Overview Comment:

Company executing as expected. Outlook looks good based on July results. 

General notes:

• Funds under management, advice and administration up 10% to $14.84b.
• Net revenue up 13% to $68.2m
• Total dividend for FY 46.6c fully franked. Yield of around 3.8%.
• My "FCF" number of $20.5m.

Positives:

• NPAT up 23% to $18.6m and "Underlying NPAT" (nil amortisation) up 19% to $21.0m. Operating leverage at work.
• FUM for core platform already up 10% over FY25 average at end of July. Indicating extra revenue of $1.6m and $800k-1m in PBT based on margins.
• FUM for Funds Management up 12% at end FY. July 2025 number already 7% higher than FY2025 average.
• Market liked results/outlook up about 12% on results day.
• Strong balance sheet with net cash = $34.9m
• Last year through to 10-year return numbers have Fiducian above median manager rank in almost all funds and years. Continues to be above average manager.

Negatives:

• Nothing obvious. 

Has the thesis been broken?

• No, company is executing better than expected. However, like at half year results I think valuation is fair. Will continue to slowly add to position as I think there is potential for a better result than $20.5m NPAT for FY26.

Valuation:

Updating NPAT expectation for FY26 to $20.5 (10% increase) and moving to an EV/NPAT ratio due to high cash.

• NPAT = $20.5
• Target PE = 18
• Cash = $34.9m
• Target MC = $404m
• Target price = $12.80

What are you expecting and what do you need to see over the next reporting season or generally into the future?

• Continue to be an above average manager. This is a core competitive advantage over other managers and making the practice of using their own funds much more defensible.
• Again like 1H results, move during trading day was significant. Up around 10% from open to close. Need to have some rough numbers ready to pull the trigger for a buy on results day if you want to take advantage of this. 

Overview Comment:

Good result overall, most segments and KPIs all moving in the right direction. There continues to be operating leverage in the business. However, valuation is now fair in my view but not overvalued to the point where I won't be adding.

Market liked the result up just under 10% after results. However, opened only up slightly then throughout the day moved up to 10% gain. Note for next time to be ready to make a quick call, this happened last results as well. Did see the results in the morning and thought overall they were good so could have pulled the trigger then. Will give it a week or two before buying again, see what happens after the rush to buy after results ends. Last time this resulted in about a 10% drop in price after this rush. Given the fair valuation not in any great rush to jump in.

General notes:

• Staff numbers only grew slightly. Wage increases have been offset by efficiency gains.

Positives:

• PCP financial figures good:
• Net revenue up 15%
• Underlying NPAT (NPATA basically) up 20%
• NPAT Up 26% to $8.6m
• EPS = 27.4c
• Figures above show Fiducian continues to have operating leverage.
• Dividend of 21.9c fully franked.
• Funds under administration up 14% YoY and FUM up 15% YOY.
• All segments growth in revenue and PBT look good:

Negatives:

• Going to stop cycling the excellent previous longer-term results over the next few years as the poor 3-year return moves further into the past. Funds could be less of a selling point as a result. At least 1-year results appear to have done ok overall.

Has the thesis been broken?

• No, company is doing well at or above my expectations. However, is at a full valuation. Will add as per buying plan.

Valuation:

Updating for NPAT expectation of $17.5m for FY25.

• NPAT = $17.5m
• Target PE = 18
• Target MC = $315m
• Target price = $10.01

What are you expecting and what do you need to see over the next reporting season or generally into the future?

• NPAT growth of 15% minimum given 26% gain in 1H.
• Monitor risk in the case of a market downturn.
• Be ready to go for a buy if results look good on release, these results and the previous had a big move from open to close. There was a chance to get in early that day if I was ready.

General notes:

•  Financial figures:

Positives:

•  Operating leverage of the business showing. Revenue up 10% with NPAT up 22% (17% underlying). 
•  Final dividend of 21.1c fully franked. 39.3c fully franked dividend for the FY. At a closing price of $8.37 this represents a 4.7% yield. 
•  Platform Administration business continues to grow steadily:

•  Funds management business:
• FUM up around 15% with an additional increase of 11% in July 2024. This could contribution approximately $2.4m of revenue over the next year.

•  Continues to rank very highly compared to other fund managers returns.
•  ROE remains high at approximately 28%.
•  Market liked the results, up 13.88% at close to $8.37.

Negatives:

• Funds under advice only up 4%.
•  Longer term need to think of the impact of the focus on clients using Fiducian products. This will probably pass the test while they outperform compared to other managers but can expect more scrutiny if this isn't the case. 

Has the thesis been broken?

•  No, company performing as expected. Will be increasing my position as per my buying plan. 

Valuation:

Updating for NPAT expectation of $17m for FY25. 

•  NPAT = $17m
•  Target PE = 18
•  Target MC = $306m
•  Target price = $9.72

What are you expecting and what do you need to see over the next reporting season or generally into the future?

• NPAT growth of 10-15% over the next year.

APRA imposes licence conditions on Fiducian over data accuracy issues - InvestorDaily

APRA imposes licence conditions on Fiducian over data accuracy issues

 15 July 2024

APRA has imposed additional licence conditions on Fiducian to address data accuracy concerns ahead of the annual superannuation performance test.

In a statement on Monday, the prudential regulator said it has imposed additional licence conditions on Fiducian Portfolio Services Limited to address data accuracy and completeness concerns ahead of the annual superannuation performance test, affecting its management of Fiducian Superannuation Service with 8,770 members and $2.57 billion in assets.

The regulator explained that the action comes after issues were identified with the accuracy and completeness of data submitted previously, which, it said, raised concerns about FPSL’s ability to identify, assess, monitor, and submit accurate data.

Under the terms of the new licence conditions, which came into force from 15 July 2024, FPSL must:

- take reasonable steps to ensure that an expert completes a review of the accuracy and completeness of data submitted ahead of the 2024 performance test;

- develop and implement a remediation plan, to be approved by APRA, to address any recommendations or areas of concern identified by the expert; and

- provide APRA with an attestation regarding the accuracy of data and governance processes for data submissions.

“APRA places a high degree of reliance on the quality and accuracy of the data we receive to drive greater transparency of the industry and strengthen the accountability of trustees to act in the best financial interests of their members," said APRA deputy chair Margaret Cole.

"This includes the data submitted for the annual performance test, a powerful tool used by APRA to hold trustees to account for fund performance, fees and costs".

Fiducian has been a long running, high ROE financial planning business/ fund manager/ platform business which is founder led. Investors have done very well over the long term.

My concern has always been it is all vertically integrated and the conflicts of interests that entails - most Fiducian advisers (salaried of franchisee) would recommend the Fiducian platform and that clients then invest in Fiducian managed funds - not sure how that sits with the 'best interest' obligation. "Show me the incentive and I'll show you the outcome.” - Charlie Munger

That said they escaped the Royal Commission (with which all the recommendations are now being wound back in any case) and they've avoided all the scandals unlike Dixon Advisory which came unstuck with a similar model and now costs the industry thousands in levies.

Given the conflicts wonder what would happen if Indy Singh does retire and what a less ethical manager might do in future.

Performance of FID vs AMP and IOOF over 5 years. The company fared much better than AMP and IFL through the Royal Commision.

Disc: I own

17/06/2019,   FID to acquire My States financial planning business for $3.5 million, My State had $340 million FUA. FID as at the 31/05/2019 had $7.3 billion FUMAA.

FID, is a wealth management company that has a mixture of salaried and franchised offices that have shown consistent growth over a number of years.

Management hold a large number of shares, shares have paid increased dividends yearly.

$233 million of funds under advise has been acquired in the past 4 weeks.

Reading Wilson and FIDs reports will give a good understanding of this stock.