The Netwealth Group Ltd (ASX: NWL) share price is carrying a heavy weight on its shoulders today after the financial services platform provider released its half-year report.
In afternoon trading, the Netwealth share price is lingering 14% below yesterday's closing price of $14.85. It is currently trading at $12.79, down 13.87% for the day so far.
Earlier in the day, Netwealth shares reached an intraday low of $12.20, representing a descent of 17.8%.
Netwealth share price feels the heat on mixed first-half result
- Revenue up 17% from prior corresponding period (pcp) to $84.7 million
- Total funds under administration (FUA) of $56.7 billion, increasing 46% pcp
- Record net FUA inflows of $7.6 billion, representing an increase of 71%
- Record underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of $43.8 million, up 7%
- Statutory net profit after tax (NPAT) relatively flat at $27.1 million, down 1.8%
- Interim fully franked dividend declared of 10 cents per share, up 10% pcp.
What else happened in the first half?
Despite the disappointment reflected in the Netwealth share price today, the first half was a period of growth in many ways for the company.
According to the release, clients on Netwealth's platforms increased by 21.4% to 107,103. In the process, its market share increased to 5.2% at the end of September 2021 — rising from 4.1% a year prior.
The company's funds under management (FUM) also experienced solid growth during the first half. Specifically, Netwealth landed an additional $17.9 billion in funds, taking the total to $56.7 billion, an increase of 46%.
However, beefed-up funds and higher revenue did not make it to the bottom line. Instead, $31 million in employee benefits chewed up the bulk of Netwealth's elevated top-line income.
The 32% rise in employee benefits is a result of the company's investment in people. Netwealth grew its team by 86 people to a total of 457. As part of this, a substantial number of those added were dedicated to its IT team.
What's next?
Moving forward, Netwealth expects growth to continue to accelerate as the industry further consolidates. Notably, Netwealth has been acting as a consolidating force in recent times.
In November 2021, platform rival, Praemium (ASX: PPS) received a non-binding proposal from Netwealth. However, the board of Praemium knocked it back — a move that saw the Netwealth share price sink.
Any lift in interest rates by the Reserve Bank of Australia (RBA) is also being considered a positive outcome for Netwealth. Margins would likely increase above the current 105 basis points if the RBA moved the cash rate above 50 basis points in March. The current cash rate is 0.1%.
Finally, the financial platform expects its forecasted FUA net inflow to exceed $13.5 billion.
Netwealth share price snapshot
In recent times, ASX investors appear unconvinced by the potential in the Netwealth share price. Much like other financial platform peers, shares in the 23-year-old company have fallen over the past year.
Compared to the 5% return delivered by the S&P/ASX 200 Index (ASX: XJO), the Netwealth share price is down 28.6% in the past 12 months.
The majority of this value destruction has occurred in 2022, after a volatile ride throughout 2021.
