Maintained revenue target of $130mil

Previous normalised EBITDA at 10mil; guidance range reduced to between $8.1-$10mil.

2c dividend

no debt with a strong balance sheet. I keep holding this because of the balance sheet and ability to make acquisitions in the space, plus it looks cheap. But it is probably cheap for a reason. Will keep holding but it is at the top of my sell list.

DISC- own a small amount IRL.

next instalment fee for the Morrisons business due tomorrow by NQ. $15m transfer where SEQ will transfer 50.1% of the shares in Morrisons across to NQ. The market on higher-than-normal volume is selling down. There have been suggestions along the way that NQ would not have available funds do this acquisition of Morrisons. Will be interesting to see how this goes.

Disc - held IRL and SM

https://youtu.be/htpbYG4mbts

interview with Gary about the Morrison deal. Key points were that it’s a win win for them regardless the outcome of the deal. They also hold 20% and Gary seems to think that the Morrison business with some proper funding can grow massively and they will be rewarded in the future if this occurs.

Also right at the end Gary (who I swear says way to much in interviews and gets stung when things don’t go to fruition) mentions they will be able to bypass the dividend strategy that was expected to grow to 70% over coming years and they will likely payout 100% if the deal goes through.

pretty impressive deal if they get paid.

disc held IRL and SM

SEQ announced FY22 results today

mixed bag really and I think the market certainly was unsure at first as I was.

Highlights included

• Total revenue beat expectations at 147.3m 26.6% increase
• EBITDA of 12.4M (7.3% increase) within guidance but lower end.
• NPAT of $5.7m 3% increase YoY
• increased dividend payout total year payout of 1.4c
• EPS 4.23c

As I suggested above when I first saw the result I was really disappointed, as was the market. Sure SEQ beat revenue but I thought given historic information that EBIDTA would have been the top end of guidance or even beat it. Some large investments within the company were made to upgrade technology and service uplift.

The other notable inclusion that really surprised me was the longer term revenue target for FY26 which was reduced from 400m to 300m. At first it was a concern however quite quickly I took this more of a realistic and achievable task that would reduce risk. To make the 400m SEQ would most likely have to make some really risky acquisitions and it was always a bit of a worry for me. I feel now the 300m will reduce that risk and still maintains a good growth trajectory. Gary (CEO who is a large part of my thesis) suggested that given the current share price he does not believe it is a good idea to acquire other businesses on higher multiples that would include Shares and therefore has reduced his longer term outlook as some acquisitions that may have been in eye are now not worth the expense. I am content with this outcome

projections include

• 20%CAGR in revenue to FY26
• 25% CAGR in EBITDA to FY26
• 20% CAGR in operating net cash flow pre-tax
• increasing the dividend payout ratio to 10% each year to 70% in FY26.

Overall we saw growth in all 4 segments. I am not going to go over each segment but the investor webiner went through the longer term growth outlook and expectations moving forward and I am very comfortable to continue to hold. Key focus is on improving margins of the licence service division and equity market division to 10+%. Gary is. conservative and bascially suggested he would hope to see % margins in these sectors much higher in future.

I think a lot of the acqusitions moving forward will be within the professional service division and direct investment division where margins are 26.4% and 37.8% albeit on lower total revenue. So certainly some work can be done here to expand. Professional Service division grew 55.8% to $11m from FY21 and are hoping for margins closer to 30%.Direct Investment division the expectation is thatrevenue will move to $15mil ($2.6FY22) by FY2026 with gross margins currently at 37.8%, so this is quite attractive growth.

I like listening to Gary speak, he is always comparing the business to "the tortoise not the hare" suggesting we are going to grow at a slow but good rate and get it right. He is very conservative and has mentioned that advisory is his absolute passion and what he was put on the earth to do. The passion is evident. He owns a good number of shares and is aligned to shareholders.

Lastly the Share Buy-back was put on hold because results were out so no buy-backs have been occuring now for some weeks. Gary did say he plans on commencing this straight away and given he sees the share price as cheap, I suspect that some buying will be back on the cards. This will at least hold the SP where we are at a minimum so I am content to continue to hold.

DISC- hekd IRL and SM

@Rapstar

In reply to your #2022 Growth Outlook for SEQ

I just got off the webiner. I am feeling more confident as time passes with this growth story. 

CEO was very bullish on the growth outlook basically stating that 15% organic revenue growth was an absolute minimum. I suspect over the year we will get some good trading updates. He also alluded to the fact that  this does not count acquisitions. As you mentioned any business acquireed would be at 3.4x EBIT multiple and that any acquisition would exceed 15%EPS, with the goal of pay back period of 1.2 yrs. Any acqusition should add 500K to 1mil EBITDA. Would use back up cash therefore not increasing share count. Appears that acquisitions have been identified and discussions are taking place so we should see some announcements in coming months. 

Key growth segment: 

1. Sequoia Direct. Revenue is currently 2 mil and they are aiming for 10mil in 2 years. CEO mentioned the platform and its infrastructure is very god and they aim to market this now. They built this during the last year and it was impacted by COVID.

2. Professional Services:

• Target to increase SMSF adminsitered by 50% by June 2022.
• Panthercorp acquisition now fully integrated
• acqusitions in general insurance market place to occur (we have seen this with Steadfast with positive growth)

3. Equity Markets:The morrisons business which had significant growth appears extremely strong and maintains good retention. This is not like the SWF platforms which is more day trading rather this is advice and long term financial planning. Appears they are getting good numbers through the doors in the "boomer" category as they look for advice leading in to retirement. Simply they are winning business and not losing clients.

4. Wealth MGMT:

• further upside expected with the closure of many banks and insurer owned advice expected in the next 2-3 years. Aiming for 8% overall market. 
• Mentioned July has been great/strong.
• Operating environemnt should continue to grow as advisor number frecast drop to 13000 down from 30000 in 2018. This is significant and SEQ is benefiting from this. SEQ is trying to increase advisors to 1000+ by 2025.

Lastly I was pleased to hear that top 100 share holders have not sold and continue to hold even through the last year where SP has risen somewhat sharply. 

DISC: held

Revenue came in at 116mil after increasing guidance multiple times and predicting it to be between 110-120. This was up from 84.5 mil or a 37.8% increase.

EBITDA came just ahead of guidance provided with 11.5 mil (preciction of 11mil). This is signicantly up from 4.8 mil the previous year or 138.7% increase.

Statytory NPAT 5.5 mil up from 1.9mil the previous year

Dividend came in at 0.6c for a total of 1c for FY21. Mgmt want to maintain a good balance for future acquisition opportunities.

In FY21 company reduced debt by more than $0.5m

Future focues:

• wealth division with the ongoing goal to increase the number of advisors from current market share of around 3% towards 8%. Aiming for 13,000 advisors in 2025. 
• Equity Markets Division continue winning market share orgnaically
• Professional Services Division: focus on organic growth, cross marketing and here is where they will look for acquisitions.
• want to provide ROE on non-cash equity of 15% or above
• company wants to distrbute shareholder dividend opayments at 20-50% NPAT
• Board targets organic growth of 15% per year 

The most inrteresting part was the significant growth the company saw in 2H21 almost doubling EBITDA from 1H21 showcasing strong momentum in the business. The group expect continual growth rate over the next 12 months with tailwinds in the industry with ncrease in dmeand but reduction in supply.

Extremely happy report to read at the end of the day.

DISC: Held IRL and Strawman