Prime Financial Group Limited (PFG) Earnings Call Transcript

Good afternoon, everyone, and welcome to the FY 2026 financial results for Prime Financial Group Limited. I'm Natalie Simmons, Chief Operating Officer of Prime, and with me today are Prime's Managing Director and Chairman, Simon Madder, along with Chief Financial Officer, Sharon Papworth. Before I pass things over to Simon and Sharon for the formal presentation, I just want to remind everybody that this webinar is being recorded, and there will be chances for Q&A once the formal presentation wraps up. If you'd like to submit some questions, you can do so through the Q&A tab at the bottom of your screen. I'd now like to hand over to Simon.

Thanks, Nat — appreciate it. Hello, everyone. FY 2026 has delivered another really pleasing set of results. It's another meaningful step along our growth trajectory. I'm looking forward to taking you through the key financial metrics and what's happening operationally. Let's jump onto the first slide, if we can please, Nat. Some of you may not necessarily know what we do. The best way I can describe our business, I think, is as a market-leading integrated advice and investment firm, intentionally for ambitious clients. A lot of our clients run their own business, or they have a particular wealth management need. And I think we do our best work when we combine those two things together through our one business, which is our one connected Prime philosophy. Right now we have about AUD 1.9 billion of funds under management, 197 fantastic team members, and we've been in business for 28 years. Next slide, please, Nat. Let's touch on some of the key and most important financial highlights. A really impressive increase in our revenue, up 22%, AUD 60.5 million. That really does speak to that growth mandate that we have got and that trajectory.

Also impressive is that, measured by FTE, our team produced AUD 276,000 per FTE. That's a 25% increase, which is great once again. It demonstrates that we're achieving that efficiency and productivity goal and taking the business in the right direction. On EBITDA margin, it held steady versus the prior year, FY 2025. We aim to grow it across 2027 and 2028. For underlying EBITDA, whether reported or underlying, it rose between 17% and 18%. Once more, a genuinely pleasing outcome there. Another core element we focus on is operating cash flow. Again, we were glad to see operating cash flow strengthen, rising 47% to AUD 4.3 million for the year. So overall, a really solid set of figures on both the top line and the bottom line. I'll now pass things to Sharon, who will cover a few other items for us.

Thanks, Simon. Some context is needed for our profit measures this year. The drop in reported earnings came mainly from tax, while the underlying adjusted earnings trend keeps getting better year over year. If you set aside the tax rate change — 25% last year versus 30% this year — NPAT would have risen 11% to AUD 5.1 million. NPATA would have risen 22% to AUD 6.6 million. Reported earnings per share would have risen 5% to AUD 0.0196 per share. That context gives a clearer picture of how the business performed operationally at its core. Debt to underlying EBITDA stood at 1.5x versus 1.3x in FY 2025, which reflects acquisition payments and ongoing investment in growth. Lastly, I'm pleased to confirm the board has declared a fully franked dividend of AUD 0.0092 per share, taking the fully franked dividend for the full year to AUD 0.0172, up 4% year-on-year.

Great, thanks Sharon. I’ll move on now to a few of the operational highlights — Nat, could we go to the following page, please? I really want to walk through how the business is running across these four main areas: simplification; M&A and integration; growth, sales, and ideal clients; and technology as an enabler. Over the past 12 months, simplification has arguably been the dominant theme for us, and it will remain a theme as we go into FY 2027. What that means is offering fewer services, with more focus. We should do more of what we excel at, keep building that side of the business, and find clients who genuinely need those services — the ones where we are the experts. We’re also making sure we have a very clear enterprise-level view of our customers through the enterprise CRM we’ve rolled out, which the team is now actively using. We need full visibility across our customer base, and we need to be clear about what they purchase from us, what they require, and what they may require going forward. Another important gauge of simplification is cutting the transactional revenue within our business.

It really stood out to me that recurring revenue climbed to 85%, up from 70% before. That's a very large jump. Over the past 12 months, that represents a 21% rise, and it reflects how disciplined we've been about the simplification effort. One more important point that sits somewhere between simplification and what we've done on the divestiture side: we genuinely shrank our cost base, because we did divest certain clients who didn't fit our ideal client profile. Once you get the accounts and go through them carefully, you'll notice that we divested roughly AUD 4 million of revenue. People ask what an ideal client looks like for us, and why those clients weren't ideal. Typically, they were clients from whom we couldn't produce the margin we're aiming for, and who don't really need several services. Our ideal clients appreciate what we can deliver across the full breadth of our offering, and we can then serve them at a margin that suits our business. When we shrank our customer base and sold some of those clients to peers in the industry, we managed to shrink our cost base as well, and that happened mainly in Q4.

Recruitment has also been a major focus for us. Over the past 12 months, we were delighted to welcome two new leaders into our team, spanning both business and wealth, who brought AUD 1.7 million in annualized revenue with them—revenue that contributed to FY 2026 and will contribute more in FY 2027. That fits within our acqui-hire growth model, which I'll go into a bit more detail on later. On the M&A and integration side—and deep integration specifically—another key item for us has been the Lincoln Indicators business we acquired back in May 2025. It was the largest acquisition we've completed in the last six, and I'm pleased to report that it sits deeply at the center of our wealth segment, and we are actively delivering added value and services to that customer base. When it comes to growing our business—sales, account management—what we're really delighted about for this year that has just passed is three core growth areas across wealth, SMSF, and accounting. These are impressive numbers. Those areas grew somewhere between 14% and 44% for the year.

That covers acquisitions, but more importantly, it demonstrates that when we concentrate on the essential items our clients require and the areas where growth is possible, we can produce some truly excellent results. That is a very encouraging sign for FY 2027, FY 2028 and on through 2030, and for our aim of reaching AUD 100 million in revenue between FY 2028 and 2030. We are absolutely fixated on ensuring we engage with what we regard as those ideal client profiles. When our attention is there, it means our sales, account management, and servicing processes become better and more clearly defined, and we can provide greater value to our customers. An element of that customer journey involves ensuring we do enable technology. I have mentioned this previously: we are not first off the bench to launch into technology, but we are taking steps forward. Internally we do have a fantastic team that is partnering with external providers in partnership to ensure we are enabling and simplifying our business so that we can scale and deliver improved customer service. A key component of our technology strategy involves ensuring that our data is consolidated. Data is king when it comes to what we do, and to being able to manage our business efficiently and to be able to achieve that growth roadmap we desire.

Bringing data together matters so we can run our workflows and bring in AI in a way that's acceptable and properly governed for risk. A great deal of effort is underway on that consolidation front. Thanks, Nat. Which main themes keep propelling the business? First, M&A and business succession, whether that's happening inside our own sector, and our sector is really busy right now across professional and financial services. It's rare that a month passes without some kind of M&A showing up, be it in accounting, or in wealth or asset management. It's a very lively space, and private equity is taking an ever bigger role there. One point I'd flag is that in the U.S. lately, Grant Thornton, among the bigger accounting firms, actually laid out more than AUD 5 billion to buy what had been the largest listed accounting firm in the U.S. Things are active. We're in the right space at the right time, and we believe we have a really important role to play in what happens over the next three to five years. M&A and business succession within our own industry and for our clients is super important.

That fits into one piece of that conversation about wealth moving between generations. It's more and more on our clients' minds, and we're fortunate to be able to provide greater value under a single roof for many of them — whether that means handing down portfolios or other assets, ensuring the structure is right and that a trusted advisor is there to help, or whether it involves selling a business and what that succession could look like. Where we're positioning ourselves, along with our ideal client profile and brand, is in that mid-market opportunity. That's why we're precise about ideal clients, about clients we might otherwise divest — whom we respect — to other participants in the industry. A really key thing we've seen play out since the budget is the need for advice. Clients have needed advice throughout, but likely even more so over the next 12 months than ever before. Across accounting, structuring, wealth management, there are plenty of conversations and a great deal of need that we look forward to supporting our clients with over the next 12, 24 and 36 months. Those are some of the key themes driving our growth.

Now I'll briefly address a handful of items concerning our financials, so let's move to the following slide if possible. I won't go into depth on matters that Sharon or I have already discussed. I'd likely call out two leading items: the wealth segment's revenue and the business segment's revenue. Yes, it's striking to see wealth up 37%, though we may be somewhat underselling the business segment by implying it grew only 2%. The business segment bundles what we do in accounting together with our capital, or corporate finance, work. The capital and corporate finance side is what we're de-emphasizing. So that portion declined. It isn't a priority for us. We'll handle that in specific cases for clients. That has likely dampened some of the outstanding results of that business segment, which included our accounting operations rising 25%, a genuinely impressive outcome. Let's move to the following slide, and I can go into somewhat more detail if we're able.

For the year, total revenue came in at AUD 16.5 million, as we indicated, which is a 22% increase. Looking at our contracts with customers, that figure rose 20%. I'll keep repeating this point. Take a look at the bottom left-hand corner of this slide. Wealth was up 44%, and that's a really positive trajectory that appears fairly consistent. SMSF rose 14%, and accounting was up 25%. We're going to do more of this. This will be a focus for our M&A, for our acqui-hire. An acqui-hire is simply M&A under a different name. It's when an individual or a group of people join you with a client base, but without the legacy of the structure that might otherwise come through an acquisition. We will concentrate our efforts in those three key areas. As I said, capital matters, but it is transactional revenue and not somewhere we want to focus. Our focus is on recurring revenue, and as I mentioned earlier, that is up 21% for the year to 85% of our total revenue. We will continue to zero in on that target we set three or four years ago, which was to reach AUD 100 million. I think when we set that target, we were at around AUD 25 million of revenue.

Our company is definitely oriented toward growth, yet most of the time our attention goes beyond simply revenue—it goes to the quality of the earnings generated by that revenue and the margin we can genuinely deliver from it. Broadly, what you're seeing are certain areas of emphasis and some reduced emphasis, and looking at the upper portion of that graph shows genuine consistency in the way our business has expanded, and we think we can keep scaling that up and do so progressively at stronger margins alongside better operating cash flow. With that, I'll pass things to Sharon, who will address several of the margin-related topics.

Thanks, Simon. Underlying EBITDA to members rose from AUD 7.8 million in FY 2022 to AUD 13.9 million in FY 2026, and that figure includes year-on-year growth of 18%. We achieved that growth while cutting back on reliance on transactional revenue, as Simon discussed. The FY 2026 underlying EBITDA margin stayed at 24%, consistent with last year, but it was really driven through acquisition integration activity, investment in technology and systems, and organizational changes undertaken during the year. During Q4, Prime sharpened its focus on operational efficiency and reducing the cost base. Those actions, along with workflow improvement, automation, and data consolidation, are expected to support future margin improvement and operating leverage. For us in FY 2027, the strategic priority is to convert the additional scale already achieved into ongoing top-line growth and improved earnings conversion. Thank you, Nat. Our balance sheet remains positioned to support Prime's growth strategy. Net assets increased to AUD 61.2 million at June. Acquisition payments largely contributed to the increase in net debt of AUD 20.6 million, which is up from AUD 14.9 million last year. This was also reflected in an increase in net debt to underlying EBITDA to members, which increased to 1.5x, however, continues to be well below our banking covenant requirements.

On a positive note, operating cash flow rose 47%, reaching AUD 4.3 million. That gain matters a great deal, since it clearly shows we're converting earnings into cash more effectively. In addition, Prime can draw on Westpac facilities totaling roughly AUD 42.6 million, and AUD 21.6 million of that had been drawn at year-end. That gives us room to fund working capital, meet existing commitments, and pursue strategic growth in a disciplined way. Our stance is still to weigh investment and shareholder returns against sensible leverage and hands-on cash management. Thanks, Nat. As I noted before, the board has declared a final dividend of 0.92 cents per share, fully franked. Combined with the interim dividend of 0.8 cents per share, the FY 2026 full year fully franked dividend comes to 0.0172 cents per share — up 4% on last year and a big step up from 0.011 cents per share in FY 2022. The record date for the final dividend is the 3rd of September, and payment is set for the 28th of September. I can also confirm the dividend reinvestment plan will be available for the final dividend. This dividend increase shows the board's confidence in Prime's underlying business, while keeping a suitable balance among shareholder distributions, debt management, and reinvestment in growth.

Appreciate that, Nat.