Owen Kerr’s Pepperstone profits lift in trading surge

Profits at foreign exchange broker Pepperstone soared 50 per cent in the 2020 financial year as trading volumes surged through the COVID-19 crisis.

Trading revenue accounted for the bulk of Pepperstone’s overall earnings for the year, jumping 17 per cent to $326.1m. The broker earned a further $4m from foreign exchange gains. Picture: AFP

Profits at Owen Kerr’s foreign exchange broker Pepperstone rocketed in the 2020 financial year as trading volumes surged during the COVID-19 crisis.

Melbourne-based Pepperstone’s net profits soared 50 per cent to $150.5m in the 12 months to June 30, on revenue of $332.58m, according to documents filed with the corporate regulator.

Trading revenue accounted for the bulk of the overall earnings for the year, jumping 17 per cent to $326.1m. The broker earned a further $4m from foreign exchange gains, though interest income declined to $1.44m as rates moved lower.

Founded in 2010 by Owen Kerr and Briton Joe Davenport, Pepperstone was at one point slated for an IPO before it shelved its plans and brought in Champ Private Equity as a part-owner.

Pepperstone founder Owen Kerr.

The group’s founders and management team bought out Champ in September 2018, less than three years after it bought into the business.

Despite the record profits for 2020 that Pepperstone generated by facilitating over-the-counter derivatives such as margin foreign exchange contracts and contracts for difference, the broker flagged its intention to diversify further as the regulatory environment in Australia becomes more challenging.

After more than a year of consultation, the Australian Securities & Investments Commission in October announced its intention to use its product intervention powers to reform the OTC derivative industry.

“These measures take effect in March 2021 and will have an impact on Australian regulated providers and their clients,” Pepperstone said in its accounts.

“The group is confident that the business is well positioned to mitigate this impact and to continue to deliver attractive returns to shareholders as, over the past 12 months, it has secured regulatory licences in a number of other jurisdictions enabling it to diversify its product offering and cater to its growing international client base.”

Demand for its products and client numbers in its core markets remained strong, Pepperstone said. “We expect to broaden our geographic footprint and diversify revenues, including by adding further regulatory licences to the group,” it said.

Pepperstone already has a presence in the UK, Cyprus, Germany, United Arab Emirates and Kenya.

The broker would also invest further in technology to enhance its trading platform, it said. That bump in technology investment was already evident in its 2020 accounts, with spending on communication and technology jumping to $7.7m over the year, up from $4.2m the previous year.

Trading expenses, meanwhile, fell to $57.1m, from $94.1m in 2019.

Pepperstone paid out $162.1m in dividends in the year, a 57 per cent jump on the $69.5m paid in the prior year. The group paid a further $30.6m to its owners in August and $24.9m in November.