Online wealth management firm Moneyfarm reports steady growth, but high spending and the impact of the pandemic continue to weigh on profits.
MoneyFarm has announced a second consecutive annual loss, despite growing revenues. The company attributes the results to continued investment into the business and the impact of the pandemic.
Losses for the year amounted to a sizeable £13 million pre tax with the firm expecting to stay in the red for at least another year due to what it called ‘continued investment. The figures represent a blow to the robo adviser which had said 2019 would be the year it hit profitability. Overall, since 2016, the company has made total losses of £47million.
Away from the profit and loss column their business looks a little stronger. Revenue grew by 68% from £1.6million to £2.7 million with its customer base expanding to more than 50,000 across the UK, Germany and Italy.
In June, it announced it had reached the landmark of £1bn assets under management. Gross inflows were up 75% from January to June 2020 while deposits were up 34% and customer top ups rose by 55%.
However, this for the wealth management firm growth could not make up for spiralling costs which rose from £14.9million to £16.4million – much of which was caused by an 18% rise in staff costs as its headcount rose from 89 to 109 across its offices in the UK and Italy.
The company also pointed to the pandemic stating it would hit AUM although it did not specify to which extent. This would it said hit management fee income. It has written down £170,000 in the value of intangible assets as a result of the pandemic.
Director Giovanni Daprà said: ‘Given the company’s growth objectives, the directors believe that the company will continue to generate a loss during the next 12 months from the date of this report as continued investment is made in the development of the business.’
Moneyfarm also announced a further £14.5 of capital raised which will fuel its ‘accelerated development’ in the short term with an additional £1.4million in capital contributions made by its parent company. This capital comes on top of the £36 million raised from backers including Italian insurance giant Poste Italiane and Allianz. The latter also contributed £40 million in 2018.
“The directors expect that the company’s existing capital resources will be sufficient to fund the company’s obligation for a period of at least 12 months from the date of this report thanks to the flexibility of its operating business model and its cost base to accommodate the uncertain timing of the capital raise,” the firm added.
“It is not possible to quantify the overall impact of Covid-19 as financial markets continue to react to developments and management have a number of actions they are able to take to protect profitability and solvency.”
For the short term, then, the firm’s future appears assured and demand for its services appears strong. However, rapid spending and an Icarus like attitude to growth continues to push back the point at which it finally hopes to make money.
Tom Cropper has been writing for us since 2015. Tom is a financial journalist and his work has appeared in titles such as the Guardian, Euromoney and many others.