Company Interview / Praemium's profit falls, revenue rises

Key Insights:

Praemium's (ASX: PPS) financial performance includes a fall in profits but a significant rise in revenue Despite experiencing larger outflows in the PowerApp asset, Praemium (ASX: PPS) reports robust growth in its separately managed account platformThe firm anticipates the upcoming launch of a new investor-directed portfolio and is pleased with the ongoing integration of OneView Platform

Anthony Wamsteker, CEO of Praemium (ASX: PPS), outlines the latest financial performance of the Australian financial services firm highlighting that while profits have experienced a 42% fall to $8.8 million, revenue has seen a 12% rise to approximately $85 million. Additionally, funds under administration have achieved a 30% growth, attaining $57.4 billion at the end of June. Anthony attributes a significant part of this growth to Praemium's (ASX: PPS) decision to adjust its pricing strategy in the last six months, leading to a bolstering in revenue and margin.

Addressing the experience of larger outflows in their PowerApp, Anthony points out the occurrences of shifts in advisors from one firm to another within the wealth management industry. Nonetheless, he remains optimistic about the firm's capabilities after recognising that Praemium's (ASX: PPS) firms have been increasing their number of advisors and market share. With reference to their separately managed account platform, Anthony asserts that it's seeing strong growth in both funds under administration and revenue.

Lastly, Anthony provides an update on the firm's next venture including the anticipated public launch of a new product geared at investor-directed portfolio services. He believes this move will close a product gap in the market. Furthermore, he touches on Praemium's April acquisition of the OneView Platform, stating that the integration process is progressing on schedule and clients are pleased with the improved technology. While available platform acquisition opportunities are limited, Anthony reassures that Praemium's strong balance sheet and quality of technology will continue to drive the firm's growth.

Full unedited transcript below:

0:00

Investment platform premium has posted a 42% fall in full year profit to $8.8 million revenue rising 12% to close to $85 million, while funds under administration stood at 57.4 billion at the end of June, achieving 30% growth on the year, it's declared a $0.01 fully franked dividend.

0:24

Well, let's get some more detail on those results, Anthony. One sticker is the chief executive of premium. He joins us now Anthony welcome back. Great to catch up with you again from premium.

0:36

Let's take the result then. You did see net profit there fall overall. What are you seeing there for the business.

0:46

Yeah. Look we're very happy with the growth that we're continuing to get in our business. There's a couple of factors behind that. One is there continues in our segment. That platform segment in Australia there continues to be good shifts in market share from some of the older platforms to those platforms that are more highly rated by the independent rating agencies and premium, certainly in that category, where one of the top three platforms on those independent ratings. And so we're picking up our share of of the shift that's occurring from the older platforms to the more modern platforms. And then the second thing is, over the course of the last six months, we've spent a bit of time looking at where our pricing should be and the revenue that we should be getting on the funds that we administer. And we have put through some adjustments on that front, and we've started to see a good pick up in revenue, uh, and the margin that we're getting. So the revenue was very strong. Our expenses were kept largely under

1:46

control in the second half. And we got a very positive shift in, uh, in growth in EBITDA in the second half from 9 million in the first half to 12.5 million in the second half. That gives us a good foundation to going forward. In your last update, you pointed out that, uh, your powerapp was experiencing larger outflows. What's going on in that regard?

2:08

Yeah. So powerapp, um, obviously it's got a blue chip client base. Uh, but occasionally, you know, there's always shift in advisors. As you know, it's one of the themes in the wealth management industry that advisors shift from one firm to another over time. Uh, and certainly some of our clients have, you know, encountered some loss of advisors during the last 12 months. It's a bit unusual for us because, you know, by and large, our firms have grown their number of advisors and have been the winners in terms of market share of advisor numbers. But the last 12 months for some of the power clients has been a bit disappointing. Uh, but, you know, um, as I say, over the long run, we seem to have firms on our platform who do well in terms of growing their market share.

2:58

And what sort of momentum are you seeing in your in your, uh, separately managed account platform there?

3:05

Yeah. So the, um, the, the separately managed account is definitely getting double digit growth in, uh, in, um, funds under administration.

3:15

Uh, and that has translated to the same thing in revenue over double digit growth in revenue on that platform. So very strong growth both in uh, the for the funds under administration and in the revenue on that platform. The important thing about, uh, both the power app and, and the managed accounts part of the business is that they have we haven't had a product targeting the full market and addressing the full market opportunity. And part of the work that we've been doing is to launch a new rep account, uh, or IDPs investor directed portfolio service. We've got funds on that platform, and we'll do a public launch of that in the in the next couple of months. So, uh, I think that fills out a product gap for us and, uh, gives our sales people something to be talking to those advisors about in terms of the offering that we have in the market. Yeah. So how competitively priced is your SMA my offering. Do you think? Yeah, because we did a lot of work on what the pricing should be. We're very confident about the

4:14

pricing. Obviously, pricing is one of the factors that goes into, uh, selling your product. The others, either the service that you offer and the the quality of the technology underlying it. And we score very well, as I say in the investor, you know, the independent ratings on platforms. So we're we're very happy about where it's positioned. And, and we're now very confident about the pricing that it's, you know, obviously still a very competitively priced product. But we think, uh, the pricing is fairer for what is on offer. Um, and, and hence we were able to put through some price increases. And Anthony, I see notes that you're on the cusp of launching your next generation investor directed portfolio services. What's that involve?

4:59

Yeah. So that's um, it's a it's a platform that will provide, you know, a complete broad suite of, uh, services to advisors and their clients. So instead of just being managed accounts, which is what the managed account scheme is, if people want to own direct shares or direct managed funds or whatever, it's much easier, uh, with an IDPs than it is on a managed account scheme. It's much more suited for that. So it'll expand the breadth of offerings whilst, uh, giving um, uh, the full reporting service to uh, clients and advisors. Uh, so it really one way to look at it is managed accounts make up about 20% of the platform market, but 80% of the assets are not in managed accounts. And so it's pitching into the full market rather than a narrow segment of the market.

5:52

Now your acquisition of One View Platform, can you bring us up to date with that? How is that integration going?

6:00

Yeah. So we we've had that since mid April. So what's at about four months now. We've had the one view business under our management. Uh we've got in front of all the clients and let them know what we're planning to do. The big, um, opportunity for us is to, uh, to put all of the accounts on the premium technology stack and then decommission the one view technology stack. And so four months in, we're definitely on schedule. We said initially that would take 12 to 18 months. And so a third of the way through a 12 month window, if you like, where we would ideally like to complete that work. And we're very happy with the progress and the clients understand what we're doing. And, uh, and they all understand that, you know, the premium technology is a better quality technology than what they were getting. And so that goes to their advantage as well. So we're happy with that. And we're definitely very happy with the quality of the team that we have. Uh, have acquired in one view, some very good platform people. And so that's

7:00

good in a, in a market where it's sometimes hard to get the right people in your team and you've reassured the market that you've got a strong balance sheet overall in terms of your growth. Anthony, where are you seeing that coming from? And would that perhaps involve further acquisitions?

7:16

Look, um, uh, if I go to that second part of the question, there's not that many platforms available in the market. You know, one view was a good opportunity. But, uh, after us, you know, the smaller platforms, there's only really a couple who have got the sort of scale that would make it worth our while, uh, in terms of doing the work and getting a significant uplift in scale by acquiring the business. So there might be some opportunities, but, uh, you know, we we're not counting on it. We're more thinking that with that new next generation, uh, IDPs, uh, that that gives us an opportunity for our sales people to be in front of advisors and, and, um, benefiting from what is still a pretty strong shift in market share from older style platforms to the more modern platforms that, as I say, achieve these high rankings in the independent surveys about, uh, the quality of the platforms that are available in the market.