Praemium eyes increased footprint in wealth management industry

In its full-year results released to the ASX on Tuesday, Praemium reported a 23 per cent increase in underlying Australian EBITDA for the 2023 financial year to a record $23.4 million.

Including the impact of its discontinued international business which was sold to Morningstar last year, Praemium’s underlying EBITDA was 41 per cent higher than in FY22.

Continuing business revenue was up by 17 per cent to $74.3 million, bolstered by $1.4 billion in inflows and a 9 per cent increase in total funds under administration (FUA) to $44.0 billion, alongside positive equity market valuations and improved cash administration fee contribution.

This revenue growth was said to have been partially offset by a 15 per cent uptick in expenses to $50.9 million driven by wage inflation and a $1.5 million lift in outsourced administration costs. Consolidated profit from continuing operations was $15.2 million, up from $3.7 million.

In a note to shareholders, Praemium chairman Barry Lewin and executive director and chief executive officer Anthony Wamsteker said the firm delivered record earnings per share (EPS) of 3.2 cents.

“This result reflects a simplified business and the integration of Powerwrap into the Praemium business and technology architecture. This provides a solid foundation on which to build further growth in market share,” the pair said.

Mr Lewin and Mr Wamsteker noted that the wealth management industry was continuing to expand as Australia’s growing and ageing population saved for retirement and other goals.

“Over the years, Praemium has built enviable technology-based solutions to meet the needs of financial advisers and their clients,” they said.

“The integration of Powerwrap has expanded the product range. The technology and product foundation is in place and the focus now is on scaling that footprint.”

The firm highlighted the “continued outstanding growth” of its separately managed accounts (SMAs), which saw FUA growth of 19 per cent to $9.6 billion and $865 million in net inflows.

Powerwrap’s FUA increased by 11 per cent to $12.6 billion with net inflows of $497 million. Overall, Praemium’s platform FUA grew by 14 per cent to $22.2 billion.

Meanwhile, the FUA of the firm’s VMAAS non-custodial portfolio administration and reporting service lifted by 4 per cent on the year prior to $21.8 billion.

Mr Lewin and Mr Wamsteker indicated that Praemium’s control of the key modules of its technology architecture provided it with a “competitive advantage” that allows the firm to prioritise developments that it sees as being most beneficial for its preferred client segment.

“Given the breadth of asset types demanded by high-net-worth investors, we have consistently built data feeds, interfaces, and integrations with a wide range of market participants,” they said.

“Going forward, this particular expertise stands us in good stead as financial advisers seek better integration with other parts of their desktop architecture, especially advice planning tools and emerging artificial intelligence applications,” the pair added.

Praemium also drew attention to its newly assembled executive leadership team, which it said was “poised to steer our company into a new era of growth and innovation”.

Mr Wamsteker said that Praemium’s key strategic decisions had paid off during 2023 with the firm delivering increased profitability and enhanced shareholder returns.

“This result, derived from continued strong net funds flow, margin expansion, and discipline on directly controlled costs, has improved operating leverage,” he said.

“In addition, July flows have been encouraging as we head into 2024 with renewed optimism and a determination to continue to grow our business.”

The firm’s net assets were $108.1 million as at 30 June 2023 compared with $102.3 million a year earlier, with total assets reduced by $27.4 million to $129.5 million primarily due to a $47.9 million deployment of cash to efficiently return the proceeds from the international divestment.

Significant deployments over FY23 included a fully franked special dividend of 5 cents per share in August 2022 equating to $25.8 million, a $25 million on-market share buyback (of which $11.5 million was deployed as of 30 June 2023) and borrowings repayment of $10.6 million.

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.