IRE reported as expected 1H18 results where management reaffirmed FY18 guidance.

On the analyst call, management noted “revenue growth was led by a strong contribution by wealth management and lending, while [a] focus on operating efficiencies resulted in flat cost growth and margin expansion… segment profit margin in the first half was 29.4% compared to 28.1% pcp”. Other key highlights include:
1. Group revenue of $229.7m was +8% higher on 1H17 and +5% on 2H17 (+6% and +3% respectively, on constant currency basis).
2. Reported NPAT of $32.0m, +8% on 1H17 and +6% on 2H17.
3. Group Segment Profit of $67.5 m, +13% on 1H17 and +3% on 2H17 (+11% and flat respectively, on a constant currency basis).
4. IRE maintained strong cash conversion of 99%, recurring revenue ~90%, leverage ratio of 1.4x segment profit.

On the analyst call, FY18 reaffirmed guidance stating “2018 Segment Profit growth expected to be in the range of 3-7% on a constant 2017 currency basis…If average first half FX rates continue for the remainder of the year, reported Segment Profit for 2018 will be in the range of $131m – $136m representing growth of 5-9% from reported Segment Profit in 2017”.

Indeed, on the analyst call, management stated “…firstly, we do continue to closely watch regulatory and market structure developments in Australia and are well positioned, and we are assisting clients to respond and adapt to a changing environment. Secondly, earnings momentum in the UK is expected to increase in the second half, with client projects underway and a good pipeline of opportunities ahead.

Finally, we reaffirm the guidance provided in February”. On our conservative numbers, IRE trades on 29.2x PE20, 3.3% dividend yield. We have no doubt that IRE is a quality company with strong management team however in our view, much of the upside is captured in its share price and trading multiples and hence IRE is trading range bound. Neutral.