Iress not to proceed with divestment of UK Mortgages business
Prospective purchasers‘ valuations fell short of price expectations
Mortgage business to be retained
2022 outlook reaffirmed; Underlying Net Profit After Tax up by 25-37 percent
Underlying 2022 Earnings Per Share 40 to 44 cents.
Strong profit outlook to 2025 reaffirmed.
IRESS Limited (Iress or the Company) provides core operating systems to the stockbroking, wealth management and institutional funds management industries. The Company provides software and services for trading and market data, financial advice, investment management, mortgages superannuation, life and pensions and data intelligence. It employs 2300 people, and its software and data feeds are used by 10,000 businesses and 500,000 users globally. The company operates in Australia, the United Kingdom, Europe, South Africa and Canada.
Mortgage business retained
The Mortgage business divestment process has come to an end after prospective purchasers’ valuations fell short of the Board’s price expectations. This follows a Board led strategy review in 2021 where it was determined that higher returns could be achieved under new ownership. This would enable the sale proceeds to be redeployed to enhance returns to Iress shareholders.
During the sale process, the Board observed that global market volatility increased, and technology company valuations declined.
Just two months ago, on 17 February, the Board stated their Mortgage business was performing well with 2 more projects completed in the year and a strong and growing new sales pipeline. The Board added that the Company is assessing the potential to divest the business and distribute proceeds to shareholders.
Today the Board have concluded that the best outcome for shareholders, clients and people is for Iress to retain the business. The Chief Executive commented: “The Mortgages business continues to perform strongly, contributing £16.1m of revenue and £6.4m of net profit after tax in 2021. In recent months, Mortgages has increased its pipeline of opportunities as lenders demand greater scale, efficiency and automation in mortgage processing.”
Image: File
2022 outlook reaffirmed
Full year 2022 earnings guidance has been reaffirmed, although the earnings estimate now includes the Mortgages business. The full year 2022 Underlying Net Profit After Tax (NPAT) is estimated to grow by 25-37 percent. This translates to an estimated Earnings Per Share guidance of 40 to 44 cents.
Earnings estimates out to 2025 remain unchanged. Including the Mortgages business, NPAT is has been estimated to be in the range of $120 million to $135 million. The Company also disclosed that despite the Mortgage business not being divested, the $100 million share buy-back program currently underway, will be completed as planned.
It is noteworthy that the NPAT contribution from the Mortgage business in 2025 is estimated at 13 percent of total NPAT of the Company. This is a slight decline from 17 percent of NPAT, in 2022.
Importantly, the decision not to pursue the sale of the Mortgages business has not altered the medium-term earnings outlook of Iress. The Company continues to exhibit annual earnings growth rates of more than 20 percent per annum out to 2024 and an estimated 12.5 percent in 2025.
The Company’s 2025 Underlying NPAT target (including Mortgages) is estimated at $135 million. This compares to NPAT of $73.8 million recorded in the 2021 financial year.
This Post Market Wrap is presented by Kodari Securities, written by Michael Kodari, CEO at KOSEC.
"Michael Kodari is one of the world's most consistent, top performing investor. A philanthropist and one of the prominent experts of the financial markets, he has been referred to as ‘the brightest 21st century entrepreneur in wealth management' by CNBC Asia and featured on Forbes. Featured on TV as the "Money Expert", on the weekly Sunday program "Elevator Pitch", he is recognised internationally by governments as he was the guest of honour for the event "Inside China's Future", chosen by the Chinese government from the funds management industry, attended by industry leaders, when they arrived in Sydney Australia, on April 2014. Michael and George Soros were the only two financiers in the world invited and chosen by the Chinese government to provide advice, and their expertise on Chinese government asset allocation offshore. With a strong background in funds management and stockbroking, Michael has worked with some of the most successful investors and consulted to leading financial institutions. He was the youngest person ever to appear on the expert panel for Fox, Sky News Business Channel at the age of 25 where he demonstrated his skillset across a 3 year period forming the most consistent track record and getting all his predictions right over that period. Michael writes for key financial publications, is regularly interviewed by various media and conducts conferences around the world."
Governments’ excessive taxation on citizens risks wealth creation, necessitating strategic wealth management to avoid economic collapse.
In Short:
Dr. Steve Enticott discusses the challenges of government debt and the need for careful tax structuring to protect citizens’ wealth. He emphasises that excessive taxation can harm wealth creation, urging a proactive approach to financial management for sustainable economic growth.
Dr. Steve Enticott explores the issue of government debt and taxation.
He highlights the struggles faced by heavily indebted governments worldwide as they seek to fund ongoing projects.
Taxation is their primary method for extracting financial resources from citizens and businesses.
Enticott points out the importance of effective tax structuring, the strategic deployment of wealth, and risk diversification.
These approaches are vital for protecting individual wealth amidst growing government demands.
The phrase “you can’t get blood from a stone” illustrates the futility of overtaxing already burdened citizens.
Excessive taxation can backfire, leading to reduced incentives for wealth creation, which in turn harms tax revenues.
Governments must be cautious when implementing tax policies as they risk damaging the very sources of income they rely on.
Instead of merely focusing on extracting funds, there should be an emphasis on fostering an environment where wealth can thrive.
Enticott advocates for a proactive approach to financial management, urging individuals to recognise the situation and adapt.
By finding ways to work within the current system, citizens can protect their wealth while still contributing to society.
Money Matters underscores the need for positive action in the face of challenging economic realities.
Government approaches to taxation and debt management require careful consideration to ensure long-term sustainability and growth.
Dr Steven Enticott is a finance professional, speaker, regular columnist, and author of The Man With A Plan.
Dr. Steve Enticott critiques Australia’s new tax laws
In Short:
Dr. Steve Enticott is concerned about new Australian tax laws taxing unrealised gains, calling it the ‘great theft’ as taxpayers will pay tax on assumed profits without actual transactions. He warns that these changes could significantly impact superannuation and retirement savings for many Australians, urging individuals to stay informed and prepared.
Dr. Steve Enticott has raised concerns regarding recent changes in Australian tax laws.
He refers to these changes as the ‘great theft.’
The new tax structures involve taxing unrealised gains on assets.
This means individuals pay tax on assumed profits without actual transactions taking place.
If an asset’s value doesn’t increase, taxpayers will not receive any refunds for the tax paid.
Dr. Enticott warns this could have a significant impact on a broader segment of the population over time.
He predicts that the perception of superannuation in Australia may shift as these laws take effect.
The discussion highlights the potential long-term consequences of these tax changes.
There is a growing need for individuals to stay informed about evolving tax laws.
Understanding these changes is crucial for managing superannuation effectively.
The implications of taxing unrealised gains could affect retirement savings for many Australians.
Dr. Enticott’s insights urge citizens to carefully consider how tax policies may influence their financial futures.
Awareness and preparedness are essential in navigating these new tax regulations.
As the situation develops, it is important for individuals to seek information and advice.
The evolving landscape of tax laws may reshape financial planning for years to come.
Dr Steven Enticott is a finance professional, speaker, regular columnist, and author of The Man With A Plan.
Historical patterns inform investment strategies, highlighting recurring themes of greed, crisis, and societal response amidst technological change.
In Short:
Dr. Steve Enticott argues that while history doesn’t repeat, it shows similar patterns that can inform current investors and business owners. He highlights the importance of recognising these trends and adopting technology to remain competitive amid recurring themes like greed, fear, and economic instability.
Dr. Steve Enticott explores the idea that while history does not repeat itself, it often exhibits similar patterns.
He draws parallels between historical events and current circumstances, offering valuable insights for investors and business owners.
Enticott emphasises the need for individuals to recognise and anticipate future trends by observing these recurring patterns.
He also encourages the adoption of technological advancements as a means of reducing costs and maintaining competitiveness in a changing economic landscape.
Common themes such as greed, fear, power struggles, and economic bubbles continue to manifest, albeit in different forms.
For example, the 2008 financial crisis showed similarities to the Great Depression, with both crises stemming from causes like over-leveraging and speculation.
However, their outcomes diverged due to modern economic interventions.
Additionally, parallels can be drawn between the fall of Rome and current political instability, particularly in terms of overexpansion, wealth inequality, and deterioration of leadership.
Pandemics also reveal historical echoes; for instance, responses to COVID-19 mirrored those of the 1918 flu, highlighting societal patterns of denial, panic, scapegoating, and eventual adaptation.
Understanding these historical patterns can provide critical guidance for navigating present and future challenges in the business landscape.
By learning from history, stakeholders can make informed decisions that prepare them for what lies ahead.
Dr Steven Enticott is a finance professional, speaker, regular columnist, and author of The Man With A Plan.