ASIC questions and adviser exits cloud Sequoia’s InterPrac exit

InterPrac departures drive revenue collapse

Sequoia Financial Group Limited (ASX:SEQ) has put a number on the damage from the continuing contraction of its InterPrac licensing business: first-quarter revenue fell 58.3% year on year to A$12.9 million, while the company moved from a A$2.1 million pretax profit to a A$0.5 million loss.

The company attributed the deterioration mainly to fewer authorised representatives operating under InterPrac’s Australian Financial Services Licence. The Shield and First Guardian matters also continued to affect the licensee business, including as advisers moved to other licensees. InterPrac had 66 advisers at 30 September, and about 20 had indicated they intended to leave.

That pressure sits alongside the InterPrac sale dispute, which earlier coverage described as involving a delayed dividend and unresolved Federal Court proceedings. Sequoia said the sale process was in its final stages at quarter end and announced the sale on 13 October, after the reporting period.

Cash strengthened by asset sale proceeds

Sequoia ended September with A$11.4 million in cash, compared with A$1.5 million a year earlier. The improvement, however, was not generated by the quarter’s core operating performance: the company received A$11.2 million from selling its shares in Centrepoint Alliance Limited (ASX:CAF), producing net investing cash flow of A$9.6 million after A$1.7 million of legal and related costs.

The Appendix 4C reported net cash used in operating activities of A$0.97 million, while the narrative section described an operating deficit of about A$0.28 million. The filing says costs did not fall in line with the lower activity level, with operating expenses rising 5.8% to A$4.7 million. The quarterly figures remain unaudited, and the difference between the two operating cash-flow figures will need clarification.

ASIC has also left a loose regulatory thread around the transaction. Sequoia said the regulator has unresolved questions about whether the requirements for revoking the deed of cross guarantee as it relates to InterPrac have been met, because submitted documents remain under consideration. The company is working with ASIC to resolve the issue.

Post-sale businesses face the next test

Sequoia’s stated FY27 priorities include completing the remaining InterPrac matters, reviewing its operating subsidiaries, developing Docscentre’s technology platforms and expanding its wealth management, equities and APAC operations. Docscentre’s proprietary anti-money laundering platform went live on 1 July.

The immediate question is whether those continuing businesses can replace the revenue lost from InterPrac without a further draw on cash. The balance sheet offers more room than a year ago, but much of the quarter’s cash improvement came from an investment disposal rather than recurring receipts, while litigation, adviser departures and the ASIC review remain active variables.