IRE –11.63%%: got whacked today after posting a disappointing half, and lowering FY26 revenue guidance, with the new range falling below consensus. While the headline downgrade is disappointing, it was largely driven by weaker non-recurring revenue rather than deterioration in the core recurring software business.
Key results:
- 1H revenue of $247.1m, down 17% and below $253m expected.
- Net profit of $32m, up 85%.
- Interim dividend increased to 14cps, from 11c.
- FY26 revenue guidance cut to $509–515m, from $520–528m and below $520.1m consensus.
- Underlying net profit (NPAT) guidance narrowed to $84–88m, from $84–90m.
Iress is generating less revenue than anticipated, but its simplification and cost-efficiency program is delivering better margins, with management retaining its 25% cash earnings (EBITDA) margin exit-rate target.
MM’s view: The market has focused heavily on the revenue downgrade, but the upgrade to EBITDA guidance despite lower sales is encouraging and suggests the restructuring is delivering tangible benefits. We would be more concerned if recurring software revenue was weakening; instead, the shortfall is predominantly non-recurring. Today’s reaction looks harsh on that basis, although Iress hasn’t proven that it can complement cost-driven margin improvement with top-line growth just yet.
