Perth-based financial services company Euroz is the latest victim of shaky global markets.
In an ASX statement late Friday, it said headline profitability had been “impacted” by difficult and volatile markets that had affected the value of its investments as at December 31, 2018.
Euroz now expects to report an unaudited net loss after tax of about $2.1 million for the past six-months compared to a net profit of $13.7m for the six months to December 31, 2017.
Underlying profitability was driven by a strong performance from Euroz Securities with equity capital market raisings of $277m versus $270m in the corresponding half a year earlier, but brokerage is expected to be down in the half-year due to weaker markets.
An underlying cash profit of $6.8m was offset by an $8.9m non-cash after-tax loss after a mark-to-market valuation of its investments.
Euroz listed investment companies Westoz and Oz Growth were also affected by negative markets, recording losses of 12.1 per cent and 15.5 per cent gross of fees, respectively.
“The share prices of these significant investments continue to be a major influence on our reported profitability and the decline in their share prices for the six months to December 31, 2018 contributed minus $5.9m to our headline reported losses,” the company said.
Entrust Private Wealth Management saw a continuation of modest organic growth to $809m, though new fund inflows were partially offset by decreases in portfolio values.
“The Hayne royal commission is likely to continue to disrupt the wealth industry, prompting dealer groups to review their alignment to various licensing and platform arrangements,” Euroz said.
“Entrust is well positioned to potentially benefit from this disruption and be a destination for quality advisers looking for a market leading platform given its wide approved product list, multi-asset class portfolios and choice of discretionary versus non-discretionary direct and indirect investments.”
Prodigy Investment Partners and Dalton Street Capital have also been affected by poor investor sentiment linked to sharemarket weakness and volatility.
The latter saw a 13.2 per cent loss gross of fees for the half, due to its exposure to Asia-Pacific markets that had been “hit hard” by trade wars and China slowdown fears, the company said.
But Dalton Street managed to gain some minor net fund inflows and higher intraday volatility is expected to assist the futures side of its alternative investment strategy.
Prodigy’s new partnership with Equus Point Capital over a “market-neutral strategy” is expected to resonate well with investors in the current market and it says the early feedback remains positive.
Group funds under management slipped to $1.425 billion versus $1.46bn at June 30, 2018.
The interim dividend has been kept at 1.75c, as it was a year earlier.
MARKETS EDITOR
David Rogers began writing on financial markets in 1987, having worked for Standard & Poor's, Thomson Financial, BridgeNews, Dow Jones Newswires, Tolhurst Noall and The Wall Street Journal. David has extensive ... Read more
Aside from the hoary old one about bellhops imparting share tips, the sure-fire sign of an impending bear market is when stockbrokers seek a public listing to share the dubious love.
Well it used to be, anyway. Wizened readers will recall that three brokers listed in quick succession in 2007, only to come a cropper after the market tumbled that November.
So we note with trepidation the recent listing of Evans Dixon, the amalgam of Melbourne blue-blood broker Evans & Partners and the self-managed super fund specialists Dixon Advisory.
It’s a case of so far so good, with the shares about on par with their $2.50-a-share debut price, having poked as high as $2.70.
And much has changed since the noughties, when brokers relied on trading commissions and fees from equity capital market activities.
Old-school brokers versed in wheeling and dealing might choke on their third post-luncheon port, but now brokers call themselves wealth managers and operate highfalutin investment platforms (generating annuity fees that don’t depend on the vagaries of the All Ordinaries index).
Evans Dixon also has considerable sums invested in the US Masters Residential Property Fund and solar-farm owner New Energy Solar.
Meanwhile the class of 2007 — Bell Financial Group (BFG, 77c), Wilson HTM and Austock — have morphed beyond recognition. The latter sold its broking arm to Intersuisse in 2012 and is now an investment bonds specialist Generation Development (GDG, $1.22).
The Brizzie-based Wilson HTM was subject to a management buyout of its securities arm in 2015. But its funds management arm Pinnacle lives on as Pinnacle Investment Management (PNI, $5.33).
Previously Bell Potter, Bell Financial Group is enjoying its best conditions in a decade, with funds under advice of $47 billion, 10 per cent of which enjoys recurring revenues. “These numbers clearly demonstrate we are not simply a traditional broker relying on day-to-day revenue from secondary market execution,” said managing director Alastair Provan.
The Perth-based Euroz (EZL, $1.20), which listed earlier, rides the ups and downs of the West Australian resources sector (currently more up and down now).
Once again, it has earnings diversity through $1.43bn worth of funds under management and two listed investment companies (Westoz Investment Company and OzGrowth).
As with so many other professional service plays including real estate (McGrath) and accounting (Harts and Stockfords), broking was not amenable to the listed model.
One reason is that the brokers were more like independent deal-chasers working under the one shingle.
Many were also unable to be herded into a corporate structure because they were eccentrics and-or permanently out to lunch.”..........
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