Sequoia Financial Group (ASX:SEQ) 1H18 results & outlook


by Rachael Jones

Sequoia Financial Group Limited (ASX:SEQ) Managing Director & CEO Scott Beeton talks about the company's 1H18 results, the acquisition of InterPrac and consolidation in financial services.

Rachael Jones:
Hello I’m Rachael Jones for the Finance News Network. Joining me today from Sequoia Financial Group (ASX:SEQ) is Managing Director and CEO, Scott Beeton. Scott, welcome to FNN.

Scott Beeton: Rachael, thanks for having me.

Rachael Jones: First up, could we start with a brief introduction to your company?

Scott Beeton: Sequoia Financial Group is listed on the ASX; our market cap is approximately $32 million. We provide financial services to self-directed investors and their trusted advisers, such as an accountant, financial planner, stockbroker and a mortgage broker.

Rachael Jones: Now to your first half 2018 results. What were the highlights?

Scott Beeton: The highlight for us in the year, from a financial point of view is our revenue for the six-month period, cracked $20 million, which was great to see. Which gave us a respectable net profit after tax, around $630,000 and our EBITDA was slightly higher, around $1.25 million. And that highlights the strength of the business. But more importantly, had we completed the InterPrac and Morrison transaction at the 30th of June, so from the 1st of July, that number would have actually gone up with revenue over $32 million and our profit EBITDA, around $2 million approximately.

Our deferred revenue account comes about, because we have certain products and services in our business. Because of the accounting standard, we can’t actually recognise all the revenue up front, as revenue. So what happens is we have deferred it over the life of the period. So if that product lasts for three years, we actually have to put the revenue over a three-year period. However, we’ve actually had most of it come to us, we’ve received it and we never need to refund it. So in the period, that account went up over $2.3 million and the account is now over $5 million. So if we work more on a cash basis our financials - that would be adding considerably more money to our bottom line. And our profitability would increase over $2.3 million, for the period.

Rachael Jones: Can you give us an overview on other products that you provide?

Scott Beeton: We’re actually quite broad in what we offer to the market. So our target distribution goes through to your account, your financial planner, your stockbroker, your mortgage broker, or alternately direct to your mum and dad investor. So an example of a product and service we provide to an accountant, we provide our legal document services, where that could be the establishment of a self-managed superfund deed. Or alternately, the corporate trustee for it. Another service we provide direct to the consumer is our online stockbroking service, such as provided through our subsidiary, Morrison Securities.

Rachael Jones: Now to the acquisition of InterPrac. What was the rationale there?

Scott Beeton: I look at it a lot more as a marriage of two companies with very similar culture, and wanting to achieve similar things. So InterPrac as a whole is a diversified financial servicesfirm, predominantly in licensing for financial planners. It also has awhole suite of products and services around self-managed superfunds. And we saw that as very complementary to Sequoia Financial Group products and services, where it completes our full suite of solutions for the self-managed superfund market. But it also allows us to broaden our reach into financial planning and also to the underlying clients of financial planners.

Rachael Jones: What impact will InterPrac have on your 2018 financial year results?

Scott Beeton: Before InterPrac, just remember we completed that transaction on the 1st of December 2017, so we’re looking around for a seven-month period. We’re looking atadding approximately $10-15 million of extra revenue. And we believe that will produce between $750,000 to $1.5 million, to the bottom line for the year.

Rachael Jones: Now to a more general question. How do you see the financial services industry changing over the next five years?

Scott Beeton: Basically, the financial service market has been changed greatly and continues to change. There’s plenty of disruptive technology that keeps coming and the industry is at the front of understanding, and being able to cater for these changes. But I really see technology really impacting on the day-to-day life of investors and advisers, and basically enhancing our real experience.

Rachael Jones: Last question Scott. Where do you see the company over the next 12 months and longer term?

Scott Beeton: Over the next 12 months is really we need to keep bedding down our two acquisitions we did last year, which was InterPrac in December and earlier than that, we did Morrisons. And continue our path of doing what we do better, growing our profit, our core business. And the good news isthe strength of where the business is at today with the cash we have at bank, which is over $12 million, is that we formalise our dividend policy. I’m happy to announce that we’ll be paying between 20 per cent and 50 per cent of our profit after tax, net profit after tax. And moving forward after or longer than 12 months, is that we just want to continue our growth strategy of acquiring other businesses that are value accretive, but also focusing on everyday business.

Rachael Jones: Scott Beeton, thanks for the update.

Scott Beeton: Thank you.


Rachael Jones

Finance News Network
Rachael comes to FNN after working for Fairfax Media covering international breaking news, including the global economy and politics. She joined FNN in February 2018. She has reported on Australia’s finance news for various organisations since 2000 and has also interviewed a number of key business players, including Bill Gates. Rachael has also worked across a number of countries, including the UK and the US.