Sequoia’s EBIDTA hit by ‘abnormal items’

Oksana Patron

24 January 2023

Sequoia Financial Group has hit choppy waters, flagging financial planning license consolidation and advising in its business update that its 1H23 EBITDA has been negatively impacted by several abnormal items affecting short term performance.

In the announcement made to the Australian Securities Exchange (ASX), the firm also said it was considering a consolidation in the number of its Australian financial services licences (AFSLs) by reducing it from four to three by the year-end.

According to Wealth Data, the group currently operates four licenses which includes the largest Interprac Financial Planning (with 273 advisers as of 19 January, 2023), Libertas Financial Planning (30 advisers), Sequoia Wealth Management (6 advisers) and Viriathus Capital which currently has no advisers on its book.

Sequoia confirmed that the number of advisers across four separate AFS licences increased in recent months driven by organic recruitment  particularly under the Interprac and was expected to see the licensee services division record a very strong 2H23.

The group is also looking to recruit additional brokers in Melbourne and Sydney while a reduced number of AFSLs was expected to have a positive impact on divisional margin, it said.

In the same announcement, the firm said its 1H23 EBIDTA had been negatively hit, causing the group to fall below budget expectations with EBITDA expected to be around $3.2 million.

Sequoia said that a delay in recovery of claims cost repatriation more than $2 million along with increased adviser servicing costs contributed to the shortfall in the licensee services division.

Following this, Sequoia’s Direct Investment division had fallen short of EBITDA budget by approximately $500k as the company had “taken longer than anticipated to integrate the various companies within this division”.

“Whilst the integration is causing short term pain to our bottom line, we have significantly improved this division’s market offer and remain confident the second half results will better reflect the opportunities that we believe we can capitalise on,” the firm said in the announcement.

Also, Sequoia’s equity market division saw its EBITDA reduced by more than $500k against the corresponding period due to “unanticipated reduction in marketing of new specialist investment products”.

Despite this, the board said it remained confident on executing its long-term strategic initiatives and the business fundamentals remained strong.

“This confidence gives us the ability to confirm the half year dividend can increase by 40% from 0.5 cents per share for the 1H22 to 0.7 cents per share in 1H23.

“In addition, we expect the investment and integration program we have undertaken in this half will allow the company to make up a significant amount of the 1H23 profit shortfall in the full year 2023 result.”