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Fund administrators retract earnings forecasts

— 1 minute read

Two fund administrators have withdrawn their full-year guidance as the effects of the coronavirus pandemic have cast uncertainty on their operations, with one company hinting at potential cuts for its executive salaries.

Link Group and Mainstream told shareholders on Monday they would be pulling back on their previous forecasts for financial year 2020. 

Mainstream has remained somewhat optimistic, saying the majority of its revenue is recurring, coming via long-term contracts to provide fund services to fund managers. 

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However, the company tipped it is considering temporary reductions across board fees and executive salaries as a way to reduce costs, along with a review of growth investments and projects in line with market conditions and client demand. 

It has anticipated its revenue will be “robust” although it will face impact from market volatility and cash rate changes. 

Likewise, Link pointed to its earnings profile seeing 80 per cent of revenue recurring in nature, but with the majority of its contracted revenue coming from large financial institutions, some of its business has been impacted by market volatility. 

The group added its liquidity position is supported by cash reserves and committed, undrawn credit facilities. 

Link Group managing director John McMurtrie said: “With over 80 per cent of Link Group revenues recurring in nature, the defensive qualities of Link Group’s earnings profile will support operating cash flow during this period of volatility.”

“However, there are some areas of our business such as Corporate Markets and Link Fund Solutions that are negatively affected by market volatility and reduced margin income on float balances. 

“Forecasting these revenues is challenging in a volatile environment where the global policy response from governments appears to be escalating.”

As at the end of February, Link had $126 million in cash and net debt of $773 million.

The business has said it will implement a number of measures to reduce costs, but further details remain to be seen.

 

Fund administrators retract earnings forecasts
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Sarah Simpkins

Sarah Simpkins

Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth. 

Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio. 

You can contact her on [email protected].

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