Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 21% to $40.8 million, surpassing the high end of the guidance range.
- EBITDA grew by 18% to $10.2 million, exceeding the initial guidance of 10-15%.
- Strong second-half performance with operating cash flow up 36%, indicating robust financial health.
- Successful integration of two key acquisitions, Altor and EPM, contributing positively to revenue and team synergy.
- Dividend increased by 7% to $0.85 per share, reflecting confidence in future cash flows and shareholder returns.
Negative Points
- Earnings per share (EPS) declined in FY24, primarily due to significant non-recurring costs in the first half.
- The SMSF division underperformed, attributed to internal integration distractions and fewer new business wins.
- High investment in new services and acquisitions led to $2.6 million in non-recurring costs, impacting first-half profitability.
- Increased competition in the wealth management space, particularly from private equity firms.
- Potential dilution of EPS in FY25 due to the issuance of additional shares for acquisitions.
Q & A Highlights
Q: How do you feel about Prime Financial's progress over the past year, considering the new acquisitions and service offerings?
A: Simon Madder, Executive Chairman of the Board, CEO, & Managing Director: FY24 was a significant inflection point for us. We managed to balance organic growth with new services and strategic acquisitions. The team has done a fantastic job, and we have strong momentum heading into FY25.
Q: Can you provide an update on the integration and revenue contributions of the Altor and EPM acquisitions?
A: Simon Madder, Executive Chairman of the Board, CEO, & Managing Director: Both acquisitions have exceeded our expectations in terms of revenue contributions. More importantly, the integration of teams has been seamless, leading to joint transactions and new fund establishments. We see great upside in these acquisitions.
Q: What were the specific drivers behind the decline in EPS for FY24, and what are your expectations for FY25?
A: Simon Madder, Executive Chairman of the Board, CEO, & Managing Director: The decline was primarily due to significant investments in new services and acquisition-related costs in H1. However, H2 saw a return to normalized EPS levels. We expect EPS to stabilize and improve in FY25, although the increased share count from acquisitions will have a slight impact.
Q: Can you explain the underperformance of the SMSF division in FY24?
A: Simon Madder, Executive Chairman of the Board, CEO, & Managing Director: The SMSF division faced integration challenges and didn't win as much new business as expected. However, we have returned to growth mode in the last few months and expect substantial growth in FY25.
Q: What is the expected split between organic and inorganic growth to achieve the $100 million revenue target within three to five years?
A: Simon Madder, Executive Chairman of the Board, CEO, & Managing Director: We anticipate a roughly equal split between organic and inorganic growth. Organic growth will come from existing services and cross-selling, while inorganic growth will be driven by strategic acquisitions.
Q: How do you view the current M&A landscape, and are there many opportunities?
A: Simon Madder, Executive Chairman of the Board, CEO, & Managing Director: We are very selective in our M&A approach, focusing on customer profiles and future needs. While there are many opportunities, we reject about 95% of them to ensure alignment with our strategic goals.
Q: Can you provide more details on the non-binding indicative offer (NBIO) you have out in the market?
A: Simon Madder, Executive Chairman of the Board, CEO, & Managing Director: The NBIO is for a Melbourne-based wealth and funds management business with $11-$12 million in revenue and $600-$700 million in funds under management. We are in advanced stages of due diligence and see it as highly additive to our existing operations.
Q: How is the competitive landscape affecting Prime Financial, and what are your competitive advantages?
A: Simon Madder, Executive Chairman of the Board, CEO, & Managing Director: While the market is competitive, our unique value proposition lies in our ability to offer comprehensive business and personal wealth management services. This integrated approach sets us apart and allows us to deliver superior value to our clients.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
