HUB24 has identified improved margins as a strategic priority for the next financial year, after recent acquisitions cut into full-year profits.
In full-year results announced to the ASX on Tuesday, the platform provider reported a 15 per cent lift in EBITDA (earnings before interest, taxes, depreciation, and amortization) from $102.4 million to $118 million.
However, the company has targeted improving its EBITDA margins over the next financial year after group underlying EBITDA margin decreased slightly from 36.6 per cent in FY23 to 36.1 per cent, and platform underlying EBITDA margin decreased from 40.8 per cent to 40.7 per cent.
HUB24 will pay a fully franked final dividend of 19.5 cents a share, taking the full-year payout to 38 cents a share, an increase of 17 per cent after posting a 15 per cent gain in underlying net profit to $67.8 million.
The share price increased 1.28 per cent to $51.53 at close of market on Tuesday.
While the platform provider has made improving margins a strategic priority for FY25, HUB24 chief executive Andrew Alcock tells Professional Planner the decrease in margin is due the company’s M&A strategy, particularly the purchase of client portal service myprosperity.
“If you normalise out a couple of things we actually did deliver operating leverage,” Alcock says.
“Our EBIDTA benefited by about 1 to 2 per cent through operating leverage [and] scalability coming through, but it’s been offset by the acquisition of myprosperity. We’ve brought a business that’s loss making deliberately. It’s contributing to growing the platform but it will break even down the track.”
HUB24 derives its platform revenue from a mix of FUA-based fees, including tiered admin fees, cash management fees and transaction fees.
The group’s total expenses increased 19 per cent from $227.5 million in FY23 to $271.4 which was driven by lower employee vacancy rates and the myprosperity acquisition.
“We could be delivering much higher margins if we weren’t investing for the future,” Alcock says.
“We somewhat control that so we could stop investing and increase margins overnight, but our goal is to build a sustainable future.”
There are 4525 advisers – around a quarter of the ASIC Financial Adviser Register – using the platform, which held $84.4 billion funds under administration (up 35 per cent from $62.7 billion in FY23), giving it a market share of 8 per cent.
“We have distribution agreements with large licensees that represent 47 per cent of the market in terms of adviser that haven’t chosen to use HUB yet,” Alcock says.
Platform net inflows increased 62 per cent to $15.8 billion which included $4.4 billion from migrations.
The platform has FUA target for FY26 is $115 billion to $123 billion, which excludes its PARS (portfolio administration and reporting services).
HUB’s growth has come off the back of the Hayne royal commission with advisers gaining more control over where flows are directed. In 2H19, 6 per cent of advisers were using HUB which has increased to 29 per cent.
While HUB was once the newer player into the space, it’s $123 billion FUA target will get it significantly closer to the institutional players that had previously dominated the space before the royal commission.
Alcock says the company has already positioned itself for this event horizon. “You’re right, you no longer say you’re the new kid on the block, you’re actually at institutional level,” Alcock says.
“We’ve always been modifying the business and putting down the planks and the foundations for our future and future scale.”
The average FUA per adviser on the platform in that time has grown from just over $7.5 million to almost $17.5 million.
Group operating revenue was $327.3 million (up 17 per cent to $279.5 million for FY23). This was largely driven by revenue from the platform segment which was $252.8 million (up 21 per cent from $208.8 million in FY23).
The company received $3.8 million in corporate revenue due to interest income along with the profits of the sale of its holdings in Diverger, which was sold to Count, and finalised earlier this year.
