EQT Holdings (ASX:EQT) FY19 results & outlook


by Rachael Jones

EQT Holdings Limited (ASX:EQT) Managing Director, Mick O'Brien talks FY19 results, market conditions, contribution from recent acquisitions and outlook for 1H20.

Rachael Jones: Hello I'm Rachael Jones for the Finance News Network. Joining me today in Melbourne, from EQT Holdings (ASX:EQT) is Managing Director Mick O'Brien. Mick welcome back to the network.

Mick O'Brien: Thank you very much Rachael.

Rachael Jones: Now EQT Holdings (ASX:EQT) or Equity Trustees, as it's better known, is Australia's leading specialist trustee company. What more can you tell me?

Mick O'Brien: We provide trustee services to private clients, to corporations, to superannuation fund promoters, to funds managers. We're primarily based here in Australia with our headquarters here in Melbourne, but we've got a small fledgling business in the UK and in Ireland.

Rachael Jones: Excellent. Thanks Mick. Now before we talk about your results can we just talk about the key drivers for progress?

Mick O'Brien: Well our business is really underpinned by two key drivers. Firstly, intergenerational wealth transfer. So as the Australian population ages, and they transition their wealth either to the next generation or into charities and the like we're experts at making those transitions happen. On the corporate side of our business, and the superannuation side, it's really underpinned by the growth in the superannuation assets, which are growing at a much quicker rate than the rate of GDP. So very solid underpinning areas of growth in both parts of our business.

Rachael Jones: Now let's talk about your financial year 2019 results. What were the highlights, starting with the financials?

Mick O'Brien: Sure. Well our net profit was up 12.7 per cent to over $22 million, so we're delighted with that result. Likewise earnings per share was up 11.7 per cent. I think the pleasing thing about those results was it was primarily driven by revenue growth, so our revenues were up 4.6 per cent. We had a very disciplined expense management, with expenses only up 2.4 per cent. I think the other thing I would point out is we had great results in the private client side of the business and also in the corporate trustee services side of the business. Our total funds under supervision rose to over 80 billion and that's a key driver of our revenue. In the last quarter, and we announced at the annual general meeting, that we'd exceeded $100 billion of assets by the end of that quarter as a result of new clients we'd picked up during the quarter.

Rachael Jones: What can you tell me about strategy and progress?

Mick O'Brien: Look our strategy has really held us in great stead for the last three years, so other financial services groups are generally diversified into different lines of business. We've stuck to our knitting. With the financial services Royal Commission, and what was uncovered there, there's been a huge spotlight on trusteeship. That has meant people are more interested in our services than they have been before. The service we offer provides great benefits to many parties that avoids the issues that they've had in the past. We're going to continue with our strategy of focusing on trusteeship. Our share price has been very strong in the last year, in the last three years. We have a multiple that's pretty high at the moment, but we're confident of our earnings' prospects and our ability to turn those earnings into dividends, basically, for shareholders.

Rachael Jones: Can you tell me a little bit more about the share price?

Mick O'Brien: Our share price is currently trading over $30. That's more than a doubling of the price over the course of the last three years. As well as paying in consistent levels of growing dividends over that three year period, so shareholders who have been there for the journey so far have achieved great results. It's primarily been driven by earnings per share growth, so our EPS growth over the last three years has been 17 per cent. That's a really positive result, particularly in the environment where other financial services companies have really struggled to produce growth.

Rachael Jones: That's fantastic news. And to the last question now Mick. What is the guidance for the first half of 2020?

Mick O'Brien: Well look we've been very clear at our annual general meeting last month that we've been investing in the business over the last 12 months, and particularly over the last six months, in anticipation of growth of new clients and larger scale clients which are coming onboard. So we expect the first half of FY20 to be relatively flat on the prior corresponding period. But for growth and earnings to come through in the second half of FY20 on the back of the new clients that we've been signing up. As we said at the AGM we picked up a number of new clients, totalling 19 billion dollars, in the first quarter of this financial year. That revenue will start ticking through into the second half of FY20.

Rachael Jones: Mick O'Brien thanks so much for the update and congratulations on your progress throughout this year.

Mick O'Brien: Thanks very much Rachael. Thank you.