Sequoia Financial Group reported a 75.9% jump in operating profit for 1H FY26 despite a net loss after non-operating charges, prompting a cautious dividend cut amid regulatory challenges.
- Operating profit surged 75.9% to $4.8 million
- Revenue grew 4.6% to $63.4 million
- Net loss of $0.25 million after $3 million in non-operating expenses
- Reduced fully franked interim dividend to 1 cent per share
- ASIC civil penalty proceedings against InterPrac ongoing
Strong Operating Performance Amidst Challenges
Sequoia Financial Group Limited (ASX: SEQ) has delivered a notable improvement in its underlying operating results for the first half of fiscal year 2026. The company reported a 75.9% increase in operating profit to $4.8 million, supported by a 4.6% rise in revenue to $63.4 million. This growth reflects steady demand and operational improvements across its core divisions, despite a complex external environment.
However, the headline net result was a loss of $0.25 million, weighed down by $3 million in significant non-operating expenses. These included a $0.9 million settlement related to a legacy Libertas Financial Planning issue and a $2.1 million loss on the disposal of two insurance broking subsidiaries that failed to meet performance targets. These one-off items underscore the challenges Sequoia is navigating beyond its operational performance.
Navigating Regulatory and Market Headwinds
The Licensee & Adviser Services division, which accounts for the bulk of Sequoia’s revenue, faced headwinds from adviser resignations and platform restrictions, particularly impacting the InterPrac Financial Planning business. The collapse of the Shield and First Guardian master funds, coupled with intensified regulatory scrutiny from ASIC, has dented adviser confidence and business flows.
ASIC has initiated civil penalty proceedings against InterPrac, alleging historical misconduct by former authorised representatives. Sequoia is actively defending these claims and has strengthened governance by establishing a new AFSL Governance Committee led by a former regulator. The Board is conducting a comprehensive review of the InterPrac business model, aiming to enhance compliance and develop a more profitable framework by mid-2026.
Growth and Efficiency in Legal & Administration Services
In contrast, the Legal & Administration Services division showed robust progress, with revenue up 8.7% and EBITDA margins expanding to 42.5%. Investments in technology and operational streamlining have transformed this division into a more capital-light, technology-enabled platform. The Docscentre business, a leading supplier of legal structures, now commands an estimated 11% market share and delivers strong profitability, underpinning confidence in its standalone potential.
The SMSF business has also consolidated operations to improve efficiency and is poised to benefit from record numbers of Australians establishing self-managed super funds, with new software implementations expected to enhance performance in the second half.
Capital Management and Strategic Outlook
Sequoia maintains a strong balance sheet, closing the half with $2.5 million in cash and $17.6 million in ASX-listed investments, alongside significant stakes in Euree Asset Management and Morrisons Securities. The company has reinstated its on-market share buy-back program, signalling confidence in its capital management strategy.
Looking ahead, Sequoia is focused on rebalancing earnings away from InterPrac toward higher-margin, higher-control segments, including salaried advice and corporate finance, with an eye on Asia-Pacific expansion. The Board remains cautious, reflected in the decision to reduce the fully franked interim dividend to 1 cent per share, preserving financial flexibility amid ongoing regulatory and market uncertainties.
Bottom Line?
Sequoia’s improved operating results are tempered by regulatory risks and strategic shifts that will shape its next phase.
Questions in the middle?
- How will the final ASIC statement of claim impact InterPrac and Sequoia’s financial outlook?
- What specific changes will the InterPrac business review recommend by June 2026?
- How significant is the potential growth from Sequoia’s Asia-Pacific expansion plans?