While Embark acquired several businesses in 2016 it is now focused on organic growth
Hornbuckle-parent Embark Group is aiming to be a £12bn assets-under-administration business by the end of next year as it reports a £3m loss for the year ended 31 December 2016.
Chief executive Phil Smith explains the loss relates to acquisitions and investment in its new adviser platform. Despite the loss, the company’s balance sheet grew by 152 per cent.
In 2015, Embark reported a £1.7m loss. Revenue for the 2016 year increased to £18.3m from £11.2m in 2015, however administrative expenses rose from £13m in 2015 to £21m last year.
Embark is on track to meet its £12bn AUA goal. At the end of the first half of 2017, the business’s asset base was £11.4bn, which had increased from £8.1bn at the end of 2016.
Smith says: “There are a few things driving that [2017 growth]. There are the assets that came through from the EBS business we acquired from Charles Stanley, but we are now seeing a lot of organic growth in the book.”
In 2016, Embark acquired several businesses including the Avalon platform, Ssas administrator Rowanmoor, and fund researcher The Adviser Centre.
The cost to the business of the six acquisitions in 2016 was £3.5m.
However, Smith says it is not eyeing further deals.
He says: “We see more than enough organic growth out there for the markets we are in.”
The annual report for Embark Investment Services – the platform subsidiary of Embark, which acquired the assets of Avalon – shows that business recorded a comprehensive loss in 2016 of £75,000, which is attributed to the business being in in its development phase.
Smith does not expect the platform business to be profitable in the near future.
He says: “That is for good reason. To grow a business from its starting point, which is a £300m asset base and to turn it into a competitive market player over a five-year period, you have to be willing to invest in distribution, marketing and infrastructure as you would if you were setting up a greenfield business.”
Smith adds: “I don’t expect us to turn a profit in [Embark Investment Services] over the next three reporting years. I don’t expect to see massive losses, it will be on the trend you see in 2016 but it would be a poor show if we did not invest in that company.”
Money Marketing reported last month that Embark is partnering with BlackRock on account fund management for the new platform. It expects to reveal its pricing structure in November and says it will be a “material disruptor”.