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Edited Transcript of HUB.AX earnings conference call or presentation 27-Aug-19 1:00am GMT

Full Year 2019 Hub24 Ltd Earnings Presentation

Sep 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Hub24 Ltd earnings conference call or presentation Tuesday, August 27, 2019 at 1:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew Alcock

HUB24 Limited - MD & Director

* Mark Goodrick

HUB24 Limited - CFO & Joint Company Secretary

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Conference Call Participants

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* Aaron Yeoh

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Liam Cummins

Wilsons Advisory and Stockbroking Limited, Research Division - Research Analyst

* Matthew Johnston

Macquarie Research - Analyst

* Nicholas McGarrigle

Ord Minnett Limited, Research Division - Head of Institutional Research & Small-Caps Industrial Analyst

* Scott Lyndon Hudson

MST Marquee - Senior Research Analyst

* Simon Fitzgerald

Evans & Partners Pty. Ltd., Research Division - Senior Research Analyst

* Siraj Ahmed

Citigroup Inc, Research Division - Associate

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Presentation

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Operator [1]

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Thank you for standing by, and welcome to the HUB24 Limited 2019 Full Year Results Conference Call. (Operator Instructions)

I would now like to turn the conference over to Mr. Andrew Alcock. Please go ahead.

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Andrew Alcock, HUB24 Limited - MD & Director [2]

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Good morning, and welcome, everyone. We're very pleased to advise you this morning of our results and update the market on our plans for the future moving ahead. As an opening comment, financial year '19 was a pivotal year for our industry and our company grew substantially during that period, and we're very excited about the prospects for HUB24 moving forward as the future of wealth management in this country is taking shape.

Over to the key messages slide. Today, I'll be talking as will Mark Goodrick, our CFO, just some key messages for our presentation and thematics for the year. FY '19, we've had continued strong growth in platform net flows and funds under administration. Our strategic focus as our business is delivering results. We have a leading market position. Our sales are growing, and we're continuing to receive industry recognition. As a result, we've had continued strong growth in underlying profit. And I think that this marketplace represents an increasing and unprecedented opportunity for HUB24, as I said earlier. As the industry takes shape moving forward, we have a market-leading position, and there is unprecedented opportunity for us to continue our growth.

Consequently, we'll be continuing to invest in innovation and growth, and I'll touch on that later on in the presentation. And you may have noticed from our market releases that as a result of our strong progress now, our continuing investment in the market conditions, we've upgraded our previous guidance for FUA -- or our target FUA for the end of financial year '21 now to be in a range of $22 million to $26 billion. That's a $3 billion upgrade on the same period when we announced last year.

Moving over to our group financial highlights. You'll notice that we've had a strong growth in all the underlying fundamental issues for the business. Our platform revenue is up 36% to over $54 million. Platform underlying EBITDA is up 52% to $18 million. We've had an underlying EBITDA margin in the platform business increased up from 30% last year to 33% this year. And if you look at the half -- the second half of financial year '19, it's 35.1%. So the business is delivering expanding underlying platform EBITDA margins. And our overall underlying NPAT of $6.8 million, also up on last year by 26%.

We're very pleased to be able to announce the dividend declaration of $0.026 per share for the second half. That takes our full year dividend for HUB24 to $0.0406 per share, which is up 31% on last year.

And we're very pleased as we announced earlier in our quarterly $12.9 million of FUA for FY '19 is where we landed. Today, we're about $13.6 billion of FUA. We've had strong growth already in FY '20 at $30.6 billion with largely neutral market impact as at last Friday. It's been a good result for the business and has given us confidence to keep investing in and talk to you today about our future plans.

Moving on to the next slide in terms of business highlights for the year. Our net flows for the year were $3.9 billion. That's a 61% improvement on last year. And interestingly, it's a great result in a marketplace where most of our peers are either flat or negative in PCP comparisons for flows FY '18 to FY '19. So a 61% increase in flows in what was an interesting shifting market compounded by issues with the Royal Commission and other factors. HUB24 continue to grow in that environment quite spectacularly. That resulted us in being second place for annual net flows, up from third place previously, and that is above all traditional institutional platforms in the marketplace.

Our industry position, we've maintained our position as #1 in Managed Accounts for the third year running. And that's certainly a very strong focus of our business, and you'll hear more about our future investments in that area. Our innovation this year has also continued. It's been another year of innovation with us having recently launched multicurrency now available in our managed portfolios, and we believe this is the market-leading implementation of foreign currency inside managed portfolios. We've leveraged our investment in ConnectHUB to launch a couple of features as well. We've now got new, which is available by the platform and some historical performance reporting coming through ConnectHUB, which integrates data from multiple providers. And also this year, we launched the availability to have our model -- our managed portfolios operated under MIS schemes. And we've launched 69 of those portfolios in the 12 months today.

Our growth has been spectacular as I said. And in fact, in FY '19, we had an investment in hiring senior relationship people in our business to help us build momentum and build a pipeline. And that's been successful in securing some new opportunities during the year across the broker segment, self-license segment, across new advice models such as advice aggregators and across mid-tier licensees. And apart from those opportunities we've already secured, we have a very, very strong pipeline for future growth moving forward.

If we look at the next slide and take a look at our 5-year consistent performance in terms of revenue and FUA. We've got a 76% 5-year compound annual growth rate on platform revenue, and our FUA is growing 72% CAGR as well over that 5-year period.

For the first time here, we've highlighted our success in Managed Accounts by breaking out that chart to show you the portion of Managed Accounts for FUA inside managed portfolios in HUB24. And at 30 June 2019, that represented $5.6 billion of the $12.9 million on platform, about 44% of our funds under administration. And during FY '19, that represented growth of over $2 billion into HUB24, a fantastic result when you compare that to the marketplace in general, again, underpinning our belief that we are the Managed Account leader in Australia.

We have delivered constant shareholder returns and performance and superior client outcomes through that 5-year period. And our investments in Agility, Paragem and ConnectHUB are all adding value, driving relationship growth in our business and adding strategic capability to HUB24 moving forward.

On Slide 9, taking a deeper look at our market share growth. The chart on the left-hand side indicates the growth in the market terms, specialist platforms, of which HUB24 is one.

So on the left-hand side of that chart, you've got the growth of specialist platforms indicating the net flow share to underlying market share ratio, i.e., that's how many times you're growing faster than your current market share. And HUB24 has the leading position for that in the Australian marketplace. And this data is as at 31 March 2019, from strategic insights. You'll see that institutional platforms on the right-hand side of that chart have decreased market share. In fact, our market share in FY '19 has grown from 0.9% to 1.3%, which is a relatively modest figure. However, having the position of having the second highest flows in dollar terms, there's an extensive runway and opportunity for us to continue to grow market share, plenty of opportunity ahead for HUB24. In fact, you can see on the right-hand side of that slide that our ranking in dollar terms on an annual basis for net flows has gone from fifth place in March 2017, up to second place as at March 2019. And also on a quarterly basis, a similar trend. We are the fastest-growing platform provider of the finished terms relative to our size, and we're very proud to be sharing these results with you this morning.

And finally, before I hand over to Mark Goodrick to run through some of our financial results, the last slide I want to talk out in this section of the presentation is again about the awards and the recognition we received in the industry. On that slide, you can see we're rated #1 across a few awards, namely Managed Accounts, Decision Support Tools, Portfolio Management tools. In fact, in the Investment Trends Planner Technology report, we're rated in the top 3 in 32 out of 33 categories.

And on the bottom half of the slide, we have continued to build customer advocacy, we have the highest Net Promoter score from primary platform users again from that Investment Trends report. And Wealth Insights rates us #1 for platform offering and another category there being IT and web functionality. But once again, we're in the top 2 places in 6 out of 9 categories in that particular survey. So HUB24 is continuing to move forward and continuing to be rated and recognized in the industry as a market leader.

I'll now hand over to you, Mark, to talk about our financial results.

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [3]

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Thanks, Andrew, and good morning, everyone. On Slide 12, we present the group financial results. The group results for the year to 30 June 2019, show an increase in revenue of 15% to $96.3 million in comparison to the prior year. The majority of this increase has come from our largest segment being our platform business, which was up 36%, and we will talk about in more detail in a moment.

Revenue from our licensee, Paragem, was slightly down on last year due to some large practices moving to self-licensing. This is offset by a reduction in direct costs. However, the future growth pipeline for Paragem is strong.

Our IT Services segment, Agility, had a greater focus on HUB24 strategic initiatives during the year, like ConnectHUB in order to deliver value to the group. This saw a reduction in external revenue generation. After direct costs, group gross profit has increased 33% to $45.4 million, increasing our gross profit margin from 41% to 47%. During the year, we invested in our capability in order to capture opportunities and build foundations for the future, and this has resulted in operating expenses increasing to $30.7 million. I'll speak about this in more detail on the next slide. The result of this is a group underlying EBITDA of $14.8 million, up 30% from the prior year. This is being driven by the platform segment. Underlying NPAT of $6.8 million has resulted in the announced dividend of $0.026 per share in line with the Board's previously disclosed target of 40% to 60% of annual underlying NPAT.

Moving now to Slide 13, you'll see a breakdown of our operating expenses growth across the year. As reported after 31 December, we had a material step-up in the first half to invest in people and support our growth ambitions. This saw headcount increases in distribution, finance, operations and risk and compliance. This investment has been leveraged over a growing FUA base in the second half with the growth rate slowing materially.

Turning now to Slide 14, you will see the platform segment results on a stand-alone basis. Funds under administration grew from $8.3 billion in the prior year to $12.9 billion at 30 June 2019, with record annual net inflows of $3.9 billion. At the close of last week on the 23rd of August, funds under administration stood at $13.6 billion. Platform segment revenue increased 36% to $54.1 million. We'll talk more about revenue margin on the next slide.

Gross profit for the platform segment was $40.4 million, up 42%. You will again see the investments supporting future growth in the total platform expenses balance of $22.4 million. The result of this is an underlying platform EBITDA of $18 million, up 52% on the prior year. The EBITDA margin has increased from 30% last year to 33.3% this year with the second half of 2019 EBITDA margin at 35.1%.

On Slide 15, you will see a waterfall of the platform average monthly FUA revenue margin from last year to this year. We've shown the margin calculated both on a spot opening and closing FUA basis as well as an average monthly FUA basis. The average monthly FUA basis is more reflective of the actual revenue generation achieved because it adjusts for material FUA movements that occurred during the period. For example, large transitions or periods of market movement, both of which occurred this year.

The revenue margin in the 2019 financial year has been affected by a number of factors. Because administration fees are tiered, the fee as a percentage of FUA decreases as average account balances increased. However, the revenue per account is increasing. This year, our average account balance across the platform was up 11%.

Administration fees are also impacted by scale-based pricing for large FUA wins as these opportunities are competitively priced. The other fees shown on the chart include transaction and cash administration fees. These are impacted by market cycles and have also seen the impact of our target focus on assisted in-specie transitions. These transitions have been fantastic from a FUA growth perspective, but have a lower initial revenue profile as cash is not being deposited on the platform and then transacted into assets. The result of these factors have seen revenue margin calculated on an average monthly FUA basis decreased from 58 basis points last year to 53 basis points this year or 57 basis points to 51 basis points calculated on a spot opening and closing FUA basis.

Turning to Slide 16, you will see the consistent and strong growth trends of platform revenue, gross profit and underlying EBITDA over the last few years. This unbroken trend has been maintained now since 2013.

On Slide 17, you will see the peak performance resulting in increased EBITDA margin over time as the benefits of scale are achieved. You will see that the investment made in the first half of this year has been leveraged in the second half with EBITDA margin for the second half expanding to 35%. It is this consistent performance of the platform segment that allowed the Board to declare a second half dividend of $0.026 per share, taking the full year dividend to $0.046 per share, which is up 31% on the dividend relating to the 2018 period.

With that, I'll hand back to Andrew for HUB24 strategy and outlook.

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Andrew Alcock, HUB24 Limited - MD & Director [4]

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Thank you, Mark. We're very pleased to comment on the expense growth that happened in the first half last year. We did promise to the market that we would leverage that overgrowing FUA base and to have managed costs very well in the second half in line with that investment. That gives us very good confidence the way running the business. But also, as I said earlier, that investment has yielded results today in our growing pipeline, hence, our confidence in investing further moving ahead.

If I move on to the first slide in the strategic outlook section, the market is continuing to shift. I think that most people on the call are aware that the shift to specialist platforms is increasing, and that's -- we've talked about that earlier in some of the other statistics as well.

On the right-hand side of that slide, though, what's even more interesting is that the number of advisers in the contestable market for HUB24 is increasing both in percentage terms and in actual number, given some of the changes that are happening in the advice market. Previously, over the last few years, we've seen advisers gradually moving away from institutional alignment. The trend has been happening in the last 6 months as we've seen some institutions determined they'd like to exit the advice business and closed down or redirect advisers into different models. And as such, that's opening up an opportunity for HUB24 to grow our contestable market where advisers that are analyzed institutions and moving to our business models where the HUB24 platform is available. Those advisers, once again, are growing in percentage terms of the market and also in number.

This industry shifts, and I'm moving to the next slide providing increasing opportunity for HUB24. And there's some industry factors here I'd like to talk through and how HUB24 is well positioned for these particular trends. The first one we had there is demand for Managed Account solutions is continuing to grow. As I said earlier, we have $5.6 billion in Managed Accounts, and it was $2 billion of our growth for FY '19. We are the market leader, and we intend to continue building market share by leveraging that position and further investing in Managed Accounts.

The nonaligned advice segment, as I said earlier, is also continuing to grow. The new licensee agreements that we've secured during FY '19 provide us access to approximately 1,400 new advisers that we've not had access to previously, and that's in licensees where we actually have signed an agreement for the platform that we made available to those advisers. So there's 1,400 advisers that we are starting to contact, that we're working through and in some cases, already gaining flows so far in FY '20. And that success in sales is a result of our investments that we mentioned earlier in the first half as well as the strong team we have already.

In addition to that, our pipeline is continuing to expand. We have a long pipeline of other opportunities yet to contract. So as that underlying segment grows, contestable market is opening up HUB24 and representing a strong opportunity for which we are already positioned well.

FUA on platforms is transitioning around the marketplace. Typically, it's transitioning away from traditional platforms as advisers separate out from institutions, and of course, as grandfathering commissions is phased out. We're in a good position to take advantage of that trend. And in fact, we've also built some bulk migration capabilities, which we leveraged in the first half of this year with the large one-off transition that we undertook. So we have the capability to move money in bulk and large scale and to do it without impacting our organic business flows moving forward.

There's an increasing focus from advisers and consumers on product choice and business efficiency and being able to bring the best-in-class products together in a single platform or a single-user interface with integration services.

HUB24 delivers productivity and efficiency for advisers. We do that with our platform. We do that with our Managed Accounts. And ConnectHUB again is also helping us to win business and position HUB24 as the open architecture platform of the future, which also integrates multiple products and data providers into one interface, giving advisers and clients that access to best-in-class solutions rather than having a closed ecosystem platform.

And institutions are reshaping and exiting financial advice, as I mentioned. That's also driving growth in our Paragem business where we've been successful in attracting advisers that were previously aligned with institutions and incumbent platforms, and those advisers are focused on positioning their business for the future.

As a result of these market conditions and our strong position, we expect to leverage our foundations for even future growth in FY '20. So we expect continuing FUA growth from the existing relationships and opportunities that we've won, conversion of our current pipeline, and we expect to do that by leveraging our market-leading capability of our managed portfolios ConnectHUB and our Core and Choice platform offers.

As I mentioned earlier, we've already had strong inflows for FY '20 to date with our FUA currently being at $13.6 billion, with market impacts for FY '20 roughly being negligible as at last Friday when that $13.6 billion figure was hit. We also expect to continue constant innovation, innovation that delivers results. And we in market, with a marketing campaign to support further growth in the next few days as well, outlining our innovation and how that supports advisers. So we will innovate and will build services and products that support the transformation of advice. We will, of course, be continuing to invest in enhance customer satisfaction, platform and efficiency, simplicity and service. Interestingly, we have some great plans to enhance portfolio reporting, providing research and portfolio comparison tools for advisers and clients on the platform and the continued development of ConnectHUB and Agility solutions and the rollout of those to financial advisers, brokers and their clients. And finally, we expect to continue to grow and develop Paragem where, right now, we are onboarding a pipeline of new advisers and hopefully seeing further growth as the market continues to shift.

Finally, moving to the Slide 22. We will capture that opportunity by continuing to invest in the future. There is an unprecedented opportunity in wealth management for us as a leading platform business to continue to grow. And in fact, once again, the opportunity is greater than we thought 12 months ago, hence, our confidence in investing in the business further. So we will grow our distribution footprint. We're going to leverage our success from FY '19. It's the right time and opportunity to put more salespeople and relationship people on the ground to build relationships with advisers that can help support advisers grow their business with innovation that delivers and services and products that helps them with their growth and in turn, delivers growth for HUB24.

We will also extend our leadership in the managed portfolio space and invest in that further. There is far more we can do to unlock value and challenge the current investment paradigms for managed portfolios. We're already the leader with nested portfolios, the ability to have manager preference and client preferences deviate from a standard portfolio and create mass customization, which can generate great outcomes and value for consumers. It's a smarter model, and we intend to keep delivering in that space. With the launch of foreign currency, there's more we're going to do. We're going to create new portfolio capabilities, attract new investment managers and unlock further value for clients and improve accessibility to international markets, once again, with our managed portfolio capability. Hence, we're going to invest in an additional IT scrum team to do that as well.

And we will accelerate growth in the market share. We expect these initiatives will deliver a step-change in our targeted FUA by increasing our inflows. As I said at the start of the presentation, we've upgraded our guidance for 30 June FY '21 or 30 June '21 to now be a FUA range of $22 million to $26 billion. Having said 12 months ago for that same period, we expected a range of $19 million to $23 million. We'll deliver that through supported -- we'll do that through product innovation and expanding our distribution footprint. We expect flows from that investment to commence in the second half of FY '20 with a full run rate of flows to be experienced from FY '21 and beyond.

So that concludes the presentation, the formal part of the presentation this morning. We'll hand back to our facilitator for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Aaron Yeoh with Goldman Sachs.

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Aaron Yeoh, Goldman Sachs Group Inc., Research Division - Equity Analyst [2]

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A couple of questions for me this morning. Just with regards to the 8 new staff that you're hiring within distribution. Can you give us a bit more color around, I guess, where -- I guess, by geography and I guess, level of, I guess, seniority that where -- a bit more sort of detail around that, please?

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Andrew Alcock, HUB24 Limited - MD & Director [3]

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Sure. Effectively, the lower level staff to harvest the opportunity, we've already been successful in securing with our senior investment last year. So it's business development managers and business development assistants around the country -- spread around the country. So it's field force in the field working with advisers to convert opportunity as opposed to senior executives or strategic salespeople.

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Aaron Yeoh, Goldman Sachs Group Inc., Research Division - Equity Analyst [4]

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And with regards to the work that they'll be doing, is that more, I guess, farming opportunities within sort of your existing client base or APLs that you've recently got on to? Or is it more around sort of helping to sort of win new clients?

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Andrew Alcock, HUB24 Limited - MD & Director [5]

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It's a little bit of both. Our philosophy with business development managers is they do have a panel of advisers to work with and to farm opportunities and help show those advisers how HUB24 can help them in their business for their clients. They do have some capacity to also look for new advice relationships as well. So it's a little bit of both. But certainly, as I said earlier, there's 1,400 advisers that we have access to now that we didn't have a year ago, and so we're looking at ramping up our staff. It is a relationship business. It is an industry where advisers value relationship, education, training and onboarding is important for us, and so that's where the investment is going.

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Aaron Yeoh, Goldman Sachs Group Inc., Research Division - Equity Analyst [6]

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Right. And then, I guess, just with the timing of those hires, have they already been hired? Or are they in the process of getting hired?

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Andrew Alcock, HUB24 Limited - MD & Director [7]

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We are starting that process.

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Aaron Yeoh, Goldman Sachs Group Inc., Research Division - Equity Analyst [8]

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Right. So in terms of the cost profile, is that going to be more second half '20?

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Andrew Alcock, HUB24 Limited - MD & Director [9]

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I would expect that we'll probably finalize hire in November, December. We're just going to market at the moment. We've got some conversations underway that haven't started that hiring process or recruited as yet. So you'd see the cost emerging second half.

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Aaron Yeoh, Goldman Sachs Group Inc., Research Division - Equity Analyst [10]

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Okay. Great. And then just with regard to the strong start to the year. Were there any large transitions within that number? And I guess could you call out if there are any sort of specific clients, which might have attributed to that?

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Andrew Alcock, HUB24 Limited - MD & Director [11]

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Look, we don't talk generally about our clients, that's their business as much as also. We don't talk about particular clients and flows generally. It's been spread across existing clients and new clients. There is some flows from new clients there. There's quite a good mix. We do obviously receive the bulk of our flows every year from existing clients, which gives you an annual growth profile as well as new clients. There's no specific one-off transfers in that, it's all organic flows for the first 2 months of the year-to-date.

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Aaron Yeoh, Goldman Sachs Group Inc., Research Division - Equity Analyst [12]

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Okay. Great. And just back on the -- sorry, the additional hires in distribution. Are you noticing any of your competitors step up efforts within sort of the distribution teams as well? Or do you think you are going over and above what your competitors are doing at the moment because you think that you're well placed and the opportunities really starting to pick up?

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Andrew Alcock, HUB24 Limited - MD & Director [13]

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Look, it's a difficult question to answer. Some of our competitors have 3 to 5x the number of salespeople we have and yet they're in outflow. So drawing those comparisons are really difficult. Look, we absolutely are committed to investing in growth. There are others who are also investing in [AR] as I understand from the market, and they've commented on that. I thought we're going -- we're doing what's right for our business. If we absolutely see an opportunity we look at, and we do that very diligently. We look at the workload and the panel and the opportunity size for our business development staff in terms of looking after advisers, and we get that number right. So the opportunity has led us to make the investment.

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Aaron Yeoh, Goldman Sachs Group Inc., Research Division - Equity Analyst [14]

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Great. And I guess can you comment on, I guess, the broader sort of competitive environment, particularly relating to price at the moment. One of your sort of other listed specialty platform peers have commented on potentially a new pricing initiative in the market. I mean I'm just wondering if you have any thoughts on that as well.

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Andrew Alcock, HUB24 Limited - MD & Director [15]

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I'm not aware or wishing to comment on somebody else's pricing initiatives today. This is about our results for FY '19. Generally, the market has had some interesting changes during the last 12 months, but HUB24 has always been competitively priced, and we've seen the market move towards pricing that's similar or closer to where we were already placed. So look, I think, generally, it's coming down a little bit. We've seen 3 or 4 of the institutions reprice their products. We're not experiencing much pressure at all in terms of pricing. We think we were well placed. Apart from that, there's no further comment until we see what others is doing. But we think we're very well positioned. Our growth would suggest that our pricing is on the mark. So I'm not aware of the details of others. And as I said, today, it's about HUB24's results.

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Aaron Yeoh, Goldman Sachs Group Inc., Research Division - Equity Analyst [16]

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Okay. Great. And then just sorry, one last one, just on the new updated FY '21 volume sort of targets. Can you just, I guess, give us a high-level comment around how you derive that number and I guess what's really the change there? And how should we think about the -- I guess, the ramp-up for the sort of growth profile to get there?

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Andrew Alcock, HUB24 Limited - MD & Director [17]

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Look, we certainly do model it as we did last year. We modeled in a number of ways. If you look at the opportunity ahead of us, we look at it at a macro level from trends in the marketplace and historical trends in terms of our growth. We look at it from a bottom-up perspective in terms of the opportunity we have, the relationships in the pipeline, and we map that out with quite a lot of detail. And we look at it from a top-down perspective with the relationships we have at senior levels with organizations as well. So we have 3 different ways of modeling. Look, I think it will emerge over time. And you'll see it grow in line, you'll see it come through with our quarterly and half yearly announcements. That's the best way I can give you information on the profile of that.

Aspirationally, as a business, though, we'd like to achieve far more than that. We've put the statement out because we believe the opportunity is there. We are being successful, and we think that we needed to update the market on where we see ourselves landing. But we won't be sitting back at all, we'll be certainly seeing how we can maximize or extend that if at all possible.

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Operator [18]

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Your next question comes from Siraj Ahmed with Citigroup.

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Siraj Ahmed, Citigroup Inc, Research Division - Associate [19]

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Andrew, just on the full update and a strong start to the year. You did say it's market -- the market impact has been neutral. So that sort of implies $700 million net flows. I mean that's created in the whole of first quarter last year, just trying to understand. So looking forward, how should we think about net flows? You did have a large transition in the second half. Do you expect net flows to be still up year-on-year in spite of that?

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Andrew Alcock, HUB24 Limited - MD & Director [20]

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Look, absolutely, we'd expect our net flows to be up year-on-year. That's how we run our business. Time will tell, but we've got confidence in that at this stage. Look, generally, you would be able to work out throughout the market movement as at last Friday is largely neutral across investor markets. And so your arithmetic is probably correct. As at last Friday, those numbers are intact. It's been organic plus it's been a good start, and that's with 3 or 3 and a bit weeks of August. So there's a bit more to go in August as well. So I think time will tell, but it's been a good result to date. We obviously are always in discussion with opportunities to transition FUA, not always as large as the special ones last year, but we certainly have a couple of large discussions underway. That would even be larger than that amount, but they're not contracted at this point in time. But we certainly do smaller chunks of transition quite regularly, as Mark mentioned earlier in his chat. Part of the way we've ensured our growth is up PCP compared to PCP has been helping advisers transition FUA. So we'd expect that to be part of our organic process moving forward.

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Siraj Ahmed, Citigroup Inc, Research Division - Associate [21]

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And I guess just on that, I mean there's been I think last second half '19, you did say drivers were disrupted, et cetera. So are you starting to see that activity levels increase? It seems like advice activity is increasing now once things have settled down. Just confirming that's what you're seeing as well.

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Andrew Alcock, HUB24 Limited - MD & Director [22]

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Look, I think -- and I've been in the press talking about that. That was post the election, things started to change. I think generally, the market is starting to take shape. We've got certainty on the regulations being put through government that are in line with the Royal Commission. We've seen a lot of strategic change in the market across the institutional players. And things are starting to settle down. There's still great change in the wind, but things are starting to settle down and I think we're seeing activities return to more normal levels, if I can use that word, than perhaps the market distraction last year. As I said, however, we still continue to grow during that period. But I think things are settling down. That's my observation. But I'm one of many participating in the industry -- or HUB is one of many participating.

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Siraj Ahmed, Citigroup Inc, Research Division - Associate [23]

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Sure. Just moving on to the cost investment. If you just look at -- maybe this one small, Mark. Just looking at overall platform cost growth rate, so it is around 30% in FY '19. Do we anticipate the same level of growth next year? Is it 30%? Is it higher or is it lower? Just trying to -- if you could just give us a flavor of that.

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [24]

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Okay. So obviously, we haven't given explicit guidance to the cost growth, but maybe talking to a few of the things that happened during the year as well as the outlook statement we've given for next year. So as we discussed in February, there was a significant investment in the business in the first half of this year and that was a bit of a step change in terms of the organic growth that you would expect those operating expenses to grow at. And then we've seen in the second half that, that growth has moderated. So in the absence of the strategic initiatives that we had at the end of the presentation, that gives you an underlying element of cost growth within the platform business. Now the additional staff that we highlighted in order to really capture the opportunity that's currently available would be in addition to that organic underlying cost growth.

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Siraj Ahmed, Citigroup Inc, Research Division - Associate [25]

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And just -- I mean, if you could just split that out, what the organic cost growth is, Mark, I mean, the second half? And you only hired 7 people in the second half, I think, versus 25 in the first half. So just trying to understand what would the organic growth number be, if you could just cover those.

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [26]

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So I can't give you guidance, obviously, Siraj. And if you look back over the history, you'll see that there is a trend you can follow, but it hasn't been a perfectly straight line. There are periods where we're growing more quickly and we need to hire in order to facilitate that growth. But it does give you a trend you can follow.

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Andrew Alcock, HUB24 Limited - MD & Director [27]

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We're absolutely committed to managing costs as best as we can. At the same time, in a growing market with the position that we have, we're absolutely also committed to not leaving -- not missing out on value for shareholders. So it's a dynamic that changes all the time and we get the balance right, I hope, and we'll continue to focus that way.

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Siraj Ahmed, Citigroup Inc, Research Division - Associate [28]

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Got it. And just the CapEx for next year. Do we -- I mean is that meant to be the same as this year or lower or higher?

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [29]

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So again, we haven't given specific guidance as to the CapEx for next year. But you can take from the fact that we're hiring an additional scrum team that there will be additional CapEx associated with the work that, that scrum team will do. So that's one indication without giving you specific guidance as to exactly what the CapEx would be next year.

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Siraj Ahmed, Citigroup Inc, Research Division - Associate [30]

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Yes. Got it. But the $6.3 million this year was for ConnectHUB and thanks for that. So does that still continue, I guess, is what I was trying to think.

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [31]

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Yes. Look, so ConnectHUB is the biggest item in that balance this year. And so that project is ongoing and we'll continue to build that functionality of ConnectHUB. So that will be one element of the CapEx item next year. There's also our continued development of our managed portfolio capability and continuing to make sure that we are leaders in that space. So there will be -- there we build out in terms of that capability. So for example, this year, we built the multi-currency functionality that's included in the CapEx number that you'll see for this year's results. Next year, there will be additional functionality that we build out for managed portfolios as well.

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Operator [32]

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Your next question comes from Nick McGarrigle with Ord Minnett.

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Nicholas McGarrigle, Ord Minnett Limited, Research Division - Head of Institutional Research & Small-Caps Industrial Analyst [33]

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A lot of the questions have been asked. It's been very comprehensive. [Was just wondering] around the FUA guidance, it's been obviously upgraded. Can you just draw a map in broad strokes how you get from where you are today at sort of $13.6 billion and what the next $10 billion of flow looks like in terms of cost declines, potential larger transitions or if you feel like we've got significant sort of latent opportunity in the existing adviser base, just to give us a bit of background on how that additional $10 billion is going to kind of come up.

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Andrew Alcock, HUB24 Limited - MD & Director [34]

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Sure. Nick, the -- if you looked at the flow pattern in the previous statement we had, we're fairly comfortable that normal business operations even excluding large transitions should get us in that range, particularly with that investment in the additional salespeople. So what we've done is look at where we are. We've looked at a run rate, we've projected that forward. We've also then looked at, okay, if -- what's the normal productivity of salespeople at an individual level and what's the group productivity of a team of salespeople and looked at what we believe we can deliver with that larger investment and modeled that out. So that's the most basic way to look at that. Sure, that number will be helped in theory with large transitions and it could be exceeded if there are large transitions, but it's been purely based on pipeline, current opportunity, the productivity of an individual salesperson and in theory what the improvement in our run rate could be with investing in further people on the ground to help advisers.

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Nicholas McGarrigle, Ord Minnett Limited, Research Division - Head of Institutional Research & Small-Caps Industrial Analyst [35]

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Just the implication from what you achieved in FY '19 if you exclude Fitzpatricks. So we're sort of behind that. So is it fair to say that you sort of see the rate of flow in the first 7 weeks of the year is something you think is sustainable business, sort of one-offs in that $700 million-odd flow that's happened in the beginning of FY '20?

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [36]

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There's no real one-offs at all. I think we'd like to think it's sustainable. In fact, we'd like to think we can exceed that. But that's based on how we see the market at the moment. Hard to tell if that's the new normal for HUB24. But absolutely, we -- it was an interesting year last year. There was quite a bit noise and distraction. As I said, things are starting to settle down. So maybe we'll see after the first quarter how things are shaping up and beyond. But at this point in time, we've got no indications suggest, that isn't possible. And there isn't a run rate that we can continue to build on.

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Nicholas McGarrigle, Ord Minnett Limited, Research Division - Head of Institutional Research & Small-Caps Industrial Analyst [37]

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The monthly FUA margin that you provided was useful. It's obviously we don't get the monthly dollar, that's compressed sort of 5 basis points over the year. Can you break down potentially what the impact of larger low fee transitions might be in that so -- to give us a sense of what's a sustainable compression year-on-year and what's potentially just a transitory transaction from having those increased rev flows.

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [38]

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Yes. So we haven't explicitly broken it out. But you can see on the chart, in terms of that movement from 58 to 53 and 2 basis points is attributed to administration fees. And so that's where you'll see the impact of scaled back pricing as well as pricing -- the pricing environment in the market. 3 of the basis points are attributed to other fees and those other fees include brokerage and cash administration fees which do have more of a cyclical element to them depending on what's happening in the market. So the area that you'll see that larger pricing coming through is the 2 basis points in the administration fee section.

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Nicholas McGarrigle, Ord Minnett Limited, Research Division - Head of Institutional Research & Small-Caps Industrial Analyst [39]

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Right. So you sort of hope that some of those other fees are retained or were there fees that you removed from the model year-on-year? And then, sorry, so that's one question. And the other question, just, I guess, seeing that 2 basis point reduction, we've got I guess a bit more of that coming through from the scale-based pricing next year?

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [40]

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So the impact of the scale-based pricing does get moderated as we grow. So obviously, we've got some clients who are large and they have been of a sufficient size to be competitively priced. As we grow organically, the impact of that starts to be averaged out across the whole book. And so using the Fitzpatricks example, we said at the time that, that deal was announced that it was competitively priced. But as that grows, the impact of that starts to be spread across a larger FUA base.

In terms of looking at fee structures from one year to the next, the market's aware that we did change some of our pricing structures during the year and that allows our customers to really design a pricing structure that works for them and their clients. So there is some element of that repricing in the movement across the year, albeit it's broadly neutral but moving from one category to another.

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Nicholas McGarrigle, Ord Minnett Limited, Research Division - Head of Institutional Research & Small-Caps Industrial Analyst [41]

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Right. And then how do you think we should consider given you know what the front book is? We struggle from the outside to know what that is. What does that look like on that trajectory to $23 million to $26 billion? Do you expect the margin you achieved, say, in the second half of 50 bps to be a sustainable outcome? Or do you think that there's more compression given the sensitivity of clients may have to price? Or that's actually given in larger-scale deals?

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Andrew Alcock, HUB24 Limited - MD & Director [42]

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It's really hard to comment on it, Nick, depending on the mix of new business we get, the size of that business and what the market does since we think things are settling down. I think some of our impact this year have been cyclical in terms of transaction fees being forgone. It's equity market cycles, so it's really hard to comment on that. We're not needing to or experiencing pricing pressure that would suggest that there's ongoing price issues. It's more about the mix of clients. It's average balances as well. So for example, our average balance for clients has gone up 11% year-on-year. That's got 43% over the last 3 years. So that, indeed, actually also creates a percentage difference, although you do get more dollars or cash per account, while costs are decreasing. So there's a range of factors based on mix of client size and the business. We've got a broader footprint in terms of being able to offer choice products and more compact products which should pick up lower balances, which in some cases have higher percentages. It's a business mix issue that's hard to comment on at this point in time.

So we'd like to obviously earn the best margins possible and we'll continue working that way. So our innovation does drive increased margins to the business with the take-up of managed portfolios and some of the features that can actually supplement that moving forward. But it's a compound of -- it's a mix of a number of factors and really hard to comment on.

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Operator [43]

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Your next question comes from Liam Cummins with Wilsons.

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Liam Cummins, Wilsons Advisory and Stockbroking Limited, Research Division - Research Analyst [44]

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Most of my questions have been asked, but just to maybe clarify one point, I might have missed this earlier. Andrew, did you give a mention for what existing clients sort of represent within your inflows annually? How many have -- what percentage of FUA comes from existing clients I suppose is what I'm trying to ask?

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Andrew Alcock, HUB24 Limited - MD & Director [45]

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No. We haven't mentioned a statistic on that. We're aware that others have but we haven't mapped that or mentioned that so -- and it does vary year-on-year. But generally, we'd expect a consistent pattern with the marketing that we will be getting a larger portion of our FUA is coming from existing clients and that we've seen that to date in the Platform's growth, which means as you add new advisers, you start getting compounding growth because you've got ongoing growth as well. And that's been our pattern from day 1.

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Liam Cummins, Wilsons Advisory and Stockbroking Limited, Research Division - Research Analyst [46]

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So presumably, that trend doesn't really sort of deviate in its trajectory based on this new updated full guidance?

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Andrew Alcock, HUB24 Limited - MD & Director [47]

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Look, it may if we are successful in getting access to new advisers with the pipeline. It may shift a little bit, but I don't think -- it may shift in percentage terms, I don't think in dollar terms. I think you'll have the same growth level in dollar terms from existing clients. The mix may change, we're going out and hunting in new spaces.

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Liam Cummins, Wilsons Advisory and Stockbroking Limited, Research Division - Research Analyst [48]

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Okay. And then we've spoken about the increase in the cost base around distribution and IT. Are you happy with the -- your staffing across the business elsewhere?

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Andrew Alcock, HUB24 Limited - MD & Director [49]

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I think you see just normal incremental staff changes. I think our fixed costs, our senior cost base in terms of investment in senior people in the business is fairly stable. We did that over the last couple of years with the new CFO, Heads of Risk, change of guard at Paragem and so forth. So I think we're well placed with executive and senior management talent. It's more the variable cost of business growth, i.e., could be customer service and so forth. That normally has some scale efficiency being built into it, but it's incremental.

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Liam Cummins, Wilsons Advisory and Stockbroking Limited, Research Division - Research Analyst [50]

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Okay. No, maybe one last one. Presumably, just sort of following on to Siraj questions around CapEx. There'll be no sort of shift in the stance on how you capitalize those going into FY '20 and beyond?

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [51]

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No, no change in terms of that capitalization policy planned by the Board. That's policy that's been consistently applied by HUB24. And we do all of that CapEx work in-house. And so no change in that policy.

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Operator [52]

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Your next question comes from Scott Hudson with MST.

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Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [53]

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Just a quick follow-up on Platform revenue margins. Mark, at 3 basis point compression, other fees, is that primarily as a result of those in-specie transitions?

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [54]

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There's a large amount of that, yes, and that's because result of those in-specie transitions, the FUA is coming across to the platform in-specie. There's the organic growth in FUA on the platform would be cash being deposited onto the platform, that cash sitting there for a period of time as the adviser gets position-fit for their clients. So you're generating some additional revenue on the cash flow that's sitting on the platform as well as the transactional revenue of those positions being set, all of which you don't have with in-specie transition. So whilst it's been fantastic in terms of flows and has allowed us to continue growing at a very rapid rate, it had an impact on that initial revenue profile.

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Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [55]

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Outside of that, has there been any material change to the level of cash held on the platform?

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [56]

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So we don't publish a number in terms of the cash on the platform. It does fluctuate and it fluctuates with market activity. But there's been no material change in terms of cash on platform, it stayed within what we have seen historically. Over the year, there's been quite a lot of varying amounts of activity within the market. So there's been some periods that have been reasonably quiet in terms of transactional activity, particularly between Easter and the federal election and then there's been periods where there has been a substantial amount of additional activity and cash balances also fluctuate a lot in -- along with that.

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Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [57]

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Okay. In terms of the, I guess, the employment -- investment in employment costs through the course of FY '20, I take it, it's going to be significantly lower than the, I guess, sort of $3 million annualized run rate we've seen through FY '19?

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [58]

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Well, as Andrew said earlier, we will staffed now in terms of the senior positions that we need to have in place, there would be a level of organic growth that is necessary to service additional amount of [FUA] and additional advisers using our platform and that would be in line with a normal level of organic growth that you would see when you look back over our history. But we also have now announced intention to grow the sales team and our IT scrum team, which would be outside of that organic growth.

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Andrew Alcock, HUB24 Limited - MD & Director [59]

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And that intention, as we said, is to get a step change in flows in the business from the run rates we've experienced to date.

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Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [60]

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So what does the IT scrum team cost you on an annualized basis?

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [61]

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So we haven't published a number. Now obviously, it will depend exactly who we hire and when we hire them. So we have given the number of people that we intend to employ in those 2 teams. But we haven't published a number because it will be affected by the speed of which we're able to recruit them.

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Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [62]

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Okay. Andrew, in terms of...

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [63]

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As I said earlier, expectations are (inaudible) will perform in the second half.

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Andrew Alcock, HUB24 Limited - MD & Director [64]

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The scrum team typically involves senior developers, business analysts and testing resources that are generally cheaper than developers. So there's a mix of skills in the scrum team.

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Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [65]

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Yes. And in terms of the, Andrew, in terms of the, I guess, the broader market institutions opening up APLs. Are you seeing, I guess, accelerated the results of that?

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Andrew Alcock, HUB24 Limited - MD & Director [66]

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We're certainly seeing the contestable market growing and institutions -- if you can call institutions shutting down advice practices opening APLs by default, I suppose so. We are receiving flows from some institutions. And -- but I think there's more to go in terms of those institutions working out what their overall strategy is. Certainly, there's an imperative for advisers to have a range of options to meet best interest and Hub benefiting from that in some institutions. But in terms of having a preferred platform status and so forth, that's not the case at this stage. But certainly, there's activity and there are conversations underway.

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Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [67]

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That's very helpful. And then, lastly, I noticed recently an article that ASX taking look at managed accounts. In terms of your managed accounts book, how much should be white labeled versus, I guess, nonwhite labeled managed accounts.

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Andrew Alcock, HUB24 Limited - MD & Director [68]

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We don't actually have the concept of white-labeled managed accounts. We have, because of the white label platform and I mentioned as it's an investment option that we have managed accounts that, in some cases, are manufactured and available for all clients on the platform and others that are available to certain licensees where they've got a properly constituted investment committee and process and supervision to do that. So as for the mix, I don't have it at hand, but we do have a spectrum.

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Operator [69]

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Your next question comes from Matt Johnston with Macquarie.

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Matthew Johnston, Macquarie Research - Analyst [70]

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Just first question around FUA. Just trying to understand market movement implications for upgraded guidance and what sort of -- is the house view on what you sort of be -- you see is consistent market movements?

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Andrew Alcock, HUB24 Limited - MD & Director [71]

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Look, typically, we look at market movement being generally on the average over time roundabout in the order of 5% per annum is how we generally budget. So there might be some of those assumptions implicit in those calculations, but it is a range. So that's generally where we're at in terms of the market being consistent, no major corrections and so forth is generally the wording -- the scenario we're trying to capture with putting that footnote in there, Matt. .

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Matthew Johnston, Macquarie Research - Analyst [72]

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Okay, great. And then just quickly moving on to, I guess, you did note -- point out some strategy and some pipeline of license fee. Just trying to understand corporate costs and then license fee in IT as IT services are a negative earnings drag on the company. Just trying to get a picture of how you see that moving forward.

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Andrew Alcock, HUB24 Limited - MD & Director [73]

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Look, our license fee does fluctuate. There is growth going on in the license fee. There's been some client departures to go get their own license, and there's roughly 11 firms that are either have joined or in the process of joining Paragem. But largely, we expect the license fee to remain neutral in terms of EBITDA in the short term. It's more a strategic benefit to the group. It's a commitment of support to the advice industry. It allows us to innovate. Hopefully, we benefit from advisers in Paragem looking at HUB24 as meeting their client needs. But so in terms of financial contribution, much of the same for the licensee.

In terms of the Agility business, as Mark said, it's been not distracted, but focused on internal development for the group. We've also got a slide in the back part of the pack about what's been going on in Agility under additional information. We've been productizing some of the services. We are building some new products. We're lessening our reliance in that business on consulting revenue and more recurring product revenue. I would expect to see the Agility performance tick up coming forward in FY '20, although the current situation has been impacted by Agility focusing on strategic initiatives. So again, I think it's not meaningful in the context of the platform being the economic engine of the business. So I expect those businesses to be neutral or slightly positive moving forward in the short term at least.

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [74]

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Maybe just taking the last side off in terms of the corporate segment. So you will have seen that the costs in the corporate segment have stabilized in the second half. So there's been a run rate impact of the people that were brought on. So as we said earlier, there's significant hires in terms of that corporate segment, the head office people that are required to service the full business, all the segments as well as the company are now in place and there's been that investment made in terms of risk, compliance, legal finance, et cetera. So the growth in that segment will slow down in comparison to what you've seen this year.

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Andrew Alcock, HUB24 Limited - MD & Director [75]

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Matt, I should just reiterate that those businesses are supporting our broader strategy. We've got some interesting stuff happening in Agility with machine learning and analytics. And certainly, those businesses or Agility is opening doors for HUB24 in the broking space helped us in being successful in securing relationships that it's intended to generate flow onto the platform. So they're strategic adjacency businesses that build capability and relationship that are important to us in the broader sense. But as I said, economically, they're not meaningful in the context of the Platform business.

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Matthew Johnston, Macquarie Research - Analyst [76]

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I understand. I was just trying to try to get my earnings accurate. Just -- and finally from me on interest rates. Do you have a house view on interest rates? And then would there be any accounts that currently are under 25 bps gross cash interest.

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Andrew Alcock, HUB24 Limited - MD & Director [77]

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To have a house view on interest rates, well, I think the market has got a view on interest rates. From our perspective, we're very comfortable that if there is an interest rate kind of 25 basis points, it won't affect HUB24's earnings. So we're very comfortable that we're confident in that regard. And we're confident there was a further rate cut that then impacted the immaterial given the majority of our clients are earning approximately 50 basis points. So from that perspective, we're comfortable in the short -- in the current cycle. Beyond that, we'll comment as and when the market changes as other participants would. It's a broader context from which to consider.

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Matthew Johnston, Macquarie Research - Analyst [78]

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Okay. And then just finally from me on that subject, just for your clients, I know that one of your peers does that with the combination of direct and indirect fees. If the cash balance declines, do you have a mechanism to force-sell investments to recover costs -- to replenish the cash balance for your accounts?

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Andrew Alcock, HUB24 Limited - MD & Director [79]

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We have a lot of features in the cash transaction account, which is quite different to other cash investment options on the platform. It's based on how advisers set that out. There is a minimum cash balance there in order to pay platform fees and there is the possibility for that to be topped up automatically as set by an adviser or advisers can get alerts if that occurs and they can deal with that manually. So it depends on how the adviser and the client implement that. There's a range of possibilities and options there that's set at adviser level to facilitate that.

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Operator [80]

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(Operator Instructions) Your next question comes from Simon Fitzgerald with Evans & Partners.

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Simon Fitzgerald, Evans & Partners Pty. Ltd., Research Division - Senior Research Analyst [81]

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I know that you've alluded to a little bit of this in regards to the flows by pointing out the $700 million, which is one-off. But I was just hoping you might be able to break that down in terms of $3.9 billion exactly how much is related to new contract wins and versus how much is related to the existing adviser base in terms of those inflows.

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Andrew Alcock, HUB24 Limited - MD & Director [82]

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Look, it's not something we publish and haven't talked about and I don't have the data in front of us at this point in time. Generally, the bulk of our flows is going to be -- we have a stable base of flows that increases year-on-year from existing relationships and we benefit from having new relationships in addition to that. So generally, the business does benefit from long-term relationships the way advisers use platform, you get recurring flows every year and that's been the case in our history. And then new accounts are added during the year. So without having data or numbers to give to you, it's a similar pattern to other platforms who are growing in the market.

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Simon Fitzgerald, Evans & Partners Pty. Ltd., Research Division - Senior Research Analyst [83]

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Okay. All right. just a final question, too, on Page 19 you talked about, there's an interesting chart showing the market share for your adviser base. Just wondering to know what that's based on? Is that based on in terms of FUA number of members or revenue. Can you sort of talk to that graph a bit more?

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Andrew Alcock, HUB24 Limited - MD & Director [84]

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So at Page 19, that's just the number of advisers on the right-hand side. So it's the market share of advisers in institutions versus others or the advisers that are aligned to institutions and the advisers who are not aligned to institutions being the others. So it's just a specific on the percentage of advisers in the Australian market unrelated to membership or FUA.

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Operator [85]

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Your next question is a follow-up question from Siraj Ahmed with Citigroup.

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Siraj Ahmed, Citigroup Inc, Research Division - Associate [86]

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Just on the revenue margin, I know, just coming back to that. And Mark, just -- so there were a few one-off transition impacts. So would it be fair, I mean, where you stand right now, the decline should be less than 5 basis points next year?

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Mark Goodrick, HUB24 Limited - CFO & Joint Company Secretary [87]

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I can't give you guidance on that, Siraj.

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Siraj Ahmed, Citigroup Inc, Research Division - Associate [88]

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Yes. Okay. And just...

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Andrew Alcock, HUB24 Limited - MD & Director [89]

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It's possible for us, Siraj, but it depends on the business mix as we said. So it's absolutely possible. But it's hard for us to comment on that. If you think about scale-based pricing. In the absence of us doing similar large books with the same price the base grows. It's possible that you have the reverse effect, but we just can't comment on over that knowing the business mix.

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Siraj Ahmed, Citigroup Inc, Research Division - Associate [90]

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Sure. I get that. Just wanted clarity on the transition, but that's okay. And Andrew, you mentioned 1,400 new advisers, is that exclusive? Or are you -- is that just -- you've been like Centrepoint, for instance, your one-off, if you...

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Andrew Alcock, HUB24 Limited - MD & Director [91]

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It's -- we're now on the APL of groups, represents 1,400 advisers. And largely, it's been in the last few months that we've been successful on getting -- or having tenders and being selected in those groups. There's stockbrokers in there and there's certainly some mid-tier licensees that are growing. So it's our contestable market has opened up or the number of opportunities we have, there's 1,400 more advisers. In some cases, we are the only platform on the APL for a couple of those groups. In other cases, it's more open architecture. And in some cases, we've been selected as a preferred partner. But it still beholden on the advisers to pick the right solution for their clients. So there's a mix of that. Exclusivity is not a word I'd use, but there's certainly some APLs that are restricted at which we participate in and there's others that are more open.

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Siraj Ahmed, Citigroup Inc, Research Division - Associate [92]

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Sure. And just on the flows, you did mention there's a couple of large transitions you're working on? I mean, is there some timing that you could let us know when you could hear on...

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Andrew Alcock, HUB24 Limited - MD & Director [93]

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We're prospecting. We're competing in the market to win large chunks of business. And so if it was a material transaction that was contracted, we possibly update the market, depending on the client's view. But at this point in time, it's business development. As I said earlier, we're always working on smaller lumps of money from existing advisers to move, which are really not noteworthy, but they do support our growth rate. And evidence of that is the fact that we're up 61% on flows this year compared to last year.

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Operator [94]

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Thank you. There are no further questions at this time, and that does conclude our conference for today. Thank you for participating, you may now disconnect.