The Iress Ltd (ASX: IRE) share price has taken a dive this morning, down more than 6% in early trade after the company released its half-year results.
How did Iress perform for the half-year?
Earlier today, Iress released its report for the 6 months to 30 June 2020.
The company’s report was highlighted by a 12% surge in group revenue of $270.7 million. Despite the headline figure, Iress reported a 14% drop in net profit after tax for the half-year of $26.3 million. Group segment profit was also down 3% from the prior corresponding period to $71.9 million.
The company’s management cited the drop in net profit after tax was due to the impact of operating losses in its acquired business. In addition, Iress noted that an increase in annual leave expenses impacted the company’s bottom line. According to Iress, excluding these outliers would give the company a 4% increase in net profit after tax for the half year.
Despite the subdued result, Iress elaborated on the company’s strong underlying fundamentals. According to the company’s report Iress has a strong cash conversion rate of 134% and high level of recurring revenue.
Iress also noted that the company will be paying an interim dividend of 16 cents per share. However, given the uncertain trading conditions, the company was not able to provide financial guidance for the full year.
What is the outlook for Iress?
Iress is a technology company that provides software to the financial services industry, providing trading and market data and investment management information. The company’s software is used by more than 9,000 businesses and boasts 500,000 users in Asia Pacific, Europe, North America and Africa.
In its half-year report, Iress highlighted the resilience of its business model, which is predominantly based on recurring subscription revenue. The company also noted that it is participating in significant tenders to superannuation funds. If successful, Iress expects these will positively impact revenue in 2021 and beyond. The company noted a strong pipeline of sales opportunities and is focused on building on its strengths.
Iress also noted that the company is well capitalised to take advantage of future opportunities. The company completed a $170 million capital raise earlier this year in order to fund its proposed acquisition of OneVue Holdings Ltd (ASX: OVH), whilst also providing additional flexibility to its balance sheet.
Foolish takeaway
At the time of writing, the Iress share price is trading 6.59% lower for the day at around $10.49. Shares in the company have bounced slightly after hitting an intra-day low of $10.47. The Iress share price has struggled in 2020 and is currently trading more than 19% lower for the year.
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Motley Fool contributor Nikhil Gangaram 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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