HUB24 unfazed by new KKR-backed platform as it posts record profit

HUB24 has posted a record profit, upgraded its inflows outlook, and launched a $50m share buyback.

HUB24 is unfazed by the new wealth management platform launched by CBA-backed Colonial First State in recent weeks, saying the incumbent has a long way to go before it becomes a real competitive threat.

Speaking after posting a record $38m yearly profit that beat market expectations and upgrading its outlook for inflows, HUB24 chief executive Andrew Alcock said it takes a lot of money and time to build a good reputation of delivering good outcomes for clients.

“It’s early days for the CFS proposition,” he said. “A new platform coming to market has a lot of ground to cover and a lot of development to undertake. So at this stage, where are yet to see how that goes. “

“I think that everyone is waiting to see what’s really there and how it works. We‘ve been leading with innovation and delivering great outcomes for clients and it takes a long time to do that and a lot of investment.”

CFS, which is 55 per cent owned by private equity giant KKR and 45 per cent by Commonwealth Bank, earlier this month launched the long-touted platform to replace its 20-year old system.

Tech-driven platforms HUB24, Praemium and NetWealth have for years been luring advisers and flows from the incumbent players that still have legacy systems, including Insignia (previously IOOF), CFS and the Westpac-owned BT. CFS is hoping its new platform will help it turn around the trend.

HUB24 chief executive Andrew Alcock.

“You‘ve got the old market, the institutional platforms, largely bank-dominated, where there’s been disruption, changes of ownership, changes of strategy, and really, they haven’t kept up with the product features of the new specialist platforms,” Mr Alcock said.

But Mr Alcock said HUB24, which on Tuesday said it expects between $10bn to $12bn annual in inflows by mid 2025, felt confident about growing its adviser base.

“We‘re not concerned about (CFS’s new offering) at this stage,” he said. “As the market leader, we welcome competition (but) they’ve got a lot of ground to cover. “

Wilsons Advisory analyst Cameron Halkett said adviser feedback had been mixed, with some showing interest in the new CFS platform but others not finding a differential in pricing or features that would compel them to choose it.

Shares in HUB24 soared as much as 15.9 per cent on Tuesday before closing at $31.20 each, up 11.3 per cent, after it beat market expectations posting an annual profit more than double the previous year’s and an improved outlook.

It also launched an on-market share buy back of approximately $50m, which it said it could afford given its strong profit growth, as it also announced a higher than expected dividend.

Net profit soared to a record $38.2m for the year ended June 30 from $15.5m a year earlier, beating analysts forecasts polled by Visible Alpha.

The company declared a fully franked final dividend of 18.5c a share, which was also above expectations. That takes the total for the year to 32.5c a share, up 63 per cent.

Inflows over the year had fallen 17 per cent to $9.7bn, which HUB24 said was “industry-leading” given “ongoing market volatility and uncertainty in the macroeconomic environment,” adding that net inflows in July and August had been ahead of the “run-rate” experienced in the June quarter.

Barrenjoey analysts estimated this meant flows had rebounded to be between $190m to $210m per week, versus the $161m weekly flows during the fourth quarter of financial year 2023.

Platform funds under administration grew 23 per cent to $62bn, and the company said it was targeting to grow that to $92-to-$100bn by June 2025.

That replaced previous growth guidance of $80bn-to $89bn by the end of the current financial year.

“That implies flows of $10bn-to-$12bn or even higher billion dollars a year over the next two years and roughly five per cent market movement,” Mr Alcock said.

“We have seen good signs of adviser activity and are really confident with our pipeline that will generate and deliver flows.”

“We’ve seen less flight to defensive assets and cash and people are more confident in the markets. Things are a little bit more stable than they were in the fourth quarter where everyone wasn‘t sure what was happening with (interest rate changes by) the reserve bank and other macroeconomic factors. But I think sentiment is improving.”

Underlying earnings before interest tax, depreciation, amortisation and notable items – HUB24’s preferred profitability measure – was 45 per cent higher to $102.4m, helped by higher revenues and its acquisition of wealth accounting platform Class in February 2022. That was also higher than the $100m expected by sell-side analysts.

It said operating expenses increased 43 per cent – lower than the 45 per cent increase in revenues – driven by a larger workforce that grew by 20 per cent in order “to support growth” and future initiatives.

Analysts cheered the result, given the new FUA guidance compared to market expectations of between $95bn-to-$96bn for financial year 2025.

Barrenjoey analysts said the buyback signalled a pause on acquisitions for the company, after its acquisition of Class and accountant software provider myprosperity in the last 12 months.