Sequoia Financial Group (ASX:SEQ) FY19 financial results


by Jessica Amir

Sequoia Financial Group Limited (ASX:SEQ) Group CEO Garry Crole discusses the company's FY19 financial and operational results, including a drop in debt, a rise in cash, and growth in client and adviser numbers.

Jessica Amir: Hi! I'm Jessica Amir for the Finance News Network, and joining us over the phone now from Sequoia Financial Group (ASX:SEQ) is Group CEO Garry Crole. Garry, a pleasure to talk to you again. How are you going?

Garry Crole: Yeah, really well, thank you, Jessica. And thanks for inviting me on again.

Jessica Amir: So, first up, congratulations on releasing your results to the market. All in all, solid growth in revenue. But just take us through some of the overall financial highlights.

Garry Crole: A very good journalist I know wrote Buffett's statement on her website, and it said that someone planted a tree so that someone can have shade in the future, and that's what we've done.

We've really looked at getting the foundations right and reinvesting into the business, and that's impacted the short-term profitability. And a $1 million loss is very disappointing, but if you look at the second half numbers, the $1 million operating results, 90% of that came from the second half, and if you look at the items that are in there above the line, they total nearly $2 million.

So, in the second half the result was very strong. The first half was really about planting the tree and getting the tree a solid foundation so it could grow in the future.

Jessica Amir: And can you take us through some of the operational highlights and some of the major milestones that you ticked off in the year as well?

Garry Crole: The Morrison business was a really large investment for Sequoia. We have $11 million of cash in the bank as a security bond. You know, that's a lot of the $17 million cash we have, and the business was burning cash.

In the first six months, we were burning about $150,000 per month, and we didn't have enough scale. But, you know, we invested heavily so we could look to get scale if the clients come, and they did, particularly in the second half, and, you know, the turnover of equity trades per month is up 600% from July to June 30, and we expect that to continue to grow. Not at 600%, unfortunately, but we're looking for 40% growth in 2020 in that particular business.

Jessica Amir: And on the compliance front, Garry, we've seen the Royal Commission really shake up the entire industry. How has Sequoia fared?

Garry Crole: It's been an investment for us. We've invested heavily in our compliance side. We've also looked to outsource some of our compliance functions, so not only our internal function, have a look at our advisers' performance, but we also get a third party also looking at the statements of advice and the processes our guys are undertaking -- which is an investment, but it's been positive. And because of that, advisers in the industry are aware of our ability to support them, and we've seen 14% growth in adviser numbers off a strong base.

In addition, after July we also made an acquisition of another 70 advisers, so we're moving towards 400 advisers across the group, which is, you know, a very strong, non-aligned financial planning business.

Jessica Amir: And coming back to financials now, Garry, you've seen a significant drop in your debt. Well done. Which is welcome news for shareholders as well. And also a big uptick in your cash position. Just take us through that.

Garry Crole: We did a cap raise mid-year at 33 cents and we used much of that money to support the Morrison business. But we also, over the year, as cash started to come into the business through operations, reduced debt. So, we've reduced debt from 7.4 million right down to 1.4 million, and at the end of the period we're just shy of $19 million in cash.

So, on a net debt-to-cash basis we're, you know, around $17 million -- which is, for a market cap company of $22-odd million, that's a very strong cash position.

Jessica Amir: And, just lastly, Garry, before we let you go, just looking forward to the coming financial year and your FY2020, what can we expect?

Garry Crole: We're not putting forecasts out in totality, but we're looking to really have a look at our cost of sales. And in respect to revenue after cost of sales, we're looking for 23% increase in full year '20, and we are looking to return at least 15% on the equity component of each business that we operate.

So, they're the two KPIs that I've got for my management team, and, you know, I'm very confident that the investment we've made in the past will deliver long-term benefits, and they're the numbers that we're going after.

Jessica Amir: Wonderful. Well, Garry, it's always a pleasure chatting to you, and thank you so much for your time.

Garry Crole: Thank you, Jessica.


Jessica Amir

Finance News Network
Jessica joined FNN in January 2017 after having worked in financial advising for seven years and in TV journalism for seven years, specialising in finance, equities and analysis. She has interviewed former Prime Ministers of Australia, Tony Abbott, Julia Gillard and Kevin Rudd and ex Treasurer Jo Hockey. Jessica has worked as a journalist with Sky News Business, ABC 1, ABC's The Business, ABC24 and has also been a regional Channel 7 and 9 TV reporter with Prime7 and Win News.