FNZ has reported a more than US$555 million loss across its global operations despite top-line revenue increasing about 50 per cent year-on-year as the company absorbed acquisition costs and higher operating expenses.
The recently released 2023 accounts for the now NZ-domiciled wealth technology group show losses blew out over 70 per cent compared to the previous year’s undershoot of US$318.2 million.
However, gross revenue soared to almost US$1.5 billion for the latest calendar year, up from roughly US$966 million in 2022, while total operating income rose to about US$960 million from just under US$655 million for the prior 12-month period.
Last year FNZ continued its multi-year shopping spree by finalising four purchases including Luxembourg-based institutional fund platform, International Fund Services & Asset Management, the German Fondsdept Bank, Saturn Technologies (a UK fintech) and the US fixed income disrupter, YieldX.
Adrian Durham, FNZ chief, says in the annual report that the group remains on track to end the loss-making run by next year.
“… we expect to complete the remaining execution of our first-time new country implementations, realisation of synergies from acquisitions and most of the in-progress Lift & Shift transformations across 2024 and 2025, which we intend to translate to break-even on a go-forwards basis during 2025,” Durham says.
But the multi-jurisdiction firm founded in Wellington 20 years ago has also extended bank credit lines and arranged an almost US$320 million interest-bearing loan from shareholders to fund ongoing growth.
According to the FNZ report, the group would tack on a further US$95.6 million to a current term bank loan of over US$1.7 billion while adding US$42.6 million to its existing US$285.9 million revolving credit facility.
“The Directors note that the retained losses made in recent years have been materially driven by a combination of investment related transaction costs, increased headcount and costs associated with new acquisitions and the Group’s expansion into new geographies,” the report says. “The Directors are satisfied that the support made available to the Group from its shareholders along with the increased revenue from the Group’s growing customer base in addition to the synergies realised as the acquired entities are integrated into the Group, will generate sufficient future profits.”
Backed by a range of institutional shareholders including Canadian pension schemes, private equity players and the Singapore sovereign wealth fund, Temasek, FNZ has picked up more than half-a-dozen companies in Europe and the US over the last few years.
The accounts reveal FNZ wrote-off a US$6.5 million loan as part of a share repurchase agreement with YieldX executives with the deal also including US$5 million cash now and two further payments over the next few years.
FNZ settled a legal dispute with YieldX founders, Adam Green and Shlomo Gross, in April.
The company shifted its official home for the group entity to NZ from Jersey in 2022, consolidating local results in the broader global accounts. Nonetheless, the 2023 FNZ report shows a slight impairment value in the Hatch US share-trading platform the NZ company bought in 2021 from Kiwi Wealth for about NZ$50 million.
Hatch is now on the FNZ books for US$50.8 million, down from US$52.6 million last year.
“Challenging macroeconomic conditions have impacted current [Hatch] trading volumes, resulting in the timeline to achieve scale being extended,” the report says.
FNZ owns 75 per cent of Hatch after bundling the platform with the Jarden NZ direct business in 2022: the 25 per cent share of the entity remains part of the Jarden investment banking arm rather than the FirstCape wealth management roll-up.
Last week FNZ also racked up another accolade after making the list of top 250 global fintech firms as ordained by US business media service, CNBC.
The group was one of a dozen companies awarded kudos in the ‘wealth technology’ category and one of only two Australasian firms (along with Afterpay – the Australian buy-now-pay-later pioneer now part of US business, Block) in the entire fintech list – albeit CBNC identifies FNZ as a UK business.