Insignia’s advice division has shown signs of profitability, despite an overall loss for the business due to significant one-off expenses.
In its full-year financial results announced to the ASX on Thursday morning, group statutory net loss after tax was $185.3 million (versus $51.2 million statutory profit in FY23), due to transformation/separation costs and increased remediation provisions which had previously been flagged.
Advice EBITDA (earnings before interest, taxes, depreciation, and amortisation) improved from a $35.9 million loss to $3.1 million profit. However, the division is still delivering a net profit after tax (NPAT) loss of $4.1 million but this is down from $33.9 million the year before.
Insignia CEO Scott Hartley tells Professional Planner they consider the advice division profit making with “great potential” for profit growth in the future for Shadforth and Bridges.
“The separation of Rhombus will benefit FY25 [reporting] because it’ll purely be Shadforth and Bridges businesses which will be profitable, Shadforth is particularly strong,” Hartley says referring to the divestment of its aligned licensees which officially took place at the start of the current financial year.
Net revenue for advice increased 0.5 per cent from $204.6 million in FY23 to $205.7 million and operating expenses fell by 15.8 per cent, from $240.5 million in FY23 to $202.6 million in FY24).
Hartley says the biggest contributor to improvement in the sector was cost reductions due to restructuring.
“It was cost reduction largely that got the advice segment – and largely because of Rhombus’ cost reductions – which got the advice sector back to profitability,” Hartley says.
Underlying net profit after (NPAT), which excludes one off costs as opposed to statutory profit, grew 13.6 per cent from $190.7 million to $216.6 million.
Those cost impacts were $257.7 million for transformation/separation costs along with $243.1 million for remediation.
Hartley says most of Insignia’s remaining remediation costs should be completed this financial year with a slight “hangover” in FY26.
“It’s all provided for, so it won’t affect subsequent years unless something new pops up, but that won’t be in the advice space,” Hartley says.
The cost– optimisation program delivered a net reduction of $24 million in Fy24 and is expected to deliver $60 million to $65 million in further net reductions for FY25.
Group net revenue increased 0.9 per cent to $1.39 billion, while operating expenses declined 2.3 per cent to $1.01 billion.
The past year has seen the transition of Insignia leadership from Renato Mota to Hartley; a corporate restructure commenced by the new leadership; the creation and divestment of Rhombus Advisory; divesting from Godfrey Pembroke; the sale of Millenium3 to WT Financial Group; and the closure of Lonsdale.
Hartley says the “right answer” for licensee ownership is licensees owned by the advisers in the network.
“That’s the right model in my view, for the further professionalisation of the advice industry,” Hartley says.
“The way we’ve dealt with Rhombus here, where the ownership is predominately advisers and the management of Rhombus, is the right answer for the industry.”
Amid renegotiations on the company’s enterprise agreement, the Financial Services Union has criticised Insignia for attempting to cut long-standing redundancy agreements as high as 94 weeks’ worth of pay.
Insignia has been aiming to unify its enterprise agreements for its ex-NAB and ex-ANZ employees that have joined from relevant acquisitions.
Hartley says the redundancy package being offer now has a 52-week cap, which he says would be an improvement for 57 per cent of employees, neutral for 26 per cent but negative for 17 per cent.
“I would say those negotiations have proceeded generally in good faith and we’re at a point now where we think the package is better off for most, for the vast majority of employees the package is better off,” Hartley says.
“The vast majority of people are better off or neutral. If you’re going to have a single enterprise agreement there’s going to be winners and losers and there’s not much you can do about that.”
However, there will be a grandfathering period for the old arrangement for 12 months after the agreement is ratified by the Fair Work Commission which is expected to happen in December.
After that 12-month period, Hartley anticipates Insignia will have completed most of the business restructure.
“Most people leave this organisation for other reasons than redundancy, it’s a minority of people that are existing organisation because of a redundancy,” Hartley says.
“It’s an emotional point, I do understand that people feel strongly about it.”
