Yolanda Redrup

IRESS shares rise on stronger than expected results

September 2018

Financial services software company IRESS is investing more in automation and data analytics to help its wealth-management clients keep up with the changing regulatory environment and increased compliance demands.

The demand on financial services companies involved in the banking royal commission to produce large amounts of data quickly has resulted in a push from firms to invest more in software that increases efficiency and automates the data-collection process, which benefits IRESS.

Investors were pleased with the firm’s first-half results on Thursday that came in ahead of its own guidance, with revenue jumping 8.4 per cent in the first half to $229.7 million.

Its net profit after tax increased 8.5 per cent to $32 million, resulting in investors pushing the share price up 16 per cent in morning trading to $14.06. The stock has now gained 50 per cent from a 12-month low of $9.19 hit in April.

IRESS chief executive Andrew Walsh told The Australian Financial Review its business divisions growing most strongly were wealth management in Australia and the UK, and lending.

“We’ve seen an uptake in Australia in particular across software in customer relationship management through to advice tools,” he said.

“The reason for that is there’s a heightened focus from wealth managers on process, using systems and data to better see into the business and on risks and opportunities.

“There’s also an awful lot happening in superannuation that falls into the Australian wealth segment.”

Wealth management
IRESS provides a full suite of software services, ranging from client relationship management to portfolio tracking for financial advice and superannuation firms and it dominates about 60 per cent of the market in Australia.

It counts 12,000 professional trading and market data users as customers and has more than 50,000 advice software users.

IRESS’ wealth-management business in Australia posted 9 per cent higher revenue for the first half to $67 million, while revenue in the UK jumped 12 per cent, in part thanks to positive currency tailwinds.

Its lending division was the standout performer in terms of growth, with revenue up 40 per cent to $15 million.

The company declared an interim dividend of 16¢ a share, 60 per cent franked.

To meet the growing levels of demand for technology-driven solutions, IRESS is investing in its cloud infrastructure and moving to Amazon Web Services.

Previously, the company has utilised its own private data centre, which it will continue to maintain for niche services, but most of its applications will move to AWS.

It expects the move to AWS to have a positive impact on EBIT within the next five years.

“There will be a huge benefit to our clients from the speed and agility we’ll have in terms of getting software to them faster and in a way that doesn’t have so many hands in the middle,” Mr Walsh said.

“Not all applications will end up sitting in AWS, but a large proportion of web native applications will and we expect to have made material progress within 18 months … and we’ll have some deployed in AWS within 2018.”

Australia & New Zealand Banking Group

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