The Iress Ltd (ASX: IRE) share price is having a day to forget on Monday.
At one stage today, this financial technology company's shares were down as much as 33% to a decade low of $6.66.
This follows the release of its half-year results. And while Iress' shares have recovered a touch since then, they remain down 26% to $7.40 currently.
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Iress share price plunge on half-year loss
- Revenue up 2% to $315.3 million
- Earnings before interest, tax, depreciation and amortisation (EBITDA) down 55% to $29.4 million
- Reported net loss after tax of $139.8 million
- Underlying net profit after tax down 31% to $24.4 million
- Dividend suspended
- FY 2023 guidance downgraded
What happened during the half?
For the six months ended 30 June, Iress reported a 2% increase in revenue to $315.3 million but a disappointing 55% reduction in EBITDA to $29.4 million.
Management advised that the latter was impacted by cost pressures, including a significant uplift in tech infrastructure, market data, and inflationary salary costs.
On the bottom line, Iress posted a reported loss of $139.8 million and an underlying profit decline of 31% to $24.4 million. The reported loss includes a $130.4 million significant item relating to the impairment of UK goodwill and $12.5 million losses on the derecognition of intangible assets due to changes in strategy.
Given the current environment and its ongoing transformation, the Iress board felt it was prudent to suspend its interim dividend.
The board now intends to conduct a thorough reassessment of its capital management framework, including a new dividend policy, while it continues to realise assets and reset its cost base.
Speaking of realising assets, Iress has entered into a binding agreement to divest its Managed Funds Administration (MFA) business to global software and software-enabled services provider, SS&C Technologies (NASDAQ: SSNC) for a total cash consideration of $52 million. This is subject to customary working capital adjustments. Iress plans to use the proceeds to retire debt.
Management commentary
Iress' CEO, Marcus Price, commented:
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.
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. 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.
Outlook
Management has downgraded its guidance for FY 2024, which could be putting additional pressure on the Iress share price.
For the second half of 2023, Iress 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.
As a result, underlying EBITDA is expected to be flat half on half. This implies FY 2023 underlying EBITDA of $119 million, which is well short of its April guidance range of $144 million to $149 million.
