The Netwealth Group Ltd (ASX: NWL) share price could be on the move today following the release of its half year results.
How did Netwealth perform in the first half?
Netwealth was a positive performer in the first half of FY 2020 and delivered further strong sales and profit growth.
On the top line, the company reported total income to $58.7 million, which was up 21.7% over the prior corresponding period.
Operating expenses came in at $28.2 million for the half, which was a 20.5% increase on the same period last year. This was the result of its strategic investment in IT infrastructure, people, and software.
A slight increase in its underlying EBITDA margin over the prior corresponding period to 52%, led to Netwealth reporting a 22.8% increase in underlying EBITDA to $30.5 million. And on the bottom line, the company delivered a 20.6% lift in underlying net profit after tax to $20.6 million. Underlying earnings per share came in 20.1% higher than the same period last year at 8.4 cents.
The company's pre-tax operating net cash flow was $30.5 million, which represents an EBITDA cash conversion ratio of 100%. This allowed the board to declare a fully franked interim dividend of 6.9 cents per share.
What drove Netwealth's strong growth?
Key drivers of the company's profit growth were jumps in its funds under administration (FUA) and funds under management (FUM).
Netwealth's FUA grew 50.2% to $28,511 million thanks to net inflows of $4,355 million. This was more than double the net inflows recorded during the prior corresponding period.
Its FUM grew at an even quicker rate. At the end of the period its FUM had reached $5,749 million. This was up 83.2% over the prior corresponding period thanks to net inflows of $1,706 million. This compares to FUM net inflows of $419 million in the prior corresponding period.
At the end of the half the company had 75,512 member accounts and 2,711 financial intermediaries on its platforms. This was an increase of 15% and 13.3%, respectively.
Outlook.
Management believes industry trends are very favourable and there are significant opportunities to grow its market share.
In light of this, its full year guidance is for FUA net inflows of ~$9 billion, subject to the timing of client transitions.
This is expected to lead to full year revenue in the range of $120 million to $122 million and underlying EBITDA in the range of $61 million to $63 million. As a comparison, in FY 2019 Netwealth reported revenue of $98.8 million and EBITDA of $52 million.
