IRESS (ASX:IRE)

IRESS is a leading provider of innovative technology for the financial services industry, wealth management and mortgage sectors. It was founded in Australia in 1993 and operates in Australia, New Zealand, the United Kingdom, South Africa, Canada, and Asia.

The Company operates in the following three business segments:

Financial Markets

Providing information, trading, compliance, order management, portfolio systems, and related tools to cash equity participants

Wealth management

Provides financial planning systems and fund administration software for the wealth management, private wealth management, and superannuation industries

Lending

Provides a sales and origination platform for those in the lending industry, including mortgage services.

The Company operates the following divisions:^[1]

Key strategies include:^[3]

• Service clients exceptionally
• To be essential to its clients success through continued product investment
• Identify and deliver scale benefits
• Attract and retain great talent through culture, environment and reward
• Deliver a compelling solution and user experience

The Company’s outlook 

• Period on period revenue and cost remains subject to the timing of client implementations and significant industry change
• Expect growth weighted to the second half and a decline in Segment Profit in 1H18 (from 2H17), impacted by lower bonus provision in 2H17 not repeated in 1H18
• Expect 2018 Segment Profit growth to be in the range of 3 - 7% (on a constant 2017 currency basis
• Non operating costs relating to integration, infrastructure investments in scaling its capability and restructuring are expected to be in line with 2017 levels

The Company operates in markets including:^[4]

Major competitors include^[5]

• MasterCard Australia Holding
• Visa Inc (NYSE: V)
• IBM A/NZ Holdings

1993^[6]   

The Company story began in Australia in 1993.

2000   

Publicly listed on the ASX since 2000

2001   

Company name change from BridgeDFS Limited to IRESS Market Technology Limited

2002   

Iress and IWL to Merge

2005   

IOS network to integrate with Reuters ROR network

2007   

IRESS expands Wealth Management Solutions in South Africa

Completion of VisiPlan Pty Ltd Transaction

Acquisition of IWL's Advisory Software Division

IRESS & TSX Markets to offer premier access solution

2008   

IRESS technology supports Chi-X ATS in Canada

Acquisition of Dealer Management Systems

IRESS renews enterprise agreement with MLC

Asgard Wealth Solutions agreement to use Xtools and Xtools

2010   

IRESS launches ultra low-latency solution for Australia

IRESS Launches Low-Latency Trading Eco-system in Australia

IRESS foundation customer to ASX co-location facility

2011   

IRESS launches UK wealth management division

IRESS announces the release of ion in Canada

2013   

IRESS completes acquisition of avelo

2015   

Completion of UK acquisitions

IRESS announces strategic UK acquisitions

2016   

IRESS announces acquisition of inet BFA in South Africa

IRESS announces acquisition of Financial Synergy

IRESS successfully completes an $85million placement

IRESS Delivers Mortgage Solution to Atom Bank

2017   

IRESS invests in leading Australian Reg Tech Lucsan

Completion of MainstreamBPO transaction

Board of Directors^[7]

Tony D’aloisio – Independent Non-Executive Director, Chairman

Geoff Tomlinson – Independent Non-Executive Director

Andrew Walsh – Executive Director and Chief Executive Officer

Jenny Seabrook – Independent Non-Executive Director

John Cameron – Independent Non-Executive Director

Julie Fahey – Independent Non-Executive Director

John Hayes – Independent Non-Executive Director

Niki Beattie – Independent Non-Executive Director

Management Team

Andrew Walsh – CEO

Julia McNeil – Group Executive, Human Resources

Aaron Knowles – Global Executive, Product

Glenn Wilson – General Executive Manager, Wealth & Trading

Jason Hoang – Managing Director, Asia

John Harris – Chief Financial Officer

Kirsty Gross – Managing Director, Australia and New Zealand (Financial Markets)

Peter Ferguson – Group General Counsel and Company Secretary

Simon Badley – Managing Director, UK

Simon New – Group Executive – Strategy

Ray Pretorius – Managing Director, South Africa

Tizzy Vigilante – Managing Director, Australia and New Zealand (Wealth)

Andrew Todd – Chief Technology Officer

Coran Lill – Group Executive – Communication & Marketing

2018 Full Year Results Presentation

Financial Year 2017 (ended 31 December 2017):^[8]

Major risks include:^[9]

Business risks

Information security breach and failure of critical systems

Due to the nature of IRESS’ business, the Group could be impacted significantly by the failure of critical systems, whether caused by error or malicious attack.

Economic climate

Economic conditions, domestically and internationally, can impact client revenue and accordingly, client demand for IRESS’ systems.

Foreign Exchange

IRESS is exposed to foreign exchange movements which may affect the value of profits repatriated to Australia.

Regulation

Regulation can impact IRESS and its clients because regulation increases the cost of doing business, or because regulation results in structural changes, including consolidation or fragmentation, both of which can negatively impact IRESS client engagements.

Market or technology risk

The risk that a pronounced shift in technology or a pronounced change in the way market-segments organise themselves and make use of IRESS’ products or solutions.

Market risks

Interest rate risk

The Group’s exposure to interest rate risk mainly arises from its variable rate borrowings and cross currency swaps. A decrease in the benchmark interest rates of 50 basis points (0.5%), with all other factors held constant, would result in a decrease in the annual interest cost of the Group by $0.9 million (2016: $0.9 million decrease).

Foreign currency risk

GBP borrowings do not give rise to foreign currency risk to the Group as they are ultimately held in entities that have a GBP functional currency. However, the Group is also exposed to foreign currency risk mainly from intercompany loans denominated in foreign currency, the majority of which is mitigated by cross currency derivatives. Additional foreign currency risk arises from cash balances, receivables and payables denominated in foreign currency.

Capital risk

The Group manages its capital to ensure it will be able to continue as a going concern while maximising the return to shareholders. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group is not subject to any regulatory capital requirements. Management reviews the capital structure of the Group on a regular basis. As part of this review, the cost of capital and the risks associated with each class of capital is considered.

Credit risk

Credit risk refers to the risk a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The maximum exposure to credit risk is the carrying value of the receivables. The Company actively manages this exposure by dealing only with counterparties with good credit standing and not having any significant credit risk with any single counterparty. The credit risk exposure arising from customers is monitored on a monthly basis. Where an event of default is identified, a provision is raised against the amount owed by the customer to the estimated amount not considered recoverable in the normal course of business.

Liquidity risk

Liquidity risk arises from current payables and other liabilities that are payable in less than one year, as well as the finance arrangements with certain software providers that have an average annual contractual payment of $3.1 million per annum, over the life of the arrangements of 3 to 5 years. The Group manages this liquidity risk by maintaining sufficient cash and current assets to meet the contractual obligations as they arise.