XPS Pensions Group plc (406.F) Earnings Call Transcript & Summary

Good morning, and welcome to the XPS Pensions Group plc Interim Results Investor Presentation. [Operator Instructions]. Before we begin, I'd like to submit the following poll. And now, I'd now like to hand you over to CEO, Paul Cuff. Good morning to you, sir.

Good morning. Thank you. Good morning, everybody. Thanks very much for joining us this morning. So yes, my name is Paul Cuff. I'm Co-CEO of XPS Pensions Group, and I'm joined by Snehal Shah, who is our CFO. And we're going to canter through a few slides this morning about what we're about to XPS and how we're getting on at the moment. As for the intro, we'd really welcome engagement. We'd love to receive some questions and we'll see them pop up on the platform, and we'll take them at the end of a short presentation that we're going to canter through first. So without further ado, I should click on. In terms of who we are, I guess there are certain characteristics of XPS which we hope make us a really interesting opportunity for investment at this particular time in the cycle that we're in the market, and all the wider turmoil and challenges that many other companies face that we fundamentally think we're fairly immune from. And I want to start with an explanation as to why. In terms of our business case, we are a company that provides core services, that we'll expand on a bit more in a minute, to pension schemes and companies that provide pension schemes to their employees. And these are essential, repeat, recurring services that are needed, come rain or shine. A lot of compliance work that everybody needs to get done, we do year in, year out for our clients. On top of that, we positively benefit from wider market turmoil, regulatory change in the pensions environment is everywhere, and all of our clients need help with navigating their way through when that happens. So interference with government, tax authorities, et cetera, genuinely really, really good for us. And similarly, wider market volatility is extremely good for us. You've probably all read about the significant impact on pension schemes from huge amounts of market volatility over the last few months following the mini budget, the so-called LDI crisis and so on. That is tremendously good for business for us because our clients need a huge amount of support when the world is challenging and volatile around them. We work on indefinite, open-ended engagements for our clients. If we keep them happy, we keep them for a very long time. Lots of our clients we've had for 20-plus years. Our client churn is incredibly low. It's under 1%. We have a very large, diversified client base, more than 600 clients. It's very low client concentration. We're not exposed to the risk of any individual client as such, particularly. We have incredibly high cash conversion, and almost everything that we make in terms of profit turns to cash. We have incredibly low bad debts on revenues of nearly GBP 150 million a year. Our bad debts run in the low GBP 100,000 type levels, and this is in part because we always get paid, because we get paid ultimately from the assets of the pension scheme clients themselves. So even if companies have cash flow challenges, if they need to, they can ask the pension scheme itself to pay our fees. Our fees are inflation linked. We pass inflation on to our clients, and we'll unpack that a little bit more, no doubt. But that, again, is obviously very topical and a very attractive feature of our business model. And underneath all of this, as we'll talk about a bit more this morning, we are winning awards. We are hiring great people, and we're driving really healthy organic growth by taking some market share in what we do as well. So on the right, we listed our business in FY '17, so we've now been on the market for over 5 years. And over that period, I think when we said we listed, we explained some of these attractive features of our business model. We said we would grow in any market backdrop, and boy, has that been tested, tested to the hill by Brexit, tested to the hill by the pandemic, by war in Europe, you name it. But look at what we've achieved over that period. We've achieved solid organic growth in every single year. Some of the significant growth you can see there came from a big acquisition that we made in FY '19, as you can see, but it's that bigger XPS Group that we've now been for the last 4 years. We've achieved very strong growth and very strong profitable growth. And you can see the top line, probably our most important profit measure is our adjusted diluted EPS, which has risen every year and risen very healthily, of course, in the last 6 months that we've just reported on.

Thanks, Paul. So a little bit about who we are. So we -- in different guise is in different ownership structures, we have been in existence for over 40 years. And we provide essential services, everything to do with pensions advisory administration. Whether it'd be to trustees of pension schemes who, by law, are required to take professional advice in running the pension schemes, and we also advise corporates. And amongst the corporates we have likes of BT, John Lewis, et cetera, some very big household names within our client roster. And it is an incredible client roster, which has grown very successfully in the last few years. We employ more than 1,500 people across 18 offices in 16 locations. That strong geographic presence allows us to access talent wherever we are in the U.K. I must say that we are just a U.K.-focused business. We don't have any international presence for -- focus on international pensions market. As Paul said, we've grown incredibly since listing. A 22% CAGR in revenue growth and almost a 10% CAGR in our adjusted diluted EPS, which ultimately determines what we pay out in dividends. We've had the policy of distributing 2/3 of our adjusted profit after tax in dividends since we listed. So our current dividend yield is in excess of 6%. Of course, we have been listed on the main market, and we are the only listed company on the main market in the sector that we operate in. And along the way, we have provided great client service and it is done by a very highly motivated staff, and Paul will talk about some of the key metrics that we focus on in both of those areas. And both of those things have contributed to us winning multiple awards over the last few years. Underneath all of that, we are backed by a very high-quality shareholder register. Some very well-known names within that. Some of them have been with us through the entire journey from listing and some that have joined in the last couple of years, but joined at a sort of a meaningful holding. Aberforth, Premier Managers, and to name a few, who are within our top 10 holders. And we also have a very positive sell-side analyst coverage. When we listed in 2017, 2 analysts covered us, essentially, the house brokers. But that has now expanded to 5, and all of them have us on a very positive rating.

So let's just unpack a little bit more what we do for our clients, put a bit more flesh on the bones. At the heart of what we do, all things workplace pensions. So a lot of our business relates to defined benefit pension schemes in the U.K., and defined benefit pension schemes are, there's a lot of them, and there's a huge amount of assets and liabilities embedded within them. For a typical defined benefit scheme, we answer a few questions. And if I start with the questions on the right-hand side in the orange area there, we answered the question, or actually, it answers the question of whether there's enough money in the defined benefit pension scheme to ultimately pay out all the promises that have been made over the next 50 to 60 years. And planning this, that's what our actuaries do, and they do very complex financial modeling and report back to their client, typically, the pension scheme trustees about how things are going. And if there isn't enough money in the scheme, as often there isn't, what should be done about it in terms of negotiations with employers, underwriting these schemes to put more money in. The second question that we answer on the advisory side of our business is where should the money that the pension scheme has be invested? And that's what our investment consultants do. Doing, again, very complex financial modeling. And bear in mind, the pension schemes are trying to invest money for the next 40, 50, 60 years to pay out people's benefits in full. And we'll answer a simple question, how much in equities, how much in bonds, but also far more complex financial modeling than that too around hedging, hedging longevity risk, other risks that the pension scheme might face, and so on. So all that's done by very high-quality professionals. It's complicated professional exams like CFA qualifications or their qualified actuaries, and we have hundreds of people working in the business across the many hundreds of clients we've got doing that work for them. On the left-hand side, the other sort of half of our business, if you like, is dealing with the actual human being sort of members of these pension schemes. So we do the administration as well, and we have very skilled administration staff who will literally answer the phone to -- remember phoning up to ask any questions they've got, we do all of the record keeping, the calculations. We do all the things like pension schemes patch returns and regulatory filings, and so on and so forth. And ultimately, we track people cradle to grave, a member of pension scheme in their 20s and 30s all the way through to, one day, receiving their pension in their 80s and their 90s and even beyond. We do those services for small schemes and medium-sized schemes, which might be schemes that have a few hundred members, maybe a few hundred millions of assets. We will do everything for them with bundled services. At the very top end, we might typically provide only one service. We might be the actuary or the administrator to some very, very big pension schemes. So we do the administration for Prudential, IBM, Booker, Compass Group. We're actuaries to Pearson, to Schneider Electric and the Invensys Pension Scheme, all multibillion schemes where we provide these high-value services. Now, we do this work for our clients on open-ended engagement letters where the work is repeat and recurring, and we do the same things every year. We generally agree retainers with them, and those retainers are then inflation linked and we just get paid each year, year in, year out. The required fees in order to do things like I say, the repeat recurring work, the accounting work, regulatory filings and so on. When there's the market noise or regulatory change or projects where the pension scheme trustees or company want to do something more proactively, we then get paid like lawyers and accountants, with hours on time sheets. And at the end of the month, we tell our clients how much time cost we incurred on time materials basis, and we then charge them that accordingly. Essentially, 90% plus of what we do is very visible to us at the start of a given year. And then with the additional projects and noise on our clients that get involved in corporate activity and so on, effectively, we can see at the start of the year that we are highly, highly likely to achieve growth versus the revenues that we achieved in the prior year, particularly then with the inflation pass-through. In terms of the market, there are about 5,000, a little more, U.K. defined benefit schemes still. There are between 10 million and 11 million members of these in the private sector only, of which under half have yet -- have retired, and are yet to even draw their pension. The total liabilities' an eye-watering number of GBP 1.5 trillion embedded in this system, and the fees for doing the administration and advisory work that I've just described on this page, across all of our competitors, total around GBP 2 billion per annum. So quite a big market, and a market that is here for a very, very long time as we navigate our way through the very long-term run-off of these defined benefit schemes. I should say just before moving on to the competitive landscape, we do, do a bunch of other stuff, too. We're quite active in the public sector, which is a huge market that we have a very small market sharing, but are actively working on growing into. We do the administration for about half the police forces in the U.K., for example, and their pension schemes. We also have a thriving SIPP business, that's relatively small as a part of the whole group, but absolutely core to what we did as well, and 1 or 2 other things as well. But what we're describing obviously in the short time we've got today is the real big beast in the middle of our business, which is this advisory and administration into the U.K. workplace pensions market.

I can see some questions that are coming in, so that's great. We will get to those questions in a few minutes, if you bear with us, and do keep them coming. So just in terms of the competitive landscape. So this graph, and apologies if you can't quite read the bars, but I'll try and explain what they are. So this is the companies that operate within our sector, so doing exactly what we do. The pink bars are the pension arms of global insurance broking firms, which are Mercer, Towers Watson and AON and they are quite big within the U.K. The market is dominated by them. And then the next tier in blue is the mid-tier, which is where we operate. Ours is the fifth bar along. However, I think if you look at the revenue projections for this year, we are comfortably the fourth in the markets. We are the largest independent pensions advisory and administration firm in the market that is not the sort of the big listed -- sorry, arms of some of the big global multinationals. And then to the right, there is a very long tail of operators, and there is consolidation that has been happening. We are, as I said earlier, we're the only listed company in the market, and that gives us advantage in terms of access to capital and also the client base values that quite a lot. And now the big 3, they have been growing but probably not at the same rate as the mid-tier, that which includes us. And it doesn't take a big drop in the revenues of the big 3 for the mid-tier to benefit, and the mid-tier has been benefiting from a slow bleed of clients across from the big 3, and they move for various reasons. Price is not usually one of them. It is -- within this sector, being quite expensive or reassuring expensive to borrow a retailer's term is actually quite welcome by the trustees of pension schemes. So we don't sort of take the big 3 down in terms of a race to the bottom for price. It is usually the service that makes the difference. And as we have grown, we've been able to attract key talent from some of the big 3, the latest one being a higher out of AON, who has really spearheaded our Risk Transfer business that Paul is going to talk about in a second. But that has given us a significant presence in that market and growing market. So what are the opportunities for mid-tier firms like us? We differentiate ourselves in terms of technology. We have our proprietary Radar platform and a few other solutions that the big 3 just are not nimble enough to have sort of invested in. We have continuously invested in our people, in our service. And the market is actually driven by the need for having independent trustees on the boards of pension schemes. It used to be the case where sort of retired personnel from the company or HR people used to sit on the trustee board. But nowadays, actually, a lot of them have moved on to the independent trustee mode, so you have firms that actually sit on boards of various pension trustees and look across the entire market and then be able to provide them. So accessing and having those relationship with independent trustees is very key in driving the growth in our market.

In terms of our strategy, very briefly, it's quite simple. There are 4 key pillars. The first, as I've described, is that we benefit from regulatory and market change. Masses of this around at the moment. When you read in the papers about something like the Philip Green BHS scandal where BHS obviously left the pension scheme high and dry after lots of dividends were taken out of the company, think of us. The regulatory change that's coming in the pipeline being consulted on at the moment is a fundamental overhaul of the way pension scheme funding works, and it's likely to affect all of our clients in something like about 12 months' time from now. But it's in the pipeline, and we can see it coming. The amount of work across all of our clients who will need to respond individually on a spot basis is huge. So when things like that happen, they're really good for business. I already touched on the massive swings in financial markets we've seen this year. Pension schemes are hugely interested in what long-term interest rates and inflation expectations are. They drive underlying financial risk and reward, and we've had the most volatile year for many. And as a consequence, our investment advisory business, our wider advisory business has been unbelievably busy. Where it's actually left our clients is generally in a much better position than they were in a year ago in terms of their overall financial position, rising long-term interest rates are generally good pension scheme funding levels. But again, it drives a wall of advice because they need to know how to recalibrate their strategies. Clients that usually in benign markets review things in detail on a 3-year cycle are generally all saying we can't wait until another 2, 3 years pass. We need to review again now. So the underpin of demand for our services right now is enormous, and frankly, we're fairly well off our feet. And I suspect that is an industry-wide feature, but obviously, it's particularly good for us. As a public company, it gives us a great deal of confidence in what we're going to be doing for the next 12, 18, 24 months. In terms of expanding services, simple context. If we're actuary but not administrator, we'd like to be both and vice versa, but it's also more than that. It's about developing new service lines as the market evolves around us. It's now touched upon an area called risk transfer, a very topical growing area where pension schemes are interested in accessing solutions in the insurance market. That's an area where we've hired good people, trained good people, and are able to, first of all, do more work on our own clients, but also win work on other people's clients in that area. And we've probably gone from a run rate of GBP 1 million, GBP 1.5 million a year of fees in that area to north of GBP 5 million a year in the space of literally 12 months, with some good hires and some great people joining. And as I say, some internal reallocations and training too. That area of our business, we expect to be very high growth into the future for some considerable time, because there's a lot of demand in the market for those services. So we can grow by expanding services too, taking market share. I've seen in the Q&A a question about our market force initiatives. Thank you for that. This is about just taking other people's clients altogether, and this is where we provide high-quality award-winning services as actuaries and administrators. People want to talk to us if they're not happy with the incumbent and say, I'll describe a little bit that trend of the very biggest firms possibly losing a little bit of market share into the mid-tier, and we've won a number of very big clients like that over recent years. And we don't need to win vast numbers of them to make a nice little difference, because we tend to lose pretty much none in the other direction. And what market force is about, is about now that we are a firm that is seen as very successful, hugely capable in our market, it's about all of our people seeing themselves as people that are part of our future distribution channels into new clients. Building networks and relationships, and we have identified a few hundred direct targets in the market that we don't work with, that are clients at the big 3, and every single one of them is invited to our seminars is man-marked by being invited out for a cup of coffee, a catch-up, et cetera. And we have found in this day and age, post-pandemic that it's really fundamentally quite easy to get older people who will happily take a Teams call. The market is very curious about why it is XPS is winning all these awards and very successful at the moment, and they will talk to us. These are multiple year plays then. You can get to know people, you understand what they want, what they need. Your chances of being on a tender document in 3 years' time, our tender list are massively increased. And when there's opportunities to come, you're far more likely to win them because you have an existing relationship, and winning things cold is fundamentally quite tough. So we're very active about networking and building that relationship. Lastly, M&A. This is a core part of our strategy, too, that we have the access to capital to invest in either small businesses to help us along our way. And we recently bought a business called Penfida that we're delighted with that has really filled in probably almost the only gap in our service capability to pension trustees. And they were a niche monoline provider where we needed more scale and more strength. Brilliant acquisition, and we'll do things like that directly out of our cash flow as we go. The possibility of more consolidation is out there, but at the moment, we're extremely successful in our own right. And we'll show you some of the numbers in a second, if you haven't seen them already. We don't really need to do a lot other than keep going with the strategy of delivering on it. We're under no pressure to do a bigger acquisition because fundamentally, we're producing very, very healthy returns for our shareholders already. And any further M&A, there may be some opportunities out there, that would be very exciting. But they need to be incredibly good because, frankly, we're delivering on everything we need to without doing it. We do focus on people, and we focus on technology. And if I just show you a little bit about where the market position that all leads to is, we are the first firm in the history of the U.K. Pensions Awards to win all 3 of the main awards they give out at their annual event in September, and we are absolutely delighted with this. We won Actuarial Firm of the Year, Admin Firm of the Year and Investment Consulting Firm of the Year. I could say, nobody in 25 years has ever won all 3 of those arguably main awards that people most want to win. So we still have a bit of a spring in our step from getting that a couple of months ago, and what was a great night for us. Kind of black tie event on Park Lane, as you can imagine. In the same week, our SIPP business also won its key award. At the Manufacturing Awards, it was named Best Provider. So we are a high-quality firm that really has that market reputation and branding stage that we've been working very hard to achieve for the last few years. In terms of people, we do an employee survey every year. And we asked -- the first question on that survey is, I think XPS is a good place to work. Do you disagree or agree with that? With the scale of possible responses, and for years, that's been going up. And this year, even last year's 95%, with 98% agreeing through strongly agreeing with that statement, which we're absolutely delighted with, and that underpins everything that we're about. We are a very employee-centric firm. We work incredibly hard, talking to our people openly and honestly about our strategy, working really hard to look after them. We did huge amounts with regard to diversity and inclusion. We do huge amounts about rewarding and celebrating success, and we're delighted. I think it drives the business performance that you then see, and we'll get to our review on that in just a second. But more sustainably -- sorry. More generally, we're a very good company from an ESG and sustainability perspective too, that Snehal will cover.

Yes, thanks. So sustainability or ESG, whatever you want to call it, it's sort of core to our existence. So if you look at our values, doing the right thing is our core value and it underpins our sustainability strategy. So we have a subcommittee of the Board that focuses on sustainability that is led by one of our non-exec directors, and I am the executive sponsor for our sustainability initiatives in the business. So we have a -- being a listed company, our focus on governance is paramount. We have strong business ethics embedded throughout the organization. And in terms of -- we handle sensitive data for lots and lots of people, hundreds of thousands of people, and so protecting that data is also key within our business. And we focus a lot on that in terms of cybersecurity, et cetera. The other key pillar that Paul touched on for us is our focus on employees. We are an employee-centric business, and that is evident in the great -- the scores that we achieve in the employee surveys. And we sort of do that through a multiple of avenues. It's not just about pay and reward. There is a strong focus on inclusion diversity. We have 5 diversity networks which are all employee led, and we sponsor those and provide funding and time for people to run those networks. We have a significant investment in L&D, not just professional qualifications but just supporting people through their own learning and development ambitions, and we have a comprehensive well-being support as well. In terms of other pillars and in terms of our clients, investment practice advises on GBP 113 billion of assets, and we advise them on how to invest that in the most sustainable way. We are the signatories to the FRC Stewardship Code and also the UN Principles of Responsible Investment. And those are quite high bars both in terms of governance and the way that we achieve that, and the most prominent financial firms failed to achieve the Stewardship Code, and we've done that in the last 2 years. We also provide a pension scan protection service, and we have, in the last 12 months, advised 8,000 members on a total of GBP 1.8 billion in transfers on how to make sure that scams are avoided. We also focus on our communities. I'm not going to go through all of that, but we -- we support our local offices to get engaged with local charitable institutions and communities and do what we can. We partner with the business in the community initiative and also the tax for older people. In terms of environment, we're not the biggest of emitters, but we believe in a collective responsibility, and we do our bit. We have focused on reducing our own footprint through making our offices energy efficient. But what we can offset, we offset that through buying high-quality carbon offsets. And we do that for all of our Scope 1, 2 and 3. That's a technical term for not only our emissions, but also the emissions in our supply chain. And we are firmly on our path to developing our net 0 ambition and hope to publish that very soon.

Okay. So we'll wrap up with what this all turns into in terms of financials. We just reported on our first 6 months of our financial year, which started on 1 April, and you can see we're fundamentally doing fine. Our revenue up versus the prior period by 14%. And I must stress that is partly inflation but only partly, as there's quite a lag in the way that we pass inflation on to our clients. Our contracts typically renew and get in place an uplink on the anniversary of when we won them, so lots of our clients this year still haven't been through such an anniversary with that higher inflation and pipeline. It's more the value-add services and the demand for those services that we've invested in that is driving that terrific growth of 14%, and some big new wins coming on stream. It's profitable growth. A couple of different profit measures on the page for you, but our adjusted EBITDA up 15% on the same time a year ago, and our adjusted diluted EPS up 18% on the same time a year ago. We've got very, very strong confidence in our outlook. On that basis, we've increased our interim dividend by 13%, and the market trends for us are all extremely favorable. The amount of advice and support our clients' need that we can see coming for the next 12, 24 months is very significant. Our areas around derisking are particularly topical. There's a lot of regulatory change as I described. And so we haven't even talked about a technical aspect, but pension schemes are needing to do something call adjusting their GMPs. I shan't probably put what all that means, but all of our clients are having to fundamentally reengineer some of their historic benefits that relate to pensions built up 20, 30 years ago, but a vast amount of work in resolving and reconciling all of their GMPs for the future. So I think -- I hope you get the sense that we're pretty bullish about what the world looks like for us. We are probably one of the few companies you're likely to meet that, at the moment, is positively benefiting from the wider economic outlook. And of course, can be quite challenging for the company supporting these pension schemes and for the pension schemes themselves, but we are here to help, and it drives a huge amount of demand through our business. And those core features of our business model about being pretty bulletproof against Brexit, against the pandemic, against other things have really come to the fore. And indeed, we're really seizing the opportunity as the arguably the market-leading firm in our market at the moment, winning all those awards and we're happy staff. We're seizing that opportunity as it's been presented to us now.

So that's our presentation. I can see a couple of Q&As. We'd be really grateful for as many as you'd like to submit, of course, so let me just have a little look. I saw one about our acquisitions and also one about our investment in tech. Perhaps I'll quickly take our investment in tech first. Investment in tech for us is really important. We've got fantastic technology in our actuarial investment business, and we have something called Radar, which is a platform that we're -- we can load our client schemes onto and use them very dynamically to tell clients basically everything that's going on in their schemes real time in a language that they can understand, and it drives terrific insight. It's not a unique platform. Others have -- competitors have similar. But interestingly, none of the big 3 firms have invested in amazing tech in this way. And again, it speaks a little bit to agility that we're able to create really market-leading solutions in our market around tech. And some of the bigger firms sometimes just tech no, they do things in slightly more traditional ways and could potentially be a little slower to move. The big 3 firms doing many things really, really well. I'm not here to put the boot into them, if you like, but there are certain advantages to being very, very focused and very agile in your market. But I think we and 1 or 2 other mid-tier firms can sometimes take advantage of. In terms of future investment in technology and administration, in particular, we're investing at the moment in new platforms to provide members with fantastic administration in terms of what they can see online, but also the behind-the-scenes technology that we use for all of the record keeping, databases and calculations and so on. And it's a core part of our journey again because as XPS where we've come together over the years a little bit through acquisitions, we have a number of different platforms that we're consolidating. And a key feature of these platforms are generally third-party provided, and we pay license fees to use external software. By this time next year, we will have developed a new platform. We made a little acquisition a few months ago, and we're developing that acquisition into our own proprietary offering that we will own outright. In time, all of our pension scheme admin clients, we would expect to go on that platform, and that will save us millions of ongoing costs in the fullness of time. CapEx on that, you'll see in the figures for this year, but it's a pretty modest outgo relative to the long-term benefits that we will then eventually get. And that IT project is very nicely running on track, and indeed, even a little bit ahead of schedule. In terms of a couple of other questions, Snehal, you might want to take the one about the - I think -- in of our people that we've done acquisitions on? I'll take the one that just popped up after that about market conditions.

Yes, that's fine. Before I do, [ Alexander ], did you want to sort of just sort of explain how to raise questions? I don't know people are -- it's quite straightforward, but if there's anything else you wanted to say?

No, not at all. So you can submit questions on the right-hand side. And as you're doing perfectly well, phones are on, you can read them out, and then that would be great.

Okay, sure. So in terms of the acquisitions that we've had, so obviously the most recent one, Penfida, that completed in September, but it is embedding in very nicely. One of the key criteria that we look at is sort of the ease of integration right away from culture through to people, through to technology, cross-sell opportunities, et cetera, and that is all evaluated in the due diligence process before we complete. So because it's a tried and tested method that we've employed across 6 acquisitions now, it is a well-trodden path, and we are on the way to integrate that very, very well. And the key management are sort of highly incentivized. We -- every single acquisition that we've done most recently has an earn-out which is based off metrics, whether it be high retention, revenue or profit performance further down the line, which protects us and the shareholders in terms of the multiple that we pay. Michael J Field, which was an acquisition that we did February '22, that was in the SIPP business. It's a business based out in Manchester. That has integrated really well, and I have monthly calls with the management team on how that is progressing. And in fact, I have one this afternoon, and that has progressed very well. You could see within, underlying SIPP sales have also increased through that period, which is a great thing.

So another question about market conditions and how positive do you feel about the business over the short term given the general market conditions? Thank you very much for that question, [ Ryan ] We couldn't really be much more positive. I know life is quite hard out there in society in general, there are clearly all sorts of structural problems. But fundamentally for us, the more that there are challenges and problems out there, generally, that just does drive further demand for consulting services. Actually, the position for pension schemes has been quite misreported a little bit in the financial press. We had the crisis in September, October around LDI, a pension scheme asset class, something that pension schemes invest in. It's a liquidity crisis in the short term. The underlying position is not a solvency crisis. Generally, pension schemes' financial positions have significantly improved. But as I say, it gives rise to all sorts of consulting opportunities for us because those schemes want to lock in those gains. We want to make sure that they're very well protected into the future. And in general, where there were some LDI challenges, they were after fund managers offering LDI funds. All of our clients invested in them want to make sure they're invested in the right ones going forward. And again, therefore, need a huge amount of support and help and guidance about where to invest. In terms of opportunities elsewhere, public sector opportunities are really, really significant for us. We did public sector administrations I touched on in the presentation. There are big opportunities there for some huge defined benefit schemes that members of the workforce in the public sector have access to, and there's a real opportunity for growth into that market. In the private sector, there's an opportunity for growth into what I call first-time outsourcings. So many of the big FTSE 100 employees of the '80s and '90s still run their own pension schemes internally. They might have a team of 20 or 30 people who do all of the administration. But these days, that's getting harder and harder and harder for cyber security, for upgrading in IT, GDPR, whatever you want to name. And of course, the people running these pension schemes internally are frequently retiring, having done so for the last 20, 30 years. And it isn't the most attractive career to go and take that on in-house, as some big employee that regards this just as an ultimate legacy that's in very, very long-term runoff. So our business model there is to take people in asset kind of BP or outsourcing. We did that for IBM last year, which we transferred their people over to XPS. We have a brilliant client in the other direction in IBM straightaway, but we go out and use it as a platform to go and win more similar clients in those local areas, and so on and so forth. So the opportunities for us around regulatory change, our market volatility are huge in advisory, in administration and public sector in first-time outsourcings are very big. And lastly, with regard to our SIPP business where there's been another related question on that, that's growing really nicely because it's a very high-quality business. And we've just been added to the very short panel of one of the very biggest firms of wealth managers as to their recommended SIPPs, which we've not been on before. And that SIPP firm has about 3,500 tied independent financial advisers out there that can only recommend SIPPs that have been through their thorough dividend process and are on that panel, and we are 1 of 3. So the SIPP business, again, has its own opportunities to grow really quite significantly as we expect to see that come through in the fullness of time, and none of that is in the figures that we've just reported on. So I mean, I've got to just say we feel incredibly bullish. Very -- I don't know if fortunate is the right word, but very pleased with historic career choices of what industry we work in. And probably one of the few CEOs you'll come across who thinks the next year looks like the best that we've ever had, and the years beyond that look very promising for us, too. The underpinning demand for our services is very, very healthy indeed. I'm going to ask one final question, Snehal, before you talk a little bit more on to the other set. Somebody asked a question about how much has inflation contributed to the growth that we've just seen? I think a rough rule of thumb is that probably about half of the 14% growth comes from inflation pass-through to our clients. As I mentioned, there is a lag. For example, one of our biggest clients in advisory is a client that we won many years ago in January of that year, and we review the contract in January every year. And so January in the year just gone inflation, 3-month trailing out which was 3%, 4% at that time. We, therefore, put through a very modest increase and have worked on those lower rates all year. If inflation stays where it is, mechanistically, that contract will likely go up by double digits in January 2023. So you can see not all of our contracts have had that inflation benefit. The other 7% of growth, which is almost entirely organic, there's a tiny bit in there for one of our acquisitions. But that's come from actually the confidence in pushing through above inflation charge-out rate increases in some parts of the business where the quality of what we do is very high, particularly, say, in risk transfer. But most fundamentally, it's come from high demand for those value-add services we've been investing in and looking after our clients incredibly well. I should say there's pretty much nothing in there for all the spiking work in investment advisory for the LDI crisis. We were unbelievably busy in October and still in November, but again, this reporting period doesn't actually capture that. But it's been a very, very healthy start to the second half of the financial year as a consequence.

Okay. We had a pre-submitted question, which was how many schemes have transferred into the DC -- sorry, how many new employees have signed up to the DC Master Trust? So this is the National Pension Trust which has, I think, in excess of 170 employers. And since April, so in this financial year, 5 new employers have signed up to that. On average, in a year, we get over 100 million of contributions going into that. And clearly, the market volatility that is -- everyone has endured in the last sort of 6 months or so has impacted the value of the assets under management, and that's why you see the assets under management holding steady at about GBP 1.3 billion. Paul, do you want to take the one about -- I think we had one about the abrdn Master Trust pre-submitted as well.

Yes, certainly. How is the relationship with abrdn developing? To brief in the background, we have a strategic partnership with abrdn on what's called a Defined Benefit Master Trust. And what a Master Trust is, it's effectively an umbrella vehicle that smaller pension schemes could become part of, where they will then receive economies of scale and access to services that sometimes only the very bigger schemes can get. And somebody moving into this Master Trust, we would then become the administrator. We do all the actuarial work and the investment advisory work. abrdn underneath that would manage all of the money. It's an exciting partnership for us because obviously, they're a big institution with a wide reach and wide potential distribution. If abrdn are able to get clients in, they have an incentive to do that to get more assets under management. And for us, that would mean more client wins going forward when they're successful. We likewise will market it, and some of our smaller schemes might benefit from getting access to our services in that way that might cost them a little bit less. It would probably still be very good margin work for us if they went to the Master Trust, but it might be a more efficient or attractive way for them to receive our services. It's a slowly, slowly play. We're watching to see if the market develops and Master Trust become a widely adopted solution. At the moment, they're not. Our ongoing costs of that partnership are effectively approaching 0, but it's a very valuable partnership. Should demand for Master Trust grow into the future? We're both then ready and waiting to seize that market opportunity. So a very positive relationship, but slowly, slowly in terms of the contribution that we'll make. Our smaller clients at the moment are continuing to receive services from us in the way they already have, and we're completely happy with that team. It will be interesting to see how that develops. It's there as much as anything as a play should the market evolve around us, but the sport's being consolidation, we would be absolutely ready to exploit that if that happened.

So we just had another question submitted. So how profitable is the SIPP side of the business? So it is a profitable business on its own right. It has a similar inflation linkage that we described on the advisory parts, and the underlying SIPP sales have been growing as well. We are 1 of the 3 approved SIPP providers into the -- sorry. I should say, the -- our distribution channel is through IFAs, so it's sort of a B2B offering rather than a B2C offering. And we've just been approved as 1 of the 3 on the [ St. James panel ] where we have access to, I think, in excess of 3,000 IFAs. So the future is definitely very promising for the SIPP business, but even outside of that, it is a profitable business. It is due to generate about GBP 9 million of revenues in sort of the consensus forecast for this full financial year. That's including the acquisition of Michael J Field. But yes, it definitely has scale and is profitable. I'll just give it a few minutes if there's any other questions coming in. I think we've answered all of the ones that were pre-submitted and submitted now.

I can't see any further ones coming in unless people are tapping away, in which case we'd say a very big thank you for your interest this morning. We hope you found it informative. As we say, we feel like we're at a stock for the times, if you like, with highly visible repeat recurring revenue, inflation linkage, some very healthy growth in terms of market share and services we're developing, winning awards and with very, very happy people and a very, very sustainable business model. And we hope that's an attractive thought for a potential investment. I can see we haven't had any further questions. So, it's probably a good time for us to wrap up and wish you all a good day, and ultimately, a happy Christmas beyond.

Thanks very much.

Paul and Snehal, thank you very much for updating investors today. Can I please ask investors not to close the session, as you will now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few minutes to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of XPS Pensions Group plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.