Sequoia reports ‘disappointing result’ as revenue and profit drop

Sequoia Financial Group has reported a 22.7 per cent decline in total revenue to $61.1 million in its results for the first half of the 2023 financial year released on Monday.

Normalised EBITDA or operating profit was down 42.5 per cent to $3.2 million while the firm’s statutory net profit after tax dropped by 75.9 per cent to $630,510.

“On the surface this is a disappointing result when compared to 1HFY22, when total revenue was $79 million and normalised EBITDA $5.5 million,” Sequoia managing director and chief executive officer Garry Crole and chairman John Larsen said in the firm’s interim report.

“However, several extraordinary items have negatively impacted both our revenue and profit results, and we would encourage investors to consider these factors in full context when assessing our half-yearly performance.”

According to Mr Crole and Mr Larsen, the “major distortion” between periods was almost exclusively related to a deliberate reduction in new sales with the Sequoia Specialist Investment (SSI) business, which is part of the firm’s equity markets division.

“We took this decision because of our uncertainty around the direction of interest rates and the volatility of global bond and equity markets,” they explained.

“In HFY22, the revenue from SSI was $19 million higher than 1HFY23 with normalised EBITDA $1.6 million above 1HFY23. Going forward, we expect sales revenue from SSI to normalise at approximately $20 million per annum.”

For its licensees services division, Sequoia reported a 5.8 per cent increase in revenue compared to the prior corresponding period to $34.8 million, while normalised EBITDA was down 17.7 per cent to $2.0 million, impacted by previously flagged remediation payments.

“When considering market conditions in FY23, to achieve revenue growth in an industry that has seen a reduction in overall adviser numbers by more than 20 per cent and equity market volumes subsidence, the result in this core division is strong,” Mr Crole and Mr Larsen said.

Additionally, Mr Crole and Mr Larsen noted that Sequoia was “one of very few licensees that increased the number of advisers to whom we provide services”, with the firm reporting 343 advisers in its licensees services division.

Elsewhere, revenue in the firm’s professional services division fell 9 per cent to $4.1 million with normalised EBITDA of $0.9 million and revenue in the equity markets group was down 49.5 per cent to $20.6 million with normalised EBITDA of $1.6 million.

Meanwhile, direct investment revenue increased by 73 per cent to $1.8 million with normalised EBITDA of $0.1 million.

“Whilst we are disappointed about our half-year result on face value, the board and executive team believes the group can return to strong revenue growth and profit in 2HFY23 and beyond,” said Mr Crole and Mr Larsen.

“We expect the second half result will be far stronger than the first half and in line, if not better than, 2HF22 that saw second half normalised EBITDA of more than $1 million per month on revenues of more than $10 million per month.”