During the six months leading up to December, the troubled wealth group had conducted phase one of its operational review, which included the closure of its custody business, Dixon Projects Australia, and a wind down of funds in the US.
The reforms also made for cuts across staff with the group dropping 123 employees over the half and now holding a total headcount of 601.
This has followed on from an earlier squeeze of the business: in November, chief executive Peter Anderson told shareholders in the November annual meeting that the group had slashed its staff by 100 since April.
Evans Dixon reported with its first-half results the absence of the chopped staff’s fixed remuneration will save it approximately $12 million a year.
But the group has continued to invest in compliance, legal and professional development, with its spending up by $1.1 million for the half year compared with the prior corresponding period.
“We have installed a new and experienced management team to oversee this [transitioning] process,” Mr Anderson said.
“We have enhanced firm-wide governance structures and increased our investment in compliance and risk management. We have exited core businesses and are well progressed down the path of pivoting away from related party revenues.
“This has impacted our earnings but it is a necessary investment in the future. We have also reshaped the operating structure of the business leading to a significantly reduced but sustainable cost base.”
Operating expenses were down by 23 per cent year on year to $19.3 million for the half, yet staff expenses increased by 2 per cent to $62.8 million. The employee termination payments cost $1.7 million.
In wealth advice, the staff number dropped by 14 per cent to 235 and the corporate advisory E&P business was reduced by 5 per cent to 38. The Australian fund management segment saw its staff down by 20 per cent to 43 as the US fund management business was almost halved, decreasing by 47 per cent to 41 staff.
The group teams saw their staff reduced by 23 per cent to 121.
Evan Dixon’s net revenue was down by 7 per cent from the prior year to $102.9 million for the half, as the group implemented its operational review and saw a softer performance in its E&P and funds.
EBITDA dropped by 14 per cent to $19.1 million for the half while its statutory net profit after tax (NPAT) was $2.1 million for the half, down by 83 per cent.
Underlying net profit after tax and amortisation was $8.8 million, reduced by 42 per cent.
Looking ahead, the group has indicated it will be commencing phase two of its operational review over the next 12 to 24 months, where growth initiatives will increasingly become its focus.
Evans Dixon has forecasted an underlying EBITDA for the full year in the range of $36-$39 million, compared with its FY19 EBITDA of $37.1 million ($44.5 million when adjusted for its new accounting standard).
“We expect a near-term softening in performance due to our strategic exit from non-core operations, including the deliberate wind down of Dixon Projects [and] the re-positioning of the funds management business,” Mr Anderson said.
The funds management segment is being geared towards a “higher quality earnings base”.
Evans Dixon has also hinted at further investments for its advice infrastructure in the wealth advice business, preparing itself for future regulatory changes.
Wealth revenue flat, FUM down
The funds management business produced a net revenue of $31.2 million, 12 per cent down from the prior corresponding period.
While its recurring funds under management (FUM) revenues increased by 22 per cent to $22.8 million, the non-FUM based revenue was sliced by 57 per cent to $7.1 million. Performance fees contributed $1.3 million, improving on none in the prior corresponding period.
FUM was down by 3 per cent to $6.6 billion for the half, largely driven by strategic asset sales in the US property fund, URF, Evans Dixon reported.
There was a 22 per cent decline in underlying EBITDA to $7.9 million, with the rationalisation of the US operations.
The wealth advice segment’s revenue on the other hand stayed relatively flat, increasing by 1 per cent to $44.6 million. It remained the largest contributor to the group’s net revenue, at 44 per cent – while funds management gave 30 per cent and E&P 26 per cent.
Funds under advice, however, was on the up, ending the half on $21 billion, increasing by 17 per cent.
The E&P division generated a net revenue of $27.1 million, down by 13 per cent year on year.
Earnings per share were down by 43 per cent to 3.9 cents. The interim dividend was 2.5 cents per share, half of what it was a year before.
I used to run my own fund and went to ED with the expectation of getting professional advice. Products such as URF, CD, Fort Street New etc we’re offered, all of which lack liquidity and have underperformed. It will be interesting how the proposed class action goes.
I’m trying to unwind an ED client at the moment. Talk about vertical integration gone rogue, nearly every equity asset is ED, or a LIC run by ED, not to mention everything else. How you could think its appropriate to put people into an investment that you have to go on a waiting list for 6 months to get out of is beyond me
Hayne had the power and the opportunity to swiftly eradicate this sort of thing. Instead he gave it the green light, and chose to drown honest, ethical advisers in bureaucratic regulations that do little to improve consumer protection.
In the fullness of time Hayne will have had a bigger negative impact on Australian consumers’ financial wellbeing than a thousand Manny Cassimatis or Don Nguyens. And to think that taxpayers actually paid him to do it.
Further confirmation that the fees for service method cannot survive unless you attract high paying clients willing to pay more than the very modest $5k pa they were charging their lowest fee paying clients. Mum and dad clients who actually need advice are now forced to deal directly with the product providers. I just wonder who ASIC will blame when these mum and dad clients get riped off by the investment funds/insurers when there arent any advisers to blame for everything?
How so? Their fall from grace has nothing to do with their fee for service model (which they don’t really have). It is because they routinely put their clients into their own products which have significantly underperformed. Check out URF, CD2, Fort Street, etc. Their clients are bailing because they are sick of being put into dodgy schemes being run by ED.
Unfortunately, to remain profitable adviser firms are being forced to run their own MDA’s and in house investments. No longer can we charge sufficient fees on an ongoing basis to cover all the compliance and other rubbish that we have to do.
Even though the big “instos” like Westpac, AMP, CBA etc might be withdrawing from financial advice, the conflicted inhouse product model is still alive and well in mid size players like Evans Dixon. No doubt plenty of others will emerge in this space soon enough.
The RC should have gotten rid of these conflicted models through simple and clear regulation to ban vertical integration. But instead of simple reform, the bureaucratic old lawyer Hayne decided to drown everyone in even more bureaucratic laws, without addressing the core structural issues which were staring him in the face. Sure, the traditional instos might withdraw a bit due to reputational risk, but there are plenty of others willing to take their place. The net result for consumers is little additional protection, but lots of additional cost. Hayne and Frydenberg are both culpable.
The term headcount makes humans sound like cattle.
Yep, as usual its the staff who suffer due to management incompetence and ineptitude.