IntegraFin remains confident as it issues cost guidance

IntegraFin reported third-quarter gross inflows of £1.7bn in an update on Tuesday, and net inflows of £1bn.

The FTSE 250 company said its gross inflows and net inflows for the financial year to date, to 30 June, remained ahead of its prior-year comparative.

“This is a solid performance, considering the economic and market headwinds in 2022,” the board said in its statement.

It said average daily funds under direction for the quarter totalled £51.9bn, which was lower than both the first and second quarters of the financial year, due to the adverse impact of market movements.

The rate at which new clients and advisers were joining the platform, meanwhile, was described as “consistently strong”, providing a “solid basis” for ongoing platform growth.

“I am pleased to report a robust quarter of inflows on to our platform,” said chief executive officer Alex Scott.

“Net inflows were £1.0bn in spite of a difficult economic and market environment.

“Outflows remained broadly in line with previous quarters.”

IntegraFin announced in our half-year report that it would increase investment in IT and software development, and provided guidance on the previously-announced 50 IT and software development staff to be recruited in the 2022 and 2023 financial years on Tuesday, mainly in relation to its ‘Transact’ platform.

“This investment in IT and software development will deliver enhancements to our proprietary investment platform and back office software - with enhanced functionality for UK clients and their advisers,” Alex Scott said.

“Furthermore, this investment will enable us to implement enhanced straight through processing of our operational activities, meaning that we improve our operational efficiencies and the cost effective scalability of our investment platform.

“This will reduce the additional operational staff required to service additional clients and advisers from the 2025 financial year.”

Scott said that with the recruitment made to date, the firm expected a total group staff cost increase of 16% for the full 2022 financial year, compared to the prior year when total group staff costs reached £41.6m.

IntegraFin said it expected a similar level of percentage increase of total group staff costs for 2023.

Total group staff costs were then expected to increase by 9% in 2024, with the guidance including the expected impact of continuing higher wage inflation.

“We confirm that after these IT and software development staff have been recruited, we then do not expect any material levels of recruitment in these areas in the period to the end of the 2027 financial year,” Alex Scott added.

The board also provided guidance on other key areas of group costs, noting that it received a “significant” one-off business rate rebate in the 2021 financial year.

Allowing additionally for a significant increase in energy costs, it said it expected occupancy costs to increase by 72% for the full 2022 period compared to the prior year, when it was £1.4m, while In 2023 it expected occupancy costs to increase 5%.

Regulatory and professional fees were expected to increase by 28% for 2022, meanwhile, from £7.6m in 2021, driven by an increase in regulatory fees, and an increase in professional fees to support its ongoing regulatory requirements as a growing business.

It then expected those costs to increase by “a single-digit percentage” in the 2023 fiscal period.

Finally, other costs are expected to rise 24% for 2022, from last year’s £3.9m.

The board said that would be driven by an increase of sales and marketing activity in the period since lockdown restrictions were significantly reduced, and due to an increase in IT equipment that had been expensed.

It then expected those costs to grow 14% in the 2023 financial year.

“The Transact platform rate of net inflows, and the rate of addition of new clients and advisers, gives me every confidence that there is a strong pipeline for future platform growth,” Alex Scott said.

“Additionally, the software and system enhancements that we are making to the Transact platform mean that we will continue to provide the premier advised platform service in the UK.

“T4A's development of the new CURO 365 software is progressing well, and remains on target to be released for beta testing with a major adviser firm client later this year.”

Scott said demand for financial advice remained strong, with “significant opportunities” for the group in the growing advised market in which it operates.

“Therefore, as we have done for over 20 years, we will continue to support UK clients and their financial advisers.

“I believe it is our combination of in-house proprietary technology, best in class service standards, and resilient and efficient infrastructure, which makes our business model unique and means we are well placed to lead in this sector.”

At 1002 BST, shares in IntegraFin Holdings were down 3.37% at 240.6p.

Reporting by Josh White at Sharecast.com.