Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EQT Holdings Ltd (ASX:EQT, Financial) reported a 26.7% increase in funds under management, reaching $202.8 billion.
- Revenue grew by 23.1% to $274 million, driven by the AET acquisition and new business.
- Net profit after tax increased by 10% on a statutory basis and 13.8% on an underlying basis.
- The company declared a final dividend of $0.53, bringing the full-year dividend to $0.104, reflecting strong earnings.
- EQT Holdings Ltd achieved a total shareholder return of 27.5% for the year, with earnings per share up by 5.3%.
Negative Points
- Expenses grew by 28.3% to $142 million, partly due to restructuring and integration costs.
- Net profit before tax for Corporate and Superannuation Trustee Services declined by 1.4%.
- The company experienced a loss of a fund services client, impacting revenue by $1.3 million.
- The exit from the UK and Ireland markets resulted in a $7.9 million impact on statutory net profit.
- CSTS profit before tax margins fell from 40% in the second half of FY23 to 32% in the second half of FY24.
Q & A Highlights
Q: Are there any cost pressures in the Trustee Wealth Services (TWS) business, and how do they compare to the second half costs?
A: Michael O'Brien, CEO, mentioned that the TWS business has experienced some higher replacement costs as people have left. However, the company currently has the lowest vacancy levels at 1.9%, and turnover has been at 10% over the last 12 months. The business is operating fully resourced, especially with the ongoing AET integration and the build on the Net one platform.
Q: ACS revenue margins were squeezed lower. Should we expect the second half run rate revenue margin to maintain or shift lower?
A: Johanna Platt, CFO, stated that STS margins were squeezed during FY24. In FY25, they expect more maintenance costs as they annualize the effect of various resources added to the business, positioning them to deliver on their margin improvement journey.
Q: What was the incremental revenue for the full year from the new super CTS clients, and what will they contribute in FY25?
A: Michael O'Brien, CEO, explained that new superannuation clients primarily came in at the start of the year, with significant contributions from the Future Group and Guild. For CTS, new schemes were progressively established throughout the year, with typical contributions from minimum fees and additional schemes expected to start in FY25.
Q: Have we seen any margin benefit from tech spending to date, and how should we think about the medium-term margin benefit from all of this tech spend?
A: Michael O'Brien, CEO, noted that they haven't seen much margin benefit from tech spending yet, as the TWS client base hasn't fully transitioned. However, once transitioned, they expect to leverage technology across the TWS client base, improving margins over the long term by scaling the business without adding more resources.
Q: CSTS's profit before tax margins fell from 40% in the second half of 23% to 32% in the second half of '24. Can you talk through these pressures?
A: Johanna Platt, CFO, highlighted that investments in the CSTS business for new operating models and increased resourcing for regulatory oversight have been key cost drivers. There have also been product mix movements, and they are reviewing pricing and segmentation to ensure alignment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
