Iress exits costly super play

ANALYSIS

By selling its remaining superannuation business to Apex Group, Iress has achieved its objective of exiting what was proving to be a costly and under-performing asset.

Anyone who had examined the Iress balance sheet over the past 24 months would not have missed the fact that the superannuation business had been under-performing and was also weighing heavily on the company because of the inherent regulatory costs associated with the business of superannuation administration.

Iress said in its half-year results that the performance of the superannuation business was “below expectations” with strategic options under review and signalling a further update in February, this year.

Those results revealed a 7% decline in revenue to $26.5 million translating to an adjusted EBITDA loss of $3.6 million.

The sale of the superannuation business also needs to be seen in the context of Iress’ exit of the businesses it gained when it acquired OneVue in 2020 for $115 million and it is notable that this week’s transaction comes just 11 months after it sold its OneVue Platform Business to Praemium.

The time and costs involved in running the superannuation business were also not assisted by the news late last year that ESSSuper was pursuing legal action against Iress and its wholly-owned subsidiary, Financial Synergy, over an alleged software error which sent the wrong information to the Australian Taxation Office (ATO).

Iress identified more than two years’ ago that the OneVue acquisition was not generating the originally-envisaged objectives and, like the sale of the platform business, the superannuation divestment was the result of a strategic review undertaken as part of a transformation program.

Thus, as Iress Group chief executive, Marcus Price, said on Monday the company is now positioned to focus on its “core strengths in software delivery”.

Just as importantly for Iress, the terms of the sale to Apex Group, the Iress will continue to deliver advice and education software to the funds administered by Apex.

The transaction will see the Iress superannuation team moving across to Apex and its technology partner, Novigi.

Indeed, just as the sale of superannuation business spells a refocus on the part of Iress it represents a significant expansion of the Apex Group footprint in the Australian superannuation sector alongside Novigi.

Apex announced in July last year that it had appointed Novigi as is data and technology platform partner.