Iress Limited · ASX:IRE
Iress — Investor Presentation (July 2021)
53 slides from Iress's investor presentation, Jul 29, 2021
Slide 1: Strategy Day: Accelerating growth & returns
29 July 2021 strategy Day Accelerating growth & returns
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 implied. date of the presenta
Slide 3: Agenda
Agenda Introduction and overview Andrew Walsh Chief Executive Product & Technology Joydip Das Andrew Todd Chief Product Officer Chief Technology Officer Commercial Michael Blomfield Chief Commercial Officer Financials John Harris Chief Financial Officer Panel Q&A All presenters Close Andrew Walsh 3
Slide 4: Strong and stable management team
Strong and stable management team Joydip Das Chief Product Officer John Harris Julia McNeill Chief Financial Officer Chief People Officer Coran Lill Michael Blomfield Chief Communications Chief Commercial Officer & Marketing Officer Andrew Walsh Chief Executive Officer & Managing Director Andrew Todd Peter Fergu
Slide 5: Technology for financial services
Technology for financial services 500,000+ 10,000+ 2,250+ Users Clients Employees >90% ~99% 9 countries Recurring and subscription Client retention for the last 25 offices revenue three years 5
Slide 6: Introduction and overview
Introduction and overview Andrew Walsh Chief Executive 6
Slide 7: Iress' vision: simpler, faster with higher returns
Iress’ vision: simpler, faster with higher returns Iress’ opportunity is greater than previously anticipated. Opportunity to accelerate a successful business from a strong foundation. Underpinned by a single technology platform. Existing growth strategies in UK, superannuation, investment infrastruc
Slide 8: New medium term target
New medium term target Total addressable markets Targeting more than double NPAT in 2025, with potential upside to 3x. Targets exceed consensus revenue based on modest market share gains. Shift to single technology platform to drive operating leverage and higher returns with $1.4bn Super $15m p.a. o
Slide 9: Accelerating the benefits from a changing operating model
Accelerating the benefits from a changing operating model Today Target future state Product strength is primarily based on the individual capability of The IP and functionality in each product can be easily leveraged by each product. Iress and accessed by clients across multiple offers. Integration a
Slide 10: Our five areas to win
Our five areas to win Areas to win Opportunity Progress Additional focus 1 Single technology Operational leverage, speed and Building & delivering cloud native Movement of remainder of Iress platform response business capabilities (Migrations include applications to cloud 85% of CommPay and 62% of Xp
Slide 11: What we are building at Iress
What we are building at Iress A single technology platform that drives: Iress’ strong intellectual property into multiple offerings. Faster product development and delivery. Seamless technology experience including onboarding and upgrades. More products and options for clients and users. Decoupling
Slide 12: Accelerating investment infrastructure
Accelerating investment infrastructure Combination of Iress’ technology footprint Benefits across the industry and OneVue’s market-leading managed fund admin business. Seamless and straight-through from advice to execution of all asset classes. Material new recurring revenue opportunity. Reduce advis
Slide 13: Medium-term operating outlook reaffirmed
Medium-term operating outlook reaffirmed FY20 ROIC group average Medium-term organic (above / below) revenue trend (pa) Margin trend Group 5-10% APAC Trading & Market Data Above Up to 5% APAC Financial Advice Above ~ 5% Superannuation Below >10% UK Wealth Below ~10% OneVue Below >10% As announced in F
Slide 14: Accelerating growth with capital management, enhancing earnings
Accelerating growth with capital management, enhancing earnings FY20 FY25 base Target growth FY25 potential Potential upside Actuals case targets v FY20 upside growth growth v FY20 Revenue (A$m) $542.6m $766m - $806m 7-8% pa $870m - $910m ~10%-11% pa Segment Profit in $152.9m $240m - $250m 9-10% pa $
Slide 15: Base case growth plans exceed consensus
Base case growth plans exceed consensus Revenue target (A$m) NPAT target (A$m) EPS target (cents per share) 7 - 8% p.a. increase FY25 v FY20 ~15% p.a. increase FY25 v FY20 Increase of 35 cents per share FY25 v FY20 766 - 806 ~120 ~67 738 37 - 40 Potential sale of 604 70-77 MSO in FY22 107 54 38 74 F
Slide 16: Summary
Summary We are building scale in large addressable markets with a focus on the United Kingdom, superannuation and investment infrastructure. We see benefits being realised at a greater rate with the opportunity for acceleration in key areas. A single technology platform is key to unlock scale and ben
Slide 17: Product & technology
Product & technology Joydip Das Andrew Todd Chief Product Officer Chief Technology Officer 17
Slide 18: Building the Iress vision: a single technology platform
Building the Iress vision: a single technology platform Unlocking the value in our products A natural evolution of what Iress offers today. Products Capabilities are currently built and deployed for industry segments. Common capabilities (Services, Portfolio Calc, Revenue Calc etc) A single technolo
Slide 19: Multiplying the opportunities
Multiplying the opportunities Increasing speed to more revenue Industry segments continue to converge, changing what clients need. Point-to-point integrations create new problems for clients. Single applications for single client segments need to be able to ‘collapse’ and be shared across products.
Slide 20: Iress has the ingredients for greater operational leverage
Iress has the ingredients for greater operational leverage Using technology to drive efficiency and scale Many of our products need the same functional components. These are currently housed in individual applications and re-using them requires integrations. We are moving from an approach where functi
Slide 21: From application-based to single technology platform
From application-based to single technology platform Application-based architecture Single technology platform Monolithic applications serve segments, duplicating Horizontal service-based, designed and architected for capabilities, requiring direct integration points and scale, speed and cohesivenes
Slide 22: Transition to future state underway
Transition to future state underway Accelerating from strong foundations A single technology platform is an extension and acceleration of the current strategy. Successful movement of services into the cloud. Cloud and new architecture is dramatically speeding up delivery - up to 90% faster in develo
Slide 23: Incremental, targeted program
Incremental, targeted program Investment infrastructure will be initial focus Near and mid-term initiatives to accelerate growth through a single technology platform will be through investment infrastructure. Investment infrastructure will drive growth in the registry, and efficiency and value for adv
Slide 24: Accelerating growth and returns
Accelerating growth and returns A single technology platform that drives: Users will be able to more seamlessly access functionality beyond the product they traditionally use New revenue opportunities with functionality unlocked from today’s applications. Differentiated end-to-end client and user Us
Slide 25: Commercial
Commercial Michael Blomfield Chief Commercial Officer 25
Slide 26: Driving commercial outcomes
Driving commercial outcomes Significant industry inefficiency in financial services - Iress ideally placed Iress has core capabilities and products to drive accelerated growth, with faster speed to market. New products to open additional revenue pools. Disruptive pricing to assist adoption. Upgraded sal
Slide 27: Technology is central to the future of financial services
Technology is central to the future of financial services Iress technology unlocks scale benefits Structural efficiency is the industry’s biggest challenge - getting ‘bigger’ to get ‘cheaper’ is half a solution. The industry of investing is democratising through new tech, deeply challenging incumbents e
Slide 28: Significant opportunity in the Australian market
Significant opportunity in the Australian market Scaled, integrated technology will disrupt expensive value chains, creating further opportunities to grow The advice industry’s demands on technology are accelerating. Demographic and economic changes mean more and more Australians want financial advice
Slide 29: Cost to serve members increasing despite growing super pool
Cost to serve members increasing despite growing super pool Only technology will reduce cost for members. Median Operating Cost Per Member vs Super Assets Under Management (exc. SMSF) $B $350 $2,500 $288 $258 $277 $263 $2,000 $300 $245 $241 $252 $242 $1,500 $218 $250 $211 $1,668 $1,672 $1,536 $1,000
Slide 30: Superannuation funds under huge pressure to reduce costs
Superannuation funds under huge pressure to reduce costs Outsourced super admin costs - Incumbents vs Iress Iress technology can reduce admin costs by up to 50% 100% up to 50% Super fund reinvestment to member Allows funds to be laser focused on where the most value Cost of incumbent outcomes outsou
Slide 31: Investment infrastructure progress
Investment infrastructure progress Delivering on an unmet need Xplan integration in pilot with Xplan users, go-to-market in Q3. Build of investment infrastructure well advanced against plan. To be delivered at a per-account subscription price unrelated to asset value. Subscription pricing model sche
Slide 32: Significant opportunity in United Kingdom wealth
Significant opportunity in United Kingdom wealth At the centre of trading & wealth in the UK Well positioned for continued growth in a large market(1) New sales leadership in place. At the centre of trading & wealth Integrated wealth firms require integrated software forinbusiness the UK outcomes. ~85
Slide 33: Globally competitive in market data
Globally competitive in market data Extensive current local and global low-latency network and connectivity Focus on driving revenue growth in international market data Moving focus from supply and profitability to revenue growth. Exceeding QuantHouse acquisition business case. Turnaround to profitabi
Slide 34: Improved sales approach and client servicing
Improved sales approach and client servicing Strategic client needs Operational excellence in sales and service Emphasis on maintaining and deepening strategic Consistent, global model for business development, relationships. sales and client management. Leveraging experience and knowledge across re
Slide 35: Conservative 5 year growth opportunities with significant upside
Conservative 5 year growth opportunities with significant upside Super Investment Infrastructure UK Wealth TAM = $1.4bn + TAM = $3bn + TAM = $700m + Base Case Base Case Base Case Target Market Share Target Market Share Target Market Share (wealth) FY25: 6% (FY20: 2%) FY25: 3% (FY21: 1%) FY25: 14% (FY
Slide 36: Financials
Financials John Harris Chief Financial Officer 36
Slide 37: Medium-term base case target: more than double NPAT by 2025
Medium-term base case target: more than double NPAT by 2025(1) NPAT in constant currency (A$m)(2) Our base case target is to at least double NPAT by 2025 (v2020) NPAT at least doubled by 2025 Balance sheet management will enhance EPS outcome EPS outcome enhanced by up to $100m buyback announced EPS:
Slide 38: Additional upside potential: 3x NPAT by 2025
Additional upside potential: 3 x NPAT by 2025(1) NPAT in constant currency (A$m)(2) Upside potential to triple NPAT by FY25 Additional Upside Potential 3 x NPAT by 2025 Management see growth horizon well beyond FY25. EPS: ~99 cents Every +1% market share ROIC: ~27% Potential upside driven by = +$30m
Slide 39: Base case target of 103% NPAT growth to 2025
Base case target of 103% NPAT growth to 2025 NPAT in constant currency (A$m)(1) Upside FY22 potential and FY23 to assumes $15m triple p.a.NPAT of pre bytax FY25investment spend (i.e. $30m in total) to Reflects the NPAT result including a $15m investment Growth horizon accelerate growth welland beyond
Slide 40: Base case revenue growth of 7-8% pa from market share growth alone
Base case revenue growth of 7-8% pa from market share growth alone Revenue in constant currency (A$m)(1) NPAT target driven by revenue growth in Super, UK Wealth and Investment Infrastructure. ~7 - 8% CAGR Revenue to remain 90+% recurring. Target market shares are modest - significant upside potentia
Slide 41: Conservative assumptions underpin net profit outlook
Conservative assumptions underpin net profit outlook Super Investment Infrastructure UK Wealth Product & Technology cost TAM = $1.4bn + TAM = $3bn + TAM = $700m + Historically 24% of revenue Base Case Base Case Base Case Base Case Target market share ~6% Target market share ~3% Target market share ~1
Slide 42: Capital management further enhancing earnings metrics
Capital management further enhancing earnings metrics Capital management Potential cumulative dividends Target leverage ratio post buy-back (cents per share) ex potential MSO sale proceeds Buyback Potential Dividend(1) Neutral net leverage = 2 x Segment Profit 400 Capacity of Range Range additional d
Slide 43: 1H 2021 half year results
1H 2021 half year results (unaudited) 43
Slide 44: 1H 21 pro forma financial performance (unaudited) - constant currency
1H 21 pro forma financial performance (unaudited) - constant currency Delivered pro forma Segment Profit and NPAT growth - full year guidance reaffirmed 2021 guidance affirmed 296.2 298.7 164-168 Pro forma revenue (1) Constant currency 71.9 76.1 Up 1% (using average 2020 FX rates) Segment Profit (5) 1H 202
Slide 45: 1H financial performance (unaudited) - actual currency
1H 21 financial performance (unaudited) - actual currency Reported EPS growth accelerates, up 42% 270.7 290.2 75.5 71.9 Reported revenue Reported 26.6% 26.0% Up 7% Segment profit & margin Up 5% 1H 2020 1H 2021 1H 2020 1H 2021 40.9 25% 24% Reported NPAT (1) 26.4 Product & Technology Up 55% % of Revenue
Slide 46: 1H results summary
1H 21 results summary Delivered Growth Progress In constant currency, pro forma Strong revenue growth 10% v 1H 20 UK margins have increased v 1H 20; segment profit up 3% v 1H 20. in constant currency largely driven by Super client Guild and two Mortgage NPAT up 9%, EPS up 6%, ROIC 9%. full period imp
Slide 47: Segment profit guidance affirmed
Segment profit guidance affirmed Delivered Guidance (constant currency) (A$m)(1) FY20 1H 21 2H 21 guidance FY21 guidance - Updated Segment profit guidance affirmed: Inc OneVue Total required Total up 7-10% on pcp. ROIC expected Actual Actual Low High Low High to be in the range of 10% to 11%. Segment profi
Slide 48: Segment performance (unaudited)
Segment performance (unaudited) Strong revenue growth with investments in growth, scale & new product development Segment ($AUDm) 1H 20 2H 20 1H 21 1H 21/1H 20 1H 21/2H 20 Revenue Reported Reported Reported APAC 142.3 147.5 164.6 16% 12% UK & Europe 79.1 75.5 75.7 (4%) - Mortgages 11.8 15.1 13.6 15%
Slide 49: Pro forma Segment Profit reconciliation by region
Pro forma Segment Profit reconciliation by region Reported segment profit to pro forma segment profit by region 1H 2020 1H 2021 (unaudited) 1H 21/1H 20 Add: Add: Pro Remove: Pro Pro forma $ AUDm Reported Reported OneVue Pre-Acq(1) O&M Pre-Acq(2) forma Currency(3) forma % change APAC 102.1 18.7 120.8 11
Slide 50: Pro forma NPAT reconciliation
Pro forma NPAT reconciliation 1H 2020 1H 2021 Add: Add: Remove: Remove: Earnout $AUDm Reported OneVue Pre-Acq(1) O&M Pre-Acq(2) Pro forma Reported Currency(3) provision release(4) Pro forma Operating Revenue 270.7 24.7 0.7 296.2 290.2 8.5 298.7 Operating Costs (198.7) (21.5) (0.7) (221.0) (214.7) (6
Slide 51: Panel Q&A
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Slide 52: Close
Close Andrew Walsh Chief Executive 52
Slide 53: Thank you
Thank you iress.com 53