Financial software business Iress Ltd (ASX: IRE) slumped around 6% to $9.40 today after posting a net profit of $28.5 million on revenues of $173.2 million for the six months ending June 30, 2015.
The statutory profit was down 5% on the prior corresponding period, which is a result the group partly blamed on the bankruptcy of Australian broking house BBY Ltd, which also affected Iress's junior rival GBST Holdings Limited (ASX: GBT).
In another blow to Iress's Australian financial markets business the broker CIMB Securities also withdrew from the Australian market over the period.
These look to be short-term hiccups for Iress, which is a global business with particular strength in the large UK financial services market. The wealth management business there delivered a flat result as the business invests for the future. Iress also announced a partnership with one of the world's first digital-only banks named Atom, which will use IRESS's technology in the UK market.
Iress also has operations in Canada, South Africa and Asia and stated that assuming foreign exchange rates stay at constant levels that it now expects segment profit growth for the full year to be at the lower end of its previously forecast range.
Most of the issues weighing the share price down today look short-term in nature and Iress remains an attractive investment opportunity over the long term in my opinion.
Revenues are generally resilient and predictable thanks to the sticky nature of its products, while it has high profit margins and relatively fixed costs which equals strong free cash flows to pay out in the form of dividends.
The group's interim dividend is a partially franked 16 cents per share and assuming the full year payout will be around 43-45 cents per share the yield is around 4.6%. That's attractive for a business with solid long-term growth prospects and overseas exposure and it looks one of the better options available to buy right now.
