Ups and downs: Praemium (ASX:PPS) share price tumbles 12% following half-year results

Record funds are not enough to please Praemium shareholders today…

| More on:
A woman sits with her hands covering her eyes while lifting her spectacles sitting at a computer on a desk in an office setting.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Praemium share price is trading 11.4% lower following the release of its half-year results
  • Funds under administration reached a record $49 billion, but increased expenses have sent profits down the drain
  • The company expects to complete the sale of its international platform business this year

The Praemium Ltd (ASX: PPS) share price is packing its bags and taking a trip to the downside on Monday.

The disappointing price action follows the release of the investment platform's FY22 half-year results.

At the time of writing, Praemium shares are swapping hands for $1.085 apiece, down 11.4%.

Let's take a closer look at the company's results.

Praemium share price plunges as earnings swing to a loss

What else happened during the half?

For the six months ended 31 December, Praemium achieved record FUA and platform growth, taking the company to $49 billion in FUA. This result is partly boosted by the inclusion of a full six months worth of revenue from the Powerwrap acquisition.

Additionally, the financial services company witnessed higher growth in FUA in its international platform than its Australian platform. For reference, the international platform experienced a 58% jump, compared to the Australian segment's 28% increase.

However, as announced on 21 December 2021, Praemium is offloading its international business to Morningstar for A$65.1 million. Shareholders were relatively unfazed by the news at the time, with the Praemium share price moving a mere 2% higher.

Shareholders might be unsettled by the swing back into loss-making territory in the latest half. This marks the first time Praemium has made a loss on the bottom-line since 2015.

According to the half-year report, this reflects an increase in expenses in "key investments" in operations; sales and marketing; and research and development. The largest of these expenses was a $12.3 million investment in operations, representing a 31% increase.

What did management say?

Commenting on the result, Praemium CEO Anthony Wamsteker said:

The first half of FY2022 saw continued strong growth in revenue, reflecting the ongoing success of our investments in people and technology, including the recent acquisition of Powerwrap. Following another half year in which we significantly expanded the size of our team in order to further improve the underlying proprietary technology and client service levels, we are confident that our strong growth will continue.

Regarding the sale of Praemium's international business, Wamsteker noted:

The sale of our International business segment to Morningstar should provide all our stakeholders with confidence in our ongoing strategy. It allows a dedicated focus on our home market in Australia whilst the quality of the acquirer ratifies our underlying platform and technology.

The ability to now focus exclusively on the Australian platform market at a time of a major shift from incumbents to independent challengers and in the expectations of advisers and clients regarding the range of assets to be managed in one place, creates strong alignment between our strategy and our opportunity.

What's next?

Praemium remains confident in its future prospects, citing further tailwinds for independent wealth management platforms. Namely, the push from new regulations, a generational shift in advisors, and growing wealth among high net worth individuals.

Additionally, the company believes there is space for further disruption in the market. Currently, Praemium holds a 2% market share.

Finally, Praemium is expected to complete its sale of the international business during Q2 or Q3 of 2022. Any surplus proceeds from the sale are to be returned to shareholders.

Praemium share price snapshot

It seems the Praemium share price has gotten off on the wrong foot in 2022. Shares in the company are down 26% since the start of the year. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is 4.8% in the red, making it the better performer.

Despite the pullback, Praemium shareholders are still up 33% in the last 12 months.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Praemium Limited. The Motley Fool Australia has recommended Praemium Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Earnings Results

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Earnings Results

ASX 200 stock jumps 10% on strong FY24 results

How did this KFC restaurant operator perform in FY 2024?

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin, waiting in anticipation.
Consumer Staples & Discretionary Shares

Guess which ASX 200 stock just slashed its final dividend by 23%

This retailer had a tough time during the 12 months. Here's how it performed.

Read more »

Man jumps for joy in front of a background of a rising stocks graphic.
Earnings Results

Catapult shines: 20% sales growth propels ASX tech stock to new 52-week high

A strong annual result from this tech player has caught investor attention.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Earnings Results

Xero share price leaps 8% on staggering earnings upheaval

A major turnaround in profitability is sending investors into a frenzy over Xero shares today.

Read more »

a construction worker sits pensively at his desk with his arm propping up his chin as he looks at his laptop computer while wearing a hard hat and visibility vest in a bunker style construction shed.
Materials Shares

Which ASX 200 stock just plunged 12% despite record full-year earnings?

It looks like an impressive report card but UBS doesn't like the FY25 guidance.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Earnings Results

ASX 200 tech stock lifts off on another record-setting half-year profit

Investors are bidding up the ASX 200 tech company following its half-year results.

Read more »

increasing rural asx share price represented by happy looking sheep
Earnings Results

Why is this ASX All Ords stock staying strong as profits crash 76%

How is this company's share price marching higher after mowing down more than three-quarters of its profits compared to a…

Read more »

Two men sit side by side on a couch with video game controls in their hands and expressive looks on their faces as they react to the action in front of them in a home setting.
Earnings Results

Guess which ASX 200 stock is surging 11% on an 'outstanding' result

This ASX gaming giant just posted a 17% jump in profits, and its shareholders are basking in the glory.

Read more »