Iress Limited · ASX:IRE
Iress — IRESS Market Technology — H1 2008 Earnings Presentation
50 slides from Iress's earnings presentation, Aug 19, 2008
Slide 1: ASX cover letter: 2008 Half Year Results Investor Presentation
19 August 2008 For personal use only The Manager Company Announcements Office Australian Stock Exchange 10th Floor, 20 Bond Street SYDNEY NSW 2000 ELECTRONIC LODGEMENT Dear Sir or Madam 2008 Half Year Results – Investor Presentation Please find attached a copy of an investor presentation on the Comp
Slide 2: Results Presentation Half Year to 30th June 2008
For personal use only Results Presentation Half Year to 30th June 2008 August 2008
Slide 3: IRESS H1'08 Results
IRESS H1’08 Results For personal use only Î Adjusted Group profit $23.3 million (H2’07: $20.8m), up 12% Î Wealth Management consolidation consolidation, growth & acquisition Î Canadian revenue growth of >30% over H2’07 & EBITDA C$1.778 up from breakeven H2’07 Î Reported Group profit $18 $18.1 1 mill
Slide 4: Segment Performance Against Prior Half
Segment Performance Against Prior Half For personal use only Information Services Wealth Management Î Aust & NZ Î Aust & NZ * Op Rev up 5.3% (up 14.5% on PCP) Op Rev up 7.2% (up 63.8% on PCP) EBITDA up 7.5% (up 13.5% on PCP) EBITDA up 14.9% (up 59.5% on PCP) PAT up 6.0% (up 10.8% on PCP) PAT up 19.4
Slide 5: Group Performance Against Prior Half
Group Performance Against Prior Half For personal use only Adjusted Group Profit $23.270 m Up $2.502 million, 12% on Prior Half Segment Contribution against prior half $A Information Services Aust/NZ $1.000 40% Information Services Canada $1.361 54% Wealth Management Aust/NZ $0.709 28% Wealt
Slide 6: Strategic Items
Strategic Items For personal use only Strategic Charges $7 249 m for half year $7.249 As with prior periods we have continued with amortisation of purchased i t intangibles ibl such h as Computer C t Software S ft The main changes g from H2’07 charges g are: Part period amortisation charges on
Slide 7: Review of Group Recurring Subscription Revenue
Review of Group Recurring Subscription Revenue For personal use only 70 60 $A Millions s 50 40 $ 30 20 10 0 H1'03 H1'04 H1'05 H1'06 H1'07 H1'08 Aust Equities Canada Equities Wealth Mgt Aust Wealth Mgt RSA 6
Slide 8: Review of Group EBITDA
Review of Group EBITDA* For personal use only 40 $A Millions s 35 30 $ 25 20 15 10 5 0 H1'03 H1'04 H1'05 H1'06 H1'07 H1'08 -5 Aust Equities Canada Equities Wealth Mgt Aust Wealth Mgt RSA *Defintion of EBITDA as per IRESS Media Release 7
Slide 9: Relative Impact H1'08
Relative Impact H1’08 For personal use only 100% 80% 60% 40% 20% 0% Revenue EBITDA Total Direct Staff Total Strategic (Recurring Subs) Costs Charges Aust Equities Canada Equities Wealth Mgt Aust Wealth Mgt RSA *Defintion of EBITDA as per IRESS Media Release 8
Slide 10: Daily Trades on the ASX
Daily Trades on the ASX For personal use only 0.7 Trades - Millions s 0.6 0.5 04 0.4 0.3 0.2 0.1 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 9
Slide 11: ASX Trade Numbers
ASX Trade Numbers For personal use only Î ASX trade numbers have continued to increase Î Re-investment in IRESS core architecture and network have handled this hi wellll Î Ongoing commitment to further add capacity for future growth Î In H1’08, 15 days of over 500,000 trades. Unprecedented pre-2008
Slide 12: Australian Equities - Revenue
Australian Equities - Revenue For personal use only Î Revenue growth: IRESS desktop – as usual major $ contributor WebIRESS - key contract now at every large on-line broker IPS – strong growth off a small base IOS - growth from both existing and new clients Î Competitors activity unchanged,
Slide 13: Market Penetration
Market Penetration For personal use only Î All of the top 10 Institutional brokers use IRESS FIX Î All of the top 20 brokers use IRESS as their primary ASX market data screen Î 18 out of the top 20 brokers have at least one IOS system in use Î 18 out of the top 20 full service Retail brokers have Re
Slide 14: WebIRESS growth
WebIRESS growth g For personal use only Î WebIRESS with Asian market data and trading launched Now live in Singapore with two brokers who provide to their clients, a third thi d to t be b launched l h d in i H2’08 Expansion plans to launch from Hong Kong and Malaysian brokers next year y Work
Slide 15: Australian Equities – Goals balance '08
Australian Equities – Goals balance ‘08 For personal use only Î Continue roll out of FIX+ & IOS+ high speed DMA combination Î Further penetrate trading terminal market with OTW / IOS+ Î IPS IMA / SMA Solution rolled out to more clients and leveraging fund manager community Î Fully implement webIRESS
Slide 16: IRESS Portfolio System (IPS)
IRESS Portfolio System (IPS) For personal use only Î Multi M lti assett class, l multi-currency lti portfolio tf li and d ttax system t Î Unique offering of integrated reporting and asset management for new generation managed account platforms Î Fully integrated with XPLAN and ITN for data feed diss
Slide 17: Australian Equities - Outlook
Australian Equities q - Outlook For personal use only Î Revenue conditions in to the second half continue to be: Normal organic growth from many existing clients New client opportunities More significant downsizing and cost cutting Î Assuming similar conditions for the balance of the year we e
Slide 18: Aust Equities – Monthly Subscription Revenue
A tE Aust Equities iti – Monthly M thl Subscription S b i ti Revenue R For personal use only 65 6.5 $A Millions 6.0 5.5 5.0 4.5 40 4.0 3.5 3.0 2.5 2003 2004 2005 2006 2007 2008 17
Slide 19: Change in Aust Equities Revenue
Ch Change i Aust in A t Equities E iti Revenue R For personal use only 4.0 3.5 ons 30 3.0 $A Millio 2.5 2.0 1.5 1.0 0.5 - H1'03 H1'04 H1'05 H1'06 H1'07 H1'08 (0 5) (0.5) IRESS + Services Trading Services Hardware/DR Other News, Royalty & Comms 18
Slide 20: Australian Equities – Margin Analysis
Australian Equities – Margin Analysis For personal use only % Revenue per Media Release H1 2007 H2 2007 H1 2008 2005 2006 2007 Licence Fee Revenue 71.9% 71.8% 71.9% 71.8% 71.9% 71.9% Other Rev (News / Roy. / Comms) 28.1% 28.2% 28.1% 28.2% 28.1% 28.1% Gross Profit 77.4% 77.5% 77.3% 76.7% 77.3% 77.4%
Slide 21: Daily Trades on TSX & TSX Venture Exchanges
Daily y Trades on TSX & TSX Venture Exchanges For personal use only 12 1.2 es - Millions 1.0 Trade 0.8 0.6 0.4 0.2 0.0 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 20
Slide 22: Canada - Overview
Canada - Overview For personal use only Î Meeting the challenges: CX and KTA conversions are now completed. We continue to focus on client service and satisfaction. External challenges posed by significant changes in the Canadian market environment New exchange entrants in addition to PURE – A
Slide 23: Canada Business - Highlights
C Canada d BBusiness i - Highlights Hi hli ht For personal use only Î CX OMS customer conversions were completed in March 2008 Î KTA customers conversions to KTA+ (IRESS technology) completed i A in Aprilil 2008 Î KTA infrastructure shut down bringing lower costs, higher performance and greater simp
Slide 24: Canada - Outlook
C Canada d - Outlook O tl k For personal use only Î CX OMS roll-out has been completed with significant extra revenue as these customers move to billing Î Business now materially EBITDA positive at close to $C4m annualised Î Poised to make a significant contribution to IRESS results in 2008 Î Follow
Slide 25: Canada Longer Term Outlook
Canada Longer Term Outlook For personal use only Î Current strategy includes: Trading terminals for Canadian equities and options Retail order flow management (including US FX tools) Institutional order management and compliance Buy Side services FIX connectivity Limited market data arou
Slide 26: Canada – Monthly Subscription Revenue
Canada – Monthly Subscription Revenue* For personal use only 1.4 Millions 1.2 CAD$ M 1.0 0.8 Pre-IRESS full production level offering 0.6 0.4 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 *A Assumes 100% ownership hi 25
Slide 27: Canadian Equities – Margin Analysis
Canadian Equities – Margin Analysis For personal use only % Revenue per Media Release H1 2007 H2 2007 H1 2008 2005 2006 2007 Licence Fee Revenue 87.2% 84.6% 82.3% 90.5% 90.3% 85.7% Other Rev (News / Roy. / Comms) 12 8% 12.8% 15 4% 15.4% 17 7% 17.7% 9 5% 9.5% 9 7% 9.7% 14 3% 14.3% Gross Profit 72.6%
Slide 28: Wealth Management - Revenue
Wealth Management - Revenue For personal use only Î Aus/NZ revenue run rate : over $40m pa H2 2008 – impact of recent small acquisitions Î South African revenue run rate over $5m $ pa: H1 2008 – growth in underlying recurring, reduced one-off revenue; and increased costs in preparation for web a
Slide 29: Wealth Management - Overview
Wealth Management - Overview For personal use only Î Acquisitions of VisiPlan and Spotlight consolidated: Major part of the group contributing on an annualised basis 27% of revenue and 21% of EBITDA Strong retention of revenue from both acquisitions and a slightly higher than expected H1 EBITDA
Slide 30: Wealth Management - Acquisitions
Wealth Management g - Acquisitions q For personal use only Î TransActive Leading provider of mortgage analytics in broker market Compliments advice platform to dealer groups. Strong interest Integration well underway, due for release Sept Expect broker pressures more than offset by advice se
Slide 31: Wealth Management - Acquisitions
Wealth Management g - Acquisitions q For personal use only Î FundClick eApplication technology for funds and platforms Integration well underway, due for release Sept Compliments existing initiatives in insurance with AppCentral Strong interest Forms basis of loan submission and LIXI gatew
Slide 32: Wealth Management - Product
Wealth Management - Product For personal use only Î New N modules d l ffor d debt, bt eApplication A li ti Î Super Comparator released in XPLAN & VisiPlan Î Continued C ti dddevelopment l t and d iimplementation l t ti off CommPay C P Î IRESS centralised data feed infrastructure released New N arc
Slide 33: Wealth Management – Australia & NZ Monthly Subscription Revenue
Wealth Management – Australia & NZ Mthly Subscription Rev For personal use only 3.5 $A Millions 3.0 Acquisition of VisiPlan business 2.5 in Apl’07 2.0 Acquisition of 1.5 PlanTech business in Sept’06 1.0 0.5 0.0 2003 2004 2005 2006 2007 2008 32
Slide 34: Wealth Mgt – Aust & NZ Margin Analysis
Wealth Mgt – Aust & NZ Margin Analysis For personal use only % Revenue per Media Release H1 2007 H2 2007 H1 2008 2005 2006 2007 Licence Fee Revenue 97.6% 97.5% 97.3% 97.4% 96.9% 97.5% Oth Rev Other R (News (N /R Roy. / C Comms)) 2 4% 2.4% 2 5% 2.5% 2 7% 2.7% 2 6% 2.6% 3 1% 3.1% 2 5% 2.5% Gross Profi
Slide 35: Wealth Management - South Africa
Wealth Management - South Africa For personal use only Î Spotlight is the leading provider in South Africa with a large installed user base (16 (16,000) 000) and strong established client relationships relationships. Î Spotlight continues to provide client support and development locally, incorporat
Slide 36: Review of Group Opex
Review of Group p Opex p For personal use only 12 Canada Equities (Assumes 100% Ownership) Aust Equities 5 10 4 8 3 6 $Am C AD m 2 4 2 1 0 0 H1'03 H1'04 H1'05 H1'06 H1'07 H1'08 H1'03 H1'04 H1'05 H1'06 H1'07 H1'08 Total Direct Staff Costs (inc AL) Other E'ee Related Expenses Hardware & Software Occup
Slide 37: Breakdown of Opex H1'08
Breakdown of Opex H1’08 Canada Equities For personal use only Aust Equities 1% 6% 5% 0% 4% 3% 2% 8% 3% 8% 76% 84% Total Direct Staff Costs (inc AL) Other Employee Related Expenses Hardware & Software Expenses Occupancy Expenses General Administration Expenses Comms & Other Wealth Mgt Aust Wealth Mgt
Slide 38: Headcount & Direct Staff costs
Headcount & Direct Staff costs* costs Acquisition of For personal use only Spotlight business Acquisition of in Jul’07 VisiPlan business equivalent sttaff 400 in Apl’07 Apl 07 300 200 Full time e 100 - H1'05 H1'06 H1'07 H1'08 Aust Equities Canada Equities Wealth Mgt Aust Wealth Mgt RSA 25 20 $A Miil
Slide 39: Other: Non-Recurring expenses, CAPEX, Depreciation
Other For personal use only Î Non-Recurring expenses $0.095m for the period reflecting a return to normal levels. (H2’07 was $0.789m $0 789 d due tto relocation l ti and d rationalisation ti li ti costs). t ) Î CAPEX No major CAPEX for the period Î Operating Depreciation and Amortisation Incre
Slide 40: Dividends
Dividends For personal use only Î Interim Dividend 12.0 cents (10.0 cents previous) Fully franked Payable 30th September 2008 20% growth in dividend Î Franking credit balance $20.963m (Dec 2007: 19.887m) 39
Slide 41: Update: MD contract
Update: p MD contract For personal use only Î Agreement to continue as MD till May 2010 in line with existing five year agreement Î Flagged intention not to renew beyond that. Extended period for orderly succession process Î Intention is for an ongoing strategic board role after this date Î Logical
Slide 42: Update - Share Based Payments
Update - Share Based Payments For personal use only Î Is fully recognised as a component of remuneration. Structure of instruments conserves cash & strongly encourages retention retention. Now also more tax efficient Î Expense increase reflects growth of group’s operations / headcount Î During the p
Slide 43: 2008 Share Grant Instruments
2008 Share Grant Instruments For personal use only Performance Strike Price Shares purchased by / Vesting Period Ranking (if any) issued to Share trust Criteria At the end of the vesting Performance Peer Group 3 years $1 at end period, based on peer group Rights Ranking ranking Deferred At the end o
Slide 44: Quantum of Staff Share Grants (excludes MD)
Quantum of Staff Share Grants ((excludes MD)) For personal use only Î Assessment of reasonableness of share grants made by IRESS is clearer when examined at date of grant grant. Accounts allocate across periods which blends both current and prior period decisions. Î Grants made in a year are highly
Slide 45: Staff Share Grants
Staff Share Grants For personal use only 8 6% Millions $A M 6 4 4% 2 0 2% 2004 2005 2006 2007 2008 Staff Grant Effective Cost after Tax Pre-Tax Grant as % of Operating Revenue 44
Slide 46: Share Based Payments - Committed Expense
Share Based Payments - Committed Expense For personal use only SBP Expense ($m) Jun 2008 Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010 Jun 2011 2005 Staff Series 0.382 0 382 - - - - - - 2005 MD Series 1 0.118 0.093 0.084 0.066 0.046 - - 2005 MD Series 2 0.280 0.232 0.196 0.120 0.083 - - 2006 Staff Se
Slide 47: Strategic Charges - Amortising
Strategic Charges - Amortising For personal use only Î Amortising Intangibles arising through the acquisition of a business or company Cost (AUD) Tax Description Amortisation period $m Deductible Canada Equities Reuters Commission Charge 3.431 3 years (ending Jun10) Yes Xplan Software 11.034 5 years
Slide 48: Goodwill on Acquisition
G d ill on Acquisition Goodwill A i iti For personal use only Î Goodwill arising on Acquisitions Cost (AUD) Description Amortisation period $m Canada Equities LP Goodwill 10.125 Plantech Goodwill 3.449 Will be subject to regular Wealth Mgt Aust Visiplan Goodwill 10.695 impairment testing Transactive
Slide 49: Estimated future strategic charges
Estimated future strategic charges For personal use only Description H1'08 H2'08 H1'09 H2'09 H1'10 H2'10 H1'11 H2'11 Canada Equities Reuters Commission Charge 0.780 0.844 0.746 0.463 0.079 - - - Xplan Software 0 478 0.478 - - - - - - - Plantech Software 1.907 1.907 1.907 0.953 - - - - Wealth Mgt Aus
Slide 50: For personal use only
MARKET TECHNOLOGY A.B.N. 47 060 313 359
IRESS Market Technology — H1 2008 Earnings Presentation on 6ix