IRESS LIMITED — Annual Report 2011

May 16, 2012

MAY 2012 MAY 2012

IRESS 2011 RESULTS

• Underlying Group profit $59.8 million (2010: $58.4m, up 2.4%). Before growth investments $62.0m (2010 $59.7m, up 3.7%).

• Group (ex Investments & Peresys): Revenue up 5.1% and Group Segment Profit down 1.6% on 2010.

• Peresys contribution: Revenue $15.3m, Segment Profit $5.5m.

• Reported Group profit $41.3m (2010: $50.5m, down 18.1%).

• Final dividend of 24.0¢ 83% franked (2010: 24¢ 66% franked & 3.5¢ unfranked special).

• Revenue growth softer in first half in line with market conditions.

• Continued headcount growth to support implementation of multimarket environments.

• Appreciation of AUD impacted Canada and South Africa Australian dollar contribution.

SEGMENT PERFORMANCE AGAINST PRIOR HALF

FINANCIAL MARKETS

• Aust & NZ South Africa (ZAR) H2’11 ( no full prior half • • Op Rev up 1.7% (up 4.2% on PY) Op Rev R62.4m AUD 8.0m

• Aust & NZ

• Seg Profit down 2.4% (down 4.4% on PY)

• • PAT down 2.8% (down 7.8% on PY)

• Seg Profit R22.8m AUD 2.9m

• • PAT R15.6m AUD 2.0m

• Canada (CAD) • Op Rev up 7.1% (up 10.9% on PY)

• • Seg Profit up 15.4% (up 13.5% on PY)

• • PAT up 15.4% (up 14.4% on PY)

• Asia (AUD) H2’11 ( start up phase ) • Op Rev $0.5m H1’11: $0.5m

• • Seg Profit $(1.0)m H1’11: ($0.5m)

• • PAT $(0.8)m H1’11: ($0.4m)

SEGMENT PERFORMANCE AGAINST PRIOR HALF

WEALTH MANAGEMENT

• Aust & NZ

• Op Rev up 7.5% (up 12.2% on PY)

• • Seg Profit up 8.9% (up 8.7% on PY)

• • PAT up 9.2% (up 16.9% on PY)

  • South Africa (ZAR)

    • Op Rev up 2.6% (down 6.3% on PY)

    • • Seg Profit up 44.6% (down 23.9% PY)

    • • PAT up 49.9% (down 20.7% PY)

• United Kingdom (GBP) ( start up phase )

• Op Rev $ 0.0m

• Seg Profit $ (0.1)m

• PAT $ (0.1)m

• Asia (AUD)

• Op Rev $0.1m H1’11: $0.1m

• Seg Profit $(0.7)m H1’11: ($0.6m)

• PAT $(0.5)m H1’11: ($0.4m)

GROUP SEGMENT PROFIT MARGINS

Group Segment Profit Margin:% Revenue per Media Release H1 2010 H2 2010 H1 2011 H2 2011	Group Segment Profit Margin:% Revenue per Media Release H1 2010 H2 2010 H1 2011 H2 2011	Group Segment Profit Margin:% Revenue per Media Release H1 2010 H2 2010 H1 2011 H2 2011	Group Segment Profit Margin:% Revenue per Media Release H1 2010 H2 2010 H1 2011 H2 2011	Group Segment Profit Margin:% Revenue per Media Release H1 2010 H2 2010 H1 2011 H2 2011	Group Segment Profit Margin:% Revenue per Media Release H1 2010 H2 2010 H1 2011 H2 2011	Group Segment Profit Margin:% Revenue per Media Release H1 2010 H2 2010 H1 2011 H2 2011	2009 2010 2011	2009 2010 2011	2009 2010 2011
Fin Mkts	Aust Can (CAD)	56.3% 56.4% 52.7% 50.6% 33.6% 33.3% 32.9% 35.4%					57.2% 56.3% 51.7% 31.7% 33.5% 34.2%
	RSA (ZAR)	36.7% 36.6%					36.6%
Wealth Mngt	Aust	42.5% 42.8% 41.0% 41.5%					41.0% 42.6% 41.3% 35.0% 28.4%
	RSA (ZAR)	32.9% 37.0% 23.5% 33.2%

• Margins impacted by:

• Flatter revenues

• Increased headcount to support client implementations

• Investment for medium-term growth

• Two sizeable bad debts

• Cash generation from the business impacted by return to normal effective tax rate in H1’11

Presentation Title| Subtitle (change on master slide) GROUP RESULTS

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GROUP RESULTS|||
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$AMillions|H1'08
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Recurring Subscription Revenue
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Wlth Mgt - Aust
Wlth Mgt - UK
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• Excludes revenues on recoveries for services such as news, market data costs and provision of client communication networks

• Definition of Segment Profit as per IRESS Media Release

RELATIVE IMPACT 2010 & 2011

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• Definition of Segment Profit as per IRESS Media Release

AUSTRALIA & NEW ZEALAND

FINANCIAL MARKETS

• Reduced H2 2011 result from flatter momentum and increased operating costs:

• Revenue increased 1.7% on H1 2011 (up 2.3% pcp).

• Segment Profit decreased 2.4% on H1 2011 (down 8.1% pcp).

• Net revenue growth higher in H2 than H1:

• Growth in late H2 aligning to project activity, but few data points.

• Server-based revenue primary contributor.

• Still below historical levels.

• Heavily invested in headcount, supporting large-scale transition and opportunities across client base.

AUSTRALIA & NEW ZEALAND

FINANCIAL MARKETS – RECURRING SUBSCRIPTION REVENUE

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2006 2007 2008 2009 2010 2011 2012
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Up to May 2012

AUSTRALIA & NEW ZEALAND

WEALTH MANAGEMENT

• Good growth from ongoing demand and delivery:

• Revenue increased 7.5% on H1 2011 (up 13.2% on pcp)

• Segment Profit increased 8.9% on H1 2011 (up 10.0% on pcp)

• Revenue growth consistent over the period as rollouts continue:

• Growth from rollout progress and generating additional opportunities.

• Organic growth across products as clients seek efficiencies and consolidate functions.

• Not immune from climate but underpinned by advice model/regulatory reform.

• Consolidation present in the sector, but to date in our favour.

• Marginal headcount increases to support projects and transitions across client base.

• Important role in providing flexible solutions as clients reposition through advice reform.

• Product, independence, and scale continue to be differentiating characteristics.

AUSTRALIA & NEW ZEALAND

WEALTH MANAGEMENT – RECURRING SUBSCRIPTION REVENUE

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2006 2007 2008 2009 2010 2011 2012
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Up to May 2012

CANADA

FINANCIAL MARKETS

• Resilient result.

• Revenue (CAD) increased 7.1% on H1 2011 (up 14.6% on pcp).

• Segment Profit (CAD) increased 15.4% on H1 2011 (up 21.9% on pcp).

• Margin improvement from increased content cost recovery, and implementation project fees.

• AUD result impacted by adverse currency movements.

• Revenue growth strongly correlated to client projects and rollout.

• Prolonged conditions continue to increase pressure on clients and cost focus.

• Opportunities in differentiated market segments, client cost savings, and enhanced user workflow.

CANADA

RECURRING SUBSCRIPTION REVENUE*

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2006 2007 2008 2009 2010 2011 2012
CAD$ Millions
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*Assumes 100% ownership Up to May 2012

SOUTH AFRICA

FINANCIAL MARKETS

• Good growth result for the division after allowing for partial Jan 2011 contribution

• Revenue (ZAR) increased 20.4% on H1 2011.

• Segment Profit (ZAR) increased 20.1% on H1 2011.

• AUD result significantly impacted by adverse currency movements (~22% decline in ZAR over 2011).

• Stable software revenue performance in the conditions.

• Volatility in volume-based revenue:

• Depressed volumes and extreme volatility generally.

• Secular changes in RSA influencing behaviour from SSFs to CFDs.

• Current product initiatives are priority growth focus.

SOUTH AFRICA

FINANCIAL MARKETS - RECURRING SUBSCRIPTION REVENUE*

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*Revenue variances partly due to Message Volumes fluctuations Up to May 2012

SOUTH AFRICA

WEALTH MANAGEMENT

• Revenue up 2.6% and Segment Profit up 44.6 % on H1 2011 respectively (ZAR)

• Several institutional XPLAN transitions underway or commencing in 2012.

• Expect growth from rollout progress and additional opportunities.

• Client seeking to leverage integrated advice platform to manage multi-channel distribution and compliance, in cost efficient manner.

• XPLAN modules that bring compliance efficiency or enhance adviser capability and client experience in demand.

• Increasing focus on investment planning and assets under management.

• Regulation and education criteria having some impact on industry dynamics.

ASIA

FINANCIAL MARKETS

• Revenue growth over the year:

• Progressing with growing exposure to new opportunities in the region (organic and through seed relationships).

• Impact of MF Global material for division. Working to offset by surrounding opportunities in 2012.

• Positive project activity and opportunities:

• Numerous new projects underway anticipating short term delivery H1’12.

• Two new clients offering online CFD platforms in H1’12.

• Further white-label regional opportunities through existing clients.

• Local team expanded with regional business development focus.

• Costs carefully managed ahead of revenue. Other than revenue timing hole from MFG, net loss will be around $2.0m in 2012.

• Open to acquisitions in the region.

ASIA

WEALTH MANAGEMENT

• Continuing exposure to opportunities in the region. Focus on product positioning and business building.

• Confidence in medium-long term growth segments across tied distribution, independent advice, expatriate franchises and private banking.

• Local team expanded with regional business development focus.

• A number of pre-billing implementations underway. Integration and data aggregation via IRESSnet are differentiating and keys to success.

• Strategic positioning by product and segment across region:

• Tied and sales models: XLITE

• Independent advice (networks, expat): XPLAN (incl IPS, IRESSnet, CommPay)

• Private banking: XPLAN/IPS/IOS+

• Costs continue to be carefully managed and reviewed ahead of revenue opportunities.

UNITED KINGDOM

WEALTH MANAGEMENT

• Strategic medium-long term growth initiative in UK commenced November 2011.

• Established with significant seed client and experienced team. Represents low risk profile compared to normal green fields operation without tangible client.

• Advice technology market in United Kingdom:

• Advice segment and technology opportunity more than 2x Australia/NZ

• Competitive marketplace, made up of niche providers lacking scale.

• UK advice reforms similar to Australia impacting practice management, compliance, and technology. XPLAN well suited to address, with good feedback to date.

• Segment Profit funding requirement of up to $5.0m pa, subject to regular review.

UNITED KINGDOM

DELIVERY/PROGRESS

• Initial product delivery on track for July release. Earlier component releases in May.

• Integration with product providers, platforms and relevant third-parties now in place.

• Initial hosting infrastructure now in place. Second data-centre finalised by June.

• Client and early user feedback has been positive.

• Strong regulatory reform driving technology evolution

• Advice networks of all sizes undergoing technology reviews.

• Many incumbent providers not responding or not able to act responsively.

• Prospective interest growing and IRESS operations scaling appropriately.

• IRESS offers differentiated solution

• XPLAN flexibility key to handling compliant multi-channel distribution.

• Australian and international advice technology experience highly regarded.

• XPLAN’s solution breadth and modularisation contrasting to less flexible specialised alternatives.

• Vendor of scale and ongoing re-investment in technology.

IRESS GROUP OUTLOOK

• Trading 2012

• Challenging environment in global capital markets prolonged.

• Mixed experience: additional revenue impacted by widespread focus on costs.

• Some divisions with positive momentum from prior half.

• Demand for solutions remains, heightened in differentiated products and segments.

• Outlook

• Broad and rich product set with fully managed offering positions us favourably.

• Poor market dynamics continue to impact client base and moderate financial results. Pronounced in financial market operations.

• Australia and Canada have experienced heightened cancellations in past few months. Other than price increase, 2012 outlook assumes flat revenues for these divisions.

• In context, price indexation policy in Australia to adjust to per annum from 2012.

• Group Segment Profit in 2012 compared to 2011:

• Before investments, anticipated to decline by approximately 4%.

• Including investments, expected decline in the order of 10%.

• Committed to investment in medium and long term growth opportunities.

IRESS DIVISIONAL OUTLOOK FOR H1 2012

Division	H1 2012 (vs H2 2011)
Australia/NZ FM	Neutral outlook on revenue and segment profit declining at a rate exceeding H2’11 decline.
Australia/NZ WM	Low % increase in revenue and neutral segment profit growth.
Canada (CAD)	Softening in revenue expected to lower segment profits to a little under H1’11 levels.
South Africa (ZAR)	Low % increase in revenues, and decline in segment profit with investment in future revenue growth.
Asia	Impact of revenue recovery post MF likely to see total Asian investment (FM & WM) slightly above guidance of $4m pa.
United Kingdom	Segment loss on annualised basis below $5m pa guidance.

ATTRACTIVE SERVICE COMBINATIONS

RETAIL ONLINE TRADING & MARKET DATA

• IRESS product set proving globally differentiated and very portable:

• Rich multi-asset/currency/language online trading solution providing differentiation.

• IRESSTrader & IOS+ combination for international execution live in Asia and UK.

• Flexible solution across regions and proving portable by leveraging IRESS central infrastructure. IOS+ order routing flexibility core to opportunities.

• iPhone, iPad now available for market data and soon trading, available across all IRESS clients. White label opportunity for retail brokers.

• Fully managed service offering.

• Numerous opportunities in active trading, market data, CFD, hedge fund segments.

• Variety of in production deployments and opportunities across regions.

AWAKENING SERVICE COMBINATIONS

PRIVATE WEALTH MANAGEMENT

• Private wealth management increasingly prominent, supported by global trend from commission/transaction to asset management/advice.

• Desire for client service differentiation, branding and margin control.

• Unique IRESS solution and positioning

• Legacy solutions often biased to investment-only.

• IRESS uniquely provides integrated whole of wealth solution.

  • Private wealth solution combining XPLAN/IPS/IOS+ a key differentiator.

  • Multi-asset/currency/language portfolio and tax management, order management, CRM, advice.

  • Essential tools as clients seek complete service propositions.

• Progressing opportunities in this segment internationally.

CONTACT IRESS

AUSTRALIA				NEW ZEALAND		ASIA
Melbourne		+61	3	9018 5800	Auckland		+64 9 300 5571
Sydney		+61	2	8273 7000	Wellington		+64 4 462 6850
Perth		+61	8	6211 5900
Brisbane		+61	7	3011 4700
Adelaide		+61	3	9018 5800
CANADA				SOUTH AFRICA		UNITED KINGDOM
Toronto		+41	6	907 9200	Johannesburg		+27 11 236 4700
				Durban		+27 31 203 7500
				Capetown		+27 21 657 8800

Email | enquiries@iress.com Web | www.iress.com

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