The Motley Fool

Results: Netwealth share price on watch as profit surges 65%

The Netwealth Group Ltd (ASX: NWL) share price is on watch after the company reported a 64.7% increase in full-year net profit this morning.

What were Netwealth’s full-year highlights?

Netwealth reported revenue from ordinary activities up 18.6% on the prior corresponding period (pcp) to $98.77 million for the year ended 30 June 2019 (FY19).

The company reported that its average platform revenue per account increased by $55 throughout the year, up from $1,415 to $1,460 per account in FY19.

Profit before tax climbed 71.6% on pcp to $50.08 million while net profit after tax (NPAT) surged 64.7% to $34.30 million.

Positively for the company’s growth prospects, Netwealth’s earnings before interest, tax, depreciation and amortisation (EBITDA) climbed 180 basis points (bps) to 52.6% in FY19.

Netwealth’s earnings per share (EPS) climbs 2.9 cps higher to 14.8 cps, while the company remains debt-free at this point in time.

However, while headline profit was strong, the Aussie wealth management platform reported net tangible assets (NTA) down 5.3% to 26.7 cents per share (cps).

Netwealth’s funds under administration (FUA) grew 29.9% to $23.3 billion as at year-end, and the company also increased its workforce to 271 employees in FY19.

Total distributions paid by Netwealth climbed higher, with the final 2019 dividend coming in at 6.60 cps compared to 5.38 cps in FY18.

Pre-tax operating cash flow came in at $49.5 million, with Netwealth’s high cash conversion ratio increasing to 95.3% for the year.

Management also said that it had increased its market share to 2.5% having achieved the highest industry platform net inflows for the 12 months to March 2019 at $4.3 billion.

Foolish takeaway

The Netwealth share price closed 4% lower on Friday and remains 8.5% lower so far this year following a share price crash in January.

January’s share price crash came on the back a 1.5% decline in funds under management for the quarter, with the Netwealth share price since trying to recover its losses.

Netwealth currently boasts a market cap of $1.65 billion but is trading on a price-to-earnings ratio of 82.3x earnings, meaning significant growth is required if investors are to get more bang for their buck on their investment.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Netwealth. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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