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Iress superannuation unit performance ‘below expectations’
In an ASX announcement on Monday, Iress announced an adjusted EBITDA in the 1H24 period of $67 million, up 52 per cent from $44 million in the prior corresponding period (pcp).
This is on the high end of what the firm projected last month, with CEO and managing director Marcus Price spruiking the “transformation initiatives” Iress has undertaken.
“We are executing well on our transformation initiatives and are on track to complete the program in the second half, with benefits being realised well ahead of schedule,” Price said.
“Strong action on cost reduction has delivered operating leverage with our adjusted EBITDA margin up 760 basis points to 21.7 per cent and adjusted EBITDA up 52 per cent versus pcp.”
In April, Iress completed the sale of its OneVue platform business to Praemium for an initial $1 million in cash consideration and a further payment of up to an additional $20 million over 18 months as milestones are met.
Then, earlier this month, the financial services software provider confirmed the sale of its UK mortgages business to Bain Capital Tech Opportunities LP for a total cash consideration of £85 million ($167 million) before costs.
“Along with disciplined capital management, we are now seeing revenue growth and have upgraded our FY24 adjusted EBITDA guidance to $126–$132 million post the sale of UK mortgages (equivalent to $135–$141 million before asset sales), a 9 per cent uplift from the last guidance provided on 1 May 2024,” Price said.
“Through the sale of non-strategic assets, including our UK mortgages early in the second half, we have considerably strengthened our balance sheet which now sits within our target range at 1.2x leverage. Pleasingly, we now plan to reinstate a final dividend for FY24.”
However, according to its announcement, the performance of its superannuation division has fallen below expectations and is “below acceptable level”.
Super revenue stood at $26.5 million, down 7 per cent on pcp, which “reflects the exit of a number of clients in 2023”, it said.
“This decline was partially offset by an increase in consulting based fee revenue which grew 81 per cent in 1H24 reflecting strong ongoing demand from new and existing clients,” Iress said.
The firm said actions have been taken on cost and revenue, adding that it expects an improved second-half performance.
It also flagged strategic options are under review for the super unit and a further update is expected in February 2025.
Earlier this month, Iress announced the appointment of former Insignia general manager Sam Wall as CEO of its superannuation business, effective 9 September.
At the time, the firm confirmed the appointment comes at an important juncture for its superannuation business, which is now seeking to reset its strategic priorities to drive improved performance and outcomes for its customers.
“Sam has a strong track record of leading transformational change within the wealth management industry, with considerable experience of the operating and risk environment within superannuation,” said Price.
“He brings extensive experience in designing and delivering market-leading superannuation offerings for the benefit of members, with a focus on simplification and operational efficiency.”
According to Iress’ latest results, its ongoing transformation program has produced a “stronger and more streamlined business with improved financial returns”.
The firm said its pro forma revenue has increased 4 per cent on pcp to $302.4 million and headline revenue has decreased by 1 per cent due to asset sales.
The sales have also seen the firm reduce its cost base, noting a 4 per cent reduction in pro forma operating costs to $236.9 million, “despite a high inflationary environment”.
“This was achieved through operating model enhancements and an 11 per cent headcount reduction which reduced staff costs by 5 per cent ($8 million) with the full benefit to flow through into the second half of FY24,” Iress said.
AUTHOR
Keith Ford
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