The Iress Ltd (ASX: IRE) share price has climbed 1.5% to $11.19 this morning after the fintech leader reported its annual result for the year ending December 31 2016. Below is a summary of the key numbers.
- Underlying profit of $123.5m, up 4% (up 7% on a constant currency basis)
- Revenues of $389.7m, up 8% (up 13% on a constant currency basis)
- Net profit of $59.5m, up 7%
- All recent acquisitions made a positive contribution to earnings
- Basic earnings per share of 37 cents
- Final dividend of 28cps, 60% franked, up from 26.7cps
- Total dividends for 2016 of 44cps
- Net debt of $154.9m, down from $184.9m
- Forecast for "strong" revenue and underlying profit growth in 2017
This was a respectable result for Iress over a calendar year that included the Brexit vote in the United Kingdom, where much of Iress's financial services revenues and earnings are generated.
More than one third of the group's operating revenues come from the UK where its software and data feeds are embedded into the systems of leading global fund managers, brokers and other organisations across the UK's giant financial services markets. Iress's management though suggested that other than the powerful currency headwind no discernible change in client activities had been noted.
The group also performed well across its core Australia market and South Africa. In Australia it is embedding significant recent acquisitions that diversify its area of operations and offer growth alongside scalability potential.
Overall it is the recurring revenue model, stickability and market-leading nature of Iress's products that make it an attractive long-term investment option and easily Australia's best fintech business in my opinion.
Iress's strengths are no secret though with the group trading on an expensive multiple of earnings that reflects its narrow moat as a leader in a complex market. It also pays a partially franked trailing dividend of 4%, which is very attractive for a business with genuine long-term growth potential.
Others that trade cheaper in a related space include GBST Holdings Limited (ASX: GBT) and Computershare Limited (ASX: CPU), although I would prefer Iress in terms of business quality and rate its shares a buy.
