Iress Limited (IRE)
HOLD

Credible Refresh

 21 Apr 2023
Sector: Information Technology

INVESTOR DAY

Need To Know

  • Cost base strategy includes A$32m cost out and A$123m write down
  • FY23 Guidance re-affirmed at A$166-171m of segment profit
  • Share price has rallied +20% over the past month. We retain Hold rating 

The Investor Day this morning outlined the refreshed strategy and clear actions to reset Iress’ cost and asset base to lift future earnings growth. 

THIS INCLUDES:

  1. Cost-efficiency program to deliver A$32m in annualised savings, representing 10% of headcount. This excludes redundancy costs, with FY23 realising A$16m of benefits, and the remainder in FY24.
  2. The company will be moving forward with a non-cash write down of A$123m to recognise decline in value of underperforming assets, predominantly UK operations.
  3. Total non-operating items are guided to be A$184m. (A$123m UK write-down, A$28m in restructuring and A$28m for technology uplift program).
  4. Investment in the core XPLAN and IOS trading software, which is expected to be completed by the end of 1Q2024.

FY23 GUIDANCE WAS RE-AFFIRMED:

Segment profit guidance at A$166-171m and underlying EBITDA guidance at A$144m-A$149m. Previous 2025 targets were flagged as no longer appropriate given the company’s new path to enterprise improvement.

Investment View

With a 20% rally in the share price over the past month, we think much of today’s news is already in the share price. 

The cost out program comes as a positive and is likely to foster some stronger growth prospects for FY24E and FY25E. From our perspective, we believe that Iress should continue to shift away from its weaker geographies to continue with focusing on its core profit generating products. The strategy refresh is long overdue and credible.

To get the share price moving again from here, the market will be reliant on the sale of OneVue and the exit from offshore business. Evidence of financial improvements will also be needed. Neither of which are seen to come to fruition in the immediate short-term.

We rate Iress a Hold.

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Stock Overview

Share Price

Company Overview

IRE is a global software company that offers financial services solutions, market data, trading, and portfolio management. They operate across multiple countries, including Australia.

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