Netwealth saw total revenue of $48.2 million, an increase of $7.7 million (19 per cent) on the prior corresponding period.
The company’s share price increased 7 per cent following its first-half result, which surprised Morningstar analyst Gareth James, who said the announcement “lacked any big surprises” and contained more evidence of fee pressure.
“We expect the market was more focused on strong profit growth and that Netwealth remains the most popular of the independent platforms,” he said.
“The company should also benefit from the likely abolishment of grandfathered trail commissions, which will reduce switching costs and benefit independent platforms.
“However, we expect the market is underestimating the long-term impact of price-based competition on earnings growth, particularly as Netwealth lacks an economic moat. We expect platform providers to quickly copy competitor’s innovations and the reduction in industry switching costs is likely to impact all providers in the very long term. Notably, management also expects price-based competition to continue.”
In its half-year results presentation, Netwealth said that it is aware of the rate cuts of its competitors but has no designs to be the cheapest platform provider in the market.
“No platform is the cheapest or most expensive across all clients, the cost to client depends on account size, level of trading activity, investment asset classes, balance of cash held and number of accounts in a family group,” the company said.
Netwealth continues to grow significantly as a company. In the six months to 31 December 2018 the group added 9 more to their staff, growing the headcount to 246.
