Netwealth share price rises 9% on strong revenue growth in FY22 results

The wealth management company has released a solid set of financial results to the market today.

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Key points

  • The Netwealth share price is 8.55% higher with the company's FY22 results showing accelerated revenue growth but little movement in net profit after tax 
  • Joint managing director Michael Heine moves into a less hands-on role
  • Netwealth declares a final fully franked dividend of 10 cents per share 

The Netwealth Group Ltd (ASX: NWL) share price is surging higher this morning on the back of a strong lift in operating cash flow for FY22.

Shares in the ASX-listed wealth management platform are currently trading for $14.22 each, an 8.55% jump on yesterday's closing price

The company reported strong top-line growth but net profit after tax only increased slightly.

Let's take a closer look at the Netwealth results for FY22.

What did Netwealth report?

Here is a high-level skim over the key results for FY22.

  • Revenue grew 19.6% to $173.9 million, relative to FY21
  • Operating expenses lifted 30.7% to $85.1 million
  • Net profit after tax (NPAT) went up by 2.7% to $55.6 million
  • Declared a final fully franked dividend of 10 cents per share, resulting in a total dividend of 20 cents per share for the year

Funds under administration increased by 18.1% to $55.6 million and net inflows rose by 32.4% to $13 million. Funds under management went up by 11.3% to $13 million but net inflows dropped by 20.4% to $2.6 million due to the downturn in equity markets.

Netwealth's managed funds segment also bore the brunt of the fall in the equities market as the managed funds balance declined 0.1% and net inflows fell 6.8%.

Fund inflows generate more revenue for Netwealth because it means more transactions are processed on its platform, resulting in greater administration revenue. This is why it's an important metric to track.

Despite these headwinds, Netwealth still reeled in an additional 18,823 client accounts to 115,642, representing an uptick of 18.8%.

The big surge in operating expenses is down to a significant lift in employee headcount of 63 roles for the year. Most of these were technology recruits — they accounted for 50%.

This was the major reason why net profit after tax didn't move that much.

However, operating cash flow improved from $37.8 million to $59.6 million. Netwealth's cash balance increased by $6.9 million to $88.3 million.

The final fully franked dividend of 10 cents per share totals $24.4 million and is payable on 29 September. The ex-dividend date is 30 August.

What else happened in FY22?

Netwealth was awarded as the "Best Overall Platform" in the Investment Trends December 2021 Competitive Analysis and Benchmarking Report. Netwealth was also rated number one in the reporting and transaction tools categories.

More recently, Netwealth was rated first in the Investment Trends May 2022 Adviser Technology Needs Report for "Overall Satisfaction". This is the 10th consecutive year Netwealth has been crowned with this accolade.

On the competition front, Netwealth continues to be the fastest growing wealth platform provider based on net funds flows. In terms of market share, Netwealth is currently sixth behind the likes of Westpac Banking Corporation (ASX: WBC), Commonwealth Bank of Australia (ASX: CBA), AMP Ltd (ASX: AMP), and Macquarie Group Ltd (ASX: MQG).

Netwealth leader succession

Founder and joint managing director Michael Heine advised he will be stepping away from day-to-day management from 1 October. His son and joint managing director Matt Heine will be appointed as sole managing director.

Michael Heine will continue as an executive director on the board.

What's ahead for the Netwealth share price?

Netwealth disclosed that $2.5 million of capital will be allocated to the expansion of the data analytics and business management platform, Xeppo. Netwealth currently holds 25% ownership in Xeppo with the option to buy 100% over the next four years.

Management notes this investment will enable financial advisers, licensees, and model managers to improve their interaction with clients.

Netwealth is guiding funds under administration net inflows in the range of $11 billion to $13 billion in FY23.

Netwealth share price snapshot

Year to date, the Netwealth share price has fallen around 20% along with the rest of the ASX growth stocks but has rebounded by 9% in the past month.

At the same time, the S&P/ASX 200 Index (ASX: XJO) is down 7% year to date but has clawed its way back in the last month to post a gain of 3%.

The market capitalisation for Netwealth is currently around $3.44 billion.

The price-to-earnings (P/E) multiple for Netwealth is around 61.72 times, so there is a lot of optimism in the current Netwealth share price.

Motley Fool contributor Raymond Jang owns shares of Netwealth. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Netwealth. The Motley Fool Australia has positions in and has recommended Netwealth. The Motley Fool Australia has recommended Macquarie Group Limited and Westpac Banking Corporation. 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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