Management plays an important role in determining the success of business of an organization. Investors emphasize on the role of the Management as it determines course of business and its strategic planning. We will be discussing one business i.e. Mystate Limited and the role of its top-level Management.
Mystate Limited (ASX: MYS)
Mystate Limited operates in diversified financial services space, which is regulated by the Australian Prudential Regulatory Authority. On 10 January 2020, MYS informed about the stepping down of Melos Sulicich from the position of Managing Director and Chief Executive Officer. As per terms and conditions of his service, he will be leaving the company in July 2020.
Mr. Sulicich joined the Board during 2014 and has made immense contribution to the company and helped reach a banking loan book size of more than $5 billion. One of the prime contributions of Melos has been the digital transformation MyState, where the business witnessed rapid growth in its client base followed by growth of the loan book across mainland Australia. Other highlights of his career include his leadership during the challenging times of the Australian Banking Industry. The Bank has successfully safeguarded its customer’s interests during his tenure.
As quoted by Mr. Sulicich, the reason behind the resignation was due to his personal interests and inclination. He also quoted that the banking and wealth management businesses have achieved strong momentum under his leadership and is ready to enter the next level of the growth in the coming years. He also believes that the Bank is well positioned with respect to its strategies to augment growth in the upcoming years.
Role of Managing Director and Chief Executive Officer in an Organization:
The role of Managing Director is to take care of the operational activities of the company and to address the complexity and the transitional activities relating to new processes. The Managing Director also monitors the sales activities and the business opportunities the company can create from its products. Thus, to ensure this task, an MD has look at the available resources of the company related to the human element and other tangible assets of the company. The person is also entitled to approve the annual budget and deliver on the strategic plans and objectives of the business. MD is entrusted to review periodic sales and operational report from the respective managers and compare them with the budgets allocated to different departments. The variance or the deficit amount, if any, is critically analyzed by the MD and he would be entrusted for leveraging the resources of the company and the alterations which are required for the sake of the company’s business.
Chief Executing Officer (CEO) bridges the gap between Board of Directors and the top managers of the company. The candidate for the position of CEO is elected by shareholders through voting. A business with varied level of operations and having a wide presence would require its CEO to work for the strategies of the business, build innovative ways to enhance its operational activities and liaison with its shareholders and outside investors etc. Businesses with comparatively smaller size of operations would require its CEO to work on the day to day operating activities and other governing functions.
FY19 Financial Highlights for the Period ended 30 June 2019: MYS reported its full year results, wherein the company reported interest income at $202.103 million as compared to $188.264 million in FY18. The company reported interest expense at $112.720 million, which increased from $98.753 million in FY18. Net-interest income of the company stood at $89.383 million as compared to $89.511 million in previous financial year. The company reported net profit at $30.987 million, down from $31.461 million in the previous financial year. Cash flow from operating activities stood at $49.512 million, net cash used in investing activities stood at $549.741 million and net cash from financing activities stood at $512.347 million. The company reported closing cash balance of $79.994 million as on 30 June 2019. MYS reported total assets at $5,712.882 million which included loans and advances at $5,053.091 million, intangible assets and goodwill at $84.979 million while financial instruments stood at $450.333 million as on 30 June 2019. Deposits and other borrowings stood at $5,331.516 million while total equity came in at $327,499 million.
Operating Highlights for the Period ended FY19: During FY19, MYS reported total loan book at $5.0 billion, up 10.7%. Customers Deposit grew 12.1% on y-o-y basis at $3.7 billion, which represents 68.6% of the funding mix aided by robust growth in retail term deposit growth, particularly in online origination. The business reported cost to income ratio at 64.8%, up from 62.7% in previous financial year. The increase in costs were due to higher investment in marketing activities and fund management and administration followed by investments in IT systems. The financial year was marked by higher expense in depreciation and amortization, technology, governance and marketing expenses which have accounted for a net 2.9% increase on a y-o-y basis. The company reported funds under management at $1.17 billion, which came in at a lifetime high. The business group took a strategy of disinvesting its retail financial planning business in order to simplify its goals and ensuring the achievement of true potential across the investment and wealth-management businesses. The company is focused on enhancing its distribution through its Digital resources.
Outlook: The company is looking at innovation, introduction of new products and focusing to enhance its digital presence and believes organic customer growth is the key driver of revenues in coming years. The management also believes that the organization would deliver improved efficiencies in upcoming years. Within the wealth business, is likely to launch a platform which will enhance customer experience and lead to significant business growth in the coming years.
Stock Update: The stock of MYS closed at $5.160 with a market capitalization of ~$472.93 million on 13 January 2020. The stock has generated a decent return of 13.88% and 18.04% in the last six-months and one year, respectively. At current market price, the stock is available at a price to earnings multiples of 15.130x. The stock has delivered an annualized dividend yield of 5.56%.
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