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Analyst consensus indicates a 45% hit to FY26 earnings ($64 million NPAT) compared to FY25 ($116.5 million NPAT) resulting from the First Guardian refund to clients.. However, FY27 earnings are expected to lift to $158 million ($0.64 per share), up 36% on FY25.
Source: Analyst Growth Forecasts, Simply Wall Street
Netwealth has an impeccable balance sheet with no debt and $173 million cash reserves, more than enough to cover the $101 million refund to clients. Management have also committed to continuing dividends in FY26. There could be an opportunity to add NWL with the negative sentiment and further downward pressure on the share price this week.
Over the past 10 years NWL has been an incredible wealth winner for investors. I think the First Guardian fiasco was an unfortunate one off event with a low probability of reoccurring in future. If anything it has been an investment in trust building for the super wealthy clients it attracts to its wealth management platforms. This could be a future tailwind for the business?
Source CommSec. ROE nearly 60% for 7 years straight (shame for the First Guardian issue to spoil its track record).
Disc: Held, Accumulating on weakness
This AFR article published yesterday is a nice synopsis of the good and bad news for Netwealth over the last twelve months if you haven’t been following it.
Netwealth sees bumper inflows as First Guardian fiasco fades away
Netwealth has reported a record-breaking quarter of growth and assured investors it does not intend to slash dividends despite agreeing to pay $101 million to customers who lost money in the First Guardian collapse.
The ASX-listed wealth manager on Thursday reported it had added $8.4 billion in new funds in the three months to December 31, a figure that eclipsed its last inflow record set only in the previous quarter.
The inflows over the quarter took total funds under administration to $125.6 billion, a nearly 24 per cent increase over the last 12 months.
Much of the growth is stemming from Netwealth’s managed accounts offering with $1.8 billion in new investments this quarter. Those accounts give investors more control over what assets are included compared with traditional retirement options provided by superannuation funds. More than 35 per cent of the firm’s clients are wealthy investors and families.
Netwealth is backed by the billionaire Heine family whose wealth was estimated at $4.36 billion on the Financial Review Rich List. It was founded by Michael Heine along with his son Matt, who is the chief executive.
The record earnings come amid the ongoing fallout from the collapse of the First Guardian fund that was offered by Netwealth to its customers. In December, Netwealth agreed to refund $101 million to clients who invested in the scheme through its superannuation platforms after initially seeking a bailout from the federal government. That request was later withdrawn.
Netwealth admitted to the corporate regulator that it had failed to understand or evaluate the risks before offering First Guardian to clients of its platform. Netwealth also agreed to an enforceable undertaking with the Australian Securities and Investments Commission.
It is the second-largest compensation order secured by ASIC after the corporate regulator struck a similar deal with Macquarie – which runs a similar platform – to refund victims of the failed Shield Master fund in September.
In its Thursday update, Netwealth said it was on track to pay all victims by January 30. But it assured shareholders their dividends will not be impacted and will be based on underlying earnings, excluding the one-off charge.
The company is set to deliver its half-yearly results next month and told shareholders that excluding the impact of the First Guardian compensation, it remains highly profitable with very high levels of recurring revenue, low capital expenditure and significant cash reserves.
Netwealth chief executive Matt Heine spruiked the company’s new products including Netwealth Private – which is marketed to sophisticated investors with a higher level of service – to shareholders and signalled the company would continue pursuing Australia’s wealthiest individuals and families.
“Our customers are central to our strategy and our focus remains on both understanding and delivering solutions that meet our client needs,” he said. “These solutions continue to underpin our ultra and high net wealth offering and demonstrates our significant experience and capability.”
Held IRL and SM