Transact revenue hit by asset dip as platform costs rise

Transact revenue hit by asset dip as platform costs rise
Chris Ratcliffe/Bloomberg

IntegraFin, Transact's parent company, has reported a £1bn dip in platform assets as staff and regulatory costs climb by up to 28 per cent.

For the three months to June 31, 2022, Transact saw funds under management slide from £54.5bn at the end of March to £53.5bn.

The platform operator put the drop in assets down to "macroeconomic and geo-political events", and said it had a corresponding impact on its core platform revenue.

IntegraFin's share price was down 2.7 per cent this morning (July 19) following its Q3 results.

Net flows and gross inflows were both down on previous quarters. Net flows totalled £1bn for the period, compared to £1.3bn (Q2) and £1.4bn (Q1) in the previous quarters.

While gross inflows totalled £1.7bn, compared to the £2bn it grossed in both previous quarters.

Outflows have slowly been rising over the past year, edging up incrementally from £657mn on June 31, 2021, to £703mn on June 31, 2022.

The rate at which new clients and advisers joined the platform remained consistent.

Some 17,949 new clients have joined the platform since October, compared to 17,942 for the comparative period.

Meanwhile, 546 new advisers have registered, compared to 522 in the previous financial year.

IntegraFin’s chief executive officer, Alex Scott, said April to June 2022 was a “robust quarter” for Transact in terms of inflows, and that outflows remained “broadly in line” with previous quarters.

“The net inflows on to the platform, together with strong and consistent rates of new clients joining the platform, and newly registered advisers, is testament to the strength of the investment platform offering,” Scott added.

IntegraFin anticipates total group staff costs to rise 16 per cent (£6.7mn) for the full financial years 2022 and 2023, before dropping back down to 9 per cent in 2024. 

This reflects the 50 IT and software development staff Transact is recruiting over these years. 

By 2025, IntegraFin said the need for additional operational staff required to service additional clients and advisers will reduce, as it implements straight through processing, operational efficiencies, and scalability into the platform.

The business also said it does not expect any material levels of recruitment in these areas after these 50 staff members are hired until the end of 2027.

Regulatory and professional fees are expected to increase by an even greater 28 per cent (£2.1mn) in 2022. The group said it expects these costs to increase by a single digit percentage next year.

Meanwhile, other costs are expected to increase by 24 per cent (£900,000) this financial year, driven by an increase of sales and marketing activity post-lockdowns and by an increase in IT equipment that has been expensed.