Oberon Investments plc (AQSE:OBE) Head of Capital Markets Mike Seabrook caught up with DirectorsTalk for an exclusive interview to discuss highlights from full year results, achieving an 80% increase in FuM and administration, the integration of Smythe House, growth in each division and what we can expect in the next year.
Q1: First off, congratulations on a full year results released this morning. Can you just take us through the highlights?
A1: Forgive me just referring to a document next to me but a few highlights of the year to bring to your attention.
We grew funds under management and administration over 80% so sitting at over £1 billion now which I think is strong growth over the year and certainly from the inception of the business. Along with that becomes a growth in revenue to a touch under £7 million from I think a touch under £4 million the previous year, so good growth there and in a year of investment, we’re pleased to reduce the EBITDA loss from £600,000 to just over £200,000 but in a year investment as well so pleasing to see that.
We completed the acquisition that was on our books at the year for Smythe House, which is an upmarket independent financial advisor, very pleased with that.
We conducted a fundraise and welcomed some new shareholders, institutional and other to our share register with an oversubscribed placing raising £3.5 million in March.
On my side of the business, over on Capital, we’ve had a good year. We did our first two or three IPOs, I think we’ve grown a retained client base now to 13 in the year, and more since, and the period of investment in the business this year is not only staff but IT client facing portal and just making us fit for purpose for the next stage of growth.
Q2: You mentioned funds under management and administration increased 80% to an excess of £1 billion. Can you just explain for us how that was achieved and what it means for the group?
A2: You’re probably aware and so many commentators and people that know the financial services industry, there’s an increased return if you grow funds under management in these sort of businesses and you have to make a certain amount of investment. Once you get over a certain level, the fixed cost base of the business grows slower than the revenue so you get disproportionate impact on the bottom line profitability as you grow funds under management so that’s an objective, if you like.
How we’ve achieved it, we’ve welcomed new clients, new teams, obviously the Smythe House acquisition helped that as well and investment performance. We’re in tough markets now but over the course of the year, I think pretty disciplined investment performance, certainly better in the first two quarters than perhaps the second two quarters, but I think a good outcome for our clients.
Q3: You just mentioned the acquisition of Smythe House at the beginning the year. It adds another suite of services to the wealth management division, how is the integration going and what has it added to the business?
A3: The integration was relatively simple, there was a lot of planning beforehand, they’ve moved into the office and the systems were easy to integrate so integration was never a big challenge but we did a lot of the work upfront, that was key there.
The key for us has been putting our arms around them, helping them grow under our umbrella and I think they’ve grown numbers of staff, they added a couple of staff under Oberon’s ownership so I think they’re looking forward to a period of growth going forwards.
What it adds to the business, I’ll turn that question around if I may. A lot of the clients we have were very happy with the investment management service we were giving but there’s often the requirement for additional services you get from an independent financial advisor, such as advice on pensions, insurance, particularly life assurance, maybe it’s school fee schemes, maybe it’s tax planning, all that sort of stuff.
If you can provide that across the service lines that we provide some of our clients quite like that so there’s a great cross selling opportunity there. I think as far as when we go client facing, as far as attracting new clients to our business, it’s a suite of services we can now offer and that’s often very appealing to some.
Q4: Just stepping back a little bit. You reported strong growth across all divisions, can you just tell us a little bit more about each of the divisions and the progress that you’ve made in them?
A4: There’s four divisions at the moment, I’ll deal with two in one, if I may, which is the fund wealth management business or investment management as often known, and that is in the Oberon Investments division and also Hanson Investment Management was an acquisition we made in the of lockdown in 2020.
Both those two divisions are really what added a lot of that funds under management and administration, it’s gone extremely well and we’re very proud of the team, very dedicated in managers, I think they’ve provided great service to clients, we are very client facing, it’s in our DNA. I think that’s gone extremely well. We’ve put a lot of investment this year into making that fit for purpose for going forwards so in other words, it can scale significantly from here so the job’s not done by any stretch of imagination, but we’re very pleased with that.
Smythe House has only been with us really in this financial year, but as I indicated in your question earlier, we’ve grown the team members, I think they’ve grown client numbers. It’s freed up the principal there really cause he’s got proper support and IT support and compliance support, all the other good things that you need in a financial services organisation to free up people to go and do what they are brilliant doing, which is attracting new clients and giving brilliant advice. I think we’re starting to see that really come to the fore so we’re delighted with that.
The division that takes up most of my time is Oberon Capital, it’s two years old now, 13 retained clients, and more since, with a decent pipeline. We’re not immune from choppy market conditions which are prevalent at the moment, that’s well known, but the best businesses on the sell side, corporate broking, I really think earn their metal in difficult market conditions and really benefit as market conditions improve. My sense is the best days are certainly to come and we’re going to enjoy increasing returns for shareholders in that division alongside with the good progress on the buy side of the business.
Q5: So, just looking forward then, what can we expect to see from Oberon Investments in the next year?
A5: We’re not doing hugely different things. We are keeping a tight control on costs which I think most entrepreneurs and business owners will recognise, I think that’s key but it’s making selected investments where we can see decent returns in the year ahead.
In our industry, that’s particularly in additional service lines and great people and I think great people will become available and I think the platform we’ve built here is going to be quite attractive to a number of fund managers, wealth managers, as well as people in the corporate broking business.
So, I think this year you can see tight control on costs, selective investments, opportunistic M&A if the price is right and this oversubscribed placing that we did does give us balance sheet strength. So, opportunistically M&A but strict criteria of hurdle rates and performance and delivery for us and for shareholders there, and organic growth.
We got plans on launching a business property relief or IHT planning fund which I think our clients want, launching an EIS fund which again I think speaks very much to our core skillset with the success we’ve had with the managed VCTS there and hopefully welcoming new teams to our platform.
The shareholders will really benefit from those returns generated from increasing funds under management and administration, it would be very profitable to add those so very laser focused on those tight control on costs and hopefully give a another good result to shareholders and show further growth this year.