Why the Iress (ASX:IRE) share price has surged over 12% this week

The Iress Ltd (ASX: IRE) share price has been a stellar performer this week following a positive market update.

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The Iress Ltd (ASX: IRE) share price has been a stellar performer this week following a positive market update.

Shares in the technology company rose from a low of $8.90 on Monday to finish the week at $10.00. This represents a gain of over 12% in just five short trading days.

Let’s take a look at what pushed the Iress share price higher this week.

Q3 business update

On Wednesday, Iress provided its quarterly result to the market for the period ending September 30. The company said that financial performance was consistent with Q3 FY19, in which revenue and segment profit grew 3% and 2%, respectively.

Strong tailwinds in APAC reflected ongoing demand for Xplan and Super solutions. The segment saw an 8% growth in revenue for the first nine months of the year.

Mortgages were affected by the delay in a number of client projects due to COVID-19. However clear revenue momentum has since returned leading up to Q4.

Positive contributions were made from QuantHouse and O&M, which have been meeting management expectations. QuantHouse has now transitioned from a loss-making stream to a profit contributor in 2020.

Net profit after tax for year-to-date trading made a loss of 11% to 45 million. This included the OneVue one-off acquisition related costs of $1.4 million.

What did Iress Management say about the result?

Commenting on the excellent result, Iress Chief Executive, Mr Andrew Walsh was pleased with the business’ resilience. He said:

Iress has delivered a consistent performance in Q3. The strength of our recurring revenue model has been clearly demonstrated during 2020.

I am proud of the way the team has continued to perform, while mostly working from home. Although there are high levels of uncertainty around Covid-19 transmissions and government restrictions, we are continuing to prioritise the health and wellbeing of our people and delivering service continuity and major projects for clients.

We have delivered over 500 client conversions to Xplan this year and two mortgage clients went live in August. The projects to deploy our super administration technology and service are progressing well. QuantHouse is also performing well and has achieved profitability. Covid-19 is impacting the timing of projects and business activity, postponing the revenue growth we envisaged at the beginning of the year.

The outlook for Q4

The company expects its revenue streams to increase in the fourth quarter, improving overall profitability. In addition, a number of major client projects are underway and are predicted to benefit additional cost savings.

Iress said that the completion of the OneVue acquisition today will bring advice and investments closer together. The company stated that it’s working on a plan to deliver a more efficient service through the integration of its portfolio.

Furthermore, Iress revealed that its positive outlook remains supported by the shift to digitalisation in financial services.

Pleasingly, the company reinstated its profit guidance for the end of FY20. It is forecasting segment profit to be around $152 million, which is the same level as FY19.

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Motley Fool contributor Aaron Teboneras 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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