This morning financial services business Iress Ltd (ASX: IRE) reported a half-year net profit of $29.5 million on operating revenue of $211.8 million. Iress reports on a calendar year basis with the reported profit and revenue being up 10% and 8% respectively over the prior six-month period ending December 31, 2017.
However, on comparisons to the prior corresponding half the result was poor, with net profit down 10% and basic earnings per share down 14% to 17.7 cents, versus 20.7 cents in the prior corresponding half.
The group attributed part of the big profit falls to share-based payments to staff, foreign exchange rates, tax rates, increases to amortisation and "one-off global people initiatives" that sounds like they may be related to extra recruitment.
In total operating costs blew out 16% over the prior corresponding half, which explains why the 9% operating revenue growth resulted in profit falls.
The group also flagged that the first half had been one of heavy investment for the future across Iress's product suite of financial / market data software and digital advice or financial planning products such as XPLAN.
Iress's three core operating segments of Asia Pacific Financial Markets, Australia and New Zealand Wealth Management and the United Kingdom all posted healthy revenue growth, but with technology, operations, and corporate costs all ballooning its management has work ahead to effectively run the business.
The group declared a final fully franked interim dividend of 16 cents per share, which is flat on the prior year.
Its balance sheet remains in reasonable shape with net debt of $175 million, which represents around 1.5x annualised "segment profit" or EBITDA plus share-based payments & non-recurring items.
The silver lining for investors is that management stated it is still confident of "strong" revenue and segment profit (EBITDA) growth over the second half on a constant currency basis. The shares are down 6% to $12.40 in morning trade.
