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Netwealth posts £3.1m loss following big capital raise

Netwealth posts £3.1m loss following big capital raise

Netwealth posted a £3.1 million loss in its last year, underlining the long road to profitability for online investment management companies.

The firm’s latest accounts, filed at Companies House over Christmas, also reveal that it generated revenue of £35,998.

The company operates a sliding fee structure ranging between 35bps and 65bps, depending on the size of the clients’ assets, which means it is impossible to work out its assets under management (AUM) at that snapshot in time.

But an average of 50bps would put AUM at £6.8 million. CEO Charlotte Ransom (pictured) has said it would require £1.8 billion to turn cash flow positive, putting a potential five to six-year timeframe on this.

It is still early days for Netwealth. Its investment management proposition only went live in late May 2016, meaning it was operational for around 10 months of its accounting year.

Over the past year, the company has also reported that its average client account size has increased from around £200,000 to over £300,000.

The business also successfully attracted £10.02 million in its second fundraising last September, taking the total raised to £16.79 million.

Some 48% of the new cash raised came from existing shareholders, who include Santander vice-chair Bruce Carnegie-Brown and ex-Man Group chair Harvey McGrath, indicating they remain firm backers of the business.

A spokesman for Netwealth said: ‘The exponential growth rates of these types of businesses mean that basing any form of financial year-end AUM estimate on averages and linear growth assumptions is likely to be considerably off the mark. 

‘Netwealth’s original and new backers put up new capital last year on the basis of the growth and trajectory so far, as well as the broader business model.’

The accounts reveal staff costs were the biggest expense at £1.3 million, followed by £870,000 spent on advertising.

 

 

 

 

 

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