Sequoia reports over 4,000% profit increase with further acquisitions ahead

Sequoia Financial Group has reported an “abnormally high” net profit after tax (NPAT) of $27.8 million, an increase of more than 4,000 per cent on the previous year. 

In its results for the six months to 31 December, the firm attributed the increase to gains on the divestment of 80 per cent of Morrison Securities which it sold to digital wealth management platform New Quantum.
In the prior corresponding period, Sequoia reported NPAT of $0.6 million. 

During the six months, it also acquired Castle Corporate Pty and Castle Legal Pty in August and Australian Business Structures Ltd in December and forecast more acquisitions to come.

Revenue was $62.8 million, up 43.7 per cent from a year ago, and some $50.9 million of this came from its licensee services division.

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Licensee services was its best-performing division, reporting its highest net organic growth in adviser numbers in calendar year 2023 with a gain of 33 advisers and an increase of around 60 per cent in revenue per adviser. It also forecast “strong tailwinds” for the sector in the second half of the financial year.

“Revenue growth is due to market share growth. Specifically, growth in adviser numbers, increased effective marketing from our direct investment division’s media reach and a heavy increase in revenue per adviser. 

“This result coincides with improved market conditions for financial advice, in part due to the tight supply conditions for our services.”

Chief executive, Garry Crole, said: “The first half saw Sequoia deliver strong financial results, further capital management in the interests of shareholders and solid operating results. Pleasingly, the business has some momentum heading into the second half.”

Direct investment division

Earlier this year, it announced it is in the process of court action regarding its direct investment division and the acquisition of Informed Investor, Share Café and Corporate Connect. 

Revenue in this division declined by 35 per cent from $1.8 million to $1.2 million, described as a “major disappointment”. 

Crole said: “I put my hand up, we made an error in acquiring this business for the price we paid, it was not what we had been led to believe. We have tried to settle on a number of occasions unsuccessfully but are going now to court. But there is an absolute place for the direct investment arm in the business."

Staff in the division have been reduced from around 13 to six and it appointed Paul Sanger as head of Sequoia Direct. The firm said it has invested in the restructure of the division in order to allow it to return to profit in the second half of the year.

“We incurred a considerable expense on marketing for this division (in excess of $200,000) to drive more business from our licensee services customer base. Additional expenditure was also incurred for the restructure as we reduced the headcount in this division. We believe these changes will positively impact our EBITDA for 2H24 onwards.”