The share price of Netwealth Group Ltd (ASX: NWL) rose 3.6% in reaction to the FY19 result.
Netwealth was founded in 1999, it’s a financial services technology company that helps financial planners manage client money is a user-friendly way whilst also reporting and charging for services. The founding Haine family still own more than half of the company.
Here’s What Netwealth Reported
Netwealth revealed that its total revenue increased by 18.6% to $98.8 million which was a result of continued “strong” funds under administration (FUA) growth and increased transactional revenue and other revenue.
Over the year FUA grew by 29.9% to $23.3 billion, with a useful net inflow of $4.33 billion. Funds under management (FUM) rose by 38.7% to $3.95 billion with FUM net inflows of $899 million for the year.
Economies of scale played a part to allow operating expenses to only increase by 14.2% to $46.8 million, showing attractive operating leverage. This helped EBITDA (click here to learn what EBITDA means) rise by 22.9% to $52 million. The EBITDA profit margin improved from 50.8% in FY18 to 52.6% in FY19.
Net profit after tax (NPAT) rose by 23.9% to $36 million. The consensus of the market was that net profit would come in at $35.38 million.
Netwealth Management Comments
Netwealth Joint Managing Director Michael Heine said: “Netwealth delivered further strong growth across all key financial metrics, while continuing to increase our ongoing investment in the platform.
“We maintained our position as the number one rated platform, increased our investment in our people, enhanced brand recognition and grew market share.”
Netwealth Dividend
The Netwealth Board declared a final dividend of 6.6 cents per share, bringing the total year dividend to 12.1 cents per share – which is an increase of 14.6% compared to the total dividend paid for FY18.
Is The Netwealth Share Price A Buy?
Netwealth pointed out that the effects of the Royal Commission are benefiting it and that its investments into people and IT will help it continue to win new customers.
In FY20 it expects FUA net inflows to be more than $7 billion from existing advisers and new business opportunities with a trend of advisers looking to change platform. However, the company did warn that the EBITDA margin is likely to be slightly lower because of pricing strategies and the investments.
Netwealth is clearly doing very well, but it appears to be priced for the growth it is creating. According to CommSec it is valued at over 36 times the estimated earnings for the 2020 financial year. I think there are potentially better value investments, such as the ones in the free report below.
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