DVR 0.00% $1.15 diverger limited

Ann: Full Year 2019 Results Presentation, page-3

  1. 1 Posts.

    Not a bad result at first glance, but looking closer it seems like earnings could be at significant risk given all the headwinds that dealer groups face over the next few years.
    10% of advisers have left the industry in the last 6 months alone and, with all advisers having to pass the FASEA exam by 1 January 2021, this could accelerate over the next 16 months. Still further exits expected with all advisers having to meet the new FASEA education standards by 2024.

    While year on year adviser numbers look impressive, on their own admission this was due to new FASEA entry requirements being applied from 1 January 2019. This encouraged advisers to bring forward their registrations so potentially a significant reduction in applications going forward.

    The annual report does not detail how much revenue was contributed from grandfathered commissions on wealth products and insurance policies. Josh Frydenberg wants these cancelled sooner rather than later which could have a big impact on revenue. Note they established a mortgage broking business in January 2019 which was interesting timing.

    Some other points to consider:

    Intangible assets were $31.5 million (including $18.7 million ‘goodwill’ and $12.4 million ‘client lists’) so only $800,000 remaining if you take that away from $32.3 net assets.

    The top 4 executives were paid a total of $1.36 million and most of that was fixed – seems excessive given net profits were only $2.73 million.

    It would be interesting to see a breakdown of who bought shares in recent months. Looking at ASX announcements it looks like a lot of the heavy lifting was done by directors and buybacks. Without that support the share price could be going lower.

    Time will tell I guess.

 
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