Iress Limited · ASX:IRE
Iress — H1 2023 Earnings Presentation
34 slides from Iress's earnings presentation, Aug 21, 2023
Slide 1: Half Year Results
Results Presentation 2023 Half Year Results 21 August 2023 1
Slide 2: Disclaimer
Disclaimer The material in this presentation is intended to be general background information on Iress Limited and its activities, current at the These risks and uncertainties could cause actual results, performance or events to differ materially from those expressed or date of the presentation. The
Slide 3: Iress overview
Iress overview Iress provides essential technology to the Australian financial services industry and around the world Established in 1993 Listed on ASX since 2000 About Iress Refreshed strategy Rule of 40 Critically important capital markets Refreshed strategy outlined in April for a Adoption of Rule
Slide 4: CEO observations
CEO observations Strategy Update Financial results Outlook Summary CEO observations 4
Slide 5: CEO observations
CEO observations New leadership of the company Marcus Price ● New CEO and CFO Managing Director & CEO ● New leaders of business units ● Not encumbered by the past ● Renewed focus on improving customer experience ● Commitment to transparency. Execution against six big jobs on track ● Strategy to focu
Slide 6: 1H23 financial performance
1H23 financial performance Reported revenue Underlying earnings per share Up 2% Down 29% 1H 22 1H 23 1H 22 1H 23 Underlying EBITDA & Reported EBITDA & margin margin Down 55% 21.3% 9.3% 23.3% 18.9% Down Down 17% 16% 1H 22 1H 23 1H 22 1H 23 Underlying NPAT Reported NPAT Down 31% Down 557% 1H23 impacted
Slide 7: Challenging business conditions
Challenging business conditions Half-year opex +8% Half-year revenue up +2% ● Significant step-up in third-party technology costs - up ● Price increases offset by subdued market. 15%. ● Overall churn remains low but customers are operating in ● Base staff costs rising in inflationary environment and a
Slide 8: Strategy update
CEO observations Strategy update Financial results Outlook Summary Strategy update 8
Slide 9: Transformation: Execution on track against 2023 plan presented at Investor Day
Transformation: Execution on track against 2023 plan presented at Investor Day Update on Transformation Roadmap 1H 2023 Progress 2H 2023 Priorities Transformation Office established with an execution partner supporting ✔ Transformation Office Transformation established to drive execution rigour and disc
Slide 10: Financial results
CEO observations Strategy Update Financial results Outlook Summary Financial results 10
Slide 11: Financial results
Financial results Cameron Williamson ● Appointed as Iress’ Group Chief Financial Officer on 24 July 2023. Chief Financial Officer ● Over 25 years’ experience leading finance operations both in Australia and around the world. ● CFO at Pendal Group from 2009 to 2023. ● Prior to this, he served as CFO & Com
Slide 12: 2023 financial results summary
2023 financial results summary ● Revenue growth of 2% remains subdued versus $AUDm 1H22 1H23 Change historical trend ● Input cost pressures elevated - opex +8% Revenue 308.2 315.3 2% ● Significant expense uplift across tech infrastructure, market data and inflationary Operating costs (227.5) (245.6) 8%
Slide 13: Transformation investment - non-recurring items and NPAT
Transformation investment - non-recurring items and NPAT $AUDm 1H 22 1H 23 Change Non-recurring items Underlying EBITDA 71.9 59.5 (17%) ● $13.4m on technology uplift program to improve customer experience in core trading and advice Non recurring items (6.3) (30.1) 374% software by Q1 2024 ● $7.6m on
Slide 14: Costs breakdown
Costs breakdown 8% increase in operating costs in constant currency due to higher technology and employee costs +$4.1m - increase in technology platform costs related to cloud migration, and market/data fees ($AUDm) +$3.6m - increase in software and licencing costs +$3.9m - platform interest charges
Slide 15: Cash flow and balance sheet
Cash flow and balance sheet Free cash flow Balance sheet $AUDm 1H 22 1H 23 Dec-22 Jun-23 Underlying EBITDA 71.9 59.5 Share Based Payments 8.8 10.2 Change in working capital 1.2 18.7 326.1 375.8 Net debt - $AUDm Transformation & other non-operating costs (7.3) (30.6) Cash Generated from Operating Acti
Slide 16: Capital management plan under review
Capital management plan under review MFA sale proceeds Free cash flow Total dividend payout Net debt (pre cap mgmt) ($m)(1) ($m) ● Committing to revert with renewed Capital Management Plan in February 2024 which will address: ○ Dividend policy ○ Target debt and leverage ○ Underlying and sustainable e
Slide 17: Outlook
CEO observations Strategy Update Financial results Outlook Summary Outlook 17
Slide 18: Outlook - Pathway to Rule of 40 in core business
Outlook - Pathway to Rule of 40 in core business FY24 Outlook 2023 Guidance By end of FY24: ● Continued softening in revenue growth ● Cost pressures to continue in second half, however mitigated by ● Transformation program completed with revenue and cost full-year effect of cost measures and transfo
Slide 19: Summary
CEO observations Strategy Update Financial results Outlook Summary Summary 19
Slide 20: In summary
In summary Where we are today Where we’re headed 1H results represent point Laser focused on in time - not reflective transformation 2023 of potential and 2024 exit rate improvement Ambitious customer-centric Aligning all remuneration plans and external execution structures around achievement support
Slide 21: Appendix
Appendix 21
Slide 22: P&L results
P&L results Constant currency revenue growth more than offset by higher operating costs, one-offs and net interest expense $AUDm 1H 22 1H 23 1H 23 vs 1H 22 1H 23 CC ⁽¹⁾ 1H23 CC vs 1H 22 Operating Revenue 308.2 315.3 2.3% 316.5 2.7% Operating Costs (227.5) (245.6) 8.0% (245.6) 8.0% Share Based Paymen
Slide 23: Revenue bridge
Revenue bridge Revenue growth predominantly driven by Super and MFA & Platforms ($AUDm) Core +2% Managed +3% ⁽¹⁾ Revenue based on new reporting structure, figures subject to change as new business segment P&L implemented ⁽²⁾ CC refers to Constant Currency using 1H 22 average FX rates 23
Slide 24: Underlying Net Profit After Tax analysis
Underlying Net Profit After Tax analysis 28% decrease Underlying NPAT in constant currency ($AUDm) -28% 24
Slide 25: Foreign exchange rates
Foreign exchange rates 1H23 Foreign exchange rates 1H22 Foreign exchange rates 1H 23 Rate 1H 22 Rate GBP 0.5508 GBP 0.5521 CAD 0.9147 CAD 0.9092 ZAR 12.2950 ZAR 10.9769 EUR 0.6269 EUR 0.6547 25
Slide 26: Segment performance
Segment performance AUD (m) 1H 22 1H 23 1H 23 vs 1H 22 1H 23 CC ⁽¹⁾ 1H 23 CC vs 1H 22 APAC 175.2 184.2 5% 183.9 5% UK & Europe 77.9 75.6 (3%) 74.9 (4%) Mortgages 16.3 17.7 9% 17.6 8% South Africa 22.2 20.9 (6%) 23.4 5% North America 16.5 16.8 2% 16.7 1% Total Revenue 308.2 315.3 2% 316.5 3% APAC 124
Slide 27: APAC
APAC Strong Superannuation performance. Finance Advice impacted by client reductions to licenses and industry consolidation $AUDm 1H 22 2H 22 1H 23⁽¹⁾ 1H 23 vs 1H 22 1H 23 vs 2H 22 Operating revenue Trading & Market Data 71.1 71.8 72.2 2% 1% Financial Advice 64.6 64.0 63.4 (2%) (1%) Superannuation 2
Slide 28: UK & Europe
UK & Europe Growth in Sourcing. Private Wealth recurring revenue growth but offset by decline in non repeat implementation revenue GBP (m) 1H 22 2H 22 1H 23 1H 23 vs 1H 22 1H 23 vs 2H 22 Operating revenue Wealth ⁽¹⁾ 17.5 16.8 15.8 (10%) (6%) Trading & Market Data 13.8 14.4 13.9 - (3%) Sourcing 11.7
Slide 29: Mortgages
Mortgages Continued recurring revenue growth now contributing 64% to total revenue GBP (m) 1H 22 2H 22 1H 23 1H 23 vs 1H 22 1H 23 vs 2H 22 Operating revenue Recurring revenue 5.4 5.7 6.3 16% 10% Non-Recurring revenue 3.6 2.9 3.5 (3%) 18% Total operating revenue 9.0 8.6 9.7 8% 13% Direct contribution
Slide 30: South Africa
South Africa Growth in recurring revenues. Returns exceed the group average ZAR (m) 1H 22 2H 22 1H 23 1H 23 vs 1H 22 1H 23 vs 2H 22 Operating revenue Recurring revenue 228.6 228.5 244.6 7% 7% Non-Recurring revenue 15.0 18.2 12.4 (17%) (32%) Total operating revenue 243.6 246.8 257.0 5% 4% Direct cont
Slide 31: North America
North America Strong recurring revenues with a stable client base. 1H23 non-recurring revenues impact by elevated project work in 1H22 CAD (m) 1H 22 2H 22 1H 23 1H 23 vs 1H 22 1H 23 vs 2H 22 Operating revenue Recurring revenue 14.4 14.3 14.9 3% 4% Non-Recurring revenue 0.6 0.4 0.2 (61%) (49%) Total
Slide 32: Depreciation and Amortisation (D&A)
Depreciation and Amortisation (D&A) D&A – Operational $AUDm 1H 22 2H 22 2022 1H 23 2H 23 2023 Depreciation Plant & Equipment 5.2 4.9 10.2 5.1 6.5 11.6 Amortisation Software 1.0 1.7 2.7 1.4 2.1 3.4 Leases 7.2 7.2 14.4 6.9 6.7 13.6 Total D&A - Operational 13.4 13.8 27.2 13.4 15.3 28.6 D&A – Acquisitio
Slide 33: Glossary
Glossary Annual Contract Value (ACV) Annualised value of Recurring Revenue (calculated by multiplying the exit month by 12) plus the sum of the last 12 months of Non-recurring Revenue Annual Churn Revenue from lost clients / prior period total group revenue. Value of revenue from lost clients is equ
Slide 34: Contact
Contact Marcus Price Managing Director & CEO Cameron Williamson Chief Financial Officer +61 3 9018 5800 iress.com © Iress 2023 34