In late July 2022, iFAST released its earnings report for the second quarter ended 30 June 2022, where it saw a net loss for the quarter.
At a glance, it looks like a disappointing set of results, but it’s not as bad as it seems if we shift our focus on the right things. Let’s find out more.
iFAST 2Q 2022 Financial Highlights
Here are some quick highlights from iFAST’s latest quarter:
The company’s assets under administration (AUA) tumbled 5.1% quarter-on-quarter, but rose 0.8% year-on-year to S$17.7 billion, as of 30 June 2022. iFAST’s fall in AUA compared to the previous quarter was largely driven by a broad decline in the value of investment products as markets worldwide performed poorly, although the net inflows for the quarter was still positive at S$0.6 billion.
iFAST’s revenue for the quarter grew 5.8% year-on-year to S$53.9 million, which includes an initial contribution of S$5.9 million (or ~11%) from the UK-based iFAST Global Bank.
iFAST’s net revenue grew 13.3% year-on-year to S$29.9 million, with the newly-acquired iFAST Global Bank contributing S$3.9 million (or ~13%) of this amount. Excluding the contribution from the new banking operation, the net revenue actually decreased by 1.5% year-on-year.
The company’s operating expenses increased by 49.9% year-on-year to S$27.4 million as it prepares for the Hong Kong e-pension business (which would become operational from 2023) and ramping up of its digital banking business. Excluding the new banking operation, iFAST’s operating expenses increased by 22.3% to $22.3 million, in line with its increased efforts in enhancing its wealth management platform capabilities.
iFAST also took a one-time (non-cash) estimated impairment allowance of S$5.2 million for the quarter as iFAST India Holdings, which is a 41.5%-owned associate of iFAST, exited its onshore platform service business in India and has decided to focus on providing global fintech solutions instead. The restructuring is necessary as India’s stock market regulator announced that from 1 July 2022, the usage of pool accounts for mutual fund transactions will no longer be allowed. The new regulation has dampened the ability of iFAST’s India business to provide efficient online platform services to its clients.
With the impairment allowance, iFAST reported a net loss of S$2.7 million in the 2022 second-quarter. Excluding the one-off impairment loss, the company would have turned in a profit of S$2.5 million, down 64% year-on-year from S$7.0 million, mainly due to increased expenses for growth (~S$4.1 million higher expenses) and operating losses of the new banking operation (~S$1.1 million loss).
Although iFAST recorded an accounting net loss (of S$2.9 million) for the quarter, it still generated free cash flows of ~S$3.1 million (down 51% year-on-year), mainly because the S$5.0 million impairment expense was non-cash.
On capital allocation…
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