Xps Pensions Group Stock

Well, good morning, everybody. Thank you very, very much for coming along to the presentation of our results for the year ending 31 March 2026. I'm going to pop up a brief agenda. We're going to follow the usual format. We're going to start with a brief overview of the year, just a couple of minutes, then Snehal will unpack the results in quite a bit more detail. We thought it will be helpful to give an update on what's going on in our market and then how we're responding to that strategically and operationally. People are very important to us. We'll talk a little bit about that and our clients. And of course, a very hot topic of AI. We have got a couple of slides I want to talk about that as well. And then we'll wrap it up and get on to Q&A.

So in summary, we've had another fantastic year, and we're really, really proud of the results that we're announcing today. Headlines of revenue growth of 13% and growth in adjusted EBITDA of 9% and we're just under 5% ahead of market expectations at EPS level. So these figures are good, but actually, the underlying performance of the business is much better still. And to explain that, you need to remember that the picture is a little bit muddied because of the effect of the very large and very profitable one-off project that we did last year on the McCloud remedy. If we normalize for that and if we also adjust for the acquisition we did of Polaris, then we can see the performance of the underlying core business. And as you can see, this grew by 12% with operational gearing coming through, we grew EBITDA by 15%.

And that, of course, builds on a really sustained period of high growth in the previous 3 years as well. And the operational gearing we achieved is especially good because don't forget we also have to absorb the increase in NI, which is a people business was pretty material for us. So great performance. And -- in terms of what drove that, well, we are operating in a good market. Pension schemes have gone through a step change in recent years, some large deficits to a new age in which many are in surplus.

They have more options than ever before, and they need a lot of advice and support. Regulations are changing as well. We're still working through new rules on scheme funding for clients, and we're now about to get more new rules on surplus release as well. So in this new world, many pension schemes are accessing insurance solutions. It's keeping us really busy. Our risk transfer team helps clients to do this has just had another record year themselves. And the insurers taking on all these schemes, they need help as well. And that's why we're following a strategy that you could describe as follow the member, where we provide all the support that's needed for whatever institution is taking on a pension scheme and paying them in the long term safely and securely.

And that's working because along with the successful integration of Polaris, we are expanding our addressable market, and we are seeing wider opportunities open up. So on AI, we do see it as a big opportunity. We're going to talk about that a little bit more in a minute as well.

One thing that will always be really important to us, of course, is brand and reputation. And that's why we're so pleased that part off the press just last week, we won no fewer than 4 major prizes at our annual industry awards event. And these awards were across all the different business lines we have. So again, our brand is really going from strength to strength, and we're delighted about that. And finally, for my introduction, as you know by now, we work really hard to be a fantastic place to work and have a really healthy culture. And again, we won some really fantastic awards and got great recognition in that this year, too. So we think we're doing things on a really sustainable basis. So that's my brief introduction. We'll say more about that in a minute, but I shall hand over to Snehal, who will take us through the details of the financials.

So another strong year, as Paul said, and even better when we look at the underlying organic growth, excluding McCloud. Total revenue grew 13% and adjusted EBITDA 9%, which include the impact of the increase in National Insurance and continued investment in growing our insurance consulting capabilities. The top right-hand chart shows the increment components of the revenue growth. And you can see that the underlying business has performed very strongly. And that growth is continuing to deliver on further operational gearing. In the chart to the bottom right, we have normalized FY '25 margin of 30.1% for the impact of McCloud and the increase in National Insurance, which were both worth about 1% each.

It's showing that underlying EBITDA margins this year has improved by 70 basis points. Adjusted EBITDA was 2% ahead of consensus. Strong operational performance and a lower share count has driven the adjusted diluted EPS of 22.3p, which is up 8% and also 4% ahead of consensus. In line with the progressive dividend policy, the Board has proposed a final dividend of 9.1p, which is up 11% year-on-year, making the full year dividend of 13.2p, up 11%, also 4% ahead of consensus, underscoring our continued confidence in the business model and growth prospects. So here, we've got the usual P&L with revenue broken down by division, and Paul and Ben will take you through the divisional highlights shortly. But just briefly, Advisory grew 20% year-on-year and excluding the Polaris acquisition, growth was a healthy 8%. Administration grew 5% on a tough comparator, but excluding the McCloud, the growth was 18% and SFS delivered another year of double-digit revenue growth. The adjusted EBITDA growth of 15% to the right includes the impact of higher employers NI, which is an additional GBP 2.5 million cost this year.

The net finance costs are higher due to the higher net debt from the Polaris acquisition as well as the continued share purchase by the EBT. And as I said earlier, the lower share count from this and the strong operational performance has helped deliver adjusted EPS growth of 8%. On the non-trading and exceptional items, which are all consistent with previous treatment and largely noncash, the increase in the amortization of acquired intangibles reflects the Polaris acquisition and acquisition-related remuneration is the buildup of the Polaris contingent consideration. In terms of guidance for FY '27 in the medium term, we continue to target mid- to high single-digit percentage organic revenue growth and driving further improvements in underlying EBITDA. CapEx guidance for FY '27 is between $12 million to $13 million as we continue to invest in tech, including bolstering our AI capabilities. And it also includes the fit-out costs for our new London office, where we will have the pleasure of hosting these briefings in the future. All of this is already reflected in the current consensus.

Turning to costs. Despite the increase in NI and the full year impact of growing our insurance consulting team and capabilities, costs as a percentage of revenue have only gone up by 1%. Now if you exclude the impact of the McCloud, you can see that costs as a percentage of revenue have actually improved year-on-year. Within the cost, staff costs are up 18%.

Of that 18%, 9% is due to the increase in headcount, including from the Polaris acquisition, 2% is from the impact of higher employers NI and the remainder a combination of annual performance -- annual and promotional pay increases and the bonus commensurate with the performance of the group. The decrease in IT costs reflect the benefits from investment in Aurora coming through, offsetting the effects of increases in headcount and the continued investment in tech, particularly cybersecurity. Other costs are largely in line with prior year as we continue to maintain strong cost discipline.

Turning to cash flow. OCF conversion was a healthy 91% and guidance for future years remain between 90% to 95% as we continue to grow. Net debt at the end of March was GBP 46.2 million and a covenant leverage of 0.64x, well within our target of 1 to 1.5x, giving us flexibility for pursuing M&A opportunities. Currently, we have GBP 63 million of undrawn facilities from the GBP 120 million total available, which we have also recently extended until March 2030. We've included the progression of return on invested capital as a KPI here.

And you can see that there has been a steady improvement and returns are now 3x our weighted average cost of capital. Strong growth in returns reflect material growth in profits on a stable asset base, which is proof of our capital-light business model. And finally, just to remind you of the capital allocation priorities, which remain unchanged. The focus remains on capitalizing on the organic opportunity within our core and tangential markets. We want to continue to invest in creating market-leading proprietary tech that creates a competitive advantage, but also drives efficiencies.

But relative to the size of the business, we will remain CapEx light. We will continue with our progressive dividend policy, and we'll continue to scan the horizon for earnings-enhancing M&A opportunities, but we'll remain disciplined in that approach.

And so on to the market update. And to set the scene here, when we listed back in 2017, our ambition was to be the best place in our industry to work and the best firm for our clients. So a one-stop shop, able to provide all of the support the pension schemes need to a really, really high standard. And if we could achieve that, we could become the leading mid-tier firm in our market. Now we're a long way off that back then. But this chart shows how the last 10 years have gone. So the growth here includes some acquisitions, the largest, obviously, in FY '19. But the majority of the growth has been organic and driven by us doing more work for clients as we've expanded our services. And in particular, the rapid increase in funding levels for defined benefit schemes over the period has created huge demand from clients. And what we've done really well is keep evolving and developing our services to meet those client needs.

And today, I think we can say that we are now the leading mid-tier firm. So we are really proud of what we've achieved. So how do we see the market evolving? Well, today, over half of schemes now probably have enough money to pass their assets and liabilities to a bulk annuity provider if they wanted to with no top-up needed.

But at the same time, many companies are thinking that running their scheme on and getting some value back might be a better idea, and the rules are being changed to make that all easier. So what does this all mean? Well, first, as you can see, the market is dominated by thousands of small schemes. And the fees for running each one are quite small. Now we expect that most of these schemes are simply too small to run on. And so they end up buying out and leaving the pensions ecosystem. So this will keep us busy as the schemes themselves will need lots of support to get ready and execute a transaction, and that typically takes years where multiples of the BAU fees are earned.

On the right-hand side, we then have the large schemes. And these will want to explore run on in detail. And we actually expect many of them will then choose to run on, at least for a period as the economics are generally really compelling. So they'll continue to need all of the current BAU services plus support around what to do with surplus. And finally, for those in the middle, we'll probably see a bit of both.

Now it's also worth mentioning that the insurers taking on these schemes will also need help, and it's much harder for them to do lots of small deals to meet their business targets than doing it across a small number of larger deals. So all of this is going to play out over many years into the future, but it's a pretty positive backdrop for XPS.

So as Ben said, we have achieved our objective really 10 years ago. We are arguably the leading independent pensions advisory and admin firm in the U.K. So the question is what next? Well, first, we will, of course, be focused on maximizing every opportunity that we have in the pensions market. Our clients need a huge amount of help and advice. We will be helping lots of schemes to buy out. But for every one of these trades, there is a counterparty, an insurance company or a super fund or even a fund manager like in the recent Aberdeen deal is taking them on. And this capital shift is huge. We're likely to see between GBP 0.5 trillion and GBP 1 trillion of assets move over the next 10 to 15 years. Now our observation here is a fundamentally simple one. Although over time, there will be fewer defined benefit schemes, many members of these schemes are still going to be getting benefits in 40 or 50 years from now, just potentially from a different place. And so we'll follow the members. We'll be a brilliant provider of services to these wider institutions taking these members on over time as well.

Now that creates lots of wider opportunities, too. Insurance companies and other institutions have many other challenges, and it's a short bridge from providing wider support than just where the pensions and insurance worlds collide. And that, of course, is what the Polaris acquisition was all about. We've been really pleased with how the integration has gone, and we're now seeing a very good pipeline of wider opportunities starting to emerge.

As you can see in the little graphic at the bottom, this opens up a much larger target addressable market. And ultimately, our ambition for the next 10 years is to become a market-leading financial services, consulting and administration provider, serving pension schemes, serving life insurers, general insurers and more. Now we expect M&A to be a part of delivering on that strategy. There are broadly 2 types of opportunity. The first is in our traditional core market, which does remain quite fragmented. We could make an acquisition there, and that's got some attractions. It would create truly the largest independent firm clearly ahead of the rest of the mid-tier. And there could, of course, be synergies that could be quite material. But ultimately, we'd be unlikely probably to gain capability. We're strong already in all of the services that our pension clients need. So perhaps more likely is the type of transaction on the right that would accelerate the diversification strategy into wider markets. And that, of course, is what the Polaris acquisition did, and we would be very open to pursuing more transactions like that if we can find bolt-on deals that are a good fit for our ambitions.

So as we turn to the strategic and operational review, where we canter through each of the businesses, here's a quick reminder of how we structure ourselves. So we have our advisory businesses, and this is where we provide advice to pension schemes and insurers on the big decisions they face to run themselves really well. We then have our administration businesses where we do the day-to-day recordkeeping and communication with members. And ultimately, that's about paying the right benefits to the right people at the right time. And we do this for members of pension schemes. We also help insurers with the schemes that they've taken on. And we also do this for SIP and SaaS arrangements where we set them up and manage them too. As a rough guide, we're not far off half advisory, half administration, perhaps a little bit more advisory given the results this year. So how did the advisory business get on during the year?

So as Snehal mentioned, the headline growth of 20% -- but this is the part of the business where we include the revenues from the Polaris acquisition. So if we strip that out, the organic growth was 8%. Of this, just over 3% came from inflationary fee increases with the rest coming from an increase in volumes of work. So the things that kept us really busy were advice on strategy, so in particular, helping clients with their first valuations under the new funding regime and just in general, working with them in the new world of services. Our risk transfer team had another really strong year. And in the background, we're still busy on GMP projects and have a few more years to go of this work.

On the insurance consulting side of things, which is, of course, only a couple of years old, it's been a busy year building the team and integrating the Polaris business, which has gone really well. So during the year, all of the existing Polaris preferred supply arrangements were retained. -- we also expanded the remit on several and got some new relationships in place, too. And that all provides a great opportunity for the future.

So if we look ahead, we expect our pensions clients to keep needing lots of support as new regulations work through the system. And actually, just last week, the government issued the draft regulations for consultation on surface release. And we also think there's going to be more new business opportunities opening up as when there's lots of change. It's a great chance to be able to differentiate yourself. And that's why we were so pleased to win Run on Adviser of the Year in the recent pension awards because this is a new area for the whole industry, and we want to make ourselves famous for being brilliant at it. And finally, on the insurance side of things, we've been really pleased with how Polaris has opened up opportunities to help insurers with their bulk annuity businesses, and we think we'll be doing much more of that in the years ahead. And we also expect Polaris and our insurance consulting team to be busy more widely, too.

So turning to administration. And the performance in this area of the group was absolutely fantastic. This is, of course, a division where the McCloud project was delivered in the prior year. Growth this year was 5%. But if you exclude that one-off project, growth in administration this year was 18%. That was driven by a range of things. We took on new clients. Most notably, we had a full year of the John Lewis contract. We're doing lots of project work, again, lots of GMP work, where we still have a huge amount of that to get through. And operationally, we had a good year, too. We got all of our public sector clients migrated onto our system Aurora, and that meant leaving one more of our legacy third-party systems behind, which brings all sorts of benefits for us.

We had more new business success in the year as well, perhaps most notably winning a mandate to provide administration to the Metropolitan Police and their 80,000 members. And that win was really helped, of course, by the strong reputation that we've built through the successful delivery of the McCloud work the year before.

So although that project was one-off in nature, it's really helped to drive wider long-term opportunities as well. Now as we look to the future, I think we just see more of the same. First-time outsourcing opportunities are all around us. And there's opportunities where some of our competitors have struggled a little bit with client service. It's also an area where, again, there are wider opportunities, especially to help insurers with their admin, both when they take schemes on and when they would then run them for the very long term.

So the future looks really bright for admin. Our people are at the heart of absolutely everything that we do, and we invest a huge amount of time in having a great culture. We talk about this a lot, I know, but we do it because we really think it drives business performance. Put simply, happy, motivated people look after each other well and then they look after their clients brilliantly, too. another really good year on this front. We launched something new, our employee value proposition, setting out what it means to work at XPS, what we expect from you and what you can expect from us in return.

This landed very well, and it's got -- it's very important in the future for both retention and of course, for articulating the proposition to attract the right people to join us as we grow. Now we measure what we can. And in our annual employee survey, our Net Promoter Score bounced back into the 30s at plus 32, and we're told this is exceptionally high for a professional services firm. And we've got external recognition as well. We actually won the best medium-sized firm in the U.K. at the U.K. Business Culture Awards, which is amazing because that's not just a financial services award, that's across all employers across the whole of the U.K. So we're really, really pleased with that recognition.

Our clients have given us great feedback as well. We won our annual client survey -- sorry, we won our full client survey every 2 years. So we will have more facts and figures for you next year. But once again, client churn was extremely low, and you can see some of the great things that our clients have said about us on the slide here.

And it is hot off the press, but being recognized for client service at our annual industry awards is really important. As we mentioned, we won 4 awards in categories that span the whole of the business, including the outright winner of administration firm of the year. So that was a cracky evening for us just last week. That's fantastic. It really strengthens our brand, and it's really helpful in new business opportunities going forward.

So on to AI, and we've got 2 slides to cover here. The first looks at how we think it will affect our industry and the second looks at who we think the winners will be. So across advisory and administration, the work we do there, there's a lot of tasks that are quite manual and quite repeat in nature. And these are often very technical and specialized tasks, so are quite time consuming. So there's a clear opportunity for everyone in our market to use AI to increase automation drive productivity and efficiency. Secondly, technology has already been a bit of a differentiator between firms.

So Radar and Aurora are key parts of our service offering. But the AI capabilities we now see mean there's a much bigger opportunity to use technology to create USPs. Finally, as we've often said, there's a high level of client stickiness in our market, which makes it difficult to win new clients. But if AI does lead to more differentiation between firms, we could see more client churn and an opportunity for the first movers to win market share. So which firms do we think are best placed to take advantage of this opportunity? Now probably the first thing to say is that we believe the winners are already in our market.

So the pension consulting market has high barriers to entry. The buyers in the market, typically trustees of pension schemes are cautious and they naturally favor the established players. It's also a very relationship-driven market. There will always be a lot of person-to-person interaction in trustee meetings, helping clients negotiate complex deals and in administration, trustees it is critical that their members can speak to a person if they want to. More generally, training AI models requires data and domain knowledge and generally, this information isn't widely available.

And ultimately, compared to other opportunities that technology firms might have access to, we don't think the pensions consulting and administration market would be particularly attractive given the relatively small size compared to the high level of specialism. Now within our market, we think that specialist mid-tier firms like XPS are best placed to benefit because a firm needs to have enough scale to be able to invest in AI tools. But equally, it takes focus and agility. And if you're too big and U.K. pensions is only a small amount of what you do globally, that will be a challenge, particularly as we think this is all about building really specialist capabilities.

Now in terms of XPS specifically, we also have a strong record -- strong track record with technology. So Radar and Aurora are great examples of technology that we've built and we've deployed ourselves. We've also had already some real successes building and deploying AI.

So with the right focus and investment, we are optimistic about how this will all unfold.

Okay. So to wrap things up for the formal part of the presentation before we go to Q&A, the last 10 years have been fantastic. We've executed really, really well. You could see that from the chart on one of our earlier slides. And we're really proud that it's been another year of really good organic growth, building on that really strong run that we've been on for some years now. We are in a good market. There's a lot of regulatory change and changes caused by movement to this higher interest rate environment. These are multiyear changes. We are going to be helping our clients through them for a long time to come. We're seeing the gradual merging of the pensions and insurance world opening up opportunities. We're doing ever more with insurers, helping them to onboard and run pension schemes.

And with the acquisition of Polaris having integrated well, we're getting access to wider opportunities at insurers too, which is helping us to expand our target addressable market. We do think further M&A could accelerate that journey for us as well. Everything that we do is based on our people and our strong culture. We're really proud of those awards that we won again this year. Our people do share in our success, and that means that we're achieving our results in a truly sustainable manner. As Ben said, we see AI as an opportunity. It is going to change what we do in some areas for the better. And we're quite certain that the winners from AI in our market are already in our market.

And we think we're perfectly placed as a firm, big enough to make good investments, but not so big that the focus needed can be a challenge. Everything's going on in our market, ultimately, we're very, very excited about the future, and we see lots of opportunities for further growth. So thank you very much indeed for listening. And we'll now open the floor for some questions.

Steven Woolf from Deutsche Bank. The opportunities you mentioned on the pension surplus work that's about to kick off, is when do you think the bulk of the work happens? I think you've mentioned before in a prior presentation, distributions can happen from April next year. So do you expect sort of a flurry of activity from those larger companies that might be interested in that? Secondly, just thinking about all the work and the opportunities you've got, how well resourced you are to take on board some of that work. And then thirdly, you mentioned M&A, likely thoughts on where, how about in the insurance consulting market you might go after Polaris if that's sort of an issue.

Great. Thank you, Steve. Perhaps I'll take the first and the third, and then might take the second. So in terms of surplus regulations, I would describe this as just a nice gentle tailwind. There isn't a sort of big bang moment for this. The draft regulations on surplus release are available. People have a good understanding of what it means. They're likely to be finalized in probably the first quarter, but possibly first half of 2027. The point though is that our clients are thinking on an ongoing basis about this. And it fills up the agenda of things to talk about and things that we need to do analysis on and help them with. And there will be a sort of smooth -- some clients will want to be releasing surplus as soon as 2027. The really well-funded ones that are really advanced. Others haven't got that far in their thinking yet and we will get there as probably they follow what happens in the wider market even into 2028 and 2029. So the better way of thinking about it really is that this is just a gentle tailwind all the time that there's lots of stuff to talk about, and it's going to evolve and keep developing. And that's just a good thing.

We like to have lots of good -- and it's fun because it's new and it's value add for them. As we said at a mini Capital Markets event recently, it's so much fun talking about this in the last 20 years of talking about big black holes and deficits that never seem to go away. So it's -- yes, we're enjoying it, and I think our clients are as well.

Thank you. I think the second question was around resourcing and kind of what the recruitment market, I think is like. So staff turnover is just over 10% across the group, and that's very similar to the last 3 years or so. It includes I guess, in voluntary and retirements as well. So actually, it's at pretty low levels in terms of voluntary turnover. We -- our model is now that we largely recruit into the more entry-level roles, and we've been expanding the different channels we have, school leavers, apprenticeships and also graduates.

So we don't see that as being a particularly barrier to kind of achieving what we hope to.

And on M&A, yes, we steered in the presentation to being interested in acquisitions that would accelerate us further into those wider adjacent markets. I guess one observation about where we are in insurance at the moment is we have -- it would benefit us to have that little bit more scale. In terms of the permanent team that we have at XPS, it's still relatively small. And of course, we use the flexible delivery model that Polaris have of using contractors to deliver big projects that we win. We do think it would be helpful just simply to have more scale, higher headcount in the market. If there's a firm out there with great quality that we could bring on board that boosted that, I think it would boost our credibility and market footprint and just further help us to go and win more opportunities. So we're certainly interested in opportunities like that.

No, no. So to be clear, this would be helping insurance companies with a whole range of challenges they face. And you can think of the Venn diagram that where pensions and insurance overlap is in the bulk annuity space, insurers have all sorts of wider challenges, their own financial reporting, wrestling with legacy systems, trying to adopt new technology, all sorts of regulatory changes and market changes that affect them too. And we very much like to help them across that wider range of activity. Prior to Polaris, we didn't have that capability. With Polaris, we do.

But as I say, we'd probably like to enhance the scale that we've got to really build that credibility. I mean a great statistic for you after the Polaris acquisition and more generally, combination with XPS. But if you went back 2 years, XCS fundamentally, we had one insurance company client. Today, we have 20. And it's a different market to pension schemes. That's 20 clients that each have typically multimillion pounds, often multi, multimillion pound budgets for transformation and change and support.

So we have access to that wide range of clients. It really is almost all of the U.K. life insurers that we now have a relationship with and a master services agreement contractually with to be able to go and support. And that's the big step change. And if you feed a bit more scale into that, we think we've got great opportunities to go and take more market share from there's still only 1% to 2% of market share that we've got in that space. So it's a cracking opportunity.

Ben Cohen from RBC. I have 2 questions, if I may. Firstly, thinking about your margins going forward, I just wonder if you could talk to the sort of the headwinds and tailwinds that you see in the business and in the market for any sort of margin improvement? And the second question, excuse me, was on the sort of available firepower that you see that you have for M&A in context, I guess, the leverage ratio, what we might like to do from a share point of view to give a sense in terms of the size of things you could look to buy.

In terms of the margin, so the Aurora development that we did was to replace legacy third-party providers, and that is going to sort of lead to an OpEx saving. Most of that has already come through. There is some more, but it's also going to increase the efficiency of our administration business. So over time, that will start to feed through. More -- in terms of the mix of the business, this could I mean, it's not going to be -- we classify as a tailwind, but it would be a good thing if, for example, administration were to grow a lot faster because there are lots of public sector opportunities following the success of McCloud and appointment with Met Police, then that mix of business could lead to a sort of a small margin contraction, but that's not what we're guiding to.

If you look at the consensus, there is improvements in margin year-on-year from here until FY '28 and soon to be FY '29 numbers as well. In terms of the financial firepower, so we've done 7 acquisitions so far, 6 of those sort of bolt-ons and have driven IRR in excess of 20%. And those have been sort of focused on to Paul's slide, infilling capabilities or expanding our capabilities into markets that we're not currently in. And that model suits us really well because it's very easy to integrate, very quick to access additional markets. And as we've sort of talked about, there are lots of adjacencies within life insurance consulting and general insurance consulting.

It's a fragmented market, and there are opportunities within those. So we would look to do mainly from debt. Our sort of stated target is sort of 1 to 1.5x leverage. But if we were to go above that, the returns will have to show that we can deleverage very quickly within that range. But that gives us a lot of financial firepower to go after opportunities.

James Fletcher from Berenberg. Just a couple on AI, if I may. Just kind of in your conversations with clients and in particular, pension trustees, to what extent does AI come up? And is there a kind of knock-on impact on pricing kind of expectations to date? And then just kind of with regards to kind of big 3 players in your market, if you have sight on to what extent they've been investing in AI? And are you kind of ahead of the pack ahead of those guys? Are they kind of slow to update?

So I guess at the moment, most of the conversations we have with clients around AI are -- if you go back, I think one of the points made in our presentation was that they're quite cautious in nature. Most of the conversations are around how are you using it? Where is the data being held, where is it being processed and how are you still compliant with GDPR.

And in fact, on the 20th of May, so just last month, the pensions regulator issued a statement about AI. And that, I guess, all acknowledged that there were potential opportunities to, for example, give members better service through AI, but a large part of it was reminding trustees that they're ultimately responsible and that they need to be governing this properly and making sure people are doing it safely. So I would describe most of the questions we get are around how we're doing it safely. We haven't really had much conversations yet around the impact on pricing. So we'll have to see. And that, I guess, really will be driven by what our competitors also do.

It is true that in the past, where more automation has come into services, particularly things like administration, delivering better member outcomes, that hasn't put pressure on prices. People have seen automation as a real positive and actually a higher value service than one that doesn't have automation. But as I say, we'll see how that plays out, but we're not seeing that pressure today.

In terms of the big I guess we don't say much about exactly what we're doing on AI in this forum because we know our competitors watch it and listen to it, and they know that we scour their websites, too. So people are all a little bit coy. So probably a good anecdote I had is with one of the insurers I was speaking to. So we went into a session about the sort of AI that we've got and the tools that we've built to help them. And their feedback was you're the only firm we've seen that actually got something tangible about how they can use AI to help us. So that's an example of one. But I don't believe that other firms out there are ahead of us.

I wanted to ask first about Polaris. So if you could just talk about the revenue that you achieved in FY '26, what you expect at the beginning of the year? I appreciate that some of that has also fallen into the core business. So if you just sort of unpack that. And then you talked briefly about the pipeline for insurance consulting revenue.

Just if you could talk a little bit more about that. Are you expecting some improvement in the Polaris revenue line? The next question was about, so if you, your sort of underlying organic growth in '26 was really good if you strip out McCloud. And on the base of consensus, that assumes a slowdown in that path -- sorry, that rate of growth. So what's in there? I mean what's exciting you about '27? And what are you a little bit more cautious about compared to what you achieved last year? And the last thing, just if you could help us now on share count, what we should expect for this year? And if I could just throw in there potentially with the firepower or the balance sheet strength you have, what you thought about in terms of buyback?

Do you want to take the first one on Polaris?

Yes, definitely. So yes, Polaris in the year, if you want to take the organic or inorganic figures, you'll see a number for Polaris revenue of about GBP 16 million, something that and in the year before we acquired, we expect, we probably expect it to be about 15. It's probably a little bit better than we ultimately expected. It did do 17% in the year we bought it, but there was a big tailwind to those insurance projects on implementation of IFRS 17, which were coming to an end. So overall, really pleased with that performance. But you're right, there's a little bit of nuance in the performance. And it's quite -- I think it's worth unpacking it a little bit because it demonstrates another nice feature of the transaction that we've been really pleased about.

One of the big contracts that we won and delivered mostly in H2 that was a Polaris contract is providing support to one of the bulk annuity providers who are struggling a little bit to cope with the number of schemes that they're taking on, having won them over the last few years in a sense of their own success.

And needed to scale up their internal team to handle that quite quickly and ultimately also probably need to adapt and change their systems and modernize the way that they do things. That was a very good project for us. And the phone call for that project came into Polaris, part of XPS now, of course, but it came into one of the Polaris founders. We had an MSA with this insurer, a contract that you could just go and start work on the next day because of Polaris, where XPS didn't have that previously. So we mobilized at one point as many as 30 of our people in there, helping and making this right. And they were very successful in doing so.

And I'm pleased to say that insurer is continuing to provide a really good service with the help of XPS. So we did a good job. And we're still there today doing it. The run rate for that contract this year is likely to be pretty material and pretty significant. You characterize that certainly as a Polaris deal, but it's a Polaris contract. But it is interesting that Polaris would not have been able to deliver that without being part of XPS. The first phone call they made was to say, well, this is fundamentally pensions work. That's not their expertise. They probably would have turned it down if they hadn't been part of that.

But instead, we mobilized people and sent them in. And that's fantastic because that's what the deal was about, is bringing the best of both, and you could call out a revenue synergy. To your point, moving back, which is a subtle one, but an important one, it is fair that the 30 people that we deployed were already busy somewhere else. So there is a sort of substitution effect that you don't see a net revenue growth for the business, the group as a whole because we just did a little bit less of other projects that weren't say time critical within the pensions business because we threw resource over to insurance.

But no, it's a nice problem to have that because as you then recruit more people because there's just more demand because you're having such success with insurers, you ultimately can get to the point where that is revenue accretive. For the group this year, it arguably wasn't, but there's every reason to think that it certainly can be.

As we continue providing that support. We should say we've had calls from other insurers with very, very similar challenges. The insurance industry is genuinely creaking with taking on the pension schemes at the pace at which that's happening. And we are delighted to help and one of a small number of firms who can genuinely help. And the example I've given, by the way, before alongside calling us, if you like, a big 4 accounting firm is called, they also sent in a bunch of bodies, but they couldn't deliver the project because their expertise just isn't the right expertise, whereas for XPS, it absolutely is because of our heritage and history.

Pipeline for clients to unpack it, we think insurers had a relatively fallow year off the back of IFRS 17. And what we saw last year was a lot of reviews of preferred supplier lists and master services agreements.

And it was a great year for us in the sense that we renewed every one that we were on, and we added more. And I won't give you client names, but the FTSE 100 level insurers where we have been added to wider services that we can now provide under preferred supplier agreements and so on, which is fantastic and really sets us up. And what we're seeing is the volume of support that insurers need definitely looks like it's ramping back up and our sort of weighted pipeline of opportunities for 2027, for FY '27, the rest of this year and into '27 is really healthy. And importantly, a bunch of things that are not going to need resourcing from the pensions world, but instead are truly going to be Polaris engagements.

So a bit of all of that going on makes us genuinely really excited about what we might achieve. It leads into your second question about what we're really excited about for FY '27, which that is a part of it. But yes, more widely, really excited about the opportunities that there are around this emerging world of surplus and run on. There's a lot happening.

There's new providers, there's transactions like the Aberdeen deal that might be replicated, the super funds beginning to appear into the market. We're in detailed discussions with some of those and so on and just the range of advice that our clients in general need. So yes, we're excited about opportunities to keep the momentum going.

In terms of that sort of the organic growth rate moderating from 12% this year and the consensus sort of mid- to high single digits, inflation does play a part in that. Inflation is coming down. Secondly, some of the sort of the high-margin businesses, which have grown from a standing start such as risk transfer 4 years ago, generating about GBP 1 million. Last year, we delivered about GBP 20 million from that. To compound at that rate is not possible. So there's a sort of a slowdown within that growth rate. It will still continue to be very strong.

Just this year, we've been involved in writing 46 deals. And obviously, as you know, these are multiyear projects that don't just complete in 1 year. So yes, look, I think it certainly doesn't reflect the ambition of the management, as you know. So -- but in terms of the capital allocation, the share count, yes, we have -- we don't try and call the market on this, but when we spot the opportunity to sort of top up the EBT, which is used to satisfy the vesting of awards and therefore, protecting shareholders against dilution. That's what we've done. In terms of formal sort of buybacks, we see plenty of other opportunities of more effective capital deployment, and you can see that from our track record of M&A and also the pipeline that Paul talked about in terms of what's available. So that would be our sort of first option in terms of capital deployment. But of course, the Board will consider all options if we're sitting on a pile of cash.

It's Rahim Karim from Cavendish. A couple of questions, if I may. Just on the medium-term outlook, the 5-year ahead slide, I think, Paul, that you presented. The right-hand side didn't include the word U.K., whereas the left-hand side did. And I was just wondering if that points to some international. So I'll leave the smiles maybe to answer that question.

No, I'm smiling a little bit. I certainly wasn't some kind of intentional subliminal signaling. I think the answer is probably in the pensions world, in our heritage, the U.K. is a unique market. And there isn't -- while there are defined benefit schemes and complexities around other parts of the world in Germany, the U.S., we're not going to enter that market and be better than the people on the ground locally. So we're not going to go international probably in the pensions world. But in the wider financial services consulting world, absolutely, there is a broader international market. London is a true center actually for excellence in things like insurance company regulation solvency, et cetera. It is very -- the regulations are much more universal and much more similar in other parts of the world.

So if you do an acquisition in the future, it's possible that you will get a business that already has an office in New York or an office in Paris or Milan or somewhere in which case -- and we'd be very open to that. But it will be more into that diversification play into the future, I think, than in what's been historically our heritage of core.

And maybe if I could just build on to that a little bit. It also feels like there's a slight pivot, not away from actuarial services, but consulting more generally. Is that fair as well?

Not quite because the services we're talking about insurance companies, a lot of them are just actuarial services and support, that's Polaris heritage as well. There's a broadening here. wider finance transformation programs, implementation of technology, the way insurers consolidate and handle big data safely, securely, all things we do for big pension schemes apply very well across the board. But an awful lot of it is still actuarial consulting work just for a different end user rather than a pension scheme.

And I promised to ask my questions together now. -- just on the -- I think it was James' question earlier around pricing. I mean if you have time and material pricing agreements with your clients, how do you think about that? And how are they thinking about that? And I'm going to we talked about capital allocation and use of capital, it's a pleasant surprise that the dividend is up 11%. But to that point, isn't there something better that you could do with that extra few percentage if there's attractive M&A delivering 20% plus returns?

Just on the pricing one, -- so yes, with our clients, we've got a mix of fixed fee contracts and time costs. And probably now we're pretty neutral. They roughly come out with the same answer, and it's just a phasing of when we get paid versus when we do the work. Going forward, we see ourselves moving far more to fixed fees or fixed pricing for contracts. Now often a project kind of you don't see in advance, you wouldn't cover that in a fixed fee. But I think rather than say we'll do that work on time cost, we'll be looking to quote pretty fixed fees for more of the work than we currently do.

And I think that's probably going to happen across all professional services businesses.

On the dividend, as I said, the dividend was about 4% ahead of market expectations in cash terms, and leverage terms, it doesn't sort of move the dial a lot. But obviously, for the future, you would have seen in the consensus, the guidance is about 5% growth. So it would be more in line with profits, continuing with the sort of progressive policy. But yes, I do take your point about sort of if there is capital deployment opportunities available elsewhere, then yes, that would get reflected in what we do, but we will continue with a progressive policy.

Thomas from Davy. Just 2 questions, if I may. Firstly, on the insurance business.

I noticed that you added the general insurance to the tangible addressable market -- total addressable market. I was wondering, do you see more growth opportunity there? Or where is there more growth in life or general or what the split is for the insurance business specifically? And then secondly, on AI, it continues to drive efficiencies. Do you think there's any scope that it could change hiring practices in the future?

Great. I'll take the first one, maybe Ben take the second. So your first question about the insurance market, yes, the general insurance market and the life insurance market are also a Venn diagram overlap, but they do have quite different characteristics as well. The life market is dominated by a smaller number of very large institutions. and the general market is a much wider market of even a few hundred much smaller institutions.

The Venn diagram overlaps with somebody like an Avida and so on, but actually, they are fundamentally quite different markets. And yes, the model that we've successfully deployed that Polaris historically successfully deployed that we've acquired works into the general insurance market as well. And we've begun to deploy contractors into that market where there's XPS capability to understand the needs of the client and to fulfill it in that manner. And so that's a little start, and it's only a very small start. But we definitely see big opportunity in that market. And again, in looking for an acquisition target, an acquisition target that would enable us to bridge that gap from life into general would be really, really interesting to us.

There's a lot of technological change there. And because they're smaller, -- it's a different market, but you generally are probably going to find it slightly easier to just get access to the very senior people and just deliver them value. It isn't gigantic procurement-led processes that it can be at the giant life companies.

It's rather more agile than that and a market that we feel that you could penetrate therefore, reasonably quickly if you've got something genuinely interesting to say.

So the second question was on AI and efficiency and hiring practices. Yes, we're spending a lot of time and effort looking at how we can roll out AI in a really agile way to make sure we've got the governance around it. And part of that is looking further ahead, how it might change kind of exactly what's done in the business by kind of automation versus people. So absolutely, that will kind of change, I guess, the way we look at resourcing in the future. Probably we see this as being we'll have more capacity. We have clients that would love us to do work for them and love to do it more quickly for them. So actually, we think that's probably the outcome, having kind of similar sized workforce or we're growing a little bit more slowly than otherwise would have done, but us being able to effectively provide more services than we probably.

Hal Potter from Bank of America. Just one for me. Going back to that margin point, would you consider compromising on margins to go after those larger public sector schemes you were talking about earlier? Or can we really consider margin expansion to persist regardless of client type?

I mean I think it sort of boils down to -- and forgive me for this analogy, but the shareholders prefer more profit. And if some of those public sector opportunities are very big, public sector pension schemes are obviously still open and therefore, they can persist sort of evergreen schemes. And our reputation in public sector is very strong, enhanced by the timely delivery of the McCloud Remedy project, et cetera. So absolutely, we would go after those big opportunities because ultimately, we believe that, that's going to be in the interest of the shareholders.

Any more questions?

I think there are any online -- thank you Thanks, everyone.

Good day, ladies and gentlemen, and welcome to XPS Pensions Group plc Interim Results Presentation. [Operator Instructions] I would like to remind all participants that this call is being recorded.

I will now hand over to management to start the presentation.

Hello, everyone, and welcome to the presentation of our results for the half year ending 30th September '25.

In terms of what we are going to cover today, we'll start with the key highlights, but we thought it might then be a good idea to cover the big themes that are happening in our market today. So you can see what's been keeping us so busy and why it's going to keep us busy for a long time to come. I will talk us through the details of the financials, and then we'll look at our key divisions in turn, and we'll say a bit about our culture and brand before Ben wraps up with a summary and more comments on the outlook from here.

What will come across throughout, I think, are 3 key things. We're continuing to achieve strong growth with revenues up by double digits again. We have good visibility of continued high demand for all our services, given everything that's going on in our markets and in the coming years. And we have made really good progress in expanding our addressable market.

So to look at it in more detail, during the period, revenues grew by 13%, of which 8% was organic, with of course, the remaining growth coming from the acquisition of Polaris, which completed shortly before the start of this financial year. And we're also really pleased to report healthy growth in our profits with adjusted EBITDA up 8% and EPS up 9%. And this performance is especially pleasing, giving us measured against a very strong first half last year, and that included material one-off revenues from the large McCloud remedy project.

If you adjust for that and the one-off impact of the NI increase in our cost base, the underlying organic performance of the group is double-digit revenue and profit growth once again. Snehal will give you the details of all of that in a second, but in terms of what's driving it, I think it's fair to say that the pensions market is going through more change at the moment than probably any time in the last 20 years.

The step change in the financial position of defined benefit schemes has created a really wide range of opportunities for our clients. And it's also against the backdrop of other things such as new funding rules working their way through the system, continued work on the GMP remedy and quite more besides. Now these things are going to persist for many years to come, and we're really well placed to help our pension scheme clients. We've continued to invest in technology to be able to get cutting-edge advice, and we can do so really efficiently.

We've also won new clients in the period across all of our lines of service, but perhaps most eye-catching to me, we're delighted, of course, to have been appointed to be the Administrator for the Metropolitan Police. They've got around 80,000 members and will be, by some way, our largest public sector client. Now that appointment was, of course, really supported by our strong reputation following the successful delivery of McCloud work more widely.

Now back in the private sector, part of the big structural changes that are going on has, of course, been the increase in insurance transactions in recent years and the gradual merging of the insurance and pensions ecosystems. And it was, of course, against that backdrop that we acquired Polaris, an insurance consulting firm, just before the start of this financial year. And we're really pleased with how the acquisition has gone so far, probably especially pleased with how it's opening up opportunities for us to deploy XPS capabilities in support directly of insurance company clients.

And really importantly, more widely, we continue to do things in the right way. And as you'll know, we place a huge value on having a strong employee-centric culture. We measure this, and we've been really pleased with the results of our most recent employee survey. It confirms that we've got a happy and motivated workforce. And again, that's something that sets us up really well as we look to the future.

So before we get into the detailed business line review, it's helpful, I think, to just give you a quick reminder of how we structure ourselves within XPS. So we've got 3 key parts to the business. Actuarial & Consulting, and this is where in plain English, we're trying to make sure that there's enough money in pension schemes to provide all the benefits in the future. It's also where we help schemes to ensure that they're compliant with a wide range of regulations that apply to them.

In the Investment business, we advice on where to invest the scheme's assets and associated things like risk management. And of course, these 2 parts of the business work really closely together indeed, often resources shared between them, so you'll often hear us refer to the advisory business, which ultimately captures both of them.

And the third pillar is a little different, and that's Administration. And that's where we deal with the members directly themselves. It covers record-keeping, answering member questions, and ultimately, anything that's needed to ensure that we pay the right benefits to the right people at the right time.

Now in terms of our markets, the bulk of our work is for pension schemes. But as we've previously mentioned, we're increasingly providing these services to life insurance companies, too. And for example, insurers writing bulk annuities,sometimes need help with actuarial calculations, which is where our advisory team could help them after deal has been written and the insurer needs to keep all the records and do all the administration, again, something that's core here to us at XPS. Our markets are large, we estimate that around GBP 3 billion a year is spent running occupational schemes in the U.K. and the market for people supporting insurers is a very large one as well.

So before Snehal runs through the financials, it's helpful to explain some of the key trends in the private sector to find benefit world, which are driving our performance. So as schemes come down from the top and as they travel down the road, they need all of the typical care and maintenance support, so things like administration, regular funding investment and covenant reviews, and they also need support to react to any market or regulatory changes.

Now if I went back 5 years or so, schemes were typically quite a long way from the junction and actually, it wasn't a junction as the only real opportunity was to head to buy out. Over the last few years, two things have changed. The first is that due to large rises in gilt yields, schemes are now much better funded and they're now much closer to the junction. And indeed, many have already reached it. And this has driven an increase in the activity in the bulk annuity market, which you can see from the chart on the top right.

Now the second thing that's changed is that schemes now have a choice as the concept of continuing to run the pension scheme in the pensions regime. Perhaps using the techniques employed by insurers is now a valid option. And it's an option that's really gaining traction, particularly among schemes with over a few hundred million pounds of assets. So for example, our most recent conference, where we had around 300 external guests. We asked the audience which three of their schemes they're likely to take, and 40% said they're exploring run-on, 38% said they were likely to head to buy out with the remainder undecided. And that's a huge shift as a few years ago, the vast majority would have been heading to buy out, and this is really, really interesting to us.

So what does this all mean for XPS? Well, for schemes that choose to run-on, it's very simple. As they will continue to need all of the ongoing consulting and administration services they get today, they will probably need a bit of extra support around things like risk management and how to manage surplus release. When schemes go down the buyout route, it creates a lot of extra work. It typically takes 3 to 4 years from a scheme deciding that they want to pursue an insurance transaction to actually completing a buyout.

During this time, we typically earn a multiple of the care and maintenance fees given all of the work associated with the transaction itself and the broader work required to ultimately decommission a pension scheme. So this creates demand in the short term, but it is a double-edge sword as in the end, we have 1 less client. For a fact, each transaction, there's an insurer on the other side, and they often need help, too, whether that's onboarding the schemes or carrying out the administration that the pension scheme was previously doing.

So whilst buyouts might reduce the pension scheme addressable market, it creates opportunities for XPS to help insurers and effectively increases the insurers' addressable market. And this is something that we'll touch on as we go through the presentation.

Another strong half year, as Paul said, with revenue growth of 13%, of which 8% was organic. This is particularly pleasing as we have significant renews from the McCloud remedy project in the prior year comparator. During the period, we continued to invest in building our insurance consulting team. We also had the increase in Employers National Insurance from 1st of April this year and the prior year comparator included a strong margin contribution from the one-off McCloud remedy project. Adjusted EBITDA margin has therefore fallen by 1.2 percentage points to 26%.

However, normalizing entirely for the National Insurance increase and the one-off impact of McCloud, adjusted EBITDA margin has improved from 24% to 26.3%. We remain on track to deliver on full year expectations and further improvements in the margins over the medium term. Strong operational performance and a lower share count has driven adjusted diluted EPS of 9.7p which is up 9% year-on-year. The first half is cash outflow heavy with the payment of the full year bonus and the final dividend from the prior year.

Despite that and the additional debt due to the Polaris acquisition, leverage remains below 1x at 0.88x. In line with our progressive dividend policy, the Board has declared an interim dividend of 4.1p per share, up 11% year-on-year underscoring our continued confidence in the business model and growth prospects.

As we said in June, due to the significant overlap between our consulting service offering, we have now moved to disclose and discuss performance in our advisory, administration and SIP divisions. Paul and Ben will go through each of the divisional performance shortly, but let me give you the highlights.

As I said earlier, group revenue grew 13% year-on-year, 8% was organic. And if you exclude the significant impact of the McCloud remedy project in the comparator, organic revenue growth was very strong at 12%. Costs, which I'll cover next, have grown 15%. This includes the impact of the higher Employers NI as well as investing in growing our insurance consulting team. Normalizing for these items, cost growth is below the revenue growth, meaning operational gearing continues to improve in the underlying business.

Net finance costs have increased following the acquisition of Polaris. Adjusted profit after tax has, therefore, grown 7% year-on-year. A lower share count due to continued share purchases through the EBT has helped deliver adjusted EPS growth ahead of the growth in profit after tax. On the non-trading and exceptional items, which are all consistent with previous treatment and largely noncash, increase in amortization of acquired intangibles reflects the acquisition of Polaris, the acquisition related to remuneration is the buildup of the Polaris contingent consideration, and higher share-based payment charge reflects an increase in senior equity plan awards as well as a higher share price.

Total operating costs were up 15% ahead of the 13% growth in revenues due to the one-offs mentioned previously. Within that, staff costs are up 19%. Of that 19%, 5% is from the Polaris acquisition and expanding our insurance consulting team, 3% is from the impact of the higher Employers NI. Therefore, you can see that on an underlying basis, staff cost growth of 11% remains below the organic revenue growth of 12%. The remainder of the increase is driven by an 8% increase in headcount as well as inflationary and promotional pay rises.

Increase in IT costs reflect a higher headcount, continued investment in tech, particularly cybersecurity, partially offset by some benefits of Aurora flowing through. Other costs are largely in line with prior year as we continue to maintain strong cost discipline.

Adjusted operating cash inflow of GBP 22.8 million equates to a 68% conversion. The 84% conversion last year was flattered by project work with cash received in advance. Like-for-like conversion was 72% last year. Guidance for the full year and future years remains conversion of between 90% to 95% as we continue to grow.

We spent GBP 14 million during the half year to buy back shares, which have been used to satisfy vesting of share awards. The CapEx includes GBP 3.3 million on continued development of Aurora, our administration platform, and the remainder on BAU IT spend as well as leasehold improvements. The full year CapEx guidance is between GBP 10 million to GBP 11 million as we continue to invest in our technology. Net debt at 30 September was GBP 62.2 million and a covenant leverage of 0.88x. Currently, we have GBP 47 million of undrawn facility from the total of GBP 120 million available until March 2029.

Just to remind you of our capital allocation priorities, which remain unchanged, the focus remains on capitalizing on the organic opportunity within our core and tangential markets. We want to continue investing in creating market-leading proprietary tech that creates a competitive advantage as well as drives efficiencies. Relative to the size of the business now, we will continue to be CapEx-light. We will continue with our progressive dividend policy, and we will continue to scan the horizon for earnings enhancing strategic M&A opportunities, but we'll remain disciplined in our approach.

So in advisory, which as a reminder, covers actuarial and investment advice to pension schemes and insurers, we saw strong performance. Growth was 19%, which includes Polaris, and organic growth was 9%. Now we've been and continue to be very busy supporting pension scheme clients with a wide range of topics. The market evolution that Ben described has created a lot of demand, and we're busy advising clients on which path they might want to take, whether to look at an insurance transaction or to look at running on to benefit from surplus.

We've introduced new functionality on our software platform, Radar, to help with this debate, and we've developed some really smart financial models more widely that we believe are the first in the industry to be used with clients. Now we've innovated in other areas, too. For example, in Investment Consulting, where client needs are evolving in the age of surpluses. For example, this is Xchange, which is a service that helps pension schemes and others trade in illiquid assets, something that's been really topical lately, the schemes looking to ensure may wish to sell assets before maturity, while others running on may wish to take advantage of buying opportunities.

At the same time, our pension risk transfer team has been really busy, and we continue to see a strong multiyear pipeline of activity in that area. We're also still busy working through GMP projects for clients and there are many years of this work ahead as well. Now we've also been doing more work directly with insurers, and we're seeing a trend where the increased volume of transactions in recent years, many of which are only now being onboarded by the insurers in what's always a multiyear process, is giving rise to a need for some additional support for them as they scale up their operations.

Now XPS is really well placed to help, and the relationships and contracts that Polaris have proved invaluable in accessing some of these opportunities. And more widely, we're just really pleased with how well Polaris is integrated. Something that we've also seen is a number of the insurers have reviewed their preferred supplier list in recent months ahead of future years where they expect to need a lot of external support. Polaris, now, of course, part of XPS, has been renewed in each of these reviews. And happily in a number of cases, we've actually expanded the services to which we're now on the preferred supplier list. And that's really important for the future, and it leaves us really well positioned in the years ahead.

So in terms of the outlook, put it simply, we expect all of these things to continue. The industry is going through some really fairly seismic changes, and it will work through the system over a period of many years. It's also giving rise to a healthy new business pipeline. Change always brings opportunity to differentiate, and we're investing in our propositions, in our technology and our people to be able to rise to the challenge.

Onto administration, and this part of the business provides services to private and public sector pension schemes as well as bulk annuity providers. And in simple terms, we can split the work into core administration which is the day-to-day admin and probably accounts for around 2/3 of the business and then projects. So growth in the half was 6%. However, this is the part of the business where the McCloud revenues were earned in the prior year. And as we've mentioned, these were one-off in terms of the size and delivery method. Now whilst the McCloud project is finished, it's been really positive for our reputation in the public sector.

And actually, over the recent months, subject to contract, we've been appointed to provide pensions administration to the West Midlands Police Force. And as Paul mentioned earlier, in the last couple of weeks, subject to contract, we've been appointed to provide administration to the Metropolitan Police, which is the largest force across England and Wales. Now if we exclude the impact of McCloud revenues to look at the underlying performance, revenue growth was 16%, which is very strong. And this was driven by growth of around 10% within core administration as we onboarded some large new clients, most notably John Lewis and the SEI Master Trust.

The performance was also driven by a 30% increase in project-related revenues, reflecting the high demand from private sector schemes for support with things like data cleansing and GMP work. And also around the pensions dashboard where the first schemes are now being connected. Looking ahead, we expect to see strong demand for projects given the broader backdrop for defined benefit schemes. We're also seeing a strong pipeline of new business opportunities across both the public and private sector markets, and our service quality and Aurora platform, we've got a really strong story to tell there. So we're optimistic about continuing our success.

There's also a lot going on around operational efficiency and technology. So the project to migrate all of our schemes onto Aurora is progressing well, and this will reduce the pay aways to third-party system providers, but having all schemes on a common platform should also bring efficiency. The next big milestone here is to complete the migration of public sector schemes by February next year. And we'll then have 1 more system to migrate off which we're aiming to do by the end of 2027 or early 2028.

We also have a number of other projects underway to use technology to improve our service proposition both in the core administration business, but also around things like data cleansing. Finally, as we touched on, a lot of these services are increasing needed by insurers as they write mobile annuity business. So we're working to grow our footprint in that market, too.

Turning to our SIP business, where we set up and administer SIP and SSAS arrangements, and revenue in this part of the group was up 10%. Part of this came from fee increases applied since the comparable period, and an increase in the number of SIPs under administration. The rest came from the sharing of interest on cash balances and this element increased by around 18% compared to the previous period as the underlying cash balance has increased.

In terms of sales over the period, these were solid, perhaps not as strong as the previous record year due to inheritance tax changes, which impact people who might have considered pensions in their tax planning and also more generally, the uncertainty created by the budget speculation. However, looking ahead to sales pipeline, it does look robust as our products are highly rated, and we have a strong reputation and network among the IFA community. Also, about 1/3 of our new SIP policies are written through our place on the St. James's Place, an open work panels, where the scope for us to get a bigger share of the business written through those channels.

Finally, on the operational side, there's lots going on to drive efficiency and great service. And one particular initiative here is to increase the take-up of our online portal among advisers and members to enable more self-service in the future, and we're now up to around 90% sign up, which is great.

So our culture at XPS is something we think about a lot. We think it's really, really important. As we often say, we believe that happy, motivated people will look after each other brilliantly, and then in turn, they'll provide great service to our clients. Now we do a great deal to foster a culture where we work together, we share and celebrate success, and we provide opportunities for people to develop and have interesting varied careers. We measure how we're getting on continuously, but we do have a particular focus on our annual staff survey, which usually runs every October, and we've literally just seen the first cut of these results, and we're delighted that they're really good.

The survey is comprehensive, but the most important single figure that captures the overall mood is our employee Net Promoter Score, and this was plus 32 this year, which we're told exceptionally high for a professional services firm. We had good results last year. So it's really pleasing to see the scores in a wide range of categories, getting better still too, even against those measures, as you can see on the slide.

Now our culture has also won more awards in recent times. And again, we're really proud of this, and we think it's important as it really helps us with recruitment of talented people. Now it's, of course, really important to maintain and build on our really strong brand in the market as well. We held a large client conference in October. It was the biggest event that we've ever done, and you can see some of the images here of what was a very professional event with a real wow factor about it and how we engage people and energize people more generally.

Truly, it was more of a kind of Ted conference than it was a pensions event. And it was attended by a lot of our clients and really importantly, by many prospects as well. We covered all the key topics in the industry at the moment, and we've got some great feedback from the attendees, and it's already led to a number of new business opportunities, which is great.

So to summarize, it's been another good 6 months for the group, where we've continued to deliver on our strategy and traded in line with expectations. The underlying business is performing well, and this is a function of all of the market and regulatory changes that we've seen, but we've also done a good job of developing our services so that they focus on what clients need. We've also had some great new business wins during the period, too.

But generally, we're also seeing examples where the Polaris relationships are helping us to deploy our broader pensions capabilities into the insurance market. And if you strip out the change in Employer NI and the impact of the McCloud project, we've continued to deliver operational gearing.

Looking ahead, we expect to remain busy. It's hard to overstate the significance of the changes that we've seen in the private sector defined benefit pensions market over the last couple of years. So we expect to be busy helping our pension scheme clients decide on their long-term strategy and then helping them with the implementation, which typically involves lots of projects. And the quality of our service offering and reputation in the industry means we are well placed to continue winning more clients and mandates.

We'll also continue to invest in our services. So we're looking at how we can use AI and technology to enhance what we already offer and create USPs, and we're also expanding the services we offer to the insurance market. In terms of operational gearing, we do believe the scope for further margin improvement through the migration of schemes onto Aurora and the use of technology to drive efficiency.

And finally, and most importantly, it's worth saying that our success today has been underpinned by our culture, and we're firm believers that having happy motivated people is critical to providing a great service to clients, which, in turn, drives strong financial outcomes. So our culture will remain a key focus for us, and our employee Net Promoter Score of plus 32 shows we're really well set there.

That's the end of our presentation. Thank you for listening.

[Operator Instructions] Our first question is from Steve Woolf from Deutsche Bank.

Congrats on the strong results this morning. Just a few for me, so bear with me. Can you just sort of talk a little bit more about the type of work that you're being referred from Polaris into pensions and how quickly does those sort of referrals and wins come through into the top line? Is it something for a sort of full year '27, just think of it in that area? Do you have the amount of people you need to do the work, given you've been so successful with a number of these contracts.

Secondly, in terms of McCloud, congrats on the Met Police. Am I right in thinking they didn't complete McCloud? Or have I got that wrong? And is there opportunities in other areas?

And then finally, for the investments you're putting into the insurance market at the moment in that business, does that constrain any margin improvements you might have been thinking about in near term? Just wondering now that you're sort of 6 to 8 months into Polaris, your thoughts there?

Thanks, Steve. I'll kick it off, Steve. So in terms of the type of work, yes, we refer to Polaris referring into XPS, of course, we don't think of it quite like that. We are all one firm these days. But the opportunities that it's opening up for us to deploy sort of long-term longstanding XPS resource into insurers is what we're referring to and I think what you're asking about. And yes, the opportunities there relate to Polaris relationships and existing contracts that they've got to do work for insurers, it's often quite difficult. You need to go through procurement. You need to be on preferred supplier list. You need to then have a master services agreement and so on with them. And in some cases, those are only updated and renewed every few years.

Now the nice thing with the Polaris acquisition is that they already had such arrangements with all of the big insurers in the bulk annuity space pretty much. And as such, therefore, XPS had a license to go and do work in all those insurers straight away in a way that might have been a bit more difficult for that acquisition.

Where we've seen that really pay off has been helping insurers primarily with onboarding of pension schemes where they've written a buy-in transaction in the last year or two and are getting to the stage in the process where they now need to assume responsibility for administering the pension scheme and paying the benefits and so on. And they've seen quite an increase in volume of work that they themselves need to do because of the increase in volume in the transactions.

And we are a really obvious port of call, it is our bread and butter to do the administration pension scheme on a day-to-day basis. So offering sort of surge support to help them as they onboard new schemes is something that we've seen happen quite a bit, really kicked off in the summer in some cases. And it will help us with revenues in the second half of this year, and we expect that generally to persist into the following year as well.

So lots of opportunities opening up for us in general in that market to keep helping those insurers. As an example of one of the larger cases that we've won, it is an example where the phone rang for one of the Polaris handlers, who is now an XPS partner. And that introduction enabled him to say, yes, we can definitely help. We've got lots of resource at XPS. They would not have been able to help using just Polaris capability, if you like, in the past. So it's a really great example for their relationships, their contracts, but XPS underlying expertise and resource has been able to deliver. So in combination, that's is just great. That's exactly what we hope to happen when we bought Polaris. It's really, really pleasing to see that come through.

Now in terms of have we got enough people, we are actively recruiting. When we put people in to help and provide support to an insurer, they were already busy on pensions scheme clients. Now we've got enough people across the whole piece to be able to do that and still provide a great service to our clients. But of course, it does mean that, that's a sort of surge in busyness, if you like, across the group for our people when that happens, and we'd like to get more people in because we believe we can keep them busy when we do, do that. So I wouldn't say it's causing its operational problems, but more positively it's actually if we had more people, we've got to keep them all busy. So we do have vacancies and we are actively recruiting across the market to try to help to therefore, fuel via upgrades that will come with that. Ben, do you want to talk about the McCloud and the police question?

Yes. I mean that's very quick. I mean it's an early stage in our conversations on that, on new clients. So there will be discussions about exactly what support they need as part of the onboarding and going forward. So it's probably a bit too early to talk about any specific work or projects that we might do. And in terms of your question on investment in Insurance Consulting, so look, I think the short answer is, all of that is in the numbers that are in market at the moment. So we're not expecting any margin sort of contraction as a result of that. Of course, just to reiterate what's in the consensus is, a continued margin improvement of at least 0.5 percentage point from FY '27 onwards.

That's great. Ben, just what's -- the Metropolitan, did they defer McCloud? So is there work still to be done regardless of who does it? It has to be done in the future or was that work eventually completed?

I think it's underway. So it will be something we'll discuss about whether they need any support, but I believe it's underway. But as I say, it's not clear yet what support they might need as and when we're getting involved.

Our next question is from Portia Patel from Canaccord.

Can you hear me?

Yes, we can.

I've got one on the competitive landscape. So we've noticed within the last 12 months, there's been a bit of consolidation within your space. So Howden acquiring Barnett Waddingham and Gallagher acquiring Redington. So I just wondered whether that had created or changed the landscape for you, created opportunities for you? And could you see potential further consolidation in the space occurring?

Thanks, Portia. We've got quite a fragmented market. There are a lot of competitors. We have the big multinationals, the big 3, but then there's quite a lot of companies that are probably top of the pack of the next mid-tier competitors, but there are a few that are fundamentally pretty similar in size and scale to us and quite a long runoff.

Clearly, the deals that you mentioned there, Barnett Waddingham, a competitor, it's still a bit like us. They were a partnership, therefore entirely employee-owned and they were acquired by Howden, as you say. An interesting transaction that Howden don't have footprint in pensions advisory, they did a bit of work in employee benefits, I think, obviously, quite an acquisitive company. A transaction like that may well be very good for Barnett Waddingham and their clients and so on, but it is a big change and probably quite a cultural shift when something like that happens.

And like I say, that could go very well. But obviously, we will keep our eyes peeled to whether there are opportunities around people and clients when our competitors go through quite a lot of cultural change at times like that. So that's interesting to us. And in terms of Gallagher and Redington, Redington is a small specialist investment advisory firm and Gallagher have a wider pensions capability. So again, you can see that transaction making terms. I don't think it's nerve catching really in our world.

As to whether there'll be many more, I mean there might be. There's private equity ownership out there. Some of our competitors are owned by private equity firms and possibly part of their journey might be to consolidate and achieve benefits and so on from doing so. I think we are just very proudly independent and feel like we are on a very, very clear uncomplicated path. We're very happy with our ownership. We think we benefit from being a public company in terms of the sheen that gives us, the transparency that gives us.

And we are not going through any complicated cultural changes or mergers or anything like that. And while that's the case, we've got the best few years probably of demand out there from our clients to go and exploit. So we're very comfortable. I'm very glad really that we don't have any of those things to wrestle with while we just go and try and maximize the organic opportunity in our core business.

Of course, we did do Polaris, but it's really pretty small in the scale of things, and it opens up a wider market, and it doesn't in any way distract us from the real big price that's right there in front of us in the pensions market right now. So in terms of wider M&A, we do still scan the horizon, but it will be more likely to be things that accelerated our diversification into wider addressable market than looking at the competition more directly in our historic core market in pensions.

Our next question is from Mandeep Jagpal from RBC.

Can you hear me?

Yes, we can.

I'll stick with 3 for now. Firstly, congratulations on the win for the 2 police schemes for admin. I was wondering if you could provide the expected revenue contribution from these wins, and when you expect the revenues to start coming through?

Secondly, you spoke about run-on as an alternative end game that may be suitable for some of your clients, and that we've seen in recent weeks that some of your peers are talking about a role commercial or DB super funds can also play. Is this something that you have consulting expertise in? And is there a meaningful proportion of your clients that would consider this end game?

And then just I think you talked at the start about new client wins across the business. What kind of feedback are you getting from the tender process, processes that you enter and reasons why you do win and reasons why you don't win?

If I kick us off with the police schemes, the two largest wins that have been confirmed, West Midlands, which is a very large force, and we are pleased that there's an outsourcing of their in-house team there. McCloud perhaps was almost a project too far and demonstrated the value of an outsourced provider with economies of scale and really deep expertise and good technology perhaps to them, and we're delighted to take that onboard that involves the GP transfer of some of their people into our Birmingham office to then deliver the services back, which is great.

And then, of course, really recently, the Metropolitan Police win, which has been mentioned already, and we're delighted that that's, by some way, the largest force in the U.K. and becomes our largest public sector client. In terms of revenues, these things are clearly a little bit commercially sensitive. But let me say a little bit, particularly about the Met Police win and the feedback that we got on that, which is really, really positive. We are actually part of a consortium led by DXC to win that because DXC -- well, what the Met Police put out to tender was a much, much wider transformation process and technology transformation process.

I think pension is about 10% by value of the contract that was put out to tender. So we tethered ourselves to DXC in that as did one of the two other firms with different elements of the contract. We're delighted collectively to win. On the pensions aspect, specifically, you get feedback from procurement about how well we've scored. We scored 10 out of 10 overall for our submission. And so we were clearly a very strong part of that consortium and absolutely delighted to play our part collectively in winning that work.

And it's a 7-year minimum contract term. It's expected to go live in 2027 is the formal announcement, but we are reasonably optimistic that actually things happen more quickly than that as the latest it can go live. But probably, we will go live a little bit ahead of all of that.

Now I should say, in terms of those revenues and what's commercially sensitive, it's clearly a healthy good contributor to future growth for us. It's what we have to do in order to meet the growth expectations that there are in the group in the future, of course. But it's nice to tick that box kind of a year in advance of when those revenue numbers will start to show up in our numbers to give us that extra little confidence boost that we are already making progress towards hitting those numbers in the future, which is a really nice thing.

Your second question was around run-on and commercial DB super funds. So I guess I probably start here when we advise clients because our role is to help them understand all of the different options and then help them with whichever route they want to go down. So we have expertise to support clients across whether the pros and cons have run on, pros and cons of an insurance transaction and the pros and cons of different options like consolidators. And the market is evolving quite quickly. So there are sort of broader kind of things to consider as well. So yes, we have the expertise to effectively support plans to consider and implement those types of arrangements.

In terms of I think you asked, do we think we'll have loss of clients going down those routes? I think it's probably too early to tell. Probably my observation though is that clients who are comfortable continuing bearing the risk and would like the benefit of a surplus emerging, I think, like the control and therefore, do it in a run-on pension scheme environment. Schemes who believe that they want to discharge or companies would like to discharge the risk, I think, have a real focus on member security, then the insurance regime is really powerful in providing security. And so I generally see people at the moment, fall into all of those camps, and DB super funds aren't something that I think is getting a lot of traction. But as I said, the market is evolving and it could change, but that's where things stand today.

Then your last question, Mandeep, was about feedback on tenders. I should say what we see is tenders and increasingly, our pipeline reflects the evolving market. I've already covered administration, public sector administration is a little different and private sector administration, a very healthy tender list there. And generally, feedback is, we are recognized as a very high-quality provider with a particular expertise in large schemes and first-time outsourcing, having done, we think, probably over half of all of those that have been done now in the last decade or so. Obviously, John Lewis was recent and that's onboarded successfully. And I think the market can see that we've digested that and are ready to do another one of those which is really exciting for us.

I guess the other place that we're seeing quite a healthy increase in pipeline has been investment consulting, and that reflects the changing financial position particularly defined benefit schemes in the private sector. Essentially, many have a strategy set many years ago that would involve the need to outsource quite a lot of daily decision-making because you want to really actively trade your way out of deficits and you might use what's called a fiduciary manager, an outsourced fund manager basically to make proactive decisions and really actively trade.

But with that comes quite a lot of expense. It is an expensive way, but the idea would be net of fees, that's justified if you need to chase a really high return. These days, pensions don't need to chase a high return. That world has shifted. If you're very well funded, a sensible care and maintenance type strategy is more the order of the day. And so then there becomes a question as to whether you really need an expensive fiduciary manager and so on? And we've had some success in winning appointments over the last 6 months and a very healthy pipeline as we look forward in taking on that care and maintenance type roles on an advisory basis where people choose not to use those more expensive fiduciary management offerings that some of our biggest competitors in particular provide.

So feedback on those tenders is, we're providing services that meet the market's need right now. And I would say in general, that's the theme where what we're doing for our clients today is different to what we were doing from 3 years ago and 6 years ago, but we're always good, I think, having the right services at the right time, and that is critical. And feedback on tenders is generally, yes, what you guys have got is very relevant right now. And when we win, that's generally why is because we're quite quick out of the blocks to adapt to the world that's changing around us.

Our next question comes from Rahim Karim from Cavendish.

Hopefully, you guys can hear me. A couple of questions from me. The first, just on addressable market. I noticed that in the pensions, business has kind of gone from GBP 2.5 billion to GBP 3 billion. I was hoping that you might be able to just talk about what's changed in terms of your assumptions there? And also just on insurance, how you think that GBP 1.5 billion might evolve in the next kind of year or so as the Polaris acquisition kind of beds in and the opportunities that you talked about kind of manifest themselves.

The second question was kind of a little bit more detailed in terms of the EBT scheme and the rate of purchases that you're doing there and that's seen a step-up, obviously, trying to perhaps limit the impact of dilution. If you could give us a sense of where that might be for full year and what we should be thinking about in future years, that will be great.

And then finally, just maybe to touch on the pensions opportunity and the administration opportunity in the public sector as a whole. The announcements or the wins that you've had in the last month or 2 are encouraging. And how much more is there to do in that? Obviously, it's a smaller part of your business, but in the context of the group, where would you like to see that being in a few years time?

Thanks, Rahim. So I'll take your first question, the addressable market. So as you can see in the graph in the slides, the data is taken from the Professional Pensions survey where they look at some of the statutory entities that operate in our market. Obviously, we give the most amount of detail in terms of divisional breakdown, et cetera. But unfortunately, we don't have the same luxury from our competitors. So it is a little bit of an aggregation of the revenues of those relevant firms.

Of course, we know that some of those do operate in markets that we don't, consulting markets particularly. But that's what's led to the sort of the increase that looking at their most recent accounts, they add up to just over sort of GBP 3 billion. Of course, we don't go and look at all of the sort of the long tail that may exist within that market.

And I'll also just take your question on the EBT, the share purchase. So we've been on a sort of journey on this that we're not sort of trying to put the market or anything here, but it is more about protecting the dilutive impact of the share of remuneration that we have. And we sort of look at it very carefully in terms of the cost of the additional debt, the interest, et cetera, and make sure that it is overall net positive for the EPS, and that's what just happened. We had a very big sort of save as you add scheme maturing this year, which is, of course, great for our people and the motivations, et cetera, and we had a number of the PSPs also maturing. So it is to satisfy those awards.

So you will see the share count has reduced year-on-year, and we expect that to be the sort of the year-end position. We don't sort of assume any significant buybacks in the future. But for the future years, expect the share count to go up as we've sort of said in terms of the PSPs, et cetera, they are an issue.

Rahim, I think the second part of your first question was around the target addressable market for insurance -- around insurance companies. So the figure of GBP 1.5 billion there. So actually, when we initially looked at that market, we had some external work done on the size of it. And so the GBP 1.5 billion comes from that work and its U.K. actuarial services in effect to insurance companies and is consistent with other figures that I've kind of seen trying to do similar things.

I guess what I'd probably say is that the opportunity for us, I think, is bigger than that in terms of we do work that isn't strictly actuarial, broader consulting and, obviously, administration support. We can provide also the line between work for life insurers and general insurers, which is a different market, another very large market. I think that line is quite great. And so from our perspective, I think, we think there's a much bigger market than GBP 1.5 billion that will hopefully be open to as we go forward on our journey. So really, really exciting. That's a really big increase for us in our target addressable market.

And on public sector as a whole, different market for us. And yes, we're pleased with the headway we're continuing to make, especially in Blue Light Services, for a focus on police, there are opportunities more widely across fire as well. The market in public sector, there are definitely opportunities for us to continue to expand our footprint there. But it's something that takes time. You need to be on framework agreements and so on that our only review are fairly and frequently, and if you're not on framework agreements, you're not able to participate in bidding for public sector work and so on.

We are optimistic that over time, we have an opportunity to get on to this framework agreement because of the great work we've done in certain areas of the public sector and the reputation we have for McCloud. And there are a lot of challenges out there in the public sector right now around the quality of administration on some very large schemes and indeed, residual McCloud type issues that need to be resolved in other large public sector schemes that are some way behind, at least primarily because we've done police and the rest of the public sector market has a little bit of a way to catch up.

And we are, of course, as you'd expect, in active conversations about trying to get involved in wider work, one for us to report on in future periods. I think we certainly have ambition to do more there, and it is quite a wide big market. But it's all quite chunky. And if you win an appointment or two in that, it can be very, very material. So it can be a little bit binary as you go through those processes. But yes, we're on that path very much, and we've been trying to maximize the great reputation that we now have.

I think there was a last question about what we see the opportunity in terms of pensions administration of the public sector.

Our next question is from James Fletcher from Berenberg.

Just kind of 2 or 3 questions really within the same area for me. Just with regards to kind of bulk annuity transactions. Just if you could give some commentary around that 2025 number, so you've got year-on-year decline. Just in terms of what's going on there, I guess it's been run-on for surplus impact. Then also if you could talk about in terms of your own risk transfer team. I know in the past, you talked about them doing GBP 50 million from almost a standing start. Just if you could kind of give us an update there.

And then just finally, you've said in terms of economics of -- or you're agnostic in terms of run-on for surplus versus buyout. Just if you can give a bit more further explanation as to why you're agnostic on kind of different economics there.

Sure, of course. So the first question was about the predicted volumes and number of deals in 2025. And I think James, you've almost answered your own question there. So what we're seeing there is, if you think, schemes generally are getting better funded, as we talked about earlier. But if you like, run-on is probably something that's getting more traction with schemes above a certain size. And it doesn't have to be that big actually to gain traction, but certainly bigger schemes are more interested.

So in 2025, what we're seeing is fewer, very large transactions in the market, which is reducing the volume, but still a lot of schemes heading that way, particularly the smaller ones, which accounts, therefore, for the larger number of deals that we have predicted to happen. And I would anticipate that will be a similar trend kind of if you look forward a year or two as well.

So for our team, I think that's the key thing is what matters for us really is number of deals in the market more than the total asset size. And it is true that a large multibillion deal will have a bigger fee attached to it. But you're better off doing 3 small deals than one large one. It doesn't scale linearly with the asset size. And a GBP 50 million transaction still has a need for a huge amount of advice and support just as a GBP 5 billion one does. And I know we can't share the screen to show you. But if you look back at that slide, whilst we see the total asset value of transactions beginning to plateau, quite possibly decline this year is because of fewer big deals.

But the other chart -- the thing that we overlaid on that chart in a different color was the number of deals, which is still increasing, and we think that still will. So basically, the bulk annuity market has shifted from a few massive deals to lots more smaller deals. And from a fee perspective, that's actually good for us. If we just hold market share in that environment, we will do more revenue. And that's what we're generally seeing happen. Our pension risk transfer team has been really, really busy, probably had its best first half of this year, building on the best half it's ever had in each of the prior halves for some time now. And we do optimistically think that's going to happen for the next few years as more and more small schemes come to market.

Also lots of the work we're doing is sort of year 1 of a 3-year or 4-year process still. So again, the visibility of the revenue in pension risk transfer is pretty strong and with kind of record numbers of schemes still coming online, starting that process, we think that's going to be a very, very busy area of our business for quite years to come.

In terms of the economics of being agnostic, well, I can partly answer that question that lots of small schemes coming on is really, really good for us because we're so busy helping them all, but for the larger schemes to run on, and that creates opportunity in two ways. And of course, it creates an extended longevity. If we still have the largest clients many, many years from now, that care and maintenance work that's done for them, they are the biggest payers of fees in the market. And so that's very healthy for us from a longevity perspective.

There's lots of work to help them design and implement run-on strategies. And the last bit is, it really creates a new opportunity. Probably, there's some pension schemes out there that thought 2 or 3 years ago, I'm not that enamored perhaps with my actuarial provider or what have you, but why change from 2, 3 years away from potentially doing an insurance transaction anyway. If now you're thinking, I'm going to run on and set a course for 10 or 20 years, you need the very best actuary advice, technology supporting that and really brilliant ideas about implementation.

And actually, we are all starting to see some bigger opportunities we're opening up where people are realizing that actually this is slight change for direction, almost a bit refreshed start. And rather than just hang on to the advisers that we've got, we should review the market. And that's a brilliant opportunity for us because as you know, whilst we've got some large schemes, awful lot of them sit with the big 3 firms next to us, and we do see opportunity to potentially unsettle one or two of those actually take for change just by being better and quicker to embrace these opportunities.

Our next question is from Vivek Raja from Shore Capital.

A couple of areas I wanted to explore, please. The first one is cost and operating leverage. And the second one is organic versus overall revenue growth.

So on the cost and operating leverage, Snehal, you usefully sort of provided some commentary in your opening remarks about what underlying EBITDA margin progression was if you sort of strip out the NIC and the McCloud impact in prior year. What's driving that within the business? What are the sort of moving parts there to drive that efficiency gain? And I wonder if within that, you could talk about what you see in terms of wage inflation in the first half.

The next question was about the organic versus total revenue growth. So Polaris has obviously contributed clients and demand into sort of core pensions business. If you sort of think about that bit, I wonder if you could sort of just provide a bit more context to the organic revenue growth number with that sort of bit from Polaris into the core business?

So in terms of what's driving that, so the numbers that I quoted in the presentation, as I said, it's sort of -- if you take out the impact of McCloud entirely, of course, life won't be as sort of straightforward as best. So if we weren't doing McCloud last year, I'm sure we would have been doing something else. But obviously, it's quite difficult to estimate. So that's the reason why there is a marked improvement in the margin.

What's driving that? A few things. So in terms of the cost itself, we have come off 2 of the 4 systems that Aurora is going to be replacing. So some of that cost benefit has started to flow through. Secondly, the mix of the business as well. So we're doing more of the risk transfer work, for example, which is higher margin. And then generally, sort of the cost discipline in the business about organization pyramid, et cetera, having more junior staff joining and then developing them, reducing the sort of the input cost of the business, et cetera. So it's a consolidation of all of those things that are playing through. So those things are going to sustain and actually get better as we come off the other systems that Aurora will replace.

Ben, do you want to take the one about the revenue mix?

Yes. So when we report revenue for Polaris, we just report growth figures that are organic and inorganic is what I mean. When we win new contracts that Polaris have introduced us to, but we're delivering with excess resource, which we did some of in H1, and we expect to do more of in H2, we don't record that as inorganic. We just record that as organic growth. It's being delivered by XPS resources and so on. You obviously could argue that it could be either. But to be very clear, if that means that the Polaris contribution to the group, as a whole is stronger than it might look by just looking at purely what we're describing is inorganic growth because it is pushing revenue opportunities directly into XPS using XPS resources that existed before that transaction happened.

So we take a little bit of care with that. Whilst there are big opportunities there, there is a possible substitution effect, right, that our people, who are very busy doing chargeable work for clients in pensions, have been deployed at an insurer and are doing chargeable work, but that substitution effect doesn't necessarily instantly mean that we earn more revenue. We're just earning it from a different end client. In fact, we probably do see an incremental benefit because it drives increased busyness as people within the pensions business have to do a little bit more where their colleagues have gone and started being deployed at insurers. But it isn't a pound for pound is what I'm sort of guiding you to be a little bit careful on that.

Now clearly, if we can backfill resource, and we're sustainably deploying resource at insurance companies, which we think is significant to what is going to happen, then actually it does drive organic growth, too, without that substitution effect ultimately happening. But there is very positive news that we are managing to deploy resource into insurers because it's just broadening and deepening relationships more generally, and it opens up all sorts of wider opportunities and it boosts the brand that we have in that market.

And for the wider, more pure insurance consulting work that we'd also like to win, it clearly gives us a big head start and opens up that opportunity more generally too. So we're really, really pleased. We've had 7 months -- or 8, 9 months now of Polaris. And yes, we're really pleased with how that's generally going and what it's doing for the group as a whole.

Could I just push you, if you could, provide a bit of detail there. On Polaris versus core and organic, how much of the organic print came from Polaris, if you could just quantify that? And secondly, Snehal, if you could just talk about what wage inflation you've seen in the first half?

Sorry, yes. So the wage inflation within that was probably about 4% and this is sort of the promotions on the 1st of April. In terms of the contribution into the work that we sort of started for the large insurer, which has started from the actuarial team, that only started into the September, really. So there's a very small contribution within the pensions number for the half year.

Our next question is from Thomas Ryan from Davy.

Hopefully, you can hear me. Two quick ones, more broad-based, if I can. So firstly, I know at the full year results, AI projects were mentioned as maybe driving some efficiencies, so I was wondering if you had any updates on that area? And then secondly, with the budget next week, there's a lot of speculation out there. I was wondering if there's anything specific that you'll be focusing on that you think could have a big impact on your clients and then how that will affect XPS as well?

I'll take the first question on AI. Yes, so with the full year, we talked about a few initiatives that we had we achieved 1 or 2 things. So one of them was about improving our service and the way that we can analyze call information that we get within our contact center. The other was about the way that we ingest post and how we can make that process a little bit more efficient. So we continue to look for those types of opportunities. We're exploring for example, at the moment, how we might be able to use more technology in AI around things like data cleansing, which is one of the sort of challenges within the industry.

So there's probably not a huge amount new to say other than that we're on the same trajectory as we were before. We still do think that there are a lot of opportunities to use technology, more generally to improve what we do and also improve our efficiency, which is sales. So it's one of the things that we think embeds is some optimism about future margin improvements.

Then in terms of budget changes, in general, as a reminder, things changes to tax rules, wider regulatory changes and so on and most of these changes that are almost universally good for our business because it means that our clients are affected by it and need advice and support as to how they're going to respond to such changes. So we do work with bated breath. I don't think anything hugely dramatic is likely to happen that will affect the big picture landscape of defined benefit, defined contribution schemes that we advise.

But definitely some filling at the edges that's being talked about, changes in salary sacrifice arrangements and so on. So those affect pension contributions. There could be changes in things like thresholds for lifetime allowances and so on. You never know. And if those things do happen, then yes, we'll have a wide range of clients that need advice about how to respond to it. I don't think any of that would be earth shattering, but it would be nice to be incremental each client across our many hundreds of clients needing probably a few thousand pounds or more of advice. It can never do us any harm when those things come through. So we still wait to see.

While the government policy has been set for some time to try to release pension scheme surpluses, that's the bigger news. And that's been confirmed earlier this year and the pension bill is making its way through parliament. We're awaiting regulations and so on and all of that. I don't see any question that that's going to change. It is part of this government. And indeed, the prior government's agenda to try to help drive growth in the U.K. economy.

We are very supportive and think it's very sensible and it has cross-party consensus. It doesn't affect tax revenues, but it does help drive the growth agenda in a positive sense. So I think we can probably be pretty confident that, that's all robust and going to continue.

Our final question is from Mandeep Jagpal from RBC.

A couple of areas I don't think have been addressed yet. Firstly, could you please provide a reminder on whether the impact of McCloud remedy work in H2 earnings was similar to H1? And then great to see the inroad you have with the BPA players. Does the M&A in the PRT base create a change in the addressable market now compared to when you bought Polaris either from consolidation of insurers meaning fewer to serve or actually mean they're more for you to serve in the short term, and they look to integrate?

On the McCloud revenues, broadly last year, the revenue was 50-50 H1/H2. In terms of the BPA players, so I guess in terms of the opportunities for us in that market are all of the operations, I guess, that the BPA providers have. So as they've written more business, they often need more support around cash flows and pricing, more support around onboarding and cleaning data and transitioning and migrating it and then more help around administration. And I don't think any of the transaction in the market impact that opportunity.

In terms of activity itself, well, clearly, we have an insurance consulting team who is able to support insurers going through change, understand kind of these transactions and support them through it. So from that data lens, it should create a bit of short-term extra opportunity for David and the Polaris team. But in terms of the underlying opportunity around the bulk annuity market, I don't think it has any real impact on that.

There are no more questions. I'll now hand back to management for closing remarks.

So well, thank you, everybody, for joining. And thank you very much for all the questions, which were really, really addressing all the key areas, I think. So thank you for that. But we're really pleased with another really, really positive half year. We're delighted the growth in the core business of 12% and profit growth of more than 12% when you adjust for the very large one-off project that we had last year, is extremely healthy. And the sort of core big beast, if you like, about pensions actuarial and administration businesses are just rolling on and producing great performance. Against the backdrop, where there's a lot of market tailwinds, our clients need a huge amount of help.

So we're very excited about continuing to exploit the opportunity, to be agile and to be ahead of the competition in supporting clients against the backdrop of all this change that's multiyear in nature and going to roll on for some time to come. And of course, at the same time, really enjoying the fact that we're making some really good head roads in broadening our horizons and deepening relationships with insurance companies at the same time. So thanks very much for listening and attending. I guess, we wish you all a very good day.

Thank you for joining today's call. We are no longer live. Have a nice day.