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Investment services company, Xplore Wealth Limited (ASX: XPL) today downgraded its FY2019 EBITDA guidance to $3 million - $4 million, lower than the initial guidance of $7 million - $8.5 million as announced in March 2019.
The massive decline in the companyâs expectation underscores the revenue shortfall resulting partly from delays in new product launches; synergy benefits not realised yet; software development costs expensed which was previously forecasted to be capitalised and investments into growth initiatives.
Baes in New South Wales, the company provides services to brokers, wealth managers and financial advisory firms, offering technology solution, administration, managed discretionary accounts and Investment & Superannuation Wrap.
Xplore Wealth Ltd acquired Linear Financial holdings to access an extensive suite of products and services. The acquisition resulted in synergy benefits of $3.5 million out of which benefits worth $2.4 million have successfully realised. The remaining synergy of $1.1 million has been reportedly delayed due to the migration of the service providers not yet occurred.
Revenues earned by due diligence and research fees are due to fund managers. Revenues are expected to realise before the end of the financial year, and the amount is expected to be $0.9 million.
The company stated that the receipt of the GST refunds ($1.9m and the $1.6m) is reliant on a Responsible Entity of the Linear Managed Account lodging the application for the refund with the ATO. It expects the registration and the application to follow for the refund to commence this week. But $1.6 million amount from tax refunds is not included in the current revised guidance as it pertains to previous financial years. However, the directors of the company are likely that monies will be recoverable in the financial year 2019.
New product launch delays have resulted in an expected revenue shortfall of $1.7 million. The company is committed to developing employees and growth initiatives, recently invested AUD 500k for skills upgrade.
Based on the above changes, XPL has revised its guidance to the range of $3- 4 million after adjusting for the above stated changes in the initial guidance. The deductions include revenue shortfall of $1.7 million, unrealised synergies of $1.1 million, investments into growth initiatives of $0.5 million and software development cost of $0.3 million recorded as expense.
Outlook:
Xplore wealth is adapting to numerous growth strategies and initiatives that aim to improve profitability. The successful rebranding and relaunching of the group well positions the company for active sales campaign and driving revenue growth. The directors expect to appoint a CEO in a near-term to direct the organisation and drive improved performance.
Peter Brook, Chairman of Xplore Wealth, highlighted the progress made the company over the past year in rebranding and repositioning with extensive product suite; however, he also mentioned the disappointment to deliver revised EBITDA guidance. Xplore has an exciting future with new product development, scalable technology and upgraded capabilities.
Mr Brook added that Linear acquisition has been a positive development for the Group expanding our opportunity set.
XPL stock plunged by 16.667% to last trade at $0.110 on 8 May 2019. The 52-week high and low of the stock stands at $0.255 and $0.095, respectively. Over the past 12 months, the stock has gone down by 44.19% including a negative YTD performance of 25%.
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