Iress Limited · ASX:IRE
Iress — Investor Presentation (February 2023)
39 slides from Iress's investor presentation, Feb 20, 2023
Slide 1: 2022 Full Year Results Presentation
2022 Full Year Results Presentation 20 February 2023
Slide 2: Disclaimer
2 Disclaimer The material in this presentation is intended to be general background information on Iress Limited and its activities, current at the date These risks and uncertainties could cause actual results, performance or events to differ materially from those expressed or implied. of the presen
Slide 3: Agenda
3 Agenda Marcus Price John Harris Managing Director & CEO Chief Financial Officer CEO Observations 04 Business Update 07 Financial Results 15 Outlook 24 Q&A 26 Appendix 27
Slide 4: CEO Observations
CEO Observations
Slide 5: CEO observations
CEO observations 5 Strong core Priority to improve Iress has great Driving high Optimistic about Australian earnings and people and great performance Iress’ potential business return on capital clients Powerful franchise in core Focus on efficiency and Strong technical capabilities Powerful core franc
Slide 6: Investor Day 20 April
What to expect from here 6 1 Finalise plans to reinforce core Determine pathway for improved 2 shareholder returns in offshore markets Investor Day 3 Optimise operating & commercial model 20 April 4 Update longer-term targets
Slide 7: Business Update
Business Update
Slide 8: 2022 highlights
2022 highlights 8 Delivered results in-line with revised guidance - strong performance in APAC Trading & Market Data and Financial Advice Key achievements⁽¹⁾ Key statistics ● Constant Currency Segment Profit ($166.8m) and NPAT ($54.0m) delivered in ● Annual Contract Value $620m line with revised guid
Slide 9: 2022 underlying financial performance - constant currency
2022 underlying financial performance - constant currency 9 Underlying EPS growth up 10%. Segment Profit delivered in line with revised guidance Segment profit delivered within revised guidance 166.2 166.8 166 to 170 Revenue Segment Profit & margin Up 5% Segment Profit flat 27.9% 26.8% 2021 2022 2021 2022
Slide 10: 2022 reported financial performance
2022 reported financial performance 10 Decline in reported EPS impacted by prior year provision releases(1) Reported Revenue Reported Segment Profit & margin Up 4% Segment Profit Down 1% 27.9% 26.7% 2021 2022 2021 2022 73.8 Reported NPAT 52.7 $54.0m Reported product & technology constant Down 29% curre
Slide 11: Revenue growth and returns by business unit
Revenue growth and returns by business unit 11 APAC delivering strong revenue growth and ROIC with mixed returns from international businesses APAC UK & Europe Other 2022 vs 2021 2021: 2022: 2021: 2022: +2% +6% +3% +1% 2021 vs 2020 Reported direct $247.4m $95.1m $21.7m $32.9m $14.6m contribution⁽²⁾
Slide 12: Business update - strong performance in APAC
Business update - strong performance in APAC APAC has high quality, growing businesses with long term client relationships and high levels of recurring revenue APAC Trading & Market Data and Financial Advice Superannuation Iress provides critical industry technology infrastructure. Priority to innov
Slide 13: Business update - prioritising improved returns in the UK
Business update - prioritising improved returns in the UK 13 Good progress with transition to cloud based architecture model. Iress Affinity launched. Transition to cloud-based architecture Investment Infrastructure UK & Europe Increasing operational leverage & speed to market Automating advice execut
Slide 14: Environmental, Social and Governance highlights
Environmental, Social and Governance highlights 14 Continued commitment to a sustainable future through our ESG activities Introduced retirement Established a modern Contributed over $200K to contributions during Established 2030 slavery working group & our communities - over parental leave⁽²⁾ and s
Slide 15: Financial Results
Financial Results
Slide 16: 2022 financial performance highlights
2022 financial performance highlights Revenue +5% but Segment Profit flat compared to 2021 as a result of cost increases Revenue Costs APAC (Trading & Market Data, Financial Advice and Super) and Exchange rates and vendor pricing lift costs Mortgages performed well ● Increase in employee costs was focu
Slide 17: P&L results
P&L results 17 10% Underlying EPS driven by lower D&A, taxes and the share buy back. Higher operating costs offset revenue growth $AUDm 2021 2022 2022 vs 2021 2022 CC ⁽¹⁾ 2022 CC vs 2021 Operating Revenue 595.9 617.9 3.7% 622.7 4.5% Operating Costs (429.7) (452.8) 5.4% (455.9) 6.1% Segment Profit 166
Slide 18: Revenue bridge
Revenue bridge 18 5% constant currency revenue growth driven by APAC and Mortgages ($AUDm) Revenue +6%. Trading & Market Data and Revenue + 9% driven by full Revenue + 2% driven by full year Financial Advice saw upside from pricing and year impact of new clients going impact of new client in 2021, c
Slide 19: Segment Profit bridge
Segment Profit bridge 19 Segment Profit flat with growth from APAC and Mortgages offset by higher costs and increased investment ($AUDm) Flat P&T costs with lower BAU Direct contribution +4% driven Direct contribution increased headcount offset by salary by strong revenue 5%. Reflects revenue growth inc
Slide 20: Costs breakdown
Costs breakdown 20 6% increase in operating costs in constant currency due to higher technology and employee costs ($AUDm) Higher technology costs from FX Increases mainly due to technology movements and migrating more services vendor price increases and FX to the cloud (which flow through opex). mov
Slide 21: Underlying Net Profit After Tax analysis
Underlying Net Profit After Tax analysis 21 6% Underlying NPAT growth in constant currency basis driven by lower D&A and tax offsetting higher interest costs ($AUDm) Lower depreciation of ‘right of use Increase due to performance assets’ mainly due to office exits in 2H shares issued to employees and 2
Slide 22: Cash flow performance
Cash flow performance 22 $70m free cash flow generated with 84% cash conversion Free cash flow Dividends and share buyback $AUDm 2021 2022 Segment profit 166.2 165.1 Change in working capital (14.1) (2.2) Others (16.3) (23.6) Cash Generated from Operating Activities 135.8 139.3 Net interest paid (6.1)
Slide 23: Balance sheet
Balance sheet 23 Debt maturity profile extended with increased fixed rate exposure Net debt and leverage ratio Summary debt profile $AUDm 2021 2022 A$350m bank facilities 298.1 282.2 GBP60.5m fixed rate notes - 107.3 Debt drawn 298.1 389.5 Cash and cash equivalents 64.4 63.4 Net debt 233.8 326.1 ● Refin
Slide 24: Outlook
Outlook
Slide 25: 2023 outlook
2023 outlook 25 Focus on efficiency and improving return on capital in offshore markets ● 2023 Segment Profit expected to be at or above the level of 2022 on a constant currency basis ● Additional efficiency measures under consideration. Initiatives would benefit 2H 2023 and run rate into 2024 ● We are ve
Slide 26: Q&A
Q&A
Slide 27: Appendix
Appendix
Slide 28: Client base analysis
Client base analysis 28 Consistent low level of annual churn and long-term client relationships Annual churn rate (%) Relationship - Top 20 clients 2022 total ACV by segments 23% APAC Trading & Market Data 5% 0 - 3 years 20% APAC Financial Advice 5% 3 - 5 years 8% Superannuation 25% 6 - 10 years 5%
Slide 29: Segment performance
Segment performance 29 AUD (m) 2021 2022 2022 vs 2021 2022 CC ⁽¹⁾ 2022 CC vs 2021 APAC 335.3 356.5 6% 356.7 6% UK & Europe 156.2 153.5 (2%) 157.3 1% Mortgages 29.5 31.5 7% 32.2 9% South Africa 43.4 43.4 0% 44.2 2% North America 31.5 33.0 5% 32.3 2% Total Revenue 595.9 617.9 4% 622.7 5% APAC 239.1 24
Slide 30: APAC
APAC 30 Ongoing demand for Trading and Financial Advice software with high client retention. Strong Superannuation performance $AUDm 1H 21 2H 21 2021 1H 22 2H 22 2022 2022 vs 2021 Operating revenue Trading & Market Data 65.0 68.3 133.3 71.0 71.9 142.9 7% Financial Advice 60.3 63.5 123.8 64.6 64.1 12
Slide 31: UK & Europe
UK & Europe 31 Strong growth in Trading. Private Wealth recurring revenue growth but offset by decline in Retail Wealth GBP (m) 1H 21 2H 21 2021 1H 22 2H 22 2022 2022 vs 2021 Operating revenue Wealth ⁽¹⁾ 17.4 18.0 35.4 17.5 16.8 34.3 (3%) Trading & Market Data 13.1 13.5 26.5 13.8 14.4 28.2 7% Sourci
Slide 32: Mortgages
Mortgages 32 Continued recurring revenue growth now contributing 63% to total revenue GBP (m) 1H 21 2H 21 2021 1H 22 2H 22 2022 2022 vs 2021 Operating revenue Recurring revenue 4.4 5.0 9.5 5.4 5.7 11.1 18% Non-Recurring revenue 3.2 3.5 6.7 3.6 2.9 6.5 (2%) Total operating revenue 7.6 8.5 16.1 9.0 8.
Slide 33: South Africa
South Africa 33 Stable recurring revenues. Returns exceed the group average ZAR (m) 1H 21 2H 21 2021 1H 22 2H 22 2022 2022 vs 2021 Operating revenue Recurring revenue 226.5 226.1 452.7 228.6 228.5 457.1 1% Non-Recurring revenue 12.8 16.1 28.9 15.0 18.2 33.2 15% Total operating revenue 239.3 242.3 48
Slide 34: North America
North America 34 Strong recurring revenues with a stable client base. FY22 non-recurring revenues impact by elevated project work in FY21 CAD (m) 1H 21 2H 21 2021 1H 22 2H 22 2022 2022 vs 2021 Operating revenue Recurring revenue 12.9 14.2 27.1 14.7 14.7 29.4 8% Non-Recurring revenue 1.4 1.1 2.6 0.6
Slide 35: Details of Non-Operating and Significant Items
Details of Non-Operating and Significant Items 35 2021 2022 Realised/unrealised losses on foreign balances (0.1) (0.9) Non-operating income 0.9 0.7 Business acquisition, integration and restructuring expenses (9.9) (5.9) Recognition of severance pay provision (0.1) (0.1) Defence advisory expenses (4.
Slide 36: Depreciation and Amortisation (D&A)
Depreciation and Amortisation (D&A) 36 D&A – Operational $AUDm 1H 21 2H 21 2021 1H 22 2H 22 2022 Depreciation Plant & Equipment 5.6 5.9 11.5 5.3 5.0 10.3 Amortisation Software 0.8 0.8 1.6 1.0 1.7 2.7 Leases 7.6 8.4 16.0 7.2 7.1 14.2 Total D&A - Operational 14.1 15.1 29.2 13.4 13.8 27.2 D&A – Acquisi
Slide 37: Foreign exchange rates
Foreign exchange rates 37 2022 Foreign exchange rates 2021 Foreign exchange rates 2022 Rate 2021 Rate GBP 0.5610 GBP 0.5477 CAD 0.9020 CAD 0.9435 ZAR 11.2952 ZAR 11.0981 EUR 0.6585 EUR 0.6367
Slide 38: Glossary
Glossary 38 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
Slide 39: Contact
Contact Marcus Price Managing Director & CEO John Harris Chief Financial Officer +61 3 9018 5800 iress.com © Iress 2022