much better than expectation, page-12

"17 million of cost synergies but still reported a flat underlying Npat yoy.
mmmm :/"


Yes, @jdz101

I made that same observation, but arrived at it from a different direction.

Slide 14 (entitled "M&A offsets adverse investment markets") shows the EBITA "waterfall" between FY2015 and FY2016.

It shows an item labelled, in somewhat vague terms, "Other-Underlying EBITA", having a $16.4m negative impact on Underlying EBITA.

Since the next slide (Slide 15: "Disciplined management of costs") shows that it is not at the Opex line that is the source of this $16.4m "Other" item that has adversely affected underlying EBITA.

So, it must therefore stem from developments at the Revenue line.

And we know that it is not the level of FUMA that is driving it (because average FUMA over the course of FY2016 was, if anything, a tad higher than average FUMA during FY2015).

So it must be the margin that IFL is garnering on its FUMA balances.

And if you look at Slide 17 you will see that the gross margins have indeed come under pressure during the past year:

Group Gross Margin (bp):
1H, FY2015: 55
2H, FY2015: 55
1H, FY2016: 54
2H, FY2016: 53

(And from the Segmentals in the various appendices of the presentation, it is evident that margin shedding is being felt in most IFL businesses, including the acquired Shadforth business, the IFL platform business as well as the investment management business.)

Note: these might look like small amounts, being just one or two basis points, but remember they are applied to over one hundred billion dollars of FUMA, so small twitches in Gross Margin end up being quite meaningful in dollar terms).


It is this Gross Margin dynamic, I think, that is the reason that the market has responded the way it has to the IFL result.