Smartgroup Corporation Ltd (SIQ) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Smartgroup SIQ Annual Results 2021 briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Tim Looi, Chief Executive Officer. Please go ahead.

Thank you, Stanford. Good morning, everyone. Thank you for joining us on the call today. My name is Tim Looi, I'm the Managing Director and CEO of Smartgroup. And joining me on the call today is Anthony Dijanosic, our Chief Financial Officer. So Anthony and I will provide an overview of our financial performance for the past year, our key operational highlights and our progress on the Smart Future, our program for organic growth. We'll then take your questions. But first of all, I would like to acknowledge the traditional owners of the land for which I'm speaking to you from today, the Gadigal people of the Eora Nation. As this event is being broadcasted nationally, I would also like to acknowledge the traditional custodians of the various lands on which you all join this call from today. I recognize their continuing connection to the land, waters and culture and pay my respect to the elders past, present and emerging. Now let's turn to the investor presentation. Now on Page 2. So we're very pleased with our performance for 2021, which reflects continued growth momentum. So throughout another year of disruption, Smartgroup and our team members remain flexible to deliver exceptional client and customer experiences and strong business outcomes. So our business model continues to show resilience in the face of ongoing changing economic conditions. Our people remain dedicated to working together to achieve strong outcomes. It is through this focus and dedication that we report a year of strong growth. The highlights from 2021 are as follows: first, we delivered revenues for the full year of $221.8 million; EBITDA of $103 million; NPATA of $69.5 million. So revenue, EBITDA and NPATA are up on the prior year by 3%, 8% and 7%, respectively. So we're proud of our strong profit growth arising from ongoing organic revenue growth and actions taken both last year and this year that have driven greater operational efficiency. Second, we've renewed or extended all top 20 client contracts falling due in 2021, including our largest and second largest clients. We had strong growth in packages of 17,000. Leasing settlements grew by 4%. Our vehicle orders grew by 14%, and continuing delay in the global vehicle supply chain resulted in a fourfold increase in the pipeline of future settlements. This pipeline represents approximately $12 million of additional revenues not yet recognized. Third, our Smart Future program, which we announced in Q2 last year has delivered strong targeted benefits. So improvements to our digital leasing tools has resulted in double-digit growth in leads for new cars from the web calculator as well as an 80% improvement in customer engagement with the tools. We saw a 13-point increase in leasing customers' NPS to the review and improvements to our customer sales journey. This, in turn, has led to a 2 percentage point improvement in lead conversion. So we're very pleased with the progress we've made to date on the Smart Future. So these improvements are building the foundation that will underpin future EBITDA growth. And finally, our capital-light business model means we generate a strong level of free cash flows. After-tax operating cash flows, 113% of NPATA, and we have a net cash position of $3.6 million at year-end. This strong financial position has allowed us to declare a final ordinary fully franked dividend of $0.19 per share and declared a special fully franked dividend of $0.30 per share. This brings the total dividend for the 2021 year to $0.72 per share, all fully franked. Now turning to Page 3, please. We saw improvements in all financial metrics. So revenues, as I said before, rose by 3% to $221.8 million. EBITDA margin at 46% for the year remained strong with an improvement of 2 percentage points. Again, our capital-light business model, our strong balance sheet means we have been able to maintain a dividend payout ratio of 70% NPATA as well as declaring a special dividend. And turning to Page 4. In 2021, we renewed or extended 100% of the key client contracts that fell due. This includes Department of Defence as well as our second largest client in terms of revenues for terms of up to 7 years. In both cases, Smartgroup has remained an exclusive salary packaging provider. Our relationship with our clients are typically long tenured, they're based on trust and service excellence underpinned by long-term contracts. On Page 5 shows our net organic package growth of 17,000, which is a pleasing result. The majority of the growth was generated from the health and not-for-profit segment. In April 2021, we onboarded a new health client with over 8,500 packages. Our packaging customer profile remains largely unchanged with 96% of customers working in charities, aged care, health care, education and government, all attractive sectors for our business. Now on Page 6, you can see that new vehicle orders grew a strong 14% year-on-year. The leads for new vehicles from their digital channel grew by 12%. Unfortunately, due to the continuing tight new car supply market, our settlement volume grew only by 4%. Yields for novated leasing fell by 5% year-on-year, impacted by the insurance partner repricing, which reduced margins in the first half of 2021 versus pcp, novated leasing yield in half 2 2021 compared to pcp was stable. Our new vehicle leases as a proportion of total leases remain relatively steady with prior year at 74% versus a historical pre-COVID level of 78% to 80%. Now on Page 7. This is a line graph of settlements and vehicle orders by quarters, dating back to 2019 pre-COVID. On the left-hand side of the chart, you can see historically a vehicle that is ordered will typically be delivered within or very close in the same month. So there are 3 takeaways from this chart. First, our business is strong with vehicle orders improving as represented by the dotted line. Second, with the continuing tight new car supply market, vehicle orders are at a rate that is higher their vehicle settlements. New car supply shortages have impacted fulfillment, and we have around $12 million of additional revenue in the pipeline. This compares to the prior year of around $2 million. As previously noted, we expect vehicle supply constraints to continue well into 2022 with availability differ in like manufacturers and models. And lastly, vehicle orders in Q3 and Q4 were impacted by the lockdown in our major trading states of New South Wales, Victoria and ACT. With these states out of lockdown, we expect improvements into 2022. Moving to Page 8. We continue to play our part in a broader community. Now our strength of the business comes from a diversity, experience and skills of our team members. Smartgroup was recognized for the third year in a row as an Inclusive Employer by Diversity Council Australia. And we are one of a few select companies recognized as an Employee of Choice for Gender Equality by the Workplace Gender Equality Agency. In 2021 Smartgroup's service performance was again recognized by the Customer Service Institute of Australia, a peak body for service quality. And the work done by the Smartgroup Foundation reinforces our commitment to supporting the not-for-profit sector and the communities that we work with and service. The Foundation supported 22 organizations, and their grassroots projects ranging from supporting children in foster care to educational programs in regional Australia on health issues. Now turning to Page 10. So earlier in 2021, we announced details of our Smart Future program, which is our plan for generating stronger organic growth. So our program is based on 3 strategic pillars: firstly, delivering a great customer experience. Now we have long recognized great service as a key requirement for increased salary packaging participation. Customer experience is a natural extension to complement service. So the delivery of a great customer experience will increase client and customer advocacy. It should also increase referrals as well as enable cross sales; two, now investing in digital. We have been integrating multiple historical acquisitions for the last 2 years. This work is substantially complete with the retirement of multiple brands and systems. With a much smaller system footprint, we commenced our investment to digital last year to build good foundations for the delivery of a more seamless customer experience; lastly, this digital investment, together with a focus on simplifying and streamlining operations to reduce and eliminate complexity will see us build capability to grow revenue from across the broader client base as well as reduce a cost to serve. Our goal is to build a great customer experience enabled by technology, delivered by engaged team members to build out our brands and to build scale within our business. So I'm pleased to report that we have seen early and tangible benefits from the work we have done so far. Satisfaction and loyalty, as measured by Net Promoter Score on every interaction by a customer, has increased by 8 points year-on-year group-wide. With that increased NPS we have seen conversions improve across most sales channels. Novated leases per consultant have improved by 50% against pre-COVID benchmark. And lastly, team engagement is stronger by 7 points. These are early indicators that we're getting good traction on our program, and this gives us confidence for the work that is ahead of us. Turning to Page 11. During 2021, we have substantially completed the foundational work for our technology improvements. This includes implementation of a new digital experience platform, enhancing our API capabilities and the transition to cloud-based software. We move by delivering more digital tools, including continued refresh on customer tools to promote education and awareness. We're also starting work on redesigning our client and customer portals to enable better self-serve and reporting. Our CRM system will be extended group-wide and were designed to better support customer interactions. Now turning to Page 12. Traditionally, we had relied on a non-digital channel to generate a significant proportion of new customer leads. This is represented by the light blue portion in the bars on the left. Historically, the leads from the non-digital channel contributed to almost 1 in 2 leads for our business. And certainly with the pandemic and a cessation of on-site visitations, we increased our focus on digital engagement. We also redesigned and improved the customer journey to support our team members with experienced training. So with that work, the results have been strong, digital leads growing from 30% of total leads in 2019 to presently 44%. Importantly, lead-to-order conversion improved 2 and 4 percentage points from 2020 and 2019 to a strong 29% today. So we're currently working with clients to determine the level, the frequency and the timing of on-site activities. We expect on-site activities to return progressively through 2022 as restrictions ease. Now on Page 13, we relaunched our novated leasing calculator for Smartleasing in March '21. This redevelopment of the digital education tool saw customer engagement, as measured by time on the web calculator, improved 80% to around 8 minutes. Together with a strong increase in calculated traffic, novated leasing leads from this digital tool improved by 60%. We have also recently launched the novated leasing calculator for Autopia, our corporate novated leasing brand, and we will work to optimize this performance over the coming months. Now turning to Page 14. Through our efforts so far, we have redesigned and simplified our customer journeys. We've also taken measures to embed these new journeys with our team members through experienced training and changes to incentive schemes. The sustained results prove that these initiatives have been successful. We are seeing more consistency in engagement with revenue for itself that's improving substantially. Customer NPS and leasing improved from average of 42 to 55 in 2021. The outcomes I've highlighted are some of the early and very tangible wins from the Smart Future program. These outcomes demonstrate that we are on the right path. We're working to embed and entrench our learnings and changes to make our business more customer-centric, more digitized and with more operations streamlined. We have a strong pipeline of priorities within the Smart Future program to develop. Our team is engaged and excited to deliver on this strategy. Now let me hand over to Anthony, who will take you through the financial results in more detail.

Thank you, Tim. Turning to the profit and loss on Page 16, you will see that we've been able to grow revenue despite lockdowns in 2 of our biggest markets during quarter 3, ongoing restrictions to on-site client sales activities and continuing global vehicle supply issues. The increase in our novated lease volumes offset the full year impact of our insurance partner repricing effective 1 July 2020, while our growth in salary packages contributed to an overall increase in group revenue. As referenced in the table on Page 6, the impact of insurance partner repricing on the novated leasing yield is largely seen in the comparison of half 1 2021 versus pcp. Yields have been relatively stable since the repricing became effective. The revenue book excludes the large increase in open vehicle orders as we only record revenue on settlement of novated leases. The growth in open orders versus pre-COVID levels represents a significant pipeline of future revenue for which most costs have already been incurred. As Tim mentioned, our EBITDA margin remains strong at 46%. Other overheads saw a reduction resulting from general cost control and some lower travel and related costs due to the ongoing restrictions to on-site activity while also benefiting from the partial release of a motor dealer counterparty provision we took up in half 1 2020 given the improved overall economic environment in 2021. I also draw your attention to net finance costs where you will see a significant reduction from 2020, which is largely the result of more favorable terms from the debt finance refinanced in mid-2021 and lower average debt levels. Page 17 shows that we continue to generate a high level of operating cash. The increase in CapEx to $5.1 million largely reflects the capitalization of $4.3 million of costs related to the Smart Future program. We also provided a small amount of on-balance sheet fleet funding in half 2. Moving to the balance sheet on Page 18. You will see that our cash position at the end of the year is strong. During 2021, we returned almost $66 million to shareholders in the form of fully franked dividends, including just over $19 million in special dividends at the start of the year. We have a conservative balance sheet and are in a net cash position of $3.6 million, with around $16 million of undrawn loan facilities available at 31st of December 2021. The final ordinary and special dividends declared amount to $65.4 million to be paid in March. With that payment, we forecast our net debt position to be remaining very low at less than 0.5x EBITDA. I'll now hand back to Tim.

Thank you, Anthony. Now turning to Page 20. In summary, we're pleased to be able to report a good set of strong results for the year in the context of continuing business disruptions. During 2021, we have seen successes in client wins, in renewals as well as package growth. Now our novated leasing orders grew strongly for the year and our order pipeline grew significantly. Additional revenues from this yet to be recognized from this pipeline, $12 million at year-end. And we're making good progress on our Smart Future program with demonstrable, quantifiable earnings benefits on improvement in customer experience, our digital platform and simplification of operations. Our business model remains capital light. It generates strong cash flows with net cash from operating -- operations as a percent to NPATA in excess of 100%. Now we end the year with a net cash positive position, enabling us to maintain a strong dividend payout ratio as well as declare another special dividend for our shareholders. And in regards to the outlook, pleasingly, January novated leasing leads are 8% ahead of prior year, and our Smart Future key deliverables are on track. Now at year-end, we can be proud of what we have accomplished. We continue to generate high-quality earnings from a diversified and loyal client base. The progress that we have made over the last 12 months means we're well positioned for when vehicle supply improves, and we look forward to the year ahead. A key reason why we continue to deliver success is, of course, due to a strong level of service that our team members provide. My thanks to all of you for your hard work this year. To our Board of Directors and my executive team members to our clients and customers and, of course, our shareholders' for their ongoing support. Now let me hand you back to Stanford and provide you with a chance to ask questions.

[Operator Instructions] The first question comes from Scott Murdoch from Morgans.

Anthony, just a couple to kick off with, if that's all right. I want to focus on that comment on the January leads up 8%. I guess everything you've gone through there, you pointed the better conversion of 2 percentage points. So is it, I guess, safe for us to assume that, that conversion has continued and therefore, the order take would be up more than the 8%, implying a strong bounce back from that second half sort of COVID lockdown impact to dip?

Thanks, Scott. Look, the work that we've done to improve conversion is I think is well entrenched now within our novated leasing business. So we do expect that conversion to stay where it is and hopefully will improve as well.

Okay. So it is fair that leads are correlating to orders?

Yes. Yes. No, of course. Of course, we have the -- what you have is, Scott, is you have a lag between leads and orders. A lead today, right, certainly may not be, may not convert to an order in the same month, right, it might take a couple of months. But certainly, 8% lead increase, very happy with that.

Okay. Just on the Smart Future program, Tim, I think you've sort of given us some good sort of metrics to look at there and some solid improvements. Just noted that you sort of haven't reaffirmed or certainly haven't put back in the presentation the financial target, which was $15 million to $20 million EBITDA, I think, by the end of FY '24. So just interested in that target, which was a target over and above organic growth at the time set.

No, we're good with that, Scott, yes.

Okay. Very good. That's simple. On the yield outlook, you've sort of, I mean, you've given us enough there really. But I mean, ultimately, is that yield outlook pretty stable? Or actually, do you think there's some improvement that you can garner from here?

Certainly, there's a few different things at play. We've had the elevated levels of refinancing for some time, but conversely, there's some elevated vehicle prices at the moment, which means our hands are a little bit higher in terms of the financing. But longer term, we think where the yields are now is probably where we would expect it to be.

Okay. You've obviously done well on the contract renewals which is great. Just interested if you can talk to the sort of the pricing or margin pressure that might come through from those competitive processes. And also this whole calendar year ahead, your financial year, what large contracts are up for renewal or tender?

Sure, Scott. Look, as you know, when we price a contract, those contracts are typically long tenured. And so with the most recent repricing for the #1, #2 contracts, they signed a 5-year and 7-year, which is pretty long, pretty long in -- compared to an ordinary contract. So we've had to reinvest a little bit of margins into customer or client loyalty anyway, it's not material. It does give us longevity for the next 5 to 7 years on those contracts. In respect to what's coming up in 2022, as you know, with most contracts between around 3 to 5 years, we're always having to renew a couple of contracts every year anyway. So pretty confident, right, that the ones we have this year will be renewed. We've got 2 contracts out of a 10 that is in a tender situation at the moment. It's all been submitted or done. We're just waiting to hear the results from that.

The next question is from Phil Chippindale from Ord Minett.

First question, just on Slide 7, the chart showing the gap between settlements and orders. It does seem to sort of suggest that the second half has seen a slight improvement in that dynamic. Am I interpreting that correctly? And if so, what are your observations as to what's driven that perhaps slight improvement?

I think the -- this is where the lines probably tell a different story. I think what you'll find is that the second half delivery lines, right, were impacted by, I suppose, a bit of a pipeline being delivered from -- sorry, the last quarter, delivery is impacted by deliveries that were scheduled and ordered a little while ago. So in relation to vehicle deliveries, look, it's just [ first fueled ] by manufacturer, by model, by location. I don't think we're confident to say that we can see an improvement so far, but we'll have to see how we go in 2022.

Okay. And in terms of the conversations you're having with OEMs and dealerships and the like, if you can delve into your crystal ball for a minute. I guess what's your expectation in terms of when you do expect supply to improve in a sort of significant or sustainable way? Are we sort of still 12 months away? Is it longer do you think or a little bit more?

Look, Scott -- look, Phil, I've always been hesitant to call out any sort of time frame because, to be honest, depending on who you talk to, and when you talk to them, it differs, right? It differs. And at the moment, what we're doing is making sure that we're talking to customers for them to plan better when they buy a vehicle. Through our process, they still save money when buying a vehicle. And certainly, what our conversations have been very much structured around a car changeover, making sure you plan well ahead to change a car over, and that has led to an improvement in orders, right, and that pipeline. Now when the car supply comes through, those pipeline would [ be filled ], so we're looking forward to that. But certainly, we don't really have a crystal ball on vehicle supply.

Understood. Can we just turn to Smart Future for a second? You started -- you're sort of tracking your target of $15 million to $20 million of EBITDA improvement by end of FY '24. But you have stated here that you are seeing the benefits already. Are you able to give us a sense of what sort of contribution that made to your calendar '21 earnings?

Look, I think there's a couple of things, Phil. We're seeing improvements. If you think about our leasing sales force to have a more effective, converting better with better customer outcomes, that's something, at those levels, it's certainly early, early deliveries and it's certainly higher than what I had expected. I don't really want to quantify it at this stage because we -- because I think there's more to play out in that. Certainly, that target of $15 to $20 million, I'm pretty confident or we're pretty confident that we'll certainly achieve that.

Okay. Great. And then just finally, just on the CapEx, $4.3 million spent on Smart Future in '21. But really, that is a 6-month expenditure. Is that sort of the run rate we should expect for the next 12 months?

So when we announced the Smart Future program, we did call out sort of a 3-year average. The $4.3 million is really dependent on the delivery stage that various projects are at. So we saw a reasonable amount less in the first half than, obviously, we did in the second. We're still pretty comfortable with what we've said. However, if there are opportunities for us to generate even more value over and above that which we have said to the market, we'll look at those opportunities in terms of the overall spend of the program, but we're happy with what we've said to the market thus far.

Next question is from Paul Buys from Credit Suisse.

First one, and you've kind of probably largely answered it, but just a bit more in dips on the yields. In the past, you spoke a bit about that deferred sales model, I guess, and the impact there. I guess the -- can we take the inference from the second half flattening in yields that, that's all kind of in the base now and that's being dealt with smoothly?

What we've seen, I guess, and I think we called it out last time is we expected to see a little bit of a dip in terms of attachment rates and then some improvement. So what we're seeing at the moment, I guess, is a couple of things going on, slightly elevated vehicle values leading to a bit higher finance revenue, slightly lower product revenue from those attachment rates. But we're also seeing good signs that those attachment rates are now doing what we thought and that they would do as our team becomes a bit more accustomed to the new processes, et cetera. So we are quite confident that, that yield level will be reasonably stable going forward.

Got it. A quick one. You mentioned pilot on some balance sheet fleet funding. I kind of feel I might have missed something in the past because I kind of always viewed you guys as pretty reluctant to utilize your balance sheet for any sort of on-fleet funding. Just curious to know your intentions around that pilot and where that could go.

Yes. That's something we're trialing at the moment just with a few clients. And if it's successful, we might look to do a bit more of it, but it's very early days.

And the -- I guess, does it -- do we read into this as a change of heart? Or is it in terms of kind of how you may utilize your balance sheet? Or is it a way to drive new business? Just curious to know how kind of, I guess, why the idea came about.

I think the -- when you look at the funding, we've got there overwhelmingly capital-light, and that's definitely going to be a feature of our model. So we've trialed this particular program just with a few clients. As I mentioned, it's very early days. We're going to learn from it. And if it does make sense, we might do a bit more.

Okay. And then the last one, just again, I think it might have been Scott's question earlier, but a little bit more -- just a question related to that January leads plus 8%. And I don't know if you're going to be kind of willing or able to give this color, but I'm just trying to work out as you went through the COVID impacts in the second half, you called out particularly, I guess, obviously the -- quoted 3 lockdowns. And there was some impact on orders. I'm just trying to understand, get a little bit more color around kind of the quarterly or monthly progression in leads. I'm trying to work out what kind of bounce January represented. Were you into sort of reasonable negative territory towards the back of last year and it's a pretty quick balance? Or was it already improving towards the back end of last year? Just a little bit more color on that, if you can.

Yes. I think, Paul, I don't really want to comment on any 1 month because I think it's sort of irrelevant. But typically, December and January are funny months where people go on holidays. So we would see typically January as just a lower amount, to be honest.

Okay. Understood, Tim. I guess, I mean, but nonetheless, presumably that plus 8% is meaningful. I mean albeit a funny month, meaningful enough to be calling it out separately. So I mean you do see it as a meaningful improvement and a potential future indication for the year will hold.

Look, it's 12 months in a year, right, Paul? 1 month at 8% is good. I like 1 -- I like 10%. Our conversion rates, I told Scott, I'm pretty confident that the process and changes we'll put in place will mean that the improved conversion will hold. Hopefully, we'll give them more work and can improve on that. But there's nothing more to say than that I think. And things change very quickly as well, Paul, and you can see like from Q4, no one really expected New South Wales, Victoria and ACT go into lockdown, so.

Yes. And then last one, just you've spoken really a bit about, I guess, your client book and what may be up for retender. Just anything to call out in terms of -- on the opportunity side of the ledger, be it packaging or novated, any sort of specific things you guys may be looking at in the next 12 months?

We're always looking at stuff. But I think I've been a strong proponent to educate investors that the whole industry is very sticky. The incumbent, typically, will have -- will retain the business if the service levels are good. The relationships are strong and the price is competitive. So we're working on stuff, of course, in a lot of smaller accounts, but I don't see any material changes.

The next question is from Tim Lawson from Macquarie.

Just in terms of, you mentioned the impact of not being able to go on to site, is there any sort of cost impact or revenue impact you think from returning to on-site because obviously it's pulling out the benefit from the sort of digital distribution?

Yes. I think, Tim, that's a good question. Of course, what we have done over the last 24 months is that our field force has been scaled back. So there will be investment that we need to do to get more team members back in the field. But naturally, right, as and when they do, they will generate more interest, more leads and the flow on impact from that will be positive.

Okay. And just two points of clarification. So with that provision release, are there any other sort of COVID, more elevated sort of provisions you think are still remaining?

No. I mean, we took out -- and we called it out in last year as well in the financials. We called out that we took up $1 million provision deal, a counterparty provision. And the environment has changed a lot since then. And hence, we thought it was appropriate to reduce that provision by about 0.7%. There's nothing really meaningful left in terms of provisioning for that.

And then just on the revenue item as well that you've called out. Can you just provide a bit more detail on it? And while it's one-off, does it -- do those sort of one-off revenues ever sort of reoccur?

No, no. That was very much one-off. It was just to do with the one particular finance year and an agreement we reached. But no, I wouldn't be building any more of those one-offs.

The next question is from Scott Hudson from MST.

Just a question on the, I guess, the novated lease volumes, down about 3% on pcp. I mean a settlement -- I guess, the settlement numbers were sort of more in line with the order book. Would you have seen, I guess, organic growth in the car park?

Scott, so you're talking about the vehicles under management, do you mean?

Yes.

Okay. Yes, the result would have been -- so we definitely wouldn't go in backwards to that extent if the orders would have come through. So what we're not seeing is a lot of the new vehicles entering our system effectively. So yes, that reduction is due to the delay in the delivery of new orders.

I guess my question was with those delays, would you have still seen a reduction if it is sort of everything had been, I guess...

No, it would have been flat.

Would be flat. Okay. And can you just remind me of what sort of costs involved that the Smart Future still need to flow through in '22, if any?

Look, I think, Scott, we've called out that we're going to invest at the Smart Future program the -- were called out the sort of investment we want to make over 3 years. And we're going to spend that. And with the early wins, it gives us a lot more confidence to spend a bit more money, right? If it needs -- we need to do it quicker and faster and better. So yes, so that's going to flow through in '22 and '23.

Can you just remind me what the quantum of that spend is over the next year?

Yes. So we announced $5 million to $6 million with around $4 million in CapEx annually.

Okay. And then are there any savings attached to the, I guess, the integration of the -- just the final acquisitions onto the single operating system or the 2 operating system should I say?

Yes. The plan is to end up with 3 salary packaging platforms. We still have a little bit of work to do. Most of it has been transition, including the card transition. So I think they still will be a little bit of cost this year and possibly into next year, right? It's not a big priority for us at the moment. Our priority at the moment is to deliver some of these digital assets in the next 6 to 8 months.

And just last one, a follow-up on Paul's question around just doing some [indiscernible] on balance sheet funding. Is that a response to, I guess, concerns you have with the shifts in ownership of some of the funders that you utilized?

No. It's not that at all. I think where you have opportunity to deliver more services to clients, I should take that opportunity, right? In this case, a client came to us saying, can you do a bit of this? And we said, yes, of course, we can, right? The last thing we want to do is turn that client away to someone else.

The next question is from Scott Murdoch from Morgans.

Tim, just one quick question on clarification. You mentioned that 2 contracts are awaiting tender renewal decision. Can you just clarify sort of what those 2 contracts are in terms of top 3, top 5, sort of top 10 and the results as expected and your confidence level in renewal?

Look, the top 10, I think that we're very confident of renewing as we have done so over the last several years. Our relationship is strong. Service levels are good. Our price is competitive with a really good engagement. Yes, I'm very confident.

Okay. And the time frame, sorry, for us to sort of have [indiscernible]?

Look, you can never put a time on decision-making by clients, but certainly in the first half.

[Operator Instructions] There are no further questions at this time. I'll now hand back to Mr. Looi for closing remarks.

Thank you, Stanford. Thank you, everyone, for spending the last 45 minutes with us. I know the middle reporting season is really busy. Anthony and I will look forward to connecting with each of you over the next week or so. Thank you.

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