Iress reports first-half loss amid advice revenue dip

Iress has announced its net profit decreased from $30.6 million in 1H22 to a loss of $139.8 million in 1H23.

Its operating revenue for the first half of 2023 was $315.3 million, an increase of 2 per cent over the first half of 2022, with an underlying EBITDA of $59.5 million.

The firm said that the increase in revenue was driven by growth in the Asia-Pacific region as well as mortgages and North America.

Financial advice revenue decreased 2 per cent, with Iress saying the performance was “driven by existing client reductions to licences and industry consolidation resulting in structural changes to clients that reduced user numbers”, though noted these factors were partially offset by price increases.

Iress chief executive Marcus Price said: “In April we outlined a refreshed strategy to deliver a simpler, more focused Iress with higher returns for shareholders. We laid out six big jobs to reset Iress’ cost and asset base, and provide greater transparency and accountability, while refocusing on core businesses and customers and managing non-strategic businesses for value.

“I’m pleased that four months on, we are executing on our plan at a rapid pace. Key results include $47 million of annualised gross cost savings and the realisation of $52 million from non-strategic assets through the sale of our MFA business.”

Earlier on Monday, Iress announced the sale of its MFA business to SS&C for a total cash consideration of $52 million. The firm said it would use the proceeds of the divestment to retire debt.

As the firm looks to continue its transformation process, which it said has incurred “high one-off costs”, Iress suspended its interim dividend and will aim to further reduce debt.

“Our half-year results represent Iress mid-transformation, with many of the benefits, including the cost reduction program and a review of pricing to be recognised in the full year results for 2023 and in FY24,” Mr Price said.

“Despite this, revenue increased in a challenging macro environment while EBITDA was impacted by cost pressures, including a significant uplift in tech infrastructure, market data and inflationary salary costs.

“Given the current environment and the ongoing transformation process, the board felt it was prudent to suspend our interim dividend. We will conduct a thorough reassessment of our capital management framework, including a new dividend policy, while we continue to realise assets, reset our cost base and emerge as a leaner Iress.”

On a reported basis, segment profit for the first half was $69.7 million, a 14 per cent decline from 1H22. Iress said the decrease was due to “higher employee benefit expenses and operating expenses growing at a faster rate than operating revenue”.

Iress undertook a material cost reduction project across all segments late in the half, which it expects to positively impact future reporting periods.

APAC revenue for 1H23 was $184.2 million, which represents a 5 per cent increase from $175.2 million in 1H22.

In the second half of 2023, Iress said it expects to see softening revenue growth and cost pressures “mitigated by the full-year effect of cost measures and transformation initiatives yet to be realised”. Underlying EBITDA expectations have also been lowered to be flat in the second half of the year versus the first half.

“While we are making excellent headway with our transformation initiatives, our half-year results don’t reflect Iress’ long-term earnings potential,” Mr Price said.

“We remain acutely focused on completing the next steps with a view to delivering FY24 exit run-rate underlying EBITDA 20–30 per cent higher than FY23. Then by the end of FY25, our objective is for all core Iress businesses to be operating at Rule of 40, with capital releases from the managed portfolio, a fully reset cost base and significant debt reduction.”