Mainstream Group Holdings (ASX:MAI) CEO, Martin Smith talks FY17 results, acquisitions, strategy and outlook.Jessica Amir: Hi I’m Jessica Amir for the Finance News Network. Joining me from Mainstream Group Holdings Limited
(ASX:MAI) is CEO, Martin Smith. Martin, welcome to the Finance News Network.
Martin Smith: Thank you Jessica.
Jessica Amir: First up for those new to the company, you’ve had a name change, but can you tell us about the company?
Martin Smith: Mainstream was formed by myself and our Chairman, Byram Johnston, in 2006. We’re a full service fund administrator and we have turnover of $40 million in FY18. We operate in eight countries, rapidly expanding the reach of the business. We look after about 660 funds with $119 billion of assets.
Jessica Amir: Turning to financials for FY17. What were some of your highlights?
Martin Smith: We grew the revenue by 56 per cent and we also grew the profit by 84 per cent. We’ve taken the business since we listed from being $14 million turnover, to $40 million turnover. And it’s been through a combination of organic growth and acquisitions.
Jessica Amir: Now can you tell us about each of your business lines, first starting with the fund services?
Martin Smith: We have four service lines; some are bigger than others. The first one is full service fund administration; we have clients about 100 fund managers in this category. We provide investor services, unit pricing, NAV production, accounting and sometimes we also provide middle office services. The second stream of the business is managed accounts, predominantly serving Australian clients. We have $5 billion of assets in this category for about 5,000 high net wealth investors, looking to run model portfolios.
The third business is ETF and listed investment vehicle administration, and we have quite a number of notable clients in that segment. And the final service line is superannuation administration. That is limited to Australia, there are seven providers in Australia who are licensed to do that, we have one of those licences. We look after about 35,000 members in that space, so we’re quite small compared to our peers, but we have aspirations to get bigger.
Jessica Amir: What’s your competitive advantage and strategy?
Martin Smith: So as emerging managers are trying to compete with the incumbents, they’re trying to offer additional services and be more flexible. And therefore, they’re looking for their administrator to be more agile.
So that would be our key point of difference. Serving our clients in eight countries allows us to consolidate providers as well. So clients don’t particularly like having more than one provider, so we can now support them in multiple jurisdictions under one contract.
We were a little bit sceptical about being a listed company, but it’s been amazing for us in the conversion of bigger clients, it helps with due diligence. Fund managers need operational compliance metrics met and by being listed, we give our clients and their investors comfort that there’s good due diligence and compliance in our organisation.
Jessica Amir: The business is rebranding from MainstreamBPO to Mainstream. Can you tell us about that?
Martin Smith: The BPO stands for Business Process Outsourcing and in a number of the markets we operate in, it’s no longer relevant. Also in the last 15 months, we’ve bought five businesses with their own brands and there’s been a lot of brand confusion. And one of the key drivers we’re trying to achieve is cross border referrals, and we want to unite the business under the one brand.
Jessica Amir: Last question now Martin. What’s your goal for the next 12 months and longer term?
Martin Smith: We’d like to replicate what we’ve done in the last 15/18 months. We’ve taken the business since we listed in October ’15, from $14 million to $40 million. If we could take it the next step to $60 million. We’re seeing a lot of bigger opportunities, we want to convert those opportunities. We also want to preserve our profit margin at the same time, so we need to be careful, we need to negotiate well. And we’re also, we would like to capitalise on the cross border opportunities.
In the markets we operate in, there’re $31 trillion of funds domiciled in those markets. So it makes Australia look quite small. And if we can tap into the 200 fund managers that we support and help them in markets that we now operate in, it should be quite easy to achieve that next milestone.
Jessica Amir: Martin Smith, thank you so much for the update.
Martin Smith: Thank you Jessica.
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