the cost side, as you'd expect, and as I've noticed for a lot of participants in this sector, our IT costs are up reasonably significantly. It's not as though it's a complete arms race, but we recognize as management in these companies that we need to invest significantly, one, in our people capability, of course, but also in our IT capability to stay at the leading edge functionally and with technological capability. We're no exception to that. What I would note, though, is our cost of operations, as our IT costs have been increasing is that our cost of operations have been able to be constrained to close to flat over that period, in fact, a slight decline. What we've also been able to absorb in the current half, particularly as it pertains to comparing to the second half '24, is the launch of a brand-new product in Spectrum. We estimate outside of essential additional STIs paid to people who work very hard on that project, it cost around $800,000 overall in additional marketing and IT and other administrative costs to launch Spectrum in the first half of 2025. It's not to say and we don't give guidance that we'd be expecting our marketing costs necessarily to decline in the second half of 2025, but do note that there is a spike there for having done something that we wouldn't conventionally do half-on-half-on-half. So I'm very happy, of course, with the way that Spectrum has been received by the market and its initial green shoots. As said earlier, OneVue is really just on a run rate, and we have detailed backup for the OneVue results in an appendix and in the operating segment results. I referred earlier to our margins, and we probably show more detail in this regard than any other participant in the market. We have our platform revenue margins for the SMA products for Powerwrap and the impact that, that has on our portfolio overall. As a footnote, I've provided the OneVue average there as well. OneVue can be a little more volatile given the way that we've been repricing or looking at accruing for the revenue in that business. But these are the outcomes for the group overall. You can see with the big red oval circling there, the impact that it's had repricing from April 2024 in the SMA and the elevation we've gained to the portfolio overall, you have that margin increase backed by good organic growth and good market growth, you're going to get the revenue increase that you've seen. And happy to take any questions on some of the trends you see on the slide here. Turning now to that custodial business and the fund flows there from. This is something that we issued to the market on the 23rd of January on our funds flows. There's no new information in this slide, but it is worth revisiting that we've had very significant flow. We've got elevated FUA. And in the Powerwrap product, in particular, we've been able to rebound strongly from adviser exits that were well publicized and we were -- and continue to have a drag on Powerwrap admittedly, but we've been able to rebound from that to restore Powerwrap's flows to at least just above parity. Looking now in more detail at these portfolios and the revenue derived there from. And just a little more detail on the SMA and Powerwrap. In terms of portfolio numbers, average revenue per portfolio and also the adviser numbers. So turning to the SMA first, you can see clearly here that the impact of the SMA repricing has been entirely positive for the corporate overall. We've gone from first half '24, $628 per portfolio, up to now $839 per portfolio. And our portfolio or account is the other way to describe it, account numbers have even grown strongly in the meantime. I would note that there's been a slight decrement to the adviser numbers. And we had said on many occasions that we expected there'd be some potential decrement there as a result of doing the repricing, and that's fine. The question was whether or not we'd be able to wear it in terms of the eventual revenue drop-through. And these statistics and the P&L itself demonstrate that we've been able to do that very capably. On the Powerwrap side, the average FUA portfolio has elevated very significantly. That's no surprise in a high net worth business where you've had good market tailwinds. Adviser numbers relatively steady, meaning although we've suffered some adviser exits, those businesses have been able to recruit back in to make up the shortfall. It is a more stable, mature business. It is earning what it is earning as revenue per portfolio as we'd expect because these high net worth businesses, even though the FUA increases greatly, we do have a lot of cap fees and fee tiers within these businesses that constrain the absolute amount of revenue that's derived from the portfolio. But at close to $3,000 per, that's as much as you could expect to earn anywhere in the market that's reasonable for the sort of bespoke service that Powerwrap offers. And we'd expect that, that's the continued trend that we'd see within that business. Turning now to the noncustodial business. Again, with the net flows in FUA for noncustody, we're looking at something that we'd already published in January for the December quarter. You've got the half yearly stats here. Scope portfolio is up significantly. Scope+ portfolio is up significantly, Scope+ FUA up significantly. And I'm very pleased to report that the pipeline remains very strong. To some extent, this is where we -- well, not to some extent, we absolutely dominate the market in this space, and we're looking to continue that dominance. When Anthony mentioned that we're on the lookout for accretive acquisitions, it's in this space that we're particularly interested and see ourselves as being able to add more value to clients who are interested in taking, say, a Scope+ service, or acknowledging that the scope reporting function is leading in the market and to avail themselves of it would put them in a very strong position. So we see ourselves as being able to grow very strongly in this part of the market. Cash flow. There's something here of a disconnect from our EBITDA to our cash flow generation. As we've grown so strongly, we've grown our working capital component to a larger degree than I'd be necessarily comfortable with. You can see in the detailed balance sheet where the receivables are up, and we've been paying down the payables. We've also had beyond the operating cash flow, a return to the conventional cadence on PAYG income tax after having a tax benefit from a significant refund over the divestment loss or tax recognition on divestment of the international business, and there's a lag on receiving that money from the ATM, not I'm pretty sure no one would be surprised if there's a lag on receipts from the ATO, but that's as much as I'll say. Everywhere else on the cash flow here, you're seeing a very regular pattern of investment in our intangibles and a very regular pattern now of returns to shareholders. The dividend paid there represents the dividend paid as a final on the full year '24 and very pleased that we've announced another $0.01 per share dividend, which would equate to $4.8 million as well for the 2025 financial year as an interim dividend. So net cash movement down because we're returning funds to shareholders, and we continue to make investments. But the cash position overall at $37.3 million, given our requirements on licenses is extremely strong. And the requirements on licenses are disclosed in the balance sheet slide, which is the next in the presentation. So on the balance sheet, cash of $37.3 million, a very strong balance sheet. There's funds available there to fund future growth. There's good cash flow through on operations and how it's allocated for investment returns to shareholders is now fairly predictable and reasonably reliable, notwithstanding that we do have to make further investments in OneVue, which will be the subject of the slide to come. And I'll turn to that now. So I just wanted to, on this occasion, go into some detail about the OneVue one-off costs. It's easy to talk to an underlying EBITDA number in these presentations, but the one-off costs that we've been spending on OneVue, very, very sharply focused on these because they represent genuine cash outflow. We had announced when we made the acquisition and we've talked in successive presentations to market that we expected to pay $1.5 million on acquisition, $4 million for integration and another $1.5 million in separation. I'm focused only on acquisition and integration on this slide because we haven't spent a cent on the separation just yet as we've worked assiduously to get this business integrated into the greater hole. And we've talked a little about that or Anthony has referred a little about that in terms of working our way through commercially sustainable relationships, repricing and the impact on earn-out FUA. But in a little more detail, we had expected to spend $1.5 million. We've ended up spending $1.8 million to some extent, when you get into drafting of legals, you can enter into a fairly iterative process. So that went slightly over our forecast and also referred to a PPA, which is a purchase price allocation there, which was somewhat more complex than we'd expected it to be. Very happy with the service provided by those service providers. I think an overrun of that degree, given the amount of uncertainty you have in any M&A activity is not something that I take lightly, but it is also something that I'd reconcile myself to as having been reasonable under the circumstances. On integration costs, we've incurred $2.3 million so far. That's $1.4 million this half and $0.9 million in the prior half. These are largely focused on a TSA from Iress and also having contractor project management resources at our disposal to make sure that our own integration staff aren't distracted and to keep us well on track with how we expect this to roll out. I expect these costs will come into forecast at around $4 million that they might roll out a little more quickly is something that we'd acknowledge, but that would be great for us because that would mean we were getting our OneVue clients onto Praemium technology a little quicker than we might have otherwise expected. And then at the next half, I'm sure, having established the precedent here, we'll talk more about whether or not we've made it to that forecast and also about our separation cost of $1.5 million. But overall, should be -- and Anthony will talk to this in some more detail as well. If the earn-out remains at 0, we paid $1 million upfront. We've paid around $7 million to execute the transaction itself. for the sort of revenue that OneVue will continue to generate even with the reduction in FUA that we've seen from the FUA from the earn-out statement, we'd expect that, that's going to be a very, very successful acquisition. So with that, I'll turn it back to Anthony for the strategy section of the presentation.

Excellent. Thank you, David. So going to our Venn diagram, which we continue to use in these presentations just as a reminder of how we view the market. And I think also to just highlight that there hasn't been -- other than the growth in the 2 segments, both are continuing to grow very strongly, but there hasn't been any significant change in the way that the market is playing out and the convergence between those markets for the reasons we've highlighted there. In one way, a lot of that is demographic. There's an aging population. There's a relatively wealthy country with a cohort of very high net worth individuals, and that's demographics and demographics is destiny. So we don't expect that this is going to change materially over the coming period. And so when we view the market that way, it allows us to set a strategy to say how can we succeed in a market that is composed in that way and likely to stay composed that way, but likely to grow continually very strongly. In terms of how we meet the needs of that product now that we -- that market -- now that we've launched Spectrum, we're able to put a slide up like this that talks about what our various offerings are and how they meet particular needs as encapsulated in the Venn diagram on the previous slide. And so again, very happy to take any questions. I encourage you to look at that and consider those bullet points individually and why that positions Praemium very well to enjoy ongoing success in what is already a very dynamic market. And so that leads us to conclude with just what our focus is and the outlook over the coming period. And first of all, we do want to realize the full potential of that product range. We regard it as the best overall platform and administration solution for high net worth advice. And so the challenge now for us as a management group is to realize the full potential of that. We want to continue to develop our leadership position in alternative assets. Again, there's more and more conversations and reporting on the fact that as our wealth grows in Australia, mostly superannuation, but also non-superannuation wealth that, that has to find appropriate investment alternatives. You can't just keep piling into the Australian Stock Exchange because the wealth is growing faster than the stock exchange itself. So there has to be more and more investment in alternative assets. We have a leadership position, and we want to further develop that and demonstrate to our clients that the ability to execute and report and administer alternative assets on our platform means that there's no degradation of the reporting and the visibility that clients have of their overall portfolio just because they're starting to invest in assets that don't have the same requirements for reporting that an ASX-listed security does. We have the tailwind now of the scope repricing, and we want to realize the financial benefit of that as part of our aspiration to continue to grow revenue in double digits. We obviously need to complete the full integration of OneVue. And finally, we continue to target greater scale. The reasons whilst they might be obvious are worth stating, one is to allow ongoing investment in the development of our technology. You can see from our numbers, we continue to invest in technology. Our technology spend is growing as a proportion of our total spend. That is justified at the moment. But for those who have heard me say before about the wonderful opportunities that technology is providing at the moment and the growth in AI as one example the change from where you are today will be extraordinary. So you've got to get that right. You've got to make the investment, but you've got to be intelligent and smart about how you make that investment. We're very happy with how it's going so far, but we continue to be cautiously optimistic, I should say. We're not going to be complacent about where we invest. But part of the value of scale is to allow that investment to take place without detracting from shareholder returns. And that's the second key point about the scale. It should allow a gradual increase, not just in overall profit, but in profit margin. So they're the areas of focus in terms of executing on our strategy. Once again, as this is the last formal ASX presentation I'll do with David, I want to say how tremendous it's been to sit with David through all of these presentations quarterly and half yearly. It's been a privilege to sit with him as CFO on these calls. I'm delighted that as part of the changes he's making, he's agreed to continue to be involved in our Investor Relations function going forward. We're a small enterprise, and we don't have our own Investor Relations people. So we do it internally with a bit of help from our marketing people who are tremendous at the way they help us on this, but David has really lifted that over the years, and I'm delighted that he'll continue to be involved in that way. And I obviously wish David great success as he continues to pursue a career. He's, in my opinion, is a very young man still. And so he's got a lot of runway in front of him. So thanks, David, for all you've done over the years. And hopefully, all the questions that we now get will be for you.

[Operator Instructions] Your first question comes from Lafitani Sotiriou with MST Financial.

Can I start off with OneVue and the anticipated synergies cost out? Can you just remind me what the timing of that is or how we should think about it? So if you look at your split out for OneVue, annualized about $9 million of expenses. Will that -- how much of that will transition into the new organization or the existing organization? Or how should we think about the underlying cost out from here?

We've consistently focused on one metric, which is $3 million in synergies, meaning that's the amount of cost out we'd expect to take from a normal run rate. To the extent that we have a second and equally important commitment in the market is to have mid-teens accretion on EPS, which is a demand on us to either ensure that we've got the same revenue, grow that revenue or go further on the costs. So we're very focused on those. We restate those commitments. But I would suggest that at least $3 million in costs because we've been consistent in every presentation to market on focusing on that number.

And the timing of those?

The timing will be first half next year. There's nothing will drop through in the second half of 2025 or if it does, it would be marginal at best, I think, would be the best way to describe it. The nature of transitioning these clients to our own technology is very much akin to big bang. It's a lift and drop. It's not really that, but it's going to take place holistically with very few exceptions on the One transition date.

Got it. And just with the repricing, I know there's been repricing in the SMA platform and there's a slide there. But just for -- does it seem like there's also been repricing for VMA or what is now Scope as well?

Yes. So that was what I was referring to as the second half tailwind in the presentation on P&L. We had originally planned that we would go contract by contract, reprice to clients. We found that counting against ourselves to some degree here that because Scope was such a long-lived product in the marketplace relative to wealth management businesses and their lifespans, that we had a number of different contract terms, a number of different manners in which we'd have to edit it. So the easier way to get this done was a big bang, 1 January 2025, mail out to clients, here's your new terms, here's your new contract, please indicate your acceptance here. Now I'm not going to sit here and pretend and maybe Anthony would want to reflect on it as well, but every client just thought that that was wonderful and signed up to it and returned their form within 3 days. But by and large, that's been a pretty successful means by which we've negotiated with clients for what realistically had to occur in an inflationary environment. I mean by and large, we haven't seen price increases in Scope for around 10 years. And everyone understands that that's not the way that cost basis of suppliers have worked over the last 4 years in particular.

I'll just push one more multipart question. So just with the staff headcount, you can see a drop-off in Armenia in the last couple of months. Can you just talk to the strategy? Are you moving away from that as a support center? Or is that just being downsized to locally? And just more broadly, Anthony, with succession planning and David has only been in the role 3 years. And I think when you were first appointed, it was more a sort of an emergency type scenario. And could you just talk us through your own intentions and what the succession planning would be over the medium term? And how did you -- how did we get to a situation where you've lost the CFO after 3 years?

Yes. Thanks, for those questions. I'll go to the Armenia one first, then I'll come back to the more substantive question. The -- in terms of Armenia, what we have done, we've got about -- we had about 90 people over there, as you can see from the graph, and it's dropped to around 50 now. Now what we -- initially, it was set up as a technology and development, IT development. And then with the success of that, we expanded and put some administrative staff there or operational staff. Now we also have operational staff in India, and it is -- it's not only a different geography, but it's a different arrangement because the Armenian people are employees of Praemium, whereas the Indian team is an outsourced provider who provides a service to a lot of financial service companies globally and quite a number in Australia. And so we've made the choice that what we want to do was just run the administration function that we offshore out of India. There was a number of reasons for that, but we came to the conclusion that was a better outcome for us, and it was better to do that through an outsourced provider rather than employ the people directly. But we've got no plans to get out of the technical development and the technology people that we've got in Armenia continues to be a very successful development hub for us. Part of the reason for the change, I said there was a number of reasons. One of the reasons was because we just wanted the people in that office to come in and know we are technology development people. We just do software development. That's what we do. So we're very happy to have made the change. It's been very well received in Armenia. What -- it's still a very low-cost operation. The Armenian currency tends to be closely related to the U.S. dollar. So as the Aussie dollar reduces, it can slightly lift the price to us. But you're talking -- it's well under half the cost of an equivalent resource in Australia and very high-quality people. So just focusing that office on development. We've still got the same office space. And part of it was the people in Armenia tended to have less space per person and office worker in Australia. And so we want them to have more space without having to go and find new premises as well. So that played into it as well. And I should say, in Armenia, the people come in every day, right? There's no work from home over there. People are coming into work every day by choice. So we just wanted that to be focused on that. In terms of the succession, first of all, on my plans, I'm very appreciative to our shareholders because one of the things that they did at the AGM was award a grant of performance rights to me that go out for 3 years. So there is a financial incentive for me to stick around for another 3 years. And as you quite rightly said, it wasn't sort of envisaged that when I was appointed, it might be a 6-year appointment. I feel like I'm closer to the end of my career than the beginning, although I'm conscious that I'm very lucky to be living in a country where life expectancy is long and perhaps I shouldn't think of now that I'm 60 just getting out and doing nothing for 20 or 30 years, if that's how long I've got. So I'm very happy. I love the challenge, and I'm very happy to have a financial incentive for at least another 3 years, which is significant, and it would be material to me not to either shy away from the fact that my own personal investment in Praemium, which is all -- every share I own in Praemium has been bought with cash in my self-managed super fund. And so I've got a significant financial interest in it doing well. Having said all of that, I'm -- people can take this as they like, but I'm genuinely interested in making sure that the business has the right person running it. And if I ever thought somebody else should run it rather than me, I'd be very happy to hand that over. What I've tried to do is say to the board, every one of the direct reports that I've got is, in my view, a potential successor for the role. I think all of the people in the business have done very serious jobs, not only with Praemium, but in other areas and all of them, Richard Varner, Denis and James being the other 4 execs and Brett Marsh who's come into the business through OneVue and was essentially the CEO of OneVue when it was in Iress. So we've got 5 people besides David, who would all be considered viable alternative successors to me. And if the board ever told me we think that of those 5 is ready, I would be -- I'd be only too happy to say, well, let's get it done. And I would like that because all of them have been involved in developing a strategy and how we execute the strategy and we give a certain continuity to do it that way. Obviously, the CFO is typically another role that can be thought of as a successor. And so that's why we've said in the announcement, we won't move to a permanent CFO straight away. We'll get an interim. I think everyone knows that interim executive positions are a feature of the market and something that we can do. So we're in final discussions to appoint an interim CFO, and then we'll take our time to get a permanent CFO, and we would anticipate that we would get somebody to come into the role who as they prove their worth in that role, will ultimately also be a potential successor to my role. But I do feel -- I am -- I want to close by not saying, yes, I'm just waiting for 3 years to go. I'm very enthusiastic about the opportunity. This is a wonderful opportunity. I'm actually inspired by how well our 2 bigger competitors in the challenger space do. They have been 2 of the great success stories in Australian business generally and financial service specifically. And I don't think it's gone forever. I do believe Praemium can have a journey like that as well. And so I'm extremely motivated by the opportunity. I feel that I'm very young. I'm coming off the back of a cold, you might tell from the way I'm talking and nobody ever feels at their best as they've just come out of a cold. But other than that, I feel fitter and healthier than I've ever been, and I relish the challenge. I'm delighted with the team we've got. I've loved working with David. But 3 years is sometimes -- that's about the average of a role in Australia these days. And so we shouldn't be surprised if somebody after 3 years is ready to say I'm ready to do something else.

Just to clarify, Anthony, you said that a new CFO, like once they could prove themselves over a few years or may be considered for the top role. Is it in your view or the board's view that David proved himself over the last 3 years?

Yes. David certainly was a very -- he made a huge contribution to Praemium, and he not only made a contribution in the areas that he was involved with. And I hope that all shareholders see the value of what he did. But he made a great contribution at the executive team, not only on saying to the executive team, is what we do in finance, but also is how the business as a whole should work. And so he made a general contribution, not just a specific contribution of finance. So yes, there was no doubt David was -- when we talked about my direct reports, all potentially being successors in my view, if that had fallen to David, he would have been outstanding in that role. But we are where we are.

We might move on just to give some of the other guys on the line an opportunity. You can come back, of course.

Your next question comes from Tom Tweedie with MA Moelis Australia.

Just wanted to start off with how you think about the pipeline for the custody side of the business, maybe just across the 3 different products, sort of SMA, Power Up and Spectrum. Can you give us a sense of especially Spectrum, what you're seeing there in terms of potential pipeline wins, tenders in the second half or potentially FY '26? What the environment is kind of shaping up to look like?

Yes. Look, I'm not going to give you the pipeline, of course, it's market -- it's commercially sensitive information. But our pipeline is healthier than it's been in the whole time I've been here. And we take a lot of time on the pipeline now. We have a meeting -- obviously, the salespeople are working with their pipeline every day, but they have -- we've introduced the discipline under Denis' leadership of meeting monthly on the pipeline and any of the executive team can go to that meeting. I go to the meeting every month, and it's always a challenging meeting, not -- challenging in the sense there is genuine challenge from the executives about are the opportunities moving through at the right pace. If somebody has been in Stage 2 of the pipeline for a few months, that doesn't -- it shouldn't be there. It should have dropped out altogether or it should have moved to Stage 3 or Stage 4. So it's -- so we're very happy with it. There are quite a number of big opportunities and big opportunities in our sweet spot, which is the high net worth adviser. So yes, we are confident. We're encouraged by the flow of new leads into the pipeline, thanks to the work that our marketing people did around the launch of Spectrum. And so we've got no reservations about that. Of course, pipelines are a probability-weighted exercise. In Stage 1, your chance of winning a prospect who moves into the pipeline might be only 5% or 10%. By the time they get to the final stage in the pipeline, you might be up to 50% probability of it landing. But it's still a probability. You've still got to land it. And so there's still work to do to get all of those prospects in the pipeline through to fruition and close the sale, but very happy with how it sits, and there are big opportunities out there, which is why I said earlier in response to another question, we don't feel the opportunity has gone that the market has now been decided and market share is locked in on a trajectory for the next 5 or 10 years. We feel that it's a very dynamic opportunity still, and there will continue to be significant market share shift as well as growth in the overall market. And we feel that if we were able to go in the Delorean 5 years down the track, we should have success in growing our share of the market from where it is now.

And just a follow-up on the cost base expectations going forward. A couple of your peers at the recent result sort of revised costs slightly higher in the near term just to capitalize on the opportunity. How are you guys thinking just overall blending, obviously, full-time FTE and IT costs, et cetera, going forward. If we look at the overall expense growth, how would you be thinking about that sort of in the next sort of 12 months or for the full year anyway for the financial year?

So we think that the expenses continue to grow, partly through inflation, like a lot of people would say inflation is being conquered now. We still see some inflationary forces at play, and we will respond to that. We're not going to underpay our people. And partly through growth. What we have been able to achieve in more recent times is more of the growth comes from investment in technology than in support staff, and we would anticipate that happening. Everyone on the call probably reads the newspaper and there's articles here and there about what people are doing on GenAI. And I encourage anyone who was interested in that field, you should read a lot about it. I certainly read a lot about it and so do most of my executives and are all closely involved in our AI initiatives. Yesterday's article that was particularly interesting was what Westpac are doing with Accenture. And you only have to look at that article as an example of the sorts of efficiencies that are coming out of use cases at the moment. We're starting to see that ourselves. And so some of the growth that we would see will be in investment in technology. As use cases come to fruition and we say, yes, there's an opportunity to invest a bit more and get some more synergies. We may be able to grow the business without needing to grow the operations and support staff numbers as much, but we'll continue to invest in tech. So we see growth. Our aspiration is for the revenue to grow at a faster rate than the expense line. Obviously, every now and again, people ask us, this AI is so powerful, do you ever envisage that there'll be a dramatic cost reduction. And you can't rule that out, but we're not budgeting for that at this point in time.

Your next question comes from Nick McGarrigle with Barrenjoey.

I guess my first suggestion is you should reach out to Grant Boyle, who's recently retired from Netwealth, he might be a good appointment. Maybe just on the OneVue cost outs. Can you just give us a sense of as you've gotten into the business, is that $3 million you think a conservative estimate? Timing, you mentioned early next year. Is there kind of a more date than that, that you can allude to? And then I guess the notice from one of the larger clients that they're withdrawing $1 billion, is that -- has that been effected? Or is it just a notice at the moment?

I'll just start with the last part of that query. It's not a single client for $1 billion that's subject to the reduction in FUA between what was announced for December and what was aggregated for the earn-out statement. So that's a number of clients with whom we've had protracted discussions and come to a conclusion that we couldn't establish a commercial relationship. And even under those circumstances, it's not as though the separation is entirely free from goodwill. We will do that responsibly and amicably with those clients, but it's not a single client for $1 billion. So I just want to clarify that. And Anthony, you might turn your attention to the other parts of that question with the exception of the Grant Boyle comment.

Yes. So look, we -- just for the under $3 billion that we -- the way the earn-out works, it's not -- obviously, when we published our FUA recently, there's more than $3 billion in OneVue. So it's partly the way that we have the conversations with clients about the transition to Praemium and how that will work. And one of the things probably -- and I know you understand, Nick, and probably most people understand, OneVue was quite a diverse business. There was a range of services that were provided, not just the pure platform and administration service, there were various niche services provided as well. And so some of the FUA that's dropping off is because when we look at those niche services and how we would provide those going forward on the Praemium technology, the commercial arrangements just weren't going to work for both parties, and it's all been pretty amicable on that front. But we still remain very excited about that. We think where that land is we wouldn't expect 1/4 of the revenue to drop away. We'd expect the revenue drops away a lot less than that. But we certainly still see the potential for the synergies. And we're still saying that the $3 million of synergies, we've got line of sight about how to get that $3 million of synergies. That makes it a very profitable acquisition for us. And so we've just got to keep delivering on that.

Okay. And then I guess in terms of the new products, you mentioned -- I don't know if you can give us an update on kind of new adviser groups that have signed up to use the new products and what kind of the run rate. Obviously, in December, it had kicked off well. Just an update, any kind of sentiment statements you can provide us into Jan and Feb?

Yes. The sentiment is still strong. As I said, the pipeline is very encouraging. We're happy with the way prospects are moving through the pipeline as you would expect if you're watching a sales pipeline. Certainly, people understand that Spectrum is now realizing the full potential of what Praemium has got to offer. So sentiment remains strong. And we're encouraged by what we're seeing in terms of the interaction we're having with prospects and also our existing client base.

Your next question comes from Nic Burgess with Ord Minnett.

A couple of questions. Firstly, just on OneVue, can I follow up the previous question? So $4-ish billion of FUM, you're losing somewhere between $1 billion and $1.5 billion. You've given an update on the revenue margin in the half was 28 basis points. So a little more help would be appreciated on the revenue impact, given you've said it's going to be less than 25% or less than the proportion of FUM loss. So how should we think about that 28 basis points? And are there fee increases going through on that 28 basis points exclusive of the loss of FUM anyway? So any updates on those items would be appreciated.

So yes, on the fees, like what we've done with the Spectrum pricing as we've launched it, it's built on the back of the pricing work we did on the SMA and the platform pricing there. And so what we've now got is what we regard as the Praemium price point for different products and services. And so OneVue fits into that. And our view without putting the exact dollar amount on it. Our view is that the average cost or the average revenue that we'll generate from a client who sticks with a -- 1 gig client sticks with Praemium through the migration onto the Praemium product and technology will be higher than it was before. So that's the answer to that. But we haven't -- just as when we repriced the SMA, I think you'll probably remember, Nic, that we weren't overly prescriptive about how much that might be because there's a few moving parts that if we would give guidance about how much the uplift is, we're not confident enough that we've got all the moving parts for that to be confident enough to give the guidance about here's what we think it will be. But we certainly don't think if you took a pro rata of $4 billion and it finishes at $2.6 billion or $3 billion or wherever it finally settles, that if it was 3, you should say the revenue will be 3 quarters. It will be higher than 3 quarters in our view, but we're not going to give you guidance about exactly what we think it would be.

Okay. But if we think about the SMA going from low 30s to high 30s, something of that vicinity of a new overall premium pricing point is an appropriate place to start at least on that calculation based on the logic that you mentioned there?

Yes, it is. As long as you -- again, and I know you know a lot about OneVue because you've researched [ Hallmark ] and you looked at the acquisition and all of that. Just be conscious because it is a diverse client base, there are clients in OneVue who would be more like Powerwrap clients and there are clients in OneVue who would be more like SMA clients. And you know there's a big difference because of the average account size rather than because the pricing philosophy is different. The pricing philosophy is the same in both, but the difference in average margin comes about because of the different account size. So as long as you factor in a bit that there will be some very large accounts in OneVue and some more likely SMA average account size. And the very large accounts will continue to get what would appear on a basis point number to be a lower price. But when you look at it as a dollar per account, as we put in the presentation, it will be higher.

Yes. Okay. Got that. So last question, just on your strategic priorities. Superannuation. So you've mentioned this for, I think, a couple of years now as a priority. So just wondering what the progress there is on those improvements and what sort of time frame we should think about for completion? And what the potential outcome is there? Are you looking at a reduced cost to serve, an increase in satisfaction, increase in flows? Like what's the outcome of those issues that you've identified on Super?

Yes. So just very quickly on the part, what are you doing. You might -- it's probably burned in everyone that a few years ago, we had to talk about backdating a significant price increase on the administration service that we had to wear. And so for a few years, we've been paying a higher price for our admin service, and that was part of the uplift by the provider to lift the service. So -- and we're still working through that. The service is lifting. But one of the 2 things that we're doing is with the trustee of our Super fund, which is Diversa with whom we've got a good working relationship, Diversa have with all of their funds because we're not the only fund that they're the trustee of, have been undertaking a process just to review the market, given that the pricing went up, given they know what they know about the service levels, they've been saying, can we -- it became time for them to review the market and who is providing services. It's a dynamic market. Many of you will know that there was a company called Grow Technology -- or there is a company called Grow Technologies. There's a new provider in the market. There's a whole lot of others. Recently, there's been some publicity around Superhero building out a super admin solution. So the market is in a state of -- and indeed, our supplier, which is Iress OneVue superannuation services is now being sold to Apex. So it's a dynamic market, and we were very supportive of when they said that we think it's time to review the market and just make sure we're getting a good alternative. In conjunction with that, we're also looking at whether we should bring the administration in-house, and we're doing the work on that. So we're not yet landed on a final decision. But that -- so that -- I'm sorry, that took a bit of while, but that's about what are you doing and also why you're doing. What do we want the outcome to be? Nic, we -- I read enough about the state of the superannuation market in Australia. I think perhaps because it has grown so fast and the unusual structure that there doesn't appear to be anyone who's doing this as well perfectly. Well, by definition, nobody will be perfect. But there's a lot of problems in the market. You read about it all the time. You read about even big super funds being fined, being sued by ASIC and the like. You read about challenges that a number of people have got. So superannuation, very few, if anyone, can say we've got super right. So where do we want to land? We want to make sure that we've got -- because we're a high net worth business in high net worth demand, high standards of service, we want to have what would be regarded as a best-in-class service offering in superannuation. So that's our aspiration about where we'll land. We do think we can do that cost effectively based on the work we've done so far, and it should be -- it should be cost effective. Obviously, we're not trying to be the biggest player in the market, but we're trying to be a player that uniquely meets the needs of a high net worth individual who still has a need for retail super as opposed to just a self-managed super fund. And if we get that right, we feel that our proportion of platform assets in super can grow significantly from the current less than 10% it could grow. So if our whole business grew, then like if somebody said, we think you should double your business and if super as a proportion of the business doubled, well, you can do the math and say, that super fund is going to be massive in a few years' time.

There are no further questions at this time. I'll now hand back for any closing remarks.

Well, once again, thank you, everyone, for your interest in the call. I -- as always, I value all of the people who are involved in our business, all stakeholder groups. I want to especially say thank you to all the people who work in Praemium, who have helped to deliver this result, which we're very pleased with. Thank you to our clients who have given us their business and their trust that we will serve them well. And thank you to all of you who are shareholders on the call for your support, and we look forward to continuing to try to execute on that strategy.

That does conclude our conference for today. Thank you for participating. You may now disconnect.