WT Financial Group has defied a drop in revenue by posting growth in profits, due to a strategy of rationalising its advice network to focus on supporting fewer, more profitable practices.
In the group’s 1H24 results posted to the ASX on Thursday morning, Wealth Today said the results for the half-year reflected the “continued success” of the integration of previous acquisitions and the slight decline in revenue was the result of rationalisation of its networks and operations to focus on profitability.
Total revenue and other income during the period decreased from $83.45 million in 1H23 to $80.14 million, while direct costs of revenue decreased from $74.88 million to $71.75 million.
EBITDA (earnings before interest, taxes, depreciation, and amortisation) grew 8 per cent from $2.88 million in 1H23 to $3.11 million.
Net profit before tax was up 7 per cent from $2.11 million to $2.26 million, but net profit after tax was down 4 per cent from $2.285 million to $2.19 million, which the company said was due to an income tax benefit of $171,000 in 1H23.
Keith Cullen told Professional Planner the rationalisation of the advice network included the departure of 100 advisers.
“There’s probably 20 of those we would have really liked to have kept, the balance of them were people that hadn’t done FASEA or that didn’t fit comfortably inside our network or they sold their business – there’s been a lot of consolidation of practices as everybody knows,” Cullen said.
The licensee business had largely shifted from a flat fee model to variable fees based on profit, which Cullen said explains the revenue drop but revenue boost.
“A key differentiator for us is we’re focused on the profitability of individual practices because with the vast majority of our practices we share in the revenue,” Cullen said.
“We’re one of the few licensees that can have a net reduction in adviser numbers and actually end up more profitable.”
The firm said it had surpassed “critical scale” it was aiming to achieve from acquisitions and the primary focus was now in profit growth of the practices it supports, but the company directors would support further M&A activity that may arise.
Key acquisitions over the last couple of years have been the addition of Synchron, along with Millennium3 in November last year, the latter which the group said will further boost profitability despite the firesale pick up of $2 million off Insignia Financial.
“If it makes sense then they will pursue it and M3 was exactly that sort of example,” Cullen said.
“We weren’t out there desperately trying to acquire networks because we felt we were already at the right scale. But the opportunity came along, we were able to fund it with cash and we would’ve been crazy to take a pass on it.”
WT Financial Group has more than 400 privately-owned advice practices whose advisers operate as authorised representatives collective under Wealth Today, Sentry, Synchron and now M3.
The group’s collective network of wealth and risk advice covers $23 billion in assets under advice, along with $430 million worth of annual in-force personal insurance premiums.
“We’ve obviously got to really focus on now bringing all of M3 practices into our way of thinking and our way of doing business,” Cullen said.
