Platform provider FNZ has almost doubled net profit after tax for its NZ-domiciled business over the 2016 calendar year as assets under administration closed in on $11 billion.
According to the recently-published FNZ Holdings (NZ) accounts, the firm’s almost $4.8 million after-tax profit came on the back of $29.6 million in operating revenue and about $27.3 million of expenditure. In 2015 the company reported operating income of $20.4 million and costs of $23.2 million.
The operating profit of $2.3 million (compared to a $2.8 million loss the previous year) was propped up by $5.3 million ($6.4 million in 2015) of interest earnings with a tax bill of almost $2.7 million.
In his statement to the accounts, FNZ chair, Nick Sherry, says recurring platform revenue was up 12 per cent during 2016 to $14.6 million ($13.1 million in 2015), representing “49 per cent of total revenue”.
“Assets-under-administration (AUA), the key driver of recurring, asset-servicing revenues, stood at $10.9 billion at 31 Dec 2016, a 15.6 per cent increase compared to the prior year,” Sherry says in the statement.
AUA for the NZ group rose on “organic growth, signing and delivering one new customer platform and facilitating multiple asset migrations onto our existing customers’ platforms”, he says.
The slight majority ($14.9 million) of FNZ reported revenue for 2016 was classed as ‘other’, comprising mainly of payments from related offshore entities described as ‘management recharge’ ($4.85 million) and ‘system development fees’ ($9.1 million).
Meanwhile, the management recharge fee includes input from a new Singapore-based FNZ platform while system development fees saw a “significant increase” as the group stepped up “developing platforms for related parties in the Asia Pacific region”, the FNZ report says.
The FNZ books also show related party receivables of just over $124 million as at December 31 last year, up from $119.4 million the previous year. According to the accounts, the related party receivables involve inter-group obligations across FNZ entities in the UK, Australia and its ultimate parent company based in the Cayman Islands.
“The recoverability of inter-company receivables relies on the ability of the global group to generate sufficient cash flows and its ability to repay outstanding balances between the entities within the global group,” the FNZ report says. “As such, the Group is dependent on other companies in the global group.”
Last month the FNZ UK group scored a major coup after usurping rival IFDS/DST as technology partner for the under-construction Old Mutual Wealth (OMW) investment platform in a deal worth up to £160 million.
In a statement, OMW says it dumped IFDS/DST as platform tech partner after spending £330 million in a project initially costed at £450 million.
Paul Feeney, OMW chief, said in the statement: “These decisions considerably de-risk OMW’s UK Platform Transformation programme. We expect an enhanced customer and adviser proposition supplied by FNZ to be operational for new business by late 2018/early 2019 with migration to follow swiftly thereafter.”
OMW has about £120 billion under management, however, the FNZ deal won’t include the group’s ‘Heritage’ closed life business, put ‘on pause’ last October following ongoing issues with the IFDS/DST transition.
Frustration with IFDS/DST missing delivery timelines and potential ballooning costs triggered the move to FNZ, the OMW statement says.
“Preliminary cost estimates for the operational delivery of the FNZ platform are of the order of £120-160 million,” OMW says.
According to UK industry publication Citywire, FNZ had 11 clients with assets under administration of more than £80 billion prior to the Old Mutual deal. Founded in Wellington out of the First NZ Capital group by Adrian Durham, the FNZ wrap opened its global business after winning Standard Life as a client in 2005.
The ‘Money Marketing’ publication says the UK platform market is dominated by four players including two Australian-headquartered groups – GBST and Bravura (which has its roots in a NZ technology provider) – as well as FNZ and IFDS/DST.
“FNZ arguably has the heaviest workload of the four, particularly now it has taken on the Old Mutual Wealth project, which is expected to be finished by early 2019 at the latest,” Money Marketing reported last month.
The firm is currently shifting the Aviva platform business from Bravura as well as constructing “Vanguard’s direct-to-consumer platform which is expected to launch this spring”, Money Marketing reported.
“… [FNZ] is understood to be working with retail banks Barclays and Santander on separate platform and robo- advice propositions,” the May article says.
In the FNZ NZ annual accounts, Sherry says the global group added Barclays, HSBC and Santander as bank clients last year with total assets under administration growing £24 billion during the period.
This March FNZ also launched a new employee incentive scheme giving select “senior staff and key management” direct equity in parent entity Kiwi Holdco Cayco. Under the previous scheme, FNZ staff incentives flowed via in investment vehicle Kiwi CayLP, which held parent company shares.
“This [defunct] scheme was introduced in 2009…,” the FNZ report says. “Employees who leave employment cease to be entitled to these distributions.”
