IRESS Market Tech.
Recommendation
Iress Market Technologies has announced an underwhelming full-year result (it has a calendar year end). Despite a 14% increase in revenue to $205m, underlying net profit increased a mere 3% to $60m. Excluding last year's one off 3.5 cent special dividend, the final dividend was kept flat at 24 cents (ex date 9 Mar) and was franked to 83%. Iress currently trades on a yield of 5.4%, and management is expecting profit to remain flat in 2012.
The headline result masks the varying performance of Iress’s different businesses. Net profit from the company’s cornerstone Australian financial markets data business fell 8% to $39m, despite a 4% increase in revenue. Any financial benefits flowing from the introduction of Chi-X’s share trading service were offset by bad debts owing to the financial collapse of MF Global. Iress’s wealth management business, on the other hand, continues to grow market share. A 12% increase in revenue to $49m produced a 9% increase in net profit.
Full-year to 31 December | 2011 | 2010 | Change (%) |
---|---|---|---|
Revenue ($m) | 205 | 180 | 14 |
Underlying net profit ($m) | 60 | 58 | 3 |
EPS (cents) | 32.6 | 42.3 | -23 |
DPS (cents) | 38.0 | 41.5 | -8 |
Franking (%) | 86 | 72 | 19 |
The company’s fledgling Canadian business recorded an impressive 11% increase in revenue to C$25m, with net profit increasing 14% to C$8.4m. Across the Atlantic the recently acquired South African Peresys business showed promise, with revenue increasing 10% under Iress’s stewardship to R$114m. In contrast, Iress’s South African wealth management business suffered a 6% drop in revenue to R$16m, and 24% slump in net profit to R$13m, after losing customers. The company is investing $7m per year in its nascent Asian and UK businesses, which it hopes can produce $100m in revenue in a few years.
While that would send Iress’s share price skyward, we’re wary of paying for blue sky. The company’s share price dropped 3% following the results announcement and slightly since The Iress money making machine from 26 Sep 11 (Hold – $7.02). HOLD.