Regulatory Scrutiny Looms as Sequoia Posts Profit Growth and Dividend Hike

Strong Profit Growth Amid Operational Streamlining

Sequoia Financial Group Limited (ASX, SEQ) has delivered a solid financial performance for the full year ended 30 June 2025, reporting a 13.7% increase in operating profit to $9.9 million. This growth comes despite revenue holding steady at $124.1 million, a notable achievement given the company’s five divestments in the prior year. The improved profitability reflects a leaner operational structure and enhanced margins across its core divisions.

Managing Director Garry Crole highlighted the company’s strategic simplification, reducing its divisions from four to two, which lowered shared costs and boosted efficiency. This restructuring, combined with technological upgrades, particularly in the Legal and Administration division, contributed to stronger second-half performance and improved margins.

Funds Under Advice Reach New Heights

One of the standout metrics for Sequoia in FY25 was the surge in funds under advice, which climbed sharply from $12.5 billion to $18 billion. This growth was driven by a broader industry shift from transactional revenue models to recurring annual service fees based on funds under management. The Licensee and Adviser Services division saw revenue rise to $113 million, with an EBITDA margin of 7.4%, underscoring the division’s expanding scale and profitability.

Meanwhile, the Legal and Administration Services division benefited from an improved technology platform, achieving a robust EBITDA margin of 41% on $9.7 million in revenue. This segment operates in a fragmented market, providing legal structures and documents primarily to Australian accounting firms, and is focused on margin share growth through economies of scale.

Capital Management and Investment Portfolio

Sequoia maintained a strong balance sheet with net cash of $4.4 million and ASX-listed investments exceeding $16 million. The company’s investments in associates such as Euree Asset Management and Morrisons Securities continued to perform well, complemented by an increased stake in Centrepoint Alliance. Total gains from the investment portfolio amounted to $3.6 million over the year.

Capital management initiatives included a share buy-back program that concluded in May 2025, with 14 million shares repurchased for $6.4 million, reducing the total shares on issue. The company reaffirmed its commitment to dividend payouts within 40-60% of normalized EBITDA, declaring a fully franked final dividend of 2 cents per share, bringing the full-year dividend to 4 cents.

Regulatory Oversight and Governance Enhancements

Sequoia continues to navigate regulatory scrutiny related to the Shield Master Fund and First Guardian Master Fund, working closely with regulators investigating these matters. The company has expressed empathy for affected clients and is providing support through InterPrac’s salaried advice team.

In response to these challenges, Sequoia has established an independent compliance and governance committee post-year-end, chaired by a former ASIC operative. This committee aims to strengthen oversight of the company’s Australian Financial Services Licence structures and enhance client support mechanisms, separate from the ongoing regulatory investigations.

Outlook, Positioned for Growth in a $4 Trillion Market

Looking ahead, Sequoia’s leadership remains optimistic. The company is well positioned to capitalize on growth opportunities within Australia’s $4 trillion superannuation market. With strengthened product offerings and a focus on high-margin, recurring revenue streams, Sequoia anticipates continued expansion in funds under advice and sustained strong margins in its Legal and Administration Services division.

Overall, FY25 marks a year of strategic progress and operational resilience for Sequoia, setting a foundation for future growth despite the backdrop of regulatory challenges.