2019 Annual Report 2,011 people 18 offices 9 countries 500,000+ users 9,000+ clients 500+ integrations IRESS LIMITED ANNUAL REPORT 2019 We believe technology should help people perform better, every day. We are a global team of 2,011 people building software that helps the financial services industry perform at its best. More than 9,000 businesses and 500,000 people use our software to help them perform better and deliver more. Contents About us 1 2019 snapshot 2 Financial highlights 4 Chair and CEO’s letter 6 Iress leadership 8 Iress Foundation 10 Principal activities 12 Operating & financial review 14 Board of Directors 18 Directors’ Report 20 AGM details Auditor’s Independence Declaration 41 Financial Statements 42 Thursday 7 May 2020 Directors’ Declaration 85 11.30am AEST RACV Club Independent Auditor’s Report 86 501 Bourke Street Shareholder Information 91 Melbourne, Australia Corporate Directory 92 1 2019 snapshot At Iress we’re focused on finding better ways to work, building better software and making improvements to better service our clients and users. Here are some highlights from 2019. Improvements to better support our Recognised as one of the industry’s clients and users best innovators Throughout 2019 we sought feedback from clients and users Our CTO, Andrew Todd, was recognised as one of Australia’s top to understand how to better support them. Based on that direct ‘technology and digital chiefs.’ feedback, we made improvements to support processes which Andrew received this prestigious accolade from one of the most have driven better resolution times. influential titles for senior IT professionals in the region, CIO Australia. Changes to how we work have also resulted in noticeable Each year, CIO Australia selects top C-suite executives who have improvements in software quality and a smoother driven technology-led innovations and significant change in the way upgrade process. organisations operate. We continue to seek feedback from our clients in a structured Andrew made the list based on Iress’ enhancements to the speed, manner at key interactions in our relationships and have scale and quality of our delivery to clients, including through delivery introduced formalised methods to ensure this feedback is of Iress’ cloud program. a driver of improvement. Named in the top 50 best places to work Helping our users make better use Glassdoor, a website that allows employees to post online reviews of our software about their employer and one of the world’s largest recruitment sites, In 2019 we launched the Iress Community — a dedicated, secure named Iress in its ‘50 best places to work’ list in the UK. online community providing a single source of information for The award takes into account ratings across eight workplace users about our software. It helps users get the best out of our categories including overall company rating, career opportunities, software and includes searchable help, software release notes, compensation and benefits, culture and values, senior management, real-time service updates and best practice articles. It also work-life balance, likelihood to recommend as an employer provides users with direct access to our software experts as well and six-month business outlook. as tips from other software users. The Iress Community was rolled out in 2019 to all users of our financial advice software globally and is now being opened to users of other Iress software. 2 IRESS LIMITED ANNUAL REPORT 2019 3 Financial highlights Revenue growth and improving operating leverage driving earnings North America South Africa 5% 9% APAC Operating Revenue 52% $ UK & Europe 508.9m 34% 10% 8% on^ 2018 on^ a constant currency basis APAC UK & Europe South Africa North America 52% 34% 9% 5% – Underlying Xplan growth – Revenue growth reflects – Revenue growth reflects – Revenue growth driven driven by ongoing demand successful key client continuing demand across by QuantHouse acquisition amidst industry change and deliveries and product uptake. product suite. combined with stable increased regulatory focus. underlying client base. – Positive contribution from – Financial Markets QuantHouse. revenue resilient. – Mortgages client momentum – Demand for data is increasing. analytics ongoing. The percentages above represent the geographical segment’s share of the Group’s total operating revenue. 4 IRESS LIMITED ANNUAL REPORT 2019 Strong track record of producing sustainable return for shareholders Operating revenue Segment Profit Net Profit After Tax AUD (m) AUD (m) AUD (m) 600 508.9 200 80 500 152.1 70 65.1 150 60 400 50 300 100 40 200 30 50 20 100 10 0 0 0 09 19 09 19 09 19 Operating cash flow Earnings per share Dividend per share AUD (m) AUD (cents) AUD (cents) 120 104.7 50 50 46.0 100 40 37.9 40 80 30 30 60 20 20 40 20 10 10 0 0 0 09 19 09 19 09 19 Unless otherwise stated all comparisons are with the prior corresponding period on a constant currency basis. Financial information in this report is extracted or calculated from the half-year and annual financial statements which have been subject to review or audit. (1) Segment Profit represents earnings before interest, tax, depreciation, amortisation, share-based payments, non-operating items and realised and unrealised FX gains/losses – see page 48 for a full reconciliation. 5 Chair and CEO’s letter Tony D’Aloisio Andrew Walsh One of Iress’ strengths is our ability to In the UK, revenue growth was stronger in the second half, with the continued rollout of our Xplan software among advice businesses anticipate the needs of clients, and to build and the take up of our private wealth software by two large the necessary software and services to meet investment managers. these needs. We also saw strong momentum in our mortgages business with increasing diversification within the mortgage industry for In 2019, we continued to anticipate and deliver to meet growing our software. and changing demand. Iress announced its automated super South Africa’s results were driven by continued demand across our offering to the Australian superannuation industry, underpinned by software range, as well as successful client deployments. In North a major foundation client. Our regtech software, Lumen, has seen America, the contribution from QuantHouse saw increased revenue, increased demand and, as advisers in the UK seek ways to deliver balanced against reduced non-recurring revenue from reduced advice at scale, our Xplan Prime software is exceeding expectations. client project activity. We are also meeting the demands of disruptive neo-banks with our mortgage software. QuantHouse At the heart of this innovation is our belief that technology should help In May 2019, we announced the acquisition of market data provider, people perform better every day. In financial services, performance is QuantHouse. QuantHouse operates internationally, with a focus on a critical measure and we are ever mindful of our role in helping our Europe, North America and Asia, providing more than 145 data feeds clients and users achieve this. from exchanges and other data providers to clients globally. Financial results The provision of accurate, timely and cost-effective market data through our software and to a range of clients is an important Our financial performance for the year to 31 December 2019 reflected part of Iress’ current and future business and our growth strategy. the continuing demand for our software and services, as financial QuantHouse is highly complementary and strategically aligned to services businesses globally seek expertise in transitioning to more our existing and future activities and to our increasing focus on data. efficient, data-driven ways of working. The acquisition further strengthens our international market data Group operating revenue was $508.9 million, up 10% on 2018 (up 8% business and provides opportunities to achieve cost synergies and on a constant currency basis). Segment Profit was $152.1 million, scale, which are underway. up 10% on 2018 (also up 10% on a constant currency basis). Reported Importantly, the acquisition expands our offering to clients globally. NPAT was $65.1 million, up 2% on 2018. Excluding the impact of In particular, the acquisition allows us to provide clients with real-time changes in accounting standards and the acquisition of QuantHouse, access to additional services, including international exchanges, NPAT was up 11% on 2018. with global MSCI coverage increasing from 52% to 75%. It also meets Revenue growth reflects underlying performance in Australia and the client demand for increased channels for data beyond desktops. Our United Kingdom, as well as the acquisition of international market data business integration efforts are proceeding smoothly. business QuantHouse. In Australia, New Zealand & Asia, revenue growth was solid. We’ve seen Your dividend continued growth in demand for our financial advice software, against The Board has confirmed a final dividend of 30 cents per share, a backdrop of significant industry change. Our private wealth software franked at 40%. This takes the total dividend payable for 2019 to continues to gain momentum with two major retail firms selecting Iress 46 cents per share, franked at 30%. in 2019. And we’re seeing positive momentum in our superannuation business, with two significant client wins for our super administration Iress continues to maintain a conservative balance sheet at a leverage offer. In Asia we have seen continued strong revenue growth following ratio of 1.28x Segment Profit. the successful rollout of online trading software, ViewPoint, to two leading institutions. 6 IRESS LIMITED ANNUAL REPORT 2019 Change and innovation Mr Dwyer was recently CEO of First State Super for 14 years. He is currently a director of TCorp (New South Wales Treasury Corporation), We are well positioned as financial services changes and transforms WSC Group, the Global Advisory Council of Tobacco Free Portfolios and in 2019 we have continued to realise the benefits of our medium and the Sydney Financial Forum.