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WT Financial Group (ASX:WTL) discusses full-year statutory accounts

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WT Financial Group Limited (ASX:WTL) Founder and Managing Director Keith Cullen discusses financial highlights, 2023 guidance, the value of scale, the vision for financial advice and main shareholders.Tim McGowen: We welcome back today Mr Keith Cullen, who is the Managing Director of WT Financial Group (ASX:WTL), market cap of around $30m. The company’s a diversified financial services business that contains two distinct channels, being that of the primary business-to-business operation. It’s a financial advice operation under Wealth Today, Sentry Group and Synchron brands. And then they’ve got a direct-to-consumer channel or an operations through their Spring Financial Group brand. Keith, thanks for your time.

Keith Cullen: Yeah, thanks so much, Tim. Great to be here.

Tim McGowen: Now, when you were last in here, which wasn’t that long ago, a few weeks ago, you released your indicative results, which have now been confirmed with your full-year audited statements. What can you confirm in regards to your final results?

Keith Cullen: Yeah, great, Tim. Well, the first thing to say is are in line with the indicatives that we put out, as we suggested they would be. So, we finished the year with $103m worth of revenue that resulted in a gross profit of a bit over $11m. And most pleasing out of that is then that resulted in an EBITDA line of nearly $4m. So then we came down to a net profit before tax on an underlying basis of about $2.8m.

We had a one-off refinancing cost in there associated with our acquisition in March of Synchron, and so that resulted in the net profit after tax on a statutory basis being $1.87m, but a really pleasing result, particularly from a revenue perspective. When you look at that $103m of revenue, nearly $35m of that was contributed from Synchron, and we didn’t settle that transaction till 15 March, so it’s really put us in a good position for 2023.

Tim McGowen: And in regards to that position for 2023, what’s that look like post the confirmation of your numbers?

Keith Cullen: Yeah, good. Well, Tim, we’ve provided guidance to the market of a revenue expectation around $170m. We are expecting that to ultimately result in a net profit before-tax of around $5m, so depending upon how the tax calculation works out, a net profit after-tax of something like $4m. A key consideration with our business is that we’ve got this sort of dual benefit of carried-forward tax losses that, whilst we’ll end up with a statutory tax position, we won’t be paying tax on a cash basis, and yet we are carrying about $1.5m worth of franking credit. So, we are motivated to get back to dividends as soon as possible, and so that’ll put us in that unique position of being able to look to fully frank dividends without actually having paid tax on a cash basis in the future.

Tim McGowen: And, of course, you’ve made some significant acquisitions over the last 12 months in regards to Sentry and Synchron. You’ve actually emerged as one of the largest independent licensees in the country. What’s the vision moving forward, and what does scale look like and how does scale benefit the business?

Keith Cullen: Yeah. Well, we believe that scale is really critical. So, just what the business looks like in terms of the shape of it now, we’re providing support to around 400 practices, about 600 advisors all up across those 400 practices. Collectively, they’ve got around $16bn worth of funds under advice, very significant in-force insurance premium book of about $360m per annum, and an account for writing about $25m a year of new insurance premium. So, that gives you a sense of the sort of scale of it. Those advisors are servicing well in excess of 100,000 retail and wholesale clients, so it’s a big operation that we’ve built.

And you need scale, I think, in this business, Tim, because the reality of it is the complexity of advice that consumers need and that advisors need to consult them on and advise them on is increasing all the time. We’ve got this cohort of millennials about to receive this massive intergenerational wealth transfer. So, you’ve got the recipients need investment advice, you’ve got those giving the money need advice around estate and legacy planning, you’ve got this massive cohort heading into aged care. So, the complexities are really increasing, and advisors need support in providing advice to those clients, and as a licensee, as a dealer group, you need scale to be able to underwrite the intellectual property to deliver it to them. And that’s what our whole vision’s been about here.

Tim McGowen: And, of course, the banks have walked away from financial advice, and it’s an area you’ve invested heavily in. What’s the vision here moving forward?

Keith Cullen: Well, the vision is really, I guess… From a vision perspective, it’s really to help advisors as an industry get their mojo back. You know, they have really encountered a lot over the last sort of decade, in particular. The vertical integration model was disintegrated on them, and that’s the banks exiting the space that you talked about. They’ve seen this increased regulatory and legislative burden that they’ve really grappled with how to deal with. And I don’t think, for the most part, they’ve been very well supported by particularly those institutional networks that have exited the space. So, there’s a lot of really tired advisors out there that have found the going pretty tough.

Now, from a positive front, we’ve built the sort of level of scale to support them and give them their energy back, and really importantly for the industry is the demand for advice keeps growing. I mentioned all those complexities increasing, but this big cohort of intergenerational wealth transfer, the Baby Boomers moving into retirement, the millennials coming behind them, the demand is greater than ever. You’ve got compulsory superannuation that is a natural sort of floater of all boats, if you like, is the massive inflows into super all the time. So, demand is growing. A lot of advisors have exited the space. So, you’ve got increased demand, reduced supply. It looks like a really positive future for advisors if they can get that right level of support from their licensees.

Tim McGowen: And, of course, you have invested heavily in advice. You’ve been well supported by some substantial shareholders. Can you give us a breakdown of who owns WT Financial?

Keith Cullen: Yeah, of course. Well, I think a critical thing is to say that, to start with, board and management account for nearly 35 per cent of the business. So, there’s really great alignment and skin in the game, as my broker friends like to call it, in terms of board and management. And then we’ve got some great shareholders that really understand the business. We’ve got Somers Limited there as our largest shareholder with just short of 20 per cent. We’ve got the likes of Ariadne, Glennon Capital really backing the business. These are people that are in financial services themselves and understand the space really well, and they share in our vision that there’s a great opportunity here for someone to emerge with a best-of-breed offering for advisors that really helps them deliver as this supply-demand equation sort of heads in the direction it is.

Tim McGowen: Keith Cullen, good to see you. Thanks for your time.

Keith Cullen: Thanks very much, Tim. Really appreciate it.


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