Fiducian Group Ltd (ASX:FID) Acquires MyState's Financial Planning Business
Fiducian Group Ltd (ASX:FID) announced yesterday that it is acquiring the Tasmania based financial planning arm of MyState Limited (ASX:MYS) for $3.5 million. Fiducian already has three offices in Tasmania in Devonport, Hobart and Launceston. MyState's rationale for the disposal is to focus its wealth division on funds management and trustee services. The purchase boosts Fiducian's funds under advice (FUA) by $340 million or about 13% to ~$3 billion. MyState reported $1.7 million of revenue for its financial planning division in H1 2019 implying an annualised run-rate of $3.4 million or ~1% of FUA. Fiducian financial planning division generates about 2/3 of a percent of FUA in revenue each year and basically breaks even according to the company's segmental analysis. Group profit is entirely generated by the largely fixed cost funds management and WRAP platform businesses for which financial planning is a distributor. Last year, a $5.1 million increase in group revenue translated into a $2.6 million improvement in underlying EBITDA. Fiducian has done many similar deals in the past and, although the company also enjoys strong organic growth, its very high returns on capital suggest that such purchases usually work out.