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Iress share price falls 9% on FY19 results release

The Iress Ltd (ASX: IRE) share price is crashing lower in Thursday trade following the release of the company’s full-year financial results. 

Iress shares were trading as much as 9.2% lower today and are currently going for $12.61 at the time of writing, representing a 7.14% drop.

How did Iress perform in 2019? 

In 2019, Iress reported group revenue growth of 10% to $508.9 million (+8% in constant currency terms). Revenue growth was underpinned by strong underlying performance in Australia and the United Kingdom. The acquisition in May of international market data business QuantHouse also contributed $21.9 million to group revenue. 

Group segment profit for Iress also increased 10% to $152.1 million (+10% in constant currency terms). The full-year result was at the top end of previously issued guidance. Every segment of the business, with the exception of Mortgages, saw an increase in direct contribution.

In constant currency, Mortgages recorded a 2% drop in operating revenue and a 9% decline in direct contribution. The revenue and margin decline in Mortgages was a result of timing and mix of client projects, as well as investment in Australia.

The standout performer was the UK and Europe which was the largest contributor to overall growth for the group. The direct contribution from the UK and Europe was up 17% to $91.9 million. Strong ongoing demand for Xplan, Private Wealth, Sourcing and a contribution from QuantHouse were the main drivers of the result. Underlying margins in the UK and Europe also rose 2% to 68%, reflecting the improved operating leverage in that market. 

Net profit after tax for the group rose 2% to $65.1 million. However, excluding the impact from adopting the new lease accounting standard AASB16 and the QuantHouse acquisition, net profit was up 11% to $71.0 million.

Earnings per share increased 1% on 2018 to 37.9 cents, while Iress also declared an unchanged final dividend of 30 cents per share, franked at 40%. 

Outlook for 2020 

Iress expects 2020 segment profit to grow between 3% and 8% ($156 million to $164 million) on a constant 2019 currency basis. This forecast includes the net impact of the company’s recent acquisitions of QuantHouse and BC Gateways.

Management also noted that the execution of medium-term growth opportunities will bring 2020 investment ahead of revenue.

Iress expects growth to be weighted heavily towards the second half in 2020. The predicted skew in earnings is a result of the timing of investment, revenue and client projects.  

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Motley Fool contributor Tim Katavic has no position in any of the stocks mentioned. The Motley Fool Australia has recommended IRESS Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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