Mainstream has reduced its full year revenue guidance, saying that its superannuation segment is being challenged by amplified regulation and the industry-wide trend of consolidation.
Revenue from the underlying Fund Services business is expected to grow by 22 per cent, from $38 million in the prior year to approximately $46 million in FY19. Previously it had expected revenue for the full year in the range of $50-$55 million.
It has also alerted shareholders that its earnings will be in the lower end of its anticipated range, previously expecting an EBITDA of $7.5-$9 million.
Over recent years, APRA has ramped by regulatory requirements, which has “sparked a wave of fund consolidation,” Mainstream said.
While the super business was reported to account for around 7.5 per cent of the group’s revenue, the company noted its board is “conscious that the super industry’s consolidation will continue to challenge the growth opportunities” of the business unit, which is “performing under expectations.”
Mainstream said it is aiming to simplify and grow the division by expanding its service offering, as well as leveraging the use of its public offer retail fund promoter licence.
Combined Super Fund had terminated its contract with Mainstream for its administration in September, before merging with the Prime Super Fund and moving its administration over.
The board is working with its auditors to consider the suitable amortisation expense for the super business in full year reports.
In light of the ongoing structural changes to the super industry, Mainstream has appointed Miles Advisory Partners to conduct a strategic review considering all of its options and their financial impact.
Mainstream expects the findings of the review to be released with the group’s full year results on 30 June.
Mainstream had $162.8 billion in funds under administration at the end of March 2019, up 23 per cent on the prior year and increasing by 189 per cent since its IPO.
The group reported having 383 clients at the end of March, up 22 per cent on the prior year and an increase of 272 per cent since its IPO.
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