Praemium reflects on exiting International business

Praemium has detailed the reasons behind exiting its International business, which was sold to Morningstar in June.

The firm had sold the division to Morningstar for $62 million which realised a profit of $46 million for the business. This saw Morningstar acquire Praemium’s operations in the United Kingdom, Jersey, Hong Kong and Dubai.

In a presentation, Barry Lewin, chairman, said the intention of the international deal had been that it could be pursued using the same strategy, technology and business process in Australia.

Instead, tax and regulatory differences overseas meant the division was a drag on the business.

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He said: “This division consumed significant capital and management time over the approximate decade this strategy was pursued. That investment was originally made on the assumption that the international opportunity was at least as large as that in Australia and that it could be pursued utilising essentially the same strategy, technology, and business processes as here."

The current board and management team felt that this assumption, whilst largely correct, did not take full account of the execution risk and necessary bespoke IT development for differences in the UK tax and regulatory framework.

“In essence, it did not compare at all favourably with the wonderful opportunity here in Australia, and it provided an ongoing drag, for an indeterminate period into the future, on cashflow and profitability.”

Following the sale, this would allow Praemium to prioritise its Australian business.

Total funds under administration for the 2022 financial year at the business were $40.5 billion while platform funds under administration were $19.5 billion. These were up 10% and 6% respectively on the prior year.