Prime Financial Group Limited (PFG) Earnings Call Transcript

Good afternoon, everyone, and welcome to the FY '26 Half 1 Financial Results call for Prime Financial Group Limited. I'm Natalie Simmons, the Chief Operating Officer. With me today are Simon Madder, Prime's Managing Director and Chairman, and Sharon Papworth, who serves as Chief Operating Officer. Before I turn things over to Simon for the formal presentation, I'd just like to remind you that this webinar is being recorded. If you'd like to ask questions, please make use of the Q&A feature in the meeting, and we'll do our best to answer as many of them as we can at the end of this presentation. And now I'd like to hand over to Simon.

Perfect, and thanks, Nat, plus thanks to all of you joining us today. I'll make a few opening comments first, then hand things to Sharon to walk through the hard numbers. What's become quite clear is that this is a strong first half, and we carry great momentum from a strong second half last year and, in fact, a strong FY '25. That momentum keeps building across the business as we keep developing our platform — that entire client solution platform. And probably the most impressive piece has been the mix of revenue growth, earnings growth and, importantly, operating cash flow too. All of that gave us the confidence to raise and pay our interim dividend, which is a fantastic outcome for shareholders as well. More broadly, we're also seeing a really strong M&A market, and it's strong because we have a growing pipeline of opportunities. We're clearly fairly selective about what we pursue in terms of transactions, but that's an increasing part of our growth profile, and we're working to strike the right balance between organic and inorganic growth. Still, the business is in a great position.

It's been a tremendous half delivered by the team, and we are absolutely keeping our guidance for growth across this full year. I want to mention a few points regarding who we are, since some folks on this call may be new to us. As a business, we operate across advice, capital and asset management. We differentiate strongly by being a destination where clients can have everything taken care of under one roof. That includes our ability to share insights, deliver the services and really concentrate on our 2 key audiences, which are business owners and high net worth investors as well. You've got some key metrics on screen right now regarding the team, where we're located and the history of the business as well. Next slide, please. I think this diagram, which we show every time we present, really does describe quite well how we try to bring this all together. And as a business very much focused on this mid-market, I think there are few businesses — that are similar to us in financial services that can deliver this comprehensive list of things under one roof.

We're really concentrating on making sure we have a single connected team and service stack, so that through that one experience we can deliver more value. At this point I'll pass things to Sharon, who'll go over the financial results, and after that I'll jump back in to cover some operational matters.

Thanks, Simon, and a warm welcome to everyone joining us on the call. As Simon pointed out, we posted a really strong result for the half year, driven by acquisitions and organic growth, together with effective management of our operating cost base and our cash flow as well. Our performance highlights include revenue, which rose 31% to $30.1 billion. 70% of that growth came from acquisitions aligned with our strategy. Revenue converted into underlying EBITDA to members of $6.5 million, up 60% over the prior corresponding period. At the same time, we were also able to lift underlying EBITDA margin by 400 basis points to 22%. And I guess there were 2 key drivers behind that margin uplift. The first was an increase in revenue per FTE. Our revenue per FTE in FY '25 was $220,000, and we closed the first half with revenue per FTE of $249,000. That's a 13% uplift. In addition, we were also able to manage labor costs as a percentage of revenue. The bridge between reported EBITDA and underlying EBITDA reflects one-off costs largely associated with acquisition due diligence. Those costs were $200,000 this half. Last half, the one-off costs were $600,000.

Moving to the next slide. Net operating profit after tax to members rose 182%, reaching $3.1 million. We've also given investors a look at core operating profitability, and we now report NPATA, which climbed 112% to $3.6 million. Strong earnings, together with working capital management, pushed our operating cash flow up to $3.2 million for the half — nearly triple the result from the prior corresponding period. Our debt to underlying EBITDA ratio came down to 1.2x, once again driven by earnings growth. The earnings impact also shows in reported EPS, which rose to $0.012 per share. As announced today on the ASX, we've declared an interim dividend of $0.08 per share as well, up 4% and consistent with guidance. So in summary, Prime has performed strongly and delivered against every financial metric. We've met guidance, and we've built a really strong foundation for continuing to execute our growth strategy. I'll now hand over to Simon. Thank you.

Thanks, Sharon. There are a few operational highlights I think are worth mentioning. On people and culture — our team is clearly our greatest asset when it comes to moving the business forward, and our group's numbers have held steady throughout this period. We're putting substantial time into ensuring our people are empowered through education and leadership training, and increasingly through AI as well, which I'm sure will be a much-discussed topic in many presentations this half year. The reality, though, is that it will affect the way we conduct business and the way we empower our team. Even so, we'll remain a people-led organization, and our clients value having that human face representing the organization. Turning to M&A and integration, it's great that Lincoln Indicators — the business we acquired back in May 2025 — is now fully integrated into our core operations, which is fantastic. We now have the chance to deliver services to another 3,300 important clients of the firm. Beyond that, we've brought in some additional teams across both wealth and business, along with $1.7 million of annualized revenue, and that is integrating really well and growing at the right level, which is what we would expect.

On the funding and finance side, we did increase our Westpac facility a little, by a couple of million dollars. The way we conduct transactions really hasn't changed, though. As a reminder, though, we'll usually issue 20% to 50% of the consideration as shares in Prime — right now it tends to be nearer 20% — with the rest coming through cash, typically across a 3-year earnout period. Next slide, please. On growth and technology, I touched on this in my opening remarks, but M&A is going to be a feature of what we do over the next few years, and obviously it has been over the last 3 or 4 years. Making sure we pick the right businesses that fit into our family portrait, that add to our client value proposition and bring the right kind of client to our organization — that is the absolute imperative. So the selection criteria are very specific. And we want to ensure that everyone we go into business with has that business owner mindset and that philosophy of delivering more services and value to their clients. When it comes to a dedicated sales and account management process, we're absolutely consolidating around that and making sure we're effective in delivering the full capability of the firm to our clients.

A group-wide CRM rollout will help with that, and Phase 1 of it begins in May of this year. Before this, we had CRMs in separate pockets, but never anything fully linked together. So we're pretty enthusiastic about what that opens up — serving clients better, and also speaking more clearly about how we're growing and about how many products and services clients are using across what we offer. On marketing and events, you'll make sure — we will make sure — that we keep advancing the Prime brand in every place where we can stand apart for our ideal clients. That covers digital as well as physical. To give you an example, last year we ran roughly 60 events. We want to keep doing that, and doing it well, adding value for our customers so they know precisely what we're capable of at those important moments in their business or personal wealth journey. So the service offering stays very much centered on making sure people understand what we can do, when we can do it, and on having a truly consistent go-to-market strategy that backs up our brand positioning.

Moving to the next slide, please. The main factors propelling our business that have allowed us to keep expanding — and Sharon will address this shortly. You'll notice fairly striking revenue growth across the past 5 years. That's occurring since we're unambiguous regarding who we are and whom we aim to serve. These 5 themes listed here are elements that will keep carrying forward as part of our strategy. Intergenerational wealth and business transfer is an enormous theme, but you need to make sure you're accessing it the right way and striking that proper mix of advising businesses and then helping to guarantee that whatever might arise from a transaction standpoint, you can handle the wealth and the proceeds from it and you're engaging with the next generation wherever possible. Private markets, alternative assets will keep being a theme. M&A for ourselves and, in fact, simply broadly across the business community will keep unfolding. That connects somewhat to point #1. Technology and AI will be an overmentioned item, as I mentioned earlier, in plenty of presentations. I wouldn't claim we're early adopters in this area right now.

We’re taking a careful approach here, but the CRM rollout we’re doing will make all of this work even better, along with how we’re guiding our people to handle it safely—in a way that benefits our clients and our team as well. The mid-market opportunity—that segment we aim to serve for SME businesses and for high net worth individuals and families—is the space we want to own, and the space we want to ensure the Prime brand is most closely associated with. Those developments will keep unfolding. That’s where our focus is, and it brings us to our strategy, which I’ll discuss later. Next slide, please. Sharon?

Thanks, Simon. Our revenue rose 31%, with contributions coming from both the wealth and business segments. The wealth segment was the biggest contributor, up 50% -- sorry, 57% -- compared with a year earlier. That figure includes Lincoln Indicators, acquired in May 2025, along with the divestment of non-core assets. The business segment was up 3%, consistent with what we expected, as we take steps to cut transactional revenue while growing recurring income. In the period, transactional revenue in the business segment fell 25%, while recurring income rose 18%, mostly from our accounting and business advisory division. Group organic growth from continuing contracts was up 6% versus a year earlier. Our target sits between 5% and 10%, and while we are in range, we will focus our efforts on lifting organic growth going forward. Expenses as a share of revenue fell 400 basis points, which signals early-stage benefits from being able to leverage the Prime platform to grow both earnings and income. We plan to keep investing in core platforms such as the CRM as we build scale and capacity for growth. Meaningful income, together with optimization of our cost base, has lifted EBITDA margin to 22%. I think a key metric here is earnings per share, which will be a KPI we keep focusing on to ensure ongoing returns to shareholders.

We're hitting that target, with EPS rising to $0.012, up from $0.0046 in the earlier period. Let's go to the next slide. Our approach is producing strong revenue growth. The half-year revenue result gives us further confidence in our financial year '26 guidance, and we're still committed to reaching $100 million in revenue by financial year '28 to '30. We're meeting our objective of growing recurring income. Recurring income rose to 78%, an increase of 11% over the previous period. Next slide, please. The underlying EBITDA margin has improved significantly versus earlier periods and confirms our ability to grow both revenue and earnings. Our target remains an EBITDA margin of 30% by financial year '28 to '30. And as you can see from the margin we generated in the first half, we're making further progress toward that goal. Next slide, please.

If I could jump in for a moment there, Sharon, it's probably worth briefly addressing the point that for the whole of last year, our EBITDA margin came in at 26%, and what you're seeing is that the second half tends to be stronger than the first, since we've historically carried more weight in the second half. Still, it's genuinely encouraging to observe how the business is beginning to even out a bit more closely between H1 and H2.

Thank you. And I want to point out that Prime enjoys considerable flexibility on its balance sheet. The ratio of group debt to underlying EBITDA has gone from 1.3x in June down to 1.2x at December. As I mentioned earlier, we've also strengthened operating cash flow, which has roughly tripled — or nearly tripled — compared with the same period a year ago, reaching $3.2 million. On top of that, we can draw on $43 million in funding through Westpac, which will go toward supporting our growth strategy. Let's move to the next slide, please. Dividends have kept rising versus prior years, and our interim dividend of $0.008 per share represents a 67% earnings payout ratio, in line with earlier guidance. Thank you.

Perfect, thank you, Sharon. Now, I’ll just briefly address a few of the strategy points that remain consistent with what we’ve done before, so I’ll move through this fairly fast. Organic growth, as Sharon noted, stands at roughly 6%, compared with about 7% in the prior year. Our aim is to advance that more effectively, nearer to the 10% target at the upper end of the range. That will happen because we concentrate on those core services in the business where we already know growth is achievable, and through the cross-selling process, where the profile should improve thanks to some of the steps we’ve taken within the platform and will take during this half for the platform, CRM included. On delivering accretive acquisitions, we believe we have in fact acquired very well across the last 3 to 4 years. We remain in discussions regarding an MBO that is signed at present and is ongoing. And we feel very confident in our capacity to keep growing this business and lift our margins to 30%. Scale and technology efficiencies are somewhat a given. We believe we made the right investments at the right time.

We wouldn't call ourselves early adopters, though we think our approach here is a sensible one, and we're eager to see what efficiencies some of the newer technologies that are clearly out there can deliver. As for our FY '26 outlook, this is the guidance given at the AGM, and we're holding firm on it. We expect revenue to be up at least 15% to 20% versus the prior year. Underlying EBITDA up 20% to 25%. On operating cash flow, you'll note it came in substantially better than that in the first half, but up at least 125% to 150% on the prior year. And on dividends, we've again set a range of 3% to 5%. We landed at the midpoint of that for the interim. So we fully expect to keep growing the business. We're excited about where we stand. We have a fantastic team working really hard for our clients. And we believe the opportunity in the space we operate in, which is beginning to consolidate, is pretty material. And we believe we're really well positioned for those often founder-led financial services businesses that typically have 3 to 6 partners.

We believe we're an excellent place for them to come on board, allowing them to provide greater value while keeping that owner-operator mentality. So that excites us, along with the direction we're taking the company. A huge thank you goes out to the entire team and to our shareholders for your continued backing. Reaching this kind of outcome isn't possible without that support. I'll hand it back to you, Nat, since I suspect we may have some questions—as we typically do.

We do. Thanks to you both, Simon and Sharon. Perhaps I could start with the first question. Reported EBITDA rose sharply. What mainly drove that?

Yeah. So obviously, revenue has helped us out, and we've managed to keep our cost base in check too, which has given us room to grow. If you're putting up 31% revenue growth while holding costs steady — and actually bringing labor costs down as a share of turnover — then that math, the positive jaws everyone mentions, ends up working to your advantage. So it's been a solid mix of revenue growth from both organic and acquisition, along with cost discipline inside the business.