Stephen Lake, GBST managing director and chief executive officer said: âThe improving economic environment is benefiting our clients in the financial services industry. GBST expects revenue growth in all areas of its business, with solid growth in GBSTâs Wealth Management and Global Broker Services divisions. New opportunities are emerging in our key markets of Europe, Asia and Australia, and we are focusing on expanding sales and business development.
âSince December 2009, GBSTâs Global Broker Services division has secured three new clients. Our major focus is Asia; and GBSTâs Syn~ is now operating to execute and clear trades in seven Asian countries, with another five countries expected to âgo liveâ in the next twelve months. Considerable progress has been made to develop Syn~ for Australia, and we have secured commitment agreements with Australian clients.
âImportantly, GBSTâs new retail broking solution for the front office - which provides a single interface for all GBST products - is now complete, and undergoing user acceptance testing. This technology represents a quantum leap of improvement, and is expected to be released from mid-2010.
âGBST Wealth Management has capitalised on opportunities arising from UK financial services reform to win three new contracts. This includes Aegon Group UK, part of one of the worldâs largest listed life and pensions companies. The UK Financial Services Authorityâs 2006 Retail Distribution Review reform, which requires independent financial advisers to move away from commission-based systems, is an important driver for our business. We expect similar changes in Australia following the Federal Governmentâs proposed banning of commissions and volume-based rebates in Australia from 2012, in response to the recommendations of the parliamentary Joint Committee on Financial Services,â said Mr Lake.
Research and development (R&D) spending is expected to remain at consistent levels. Costs are expected to remain relatively flat in the Australian Broker Services division in FY2010, but may increase in Global Broker Services with implementation of new contracts. Wealth Management division costs will increase as it gears up for significant implementations in the UK.
Global Broker Services
In Asia, GBST clients are now âliveâ using Syn~ to execute and process trades across multiple markets, including brokerage firms based in Hong Kong and Singapore. A further client is scheduled to commence processing Asian trades on Syn~ by the end of 2010. A strong prospect pipeline exists across Asia.
In Europe, leading brokerage and financial technology firm Investment Technology Group (ITG) is now using Syn~ across multiple European countries. GBST is currently adding new ETO (exchange-traded options) and OTC (over the counter) derivatives capabilities.
Australian Broker Services (incorporating GBST Financial Services)
Since December 2009, the Australian Broker Services divisionâs monthly revenue for processing cash equities transactions has continued to improve and in April 2010 was more than 45 per cent above the low point of early 2009. Revenue is expected to increase further in FY2011 as the division has secured new contracts to install GBST Shares, both directly and through third-party clearers. These contracts will contribute to revenue growth in FY2011.
Development of the institutional Syn~ platform has commenced with the bulk of this work now expected to be undertaken in Australia. Work is focused on development for the Australian operations of international clients; and Asian branches of GBSTâs Australian clients. Commitments have now been formalised for Syn~ in Australia.
GBST Financial Services continues development of specialised tools and data products for the financial services industry, including international markets.
In the UK, GBST has won new contracts to provide wrap platforms and Self Invested Personal Pension (SIPP) administration solutions using its flagship wealth management platform, Composer, and expects substantial revenue growth in FY2011 as new systems are rolled out. Composer already supports clients including Macquarie and Novia Financial, enabling them to offer a fully compliant âone-stop shopâ wrap platform for financial planners.
In Australia, a new client has implemented Composer to administer listed and unlisted property trusts and, using its ASX market connectivity, track movements on the register. Also, a significant life insurance client has signed a new multi-year contract to consolidate its wealth platforms onto Composer.
Research & Development
The acquisition of web developer Emu Design in 2008 has been valuable for GBST, assisting move to a common technology and appearance across GBSTâs user interface (UI) environments. A common technology stack brings all GBST UI software, including next-generation products, into a uniform framework. This increases delivery efficiency to clients and will enable access to the benefits of wealth management features developed for the UK market.
Development of Syn~ for Australian use remains a top priority. While its advanced features for corporate actions, standard settlement instructions (SSI), multi-asset processing and unique modelling framework are substantially ahead of current technologies implemented in Australia, tailoring is required for the Australian market.
Wealth Management R&D is focused on service-improving enhancements for the growing private banking and private wealth sectors, including introduction of Composerâs UK technologies to the Australian market.
GBST has renewed its senior debt facility with NAB for a further three year term.
GBST has benefited from a divestiture of a small Melbourne-based index data and performance attribution business. Its products enable investment managers and advisers to calculate the after-tax performance of portfolios and to benchmark performance against various measures and indices. It serves over 40 funds management and investment advisory organisations in Australia and is complementary to both the Australian Broker Services and Wealth Management divisions. The business is profitable and will be EPS accretive immediately.
While GBST looks for possible bolt-on acquisitions on an ongoing basis, no significant acquisitions are anticipated.
Based on four stockbroker analyst reports, the stockbroker consensus FY2010 EBITDA forecast for GBST is $15.8 million. GBST is aware of stockbroker analysis published by Burrell Stockbroking, Hunter Green Institutional Broking, Pegasus Securities and Southern Cross Equities.