FNZ booked an operating loss of £267 million (or about NZ$565 million) before tax for the 2022 calendar year on the back of an aggressive acquisition campaign that has seen the platform provider snap up 20 firms over the last four years including six in the latest reporting period.
The FNZ global entity annual report, the first filed here following a switch of domicile from Jersey to NZ last year, shows the group recorded a “comprehensive loss” of £99.8 million for the 12 months after currency and hedging adjustments.
But the operating deficit of £267 million (up from £42.7 million in 2021) reflects ballooning staff and other expenses incurred during a high-growth year for the company as well as rising interest expenses as company term debt increased almost £365 million to tip above £1.3 billion (NZ$2.8 billion).
Gross revenue also jumped to more than £785 million (NZ$1.7 billion) for the 12 months to December 31, 2022, from close to £672 million (NZ$1.4 billion) in the previous year.
Adrian Durham, FNZ founder, says in the report that 2022 was a “year of significant transformation” for the global business as it expanded into new territories [particularly, the US] and spread across the “asset and wealth management value-chain”.
“To accelerate this strategy, we made over 20 acquisitions in the past four years, a number of which were still in progress subject to applicable regulatory approval at year end…,” Durham says.
As well as the six FNZ deals completed in 2022 – including a joint venture with Jarden in NZ to create the Hatch Invest direct-to-consumer platform – the company made four further buys post balance date.
“Given the substantial level of continued investment in long-term growth, including integration and associated transaction costs of a significant number of acquisitions, a number of which are still in-flight, the Group delivered a loss attributable to shareholders of £99.8m for the year,” Durham says. “These losses are expected to continue into 2023, consistent with further planned investment in R&D and M&A as FNZ focuses on achieving global scale.”
He says business is investing, too, in shifting all clients onto a “single core investment platform worldwide” while also increasing automation of processes through machine-learning and distributed ledger technologies (aka blockchain).
The shopping spree has, however, yielded growth in assets under administration (AUA) for the Wellington-originated platform business.
“Despite relatively weak markets in 2022, we grew on-platform assets by £204 million [NZ$430 million] to just under £1 trillion [NZ$2.1 trillion] where FNZ is contracted as either custodian, sub custodian or third administrator,” Durham says. “In addition we had approximately a further £300 billion [NZ$635 million] of contracted migrations in progress as at year end 2022.”
In total, FNZ spent almost £520 million on acquisitions last year including NZ$80 million (just over £42 million at the time) for the Jarden Direct-Hatch joint venture.
Under the deal, Jarden retains 25 per cent of Hatch Invest, which reported a loss of £6.6 million (NZ$14 million) on revenue of £3.6 billion (NZ$7.6 million).
FNZ funded the purchases by a mixture of debt and a capital injection of US$1.4 billion (NZ$1.4 billion) early in the year from two new institutional shareholders – US private equity firm, Motive Partners, and the Canadian Pension Plan – that valued the firm at about US$20 billion, or about NZ$34 billion in today’s money.
The FNZ group entity relocated to NZ last August after a seven-month stay in Jersey (previously it was based in UK mainland). UK raised its corporate tax rate from 19 per cent to 25 per cent as of April 1 this year.