Netwealth boosts profit, eyes converting advisers

Netwealth boosts profit, eyes converting advisers

Netwealth Group has seen its underlying net profit rise by 23.9 per cent in financial year 2019, with new intermediaries accounting for a quarter of its inflows, and the group planning to gain more new advisers in the coming year.

The platform provider produced $35.9 million in underlying net profit for the year, while its revenue increased by 18.6 per cent from FY18 to $98.7 million.

Platform revenue was $96.3 million, up by 18.3 per cent.

EBITDA came to $52 million, up by 22.9 per cent from the year before.

The group’s funds under administration (FUA) grew by 29.9 per cent in the year to $23.3 billion, as funds under management (FUM) grew by 38.7 per cent to $1.1 billion.

Netwealth gained $4.3 billion in FUA net inflows, up by 4 per cent from the year before.

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Netwealth expanded considerably during the year, increasing its staff from 34 people to 271 people. It now manages 71,424 member accounts, up by 15 per cent, with 2,579 financial intermediaries, increasing by 13.6 per cent from FY18.

Inflows from 308 new financial intermediaries accounted for around a quarter of the FUA increase in the year.

Managed account FUM as at 30 June was $2.8 billion, increasing by 50.4 per cent from the year before.

Netwealth’s market share increased in the 12 months leading up to March by 2.5 per cent, with it being the largest specialist platform provider, according to a master trust, platforms and wraps report.

It plans to maintain its spot in the market by increasing its investment in technology, particularly across functionality, features and infrastructure, as well as developing new revenue streams.

Netwealth expects the number of advisers switching platforms will continue to increase, with it claiming it is well positioned to take advantage.

Chairman Jane Tongs commented likewise on the royal commission in her letter to shareholders, saying it presented the provider with opportunity.

“Some of the findings have had a positive impact for Netwealth and have led to an acceleration in the number of advisers from major wealth management institutions who can now use our services,” Ms Tongs said.

She added the platform provider conducted an internal review, resulting in client rectification costs and legal expenses of $1.1 million.

Managing directors Michael and Matt Heine noted a boom in Netwealth’s investor directed portfolio service.

“While our superannuation products lead the market and have grown strongly, we have also experienced significant growth in our Investor Directed Portfolio Services (IDPS or Wrap account), which now represents approximately 60 per cent of our FUA and 70 per cent of our annual net inflows,” the pair said.

Net profit for the period attributable to members was $34.2 million, growing by 64.7 per cent from the year before, although the 2018 figure included a one off $8.7 million cost of listing on the ASX.

Meanwhile, the 2019 net profit includes client rectification costs and legal expenses, as well as an impairment of $900,000 in deferred receivables due to lower than expected amounts received from the sale of discontinued operations in FY18.

Netwealth’s profit from ordinary activities before tax attributable to members was $50 million, surging by 71.6 per cent.

Earnings per share came to 14.8 cents, up by 24.4 per cent.

The fully franked final 2019 dividend to be paid 26 September is 6.6 cents per share, up from 5.38 cents the year before.

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