NZX Limited (NZX) Earnings Call Transcript

Good morning, everybody. Welcome to the 2025 half year results call for NZX. I'm Mark Peterson, NZX' Chief Executive; and I'm here with Graham Law, NZX' CFO. Graham and I will take you through the results, and I'll lead off with some key elements, comments, and Graham will step us through the financials, after which we're more than happy to take questions. [Operator Instructions] And Graham and I will then answer the question. And before we start, please note the important notice on Page 2 of the IR pack as that statement applies to all content and comments made by us during the call. Just a few opening remarks. When we spoke in February this year, we talked to the increasing activity we saw through the 2024 year. We spoke of cautious optimism about New Zealand's economic environment in 2025 and how NZX was well positioned to take advantage of that. Through the first quarter this year, that was the case, overall market activity was maintained. Capital raising activity was active. Trading activity levels carried on at the elevated levels and asset prices were stable to rising. However, Liberation Day in early April created uncertainty and caused asset prices globally to adjust down for a period. For the businesses that we operate, this impacted all 3 to some extent and probably cost us around $1 million in revenue. Capital raising activity was pushed out. Trading levels dropped away before slowly recovering, and asset prices took approximately 6 to 8 weeks to recover from the down. Notwithstanding the macroeconomic environment impacts, NZX has posted a solid set of results for the first half of 2025. Earnings, excluding integration and restructuring costs were $25.1 million, up 7.5% on the prior year, for the same period in the prior year. If we include integration and restructuring costs, earnings were $24.1 million, and that was up 5.4%. Revenues were $61.7 million, up 6%. Expenses were $36.7 million, up $1.7 million or 5%. Operating margin improved further to 40.6% and reported NPAT was $8.3 million, down 46.4%. However, you do have to remember, if we exclude the noncash accounting adjustments for the QuayStreet earnout in the first half last year, NPAT of $8.3 million would have lifted just under 1% over the same period. We've declared a fully imputed final dividend of $0.03 per share. And as I mentioned, Graham will take us through the financials in more detail shortly. Speaking to Pages 5 and 6 of our investor pack. Many of you will recall us rearticulating NZX' growth strategy at our Investor Day in November last year and at our full year 2024 results presentation in February this year. We continue to reiterate our 3 businesses, Capital Markets, Smart and Wealth Technologies, are all targeting greater scale and greater operating leverage. For Capital Markets, we continue to enhance our product range and scale up. The focus of Smart is to continue the strong organic growth and deliver the operational efficiency program. And for Wealth Technologies, our plan is simple: keep winning new clients and to scale up the business. And none of that has changed. In recent investor and results presentations, we have talked about the benefits of NZX Group and having our businesses supporting one another, particularly Wealth Technologies powering Smart. We have also discussed that cash flow for the group will grow faster than EPS growth given the Wealth Technologies amortization bubble and the reduction in corporate CapEx from recent levels. We continue to reiterate these messages. The business highlights have been laid out on Pages 8 through 13 as we do normally. If I start on Page 8, capital listed and raised has been solid. However, we have been impacted by some macro factors, which have created uncertainty in markets, as we mentioned. This included the effects of the tariff announcements on Liberation Day and the international bond markets have been nervous since earlier in the year. Alongside that, the New Zealand economy has continued to be challenging for a number of sectors. The uncertainty created has, in some instances, pushed out corporate plans. Challenging bond market conditions did widen spreads, which meant debt issuance was challenged for the early part of the period. So this half has been effectively a tale of 2 quarters, and this has been highlighted in the capital listed and raised numbers. Fonterra's move from a private market to the main board resulted in $7.4 billion of capital listed. Of the remaining capital listed and raised, 61% or just under $3 billion of the $4.8 billion in total was completed in the first quarter. The recent uncertainty has also, in some instances, delayed plans for companies, but we are now seeing signs of change. Debt issuance has started to pick up. And generally, we are seeing a more positive second half, clearly on the assumption that we see a smoother macroeconomic environment for the remainder of the year. We continue to work constructively with government and policymakers to ensure New Zealand's capital market settings are as competitive as possible. Prospective financial information contained in IPO disclosure documentation is now in law and much more flexible for prospective issuers. Potential changes to the climate-related disclosures are with the minister, general disclosure and directors' duties work is currently being researched by policymakers. We are keen to see further changes enacted by the government this year as New Zealand can't afford to get left behind in making moves that support investment. Largely, we are also working hard to encourage the government to further align tech settings to eliminate distortions and encourage growth of capital markets, and this work is ongoing. Moving to Slide 9. If you recall, the first quarter of 2024 was soft for trading and clearing values. And then activity levels built quarter-on-quarter through the remainder of 2024. For 2025, we have broadly carried on how we finished last year. No question, the recent market uncertainty did soften activity for a period of time in the second quarter. At the end of March in 2025, were up 52% on the prior comparable period and at the end of June, levels were up 31.4% in the same period last year. We continued the pipeline of work that aims to build liquidity levels. NZX Dark is performing ahead of expectations with more than 6% of our market activity going through that venue. We continue to work towards relaunching our NZX 20 index futures. Our plan is to work towards market-wide testing with the Cornerstone group of clearers, general clearers, liquidity providers and end users in early November 2025. And we are pleased with the commitment and efforts of everybody in the group, and all going well, it will result in a go-live at the end of the first quarter or early in the second quarter in '26. And we will also see 2 new global bank participants back in our market as part of this. As most of you can see, these initiatives are all focused on assisting and increasing liquidity in the market and providing end users with risk management products. Building liquidity further will continue to be a theme for us. Assets and custody in our depository remained at $7.7 billion, but we continue to work hard to attract more global custodians to our proposition, which is cost effective and more efficient for custodians. Again, we remain cautiously optimistic for 2025 in this area of our business. Our dairy derivatives market on Slide 11 has seen volumes continue to lift, up 20% on the comparable period, with revenues up a similar amount. The partnership with SGX is strong, and we are now attracting more market makers into the product and with it, additional financial market flow providers. As flagged in our investor presentation, Global Dairy Trade did enhance their technology platform, which was expensed over the half. This did impact the share of profit -- sorry, the share of profit of associate line in the P&L, and we expect this to normalize back to previous profitability levels in the second half. The in-housing has 2 key business benefits: more agility to be able to service the market; and second, alongside GDT -- alongside this, GDT can operate the technology at a lower cost than that was being charged by the previous outsourced provider. Moving to Smart on Slide 12. The business had another period of good FUM growth, noting the impacts from the Liberation Day from $13.5 billion at the end of 2024, we took the business through to $14 billion at the end of June 2025, up 3.8% since the end of last year. Outlined in the investor pack is the split between net new cash of $400 million and market return of $100 million. Better-than-expected net cash flows have occurred into our ETF and QuayStreet products. We are behind target on our net new cash in our KiwiSaver products and are in the process of lifting our customer communications and marketing efforts. Our superannuation products have marginally higher outflows than planned off the back of our corporate and government clients reducing staff numbers. Investment performance of our diversified funds and the QuayStreet suite of products has been very solid once again, and it is important to note that we stack up well against the market in comparing performance returns net of fees. It should be noted that our diversified funds have an active asset allocation on top of the passive fund building blocks. Other notable milestones achieved include opening up the QuayStreet products to the market beyond the Craigs Investment Partners adviser network. This is the first stage of utilizing our Wealth Technologies platform to greater effect. We now move into transitioning our KiwiSaver products under the Wealth technologies platform, which is also likely to include a brand shift to Smart KiwiSaver in the mid-2026. Each of these shifts creates a step change in our client service proposition. Turning to Wealth Technologies. We are continuing the strong momentum in this business that has been built particularly over the last year. We've once again laid out on Page 13 of the investor pack, our client transitions that have been achieved through the year and client activity that is in front of us. We've also translated that into ARR, which was at $14.2 million and is now -- we're reporting [ $13.9 million ]. It's down slightly due to the market volatility and also the FUM -- sorry, the [ FUA ] levels that have actually come across with client transitions being marginally lower than what we might have thought. In this presentation, we have added a split of FUA between new client migrations, net cash flows from existing clients and the market return movements. We continue to have 2 sprint teams that are working on the Smart work, which has now opened up the QuayStreet opportunity to clients outside Craig's. And this was the first deliverable as I mentioned before. The second, as we've also mentioned previously, is assisting Smart move its KiwiSaver business onto the platform. In doing so, that will improve further the client experience. Looking forward for the Wealth Technologies business, the prospect list remains very strong with a number of ongoing discussions nearing completion. This is a testament to the people, the state-of-the-art technology and the client service that is provided, and we continue to see a pathway for this business to create at least $10 million of free cash flow for the group each year. We also continue to manage costs appropriately against the opportunities we have. Client transitions are always managed in conjunction with the client and their current supplier and to some extent, around annual cycles, tech being one of them. This sometimes impacts the planned timings that we have at this point in time. However, if where the opportunities arose that made sense to invest further to onboard these, then we would. Finally, we have included a slide in the appendices section of the pack that covers our efforts on people and culture. Our staff engagement level has hit another record high across the group in the most recent engagement survey, and staff turnover continues to operate below our target. Our agenda to pay gap has reduced to 13.4% across the business and at the senior leadership team, it is 2.5%. These metrics compare well against other financial services businesses. We also remain focused on bringing both gender and diversity balance at the more senior levels of the organization, and we are lifting the focus on staff development across the organization to help achieve this objective. Our operations, technology and risk tends to continue to deliver accurately safely and within risk tolerance levels. And we continue to our operating responsibly vision, which is a vision that creates value for shareholders while delivering a positive impact to society in the environment. And we have this ethos integrated in the way we see strategy and operate our business. With those comments, I'd now like to hand over to Graham, who will take you through the financials in more detail.

Thanks, Mark. Before I start, I'd again like to draw everybody's attention to the scheme on Slide 2, which contains certain caveats that are important to the information I'm about to cover. Starting with the financial performance. The income statement for the 6-month period ended June 2025 is summarized on Slide 15, with further explanations on the operating revenue, operating expenses and nonoperating expenses provided on Slide 16 to 19. Additionally, a detailed analysis of the operating result by business unit is provided in Appendix 1. I'm going to go into some detail across all these slides [ 9 ]. Starting with operating revenue. It increased year-on-year by $3.5 million to $61.7 million. I note that that's -- that NZX' diverse revenue sources can be seen in Note 6 to the interim financial statements. The waterfall on Slide 16 highlights the drivers for the increased operating revenue. In Smart, the FUM-based revenue has grown in line with the 17.7% year-on-year increase in FUM. In Wealth Technology, it reflects increased ARR from new clients, and in the markets business, we have seen growth in most major revenue lines, such as trading and sharing phase. However, these have been more than offset by [ 2 ] factors: firstly, as previously indicated, contractual revenue decreased for the Fonterra Corporative Group's contract ceasing on their move to the main board from the beginning of this year; and then secondly, there have been no audit or backed dated license revenues in H1 '25. Operating expenses, excluding the integration and restructuring costs, increased year-on-year by $1.7 million to $36.7 million. The waterfall on Slide 17 highlights that the year-on-year increase was across all business units. I do note that though that those costs were [ down ] $0.6 million or 1.6% on H2 '24, we continue to maintain cost control across the group. Overall, this resulted in the operating earnings before integration and restructuring costs increasing $1.7 million to $25.1 million. I'll now break down the operating earnings before integration restructuring caused by business unit, which is summarized in Slide 18, with the detailed segmental analysis provided in Appendix 1 to this presentation. Starting in the Markets business. The operating earnings before restructuring costs decreased $1 million. The market business revenue decreased $0.7 million. As I noted earlier, there were the 2 main factors causing the decrease: firstly, the contractual revenue decreased for the Fonterra Cooperative group's contract ceasing on their move to the main board, partially replaced by related annual listing fees and trading and clearing fees. Secondly, there was no audit or back-dated license revenue in H1 '25. Removing those 2 items, the main Markets business revenues increased by over 5%. The main factors being in Capital Markets origination revenue decreased due to lower annual listing phase after internal allocation to the RegCo business, which reflected the net impact of a contraction in the equity market capitalization in H1 '24 on the growth and NZX debt market capitalization. Remember, it's a market capitalization on 31 May each year, which drives the annual listing fee revenue from July to June. Lower levels of primary listing and secondary issuance for both equity, excluding the Fonterra transfer and retail debt. Remember that equity has relatively higher fee rates than retail debt and wholesale debt and finally, even funds. For completeness, I note the change in accounting policy, which is outlined in Note 5 to the interim financial statements. Initial and subsequent listing fees are now recognized evenly over 5 and 3 years, respectively. Previously, initial and subsequent listing fees were recognized when the listing or subsequent capital raising event took place. Under the previous policy for both FY '24 and FY '25, the revenues would have been $0.4 million and $0.9 million lower, respectively. The secondary markets revenue increased by, firstly, trading and clearing value was higher at higher levels, though it was partially offset by higher levels of uncharged value created, i.e., where trade exceeds the fee cap. And there was also higher levels of depository uplifts and registry transfers. Dairy derivatives revenues increased in line with the higher level of lots traded. There were some favorable FX movements, but these were largely netted off against some further margin normalization. Consulting revenues for the electricity authority was near record levels, and we don't expect that to be fully repeated in H2 '25. These increases were all offset by decreases in contractual revenue. I've already noted the funds [indiscernible] impact. In addition, the Electricity Authority's contractual 3-year extension from 1 July '24 was at the contractually preset lower levels. For Information Services, aside from the lack of audit or backdated license revenue that I noted earlier, the revenue increased 7.7% on H1 '24 due to increased license and retail license numbers and retail terminal numbers, higher end of the sea revenue on some price increases, partially offset by lower levels of professional terminals. In H2 '25, there is limited potential for audit and backed license revenue than we have previously seen. Market business -- the markets business expenses increased by $0.3 million. Net personnel costs were $0.4 million lower due to a combination of the restructuring of several teams in [indiscernible] 2024, resulting in reduced headcounts, partially offset by lower levels of capitalizable projects. Information technology costs increased $0.4 million due to trading and clearing system inflation being New Zealand and Indian inflation, related price increases, and connectivity upgrades and infrastructure running costs. Marketing costs increased $0.1 million, reflecting a greater level of direct marketing campaigns for primary listings and secondary issuance and for the dairy derivative market. Other expenses increased $0.2 million, included audit fees, travel, statutory compliance costs and nonrecoverable GST. Moving to the Smart business. The headline operating earnings, excluding integration and restructuring costs, have increased by 23.3% to $13.7 million, which primarily reflects FUM-based revenue continued to grow in line with the increased average FUM, which is shown on Slide 12 is a combination of positive net cash flows and positive market returns, though the monthly phasing profile in H1 '25 did have an impact. Average bets remains consistent with H2 '24, looked slightly down in H1 '24, reflecting the distribution channels that are driving the cash flows rather than any fee compression. Cost base increased 3.6%. The main factors being group personnel costs increased by only 2.2%, which was less than wage inflation as resources focused on integration and activities to mature SMARTS operation are recognized within the integration cost growth. Information technology costs have increased due to inflation and additional Bloomberg functionality of teams in mid-2024. Marketing costs have been very low in the first half, and we do expect these to rise in the second half of the year. Now moving to Wealth Technologies, where operating earnings increased 64.6% to $2.5 million. Operating revenue increased 32.2%, driven by Wealth Technologies administration, FUA BSBs increased in line with the increased average FUA, which is shown on Slide 13. That's a combination of new clients being integrated on to the platform in both 2024 and 2025, plus market returns -- positive market returns and positive cash flows, including those from new clients. Though similar to Smart, the monthly phasing profile in H1 '25 did have an impact. Additionally, the revenue has been slightly dampened by the deferral of revenue from a partially migrated client. It's an accounting recognition requirement due to the client taking slightly longer than expected. Aside from this impact, average [indiscernible] are higher than H1 '24, in line with new clients being migrated onto the platform, receiving operational services rather than SaaS services. Development phase and deferred income reflects the level of customization specific to client requirements, some of which is paid in advance and for accounting purposes, recognized over the life of the contract. The operating cost base increased 14%. The main factors being in gross personnel costs, these were higher. The head count includes, as previously indicated, contractors to migrate smartphone platform and bonus accrual levels up and reset after the next stage of Wealth Technologies growth. Capitalized labor and overhead were at proportionately lower levels. We expect that as the business grows, a portion of gross salaries capitalized decreases, reflecting more operational activity than migration activity. Other costs are driven by nonrecoverable GST and platform transaction phase, which increases the business growth. As indicated on Slide 13, the remaining migration of Wealth Technologies' currently contracted clients will add further to the annual recurring revenue, the timing being dependent on both the client's strategic prioritization, i.e., timing relative to tax year, and migration resources committed by them as well as the client's current platform provider supplying data in a timely manner. Additional to our prospect list, we remain in very strong conversations with a number of ongoing discussions nearing completion. Overall, the timing of migrations for currently contracted clients and future potential clients will drive the CapEx profile and the profile, a peak and duration of the amortization bubble that I've talked to at previous Investor Days. For the corporate functions, the operating expenses increased 5.1%, which is after seeing 2024 hold at the same levels as 2023. Personnel costs related to '24 restructuring of some IT teams was more than absorbed by wage inflation. The H1 '24 personnel costs had benefited from a one-off fullness accrual reversal. Professional space had higher levels of legal advice, financial and other consulting, which was offset by other costs, which were generally lower and as well as the benefit of one-off nonrecoverable GST savings. And finally, NZ RegCo, where operating earnings after internal revenue and expense allocations were a loss of $0.2 million, which is driven by regulatory fee generating activity levels being lower than 2024 and a higher level of corporate service costs allocated to NZ RegCo. Moving to the nonoperating expenses on Slide 19. The integration and restructuring costs related to -- the integration costs represent incremental one-off external costs, net of capitalized internal costs and related to the integration of the QuayStreet business, which was successfully completed earlier this month and will now allow the distribution of QuayStreet funds through several new distribution channels and the maturing of the SMARTS systems and operations, which will be ongoing for a few years. The restructuring costs related in part to the 2024 corporate service teams restructured to offset the impacts from changes to the Fonterra contract as noted earlier. Finance costs reflect the lower average interest rates, net impact on particularly interest income on cash and regulatory risk capital held being negatively impacted and interest expense on the acquisition to sell the -- being positively impacted. Moving to depreciation and amortization. It's higher, in line with our expectations as outlined in previous investor presentations and mainly reflects Wealth Technologies' increased amortization relating to new hub client migrations both '24 and '25. We continue to expect further increases as migrations continue and new clients join Wealth Technologies platform. Specifically, the amortization profile lags the CapEx profile for a few years, which I refer to as the amortization bubble and I explain this in detail in our full year '24 investor presentation on Slide 37. The share of profits and loss and associates relates to our investment in Global Dairy Trade. In line with previous indicated expectations, GDT's 3-year expansionary strategy -- strategic plan as a result of an NZX' share of profit of associate being negative $1.0 million in H1 '25. Specific GDT undertook and successfully completed an upgrade of the auction platform with the upgrade being OpEx incurred largely in the first half of the year. GDT's underlying profitability remains comparable to the previous periods. We expect our share of the associated profit/loss to revert to historical levels when the post upgrade support diminishes through H2 '25 and the gains from the auction platform upgrade are realized. For completeness, I note that there is some seasonality in the GDT business revenue streams with the majority of GDT's earnings occurring in the second half of each year. Just for completeness, last year's accounting adjustments related to, firstly, the change in the fair value of the contingent consideration at $10.9 million, that was related to the QuayStreet earn out provision at June 2025. There is no change in the assessment of the probability of achieving the net cash FUM inflows target by November 2025 for the final earnout payment. And then secondly, the goodwill write-off of $3.7 million related to the partial write-down of the energy contracts intangibles, at June 2025, there's no change to the assessment, and we had the contract retendering in 2027. The effective tax rate is comparable to the statutory at 28% -- is comparable to the statutory at 28%, differences being nontaxable items, including the share of GDT's loss and the amortization of management rights, accounting versus tax valuation differences and R&D credits, tax credits all balancing out. Overall, this resulted in net profit after tax being $8.3 million [ going ] at $7.2 million on June 2024. Normalizing the net profit after tax for accounting adjustments, the net profit after tax increased by $0.1 million or 0.9% year-on-year. Operating margin has slightly improved to 40.6% and as I noted earlier, further details of all this analysis of operating results by business units can be find in Appendix 1. The balance sheet as noted on Slide 21. The key points to note are, first, the cash includes balances that are not available for general use, including clearing highs $20 million of risk capital and approximately $3 million of working capital requirements under the Financial Markets Infrastructure Act and International Organization Security Commissions principles. And the Funds Management business, which is about $1.7 million of working capital requirements under the FMA's Miss License and the Asian regional Passport requirements. The second point to note is that funds held on behalf of third parties, both assets and liabilities, offset and hence, the assets are not available for general use. These really leads up to issue [indiscernible] deposits, participant collateral deposits and deposited funds. The third point is the interest-bearing liabilities, which includes the subordinated note, the next date for -- next election date being June [ 2028 ] and the acquisition loan facilities, which is $22.5 million drawn on the facilities now expire in February '27. The final point is the impact on other current and noncurrent liabilities from the accounting policy change relating to the primary listing phase and secondary issuance phase. This has had an impact of increasing the income in advance, which will now be recognized in the income statement over the next 3 to 5 years. Again, refer to the interim financial statements. Will file for details on that. Slide 22 summarizes the CapEx expenditure in 4 graphs, all of which are on the same scale to show relativity. Starting top left and working round clockwise, trading, clearing and energy systems, the CapEx levels depend on the specific systems life cycle. At present, there's no large upgrade projects underway, and we have enhanced our trading systems for the S&P NZX, the index futures and automation of the depository systems. Looking at the medium-term horizon, the trading system may come to the end of life from a supplier and require an upgrade. For property, plant and equipment, the 2025 CapEx has reverted to more normal levels after several years of office [indiscernible]. The other office software relates to the normal life cycle replacement of IT equipment and software as well as ongoing enhancements of NZX' technology architecture. For the growth businesses, Smart continues to enhance systems. Maturing the Smart operating model will require further enhancements to the client portal, CRM, digital tools and registries, some of which will be capitalized, though where the spend relates to SaaS, Software as a Service, then these costs will be expensed. And finally, Wealth Technologies is our largest area for CapEx, and the business continues to migrate new clients in the payments product offering. We continue to expect the level of CapEx to be at similar levels for the next few years as contracted new clients and further prospects are migrated to the platform. Slide 23 summarizes the cash flows for the year. In H1 '25, cash flows reflect our cash flow seasonality, specifically the annual listing fee and participant fee. Collection profile is at the beginning of quarter 3 each year. For operating activities, as expected, the net profit after tax adjusted for noncash items such as amortization and the associated earnings from the -- from Global Dairy Trade has increased. However, the current period has been more than offset by the working capital movements due to higher levels of provisional tax and employee benefit payments. Investing activities reflect the CapEx expenditure that I've just noted in the previous slide, which is lower than expected than previous year, with the current year also including the settlement of the QuayStreet earnout, which was funded from cash balances rather than additional debt. Finance activities mainly reflects the dividends payout, which in 2024 was now the participation in the dividend reinvestment plan. The other finance activities related to lease payments. Overall, net cash flows in H1 '25 are largely in line with expectations, with the opportunity to reverse some of the working capital movements in H2 '25. As noted in previous investor presentations in future years after wealth technology completes its migration of new clients and CapEx settles to normal levels, we expect cash flows to rise faster than NPAT increases due to the Wealth Technologies' amortization bubble. I do note that the exact timing of the amortization bubble impact is dependent on future new client migrations within Wealth Technologies, specifically if future new clients are won, then amortization bubble is deferred until those new client migrations are completed. Moving to Slide 25. Our fully imputed interim dividend is $0.030 per share, which will be paid on the second of October to all shareholders at the record date of 18 September '25. The dividend reinvestment plan is not available for the interim dividend. All shareholders have elected to participate and that the ERP will receive a cash dividend, which leads me to our 2025 earnings guidance. NZX is maintaining our full year 2025 operating earnings in the range of $49 million to $54 million. The half year results indicate that NZX is tracking towards the middle of the '25 full year guidance range. Progress towards achievement can be tracked within our shareholder metrics that we publish monthly. As always, I note that these earnings -- this earnings guidance is, of course, subject to our usual market caveats that are listed on the slide. That concludes our presentation, and we'll now open it up for questions.

Have a question from Grant Lowe. Grant, I'm just taking you off mute. Go ahead ask the question.

Hear me okay?

We're just trying to turn you up, Grant. Hang on a minute. Go ahead, Grant.

Yes. So my impression of the result is pretty much sort of in line with the expectations. So not too much from me, but just a couple of things just around the OpEx side of things. Like you mentioned that OpEx down, I think it was [ 1.7% ] on second half last year, which obviously have a good result. Is there anything, sort of key differences you'd call out the year? I guess where I'm going with this question is sort of expectations for the second half when you see things relative to first half we've just had?

Okay. So just to summarize broadly, Grant, you have [ 2 ] things, I guess, OpEx levels against first half last year, second half last year and thinking about the track going forward.

Just good momentum coming out of the [indiscernible]...

Yes. Yes, so just to chunk it down and there may be different cost categories. Our wage inflation hits us 1 January as the yearly pay increase. Wages, we would expect to be consistent first half to second half [indiscernible] market for specialists aside where you might have to pay out a different inflation rate. But we've had made inflation across the whole business for the year already. Where inflation hits us more normally in the second half of the year is around the IT costs. Our contractual arrangements usually have CPI-related increases from July 20 to 25 and some of the suppliers for particularly the trading and clearing system are U.S. or Indian-based. Inflation components are driven by New Zealand and India inflation for those 2 contracts, but we are exposed to USD as well. So it is -- the potential for inflation is more in the IT area than in the wages area. And then final comment, in certain areas of the business, we have been light in the marketing spend for the first half of the year. And I think it's proven to be detrimental to certain aspects of the business. And I do expect those costs to increase in the second half of the year. I tried to flag where they were on the way through when I was talking there, but appreciate the slower words.

And the only other thing I'd say, Grant, is from a staffing number perspective, we don't necessarily see too much change sort of from half-on-half. We've shaped about right at the moment. I guess the caveat might be if we want to significant new client and wealth -- and clearly, you would start up to accommodate that. But certainly, we don't see a large change in staffing numbers in front of us.

Yes. Okay. So -- but for a little bit for a question potentially for the second half part of the business in a more market.

Yes. And maybe a bit of marketing in our funds business.

Yes. Okay. And then just around the CapEx outlook for the remainder of the year, like you mentioned, the CapEx that [indiscernible] continue at some of the levels over the next few years and sort of roughly [indiscernible] half of last year. So [indiscernible] similar [indiscernible] in the second half, I guess. Like is it reasonable sort of double the first half that's funded?

I mean, prudently yes, maybe marginally more, but first half's way down on comparatives. I think it's -- when you look at first half of 2024, it was about $8 million, and we're down to $5.4 million. The second half of 2024 was around the same numbers in the first half. Yes, if it's higher, it's only marginally higher, and Grant, it's like it's not going to be mass -- there's no -- not be [ $1 million ]. I wouldn't have thought [indiscernible].

There's nothing that would surprise you, Grant, on the CapEx front. Yes.

And then just around the wealth, I can imagine you're going to tell me how many clients you have signed up and everything else. But just around the -- you mentioned in the wealth tech free cash flow, $10 million sort of exploration. Do you have a market outlook around the timing of that based on what you can see at the moment? Or is it's kind of contingent upon...

Yes. There's 2 factors there, Grant. I mean we need to bring on more than just the contracted clients that we have at the moment. So until we sign up certain new clients, we won't really have a time line for their migration. But if we -- and then the second factor is that we currently have resources for migration activity that we would each back on when there's a lack of migration activity. That seems like a high long to piece of string comment because we sort of have a pathway in front of us of migrations at the moment for the next while. We know that when we have a steady state, we will want to maintain the currency of the platform that it's up the day of modern, but we won't need the same levels of CapEx that we have at the moment. So it's that -- it's almost to that amortization bubble graph that I drew in the presentation in November last year. If we have more and more migration for clients, that date gets pushed out, that I sort of have a moving target, and I can't give you a definitive answer to that.

I understand. [indiscernible] Okay. And just last one for me. Like just with the dairy derivatives again. It was 20%-ish growth first half last year. I think the aspirations are obviously the potential for us is a lot higher. What do you think is required to sort of unlock that and drive that forward?