Next Financial hurts WHK Group profits

WHK Group's bottom line has been hit as a result of its 30 per cent stake in Next Financial, but the group has profited from its self-managed superannuation fund (SMSF) and risk business units.

WHK's consolidated net loss after impairment charges was $2.7 million, a decrease of 117 per cent on the previous half-year result. Net profit before impairment charges was 13.7 million, a decrease of 13 per cent on the previous half-year result.

An impairment charge of $16.4 million was provided for during the period, a write down of approximately 60 per cent on the book value of the group's Next Financial.

Next Financial is a private investment manager that offers individual investment accounts and structured investment products, specialising in equities and derivatives.

"This charge was made having regard to the lower profitability of Next and the general fall in the market value of financial services and fund management companies over the last 12 months."

Revenue increased by 15 per cent to $224.6 million while profit from operations increased by 7 per cent to $27 million. This reduction was due in part to the lower profit contribution from Next Financial, the group said.

Underlying profitability (cash earnings from operations) increased by 2 per cent to $15.8 million.

The group's financial services operations were impacted by current market conditions, with funds under advice (FUA) declining by $1 billion (to $7.7 billion) during the six months to December 31, 2008. This decreased FUA led to a 5 per cent fall in ongoing revenue, to $28.2 million. New business inflows also decreased by 32 per cent to $323 million. That resulted in a fall in up-front revenue from financial planning of 41 per cent to $4.3 million.

This was countered by administration revenue from SMSFs, which grew to $10.2 million from $7.2 million at the end of 2007.