Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sequoia Financial Group Ltd (ASX:SEQ, Financial) reported a significant increase in net profit after tax, reaching $24 million, heavily impacted by the sale of Morrisons.
- Operating profit from continued business was up 88% on the previous corresponding period, reaching $8.7 million.
- The company successfully achieved its revenue target, reporting $124.6 million in revenue from continued operations.
- Sequoia Financial Group Ltd (ASX:SEQ) paid a fully franked dividend of $0.07 per share, reflecting strong cash flow and franking credits.
- The company has a strong balance sheet with $16.8 million in net cash, up 79% from the previous corresponding period.
Negative Points
- The company experienced significant disruption in the second half of the financial year, impacting operating momentum and adding additional costs.
- There was a slight reduction in staff numbers by about 5-6% over the 12 months due to streamlining efforts.
- The operating margin for licensee services is still below the desired target, currently at 7% with a goal to reach over 8%.
- The company had to write down $7 million on goodwill and intangible assets due to impairment in certain divisions.
- Despite the positive financials, the company faced challenges with regulatory issues and had to put strict regulatory strategies in place for some advisers.
Q & A Highlights
Q: Can you provide details of the revenue impact of Sequoia Venture Eight on the improvement in revenue reported for 2024?
A: Garry Crole, Managing Director and CEO: Venture Eight has been undergoing a monitoring and supervision process, and we haven't accepted any new business from them since December 2023. The impact on revenue is minimal, around 2-3%, due to strict regulatory strategies we implemented.
Q: Why haven't you referenced NPAT and run targets and numbers in your presentation like you have in the past?
A: Garry Crole, Managing Director and CEO: We listened to shareholder feedback and decided to keep it simple by focusing on operating profit according to standards, rather than using personal terminologies.
Q: Can you please speak to the strategic share portfolio? What is the intention in holding this and what makes it strategic?
A: Lizzie Tan, Chief Financial Officer: Our strategic investments include companies like CenterPoint Alliance, which offers potential business synergies. We also support IPOs and corporate finance opportunities that align with our core business.
Q: How do customers that Sequoia serves with software currently manage their compliance with regulatory obligations? Is there an opportunity to further service them with software?
A: Garry Crole, Managing Director and CEO: We use third-party software like RS, Fourth Line, and in-house programs to manage compliance. We are investing in technology to improve margins and provide better services to our clients.
Q: How realistic is it to make earnings accretive investments in the current climate where valuations are expected to increase relative to impending rate cuts?
A: Garry Crole, Managing Director and CEO: We are open to both small bolt-ons and transformational acquisitions. Our strong cash position and access to low-interest debt put us in a good position to make such investments.
Q: Given the current share price, is there any commitment to more aggressive buybacks?
A: Lizzie Tan, Chief Financial Officer: While we will continue to consider buybacks, we believe there are better opportunities in acquisitions that offer higher returns. We also aim to provide dividends considering our strong franking credit balance.
Q: Why wouldn't Sequoia free up capital from its ASX-listed investments for M&A or shareholder returns?
A: Lizzie Tan, Chief Financial Officer: These investments are strategic and generate returns. They also offer potential business synergies. If needed, these liquid investments can be quickly sold to free up capital.
Q: Has there been any inbound interest in Sequoia, whether from industrial or private equity, in the last while?
A: Lizzie Tan, Chief Financial Officer: We can't comment on that. If there were any significant developments, we would make an ASX announcement.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
