Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong growth in underlying net profit after tax (UNPAT), up 13.6%, driven by a net reduction in operating costs of $24 million.
- Successful completion of several key strategic initiatives, including the largest single wrap migration in the Australian platform industry.
- Improved cost to income ratio from 75% to under 73%, with plans to further reduce costs.
- Positive net flows in workplace segments, indicating sustained organic growth.
- Strong performance in MySuper default options, with three options achieving top 10 performance over one year in the SuperRating SR50 MySuper survey.
Negative Points
- Net profit after tax (NPAT) adversely affected by transformation costs and provisions related to remediation of legacy issues.
- No final dividend paid this year, which may disappoint shareholders.
- Decline in asset management revenue by 6.1% due to divestments and reduced private equity investment fees.
- Cautious outlook on medium-term trajectory of advice flows due to expected one-off losses and historic divestments.
- Significant statutory losses of $185.3 million, driven by remediation expenses and transformation costs.
Q & A Highlights
Q: Can you provide clarity on the below-the-line items for FY25 and expectations for FY26?
A: Based on our current plan, we expect minimal below-the-line items in FY26. We anticipate that remediation provisions will be the final ones, making it a reasonable assumption that there will be little to no below-the-line items in FY26. (David Chalmers, CFO)
Q: Regarding the expected $60-65 million net decline in costs for FY25, how much of this relates to Rhombus and disposed businesses?
A: Approximately 60% of the cost reduction is related to advice, including the deconsolidation of Rhombus and cost savings in the retained business. Around 30% pertains to platforms, with the remainder in asset management. (David Chalmers, CFO)
Q: Is the dividend pause a one-off decision, or could it extend into next year?
A: It's too early to say definitively. The pause is to manage leverage and ensure flexibility for future opportunities. We will provide more details on our capital management strategy later in the year. (David Chalmers, CFO)
Q: Are you confident that platform outflows have stabilized post-MLC Wrap migration?
A: We remain cautious due to expected one-off losses, such as the termination of a small super fund admin agreement. However, we are seeing positive underlying flows, which is encouraging. (Scott Hartley, CEO)
Q: Can you explain the rationale behind the dividend cut despite having sufficient operating cash flow and undrawn debt facilities?
A: The decision is driven by a prudent approach to manage leverage and maintain flexibility for future opportunities. Timing of spend and benefits realization also influenced this decision. (David Chalmers, CFO)
Q: What is the current status of your platform and product numbers?
A: We have consolidated MLC Wrap into Expand, reducing the number of platforms. Further consolidation opportunities exist within Master Trust. (David Chalmers, CFO)
Q: What is your approach to owning versus renting technology for platforms?
A: We are comfortable with our proprietary Wrap technology but are exploring options for Master Trust, including potential external solutions. (Scott Hartley, CEO)
Q: Can you clarify the definition and treatment of one-off items in UNPAT?
A: We use a $10 million threshold for UNPAT adjustments. The cumulative impact of divestments was only $2.2 million in UNPAT, justifying our treatment. Future project spend treatment will be determined based on ongoing work. (David Chalmers, CFO)
Q: What are the drivers behind the margin decline guidance for platforms and asset management in FY25?
A: The decline is primarily due to mix shift changes. We expect this trend to continue into FY26 and beyond. (David Chalmers, CFO)
Q: Were there any restrictions on redemptions during the MLC Wrap migration?
A: There was a short blackout period during migration, but redemptions post-migration were minimal, indicating stabilization. (Scott Hartley, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
