Iress 1H26 Profit Jumps 85% on Efficiency Gains Despite Revenue Dip

Profit Surge Amid Revenue Decline

Iress Limited (ASX:IRE) reported a striking 85% jump in net profit after tax (NPAT) to $32 million for the half year ended 30 June 2026, despite a 16.9% decline in total revenue to $247.1 million. The revenue drop primarily reflects the impact of divesting the Superannuation and QuantHouse businesses in 2025, which no longer contribute to the group’s top line.

Underlying profit after tax, a preferred measure excluding one-off items, rose 18.4% to $38.8 million, signalling improved earnings quality and operational efficiency. Recurring revenue, which forms 95% of total revenue, grew 3.4% on a constant currency basis to $237.8 million, highlighting resilience in the core software subscription business.

Margin Expansion and Cost Discipline Drive Cash EBITDA Growth

The company’s transition to using Cash EBITDA as its headline performance metric sheds light on cash generation after capital reinvestment. Cash EBITDA surged 34% to $61.1 million, lifting the margin by 9.3 percentage points to 24.5%. This margin expansion is attributed to disciplined execution of a business efficiency program that has already delivered $31.5 million in annualised cost savings, with further $6-9 million expected in the second half of 2026.

Operating expenses fell by 22.8% to $181.4 million, driven by lower staff numbers (down 5%) and reduced infrastructure costs. Capital expenditure dropped 60% to $7.5 million, reflecting the completion of a major EMS trading platform investment in 2025, though capex is expected to ramp up in the second half as product evolution accelerates.

Segment Performance and Geographic Footprint

Iress operates across three main segments: Global Trading & Market Data (GTMD), APAC Wealth, and UK Wealth & Sourcing. GTMD revenue remained flat at $125.3 million but grew 2% on a constant currency basis, with cash EBITDA up 60% to $28.1 million due to lower capital spend. APAC Wealth saw revenue increase 4.4% to $68.2 million and cash EBITDA rise 38% to $24.5 million, benefiting from recurring revenue growth and cost discipline. UK Wealth & Sourcing revenue declined 6.9% to $53.5 million, impacted by adverse currency moves and completion of a large client project, though cash EBITDA improved 20% to $8.5 million on a constant currency basis.

Balance Sheet Strength and Dividend Increase

The group’s balance sheet remains robust, with net assets of $426 million and net debt of $70.2 million, reflecting prudent use of proceeds from divestments to reduce borrowings. Leverage stands at a modest 0.5x, providing flexibility to fund ongoing product development and strategic initiatives.

Reflecting confidence in the business and cash flow, the board declared a fully franked interim dividend of 14 cents per share, a 27% increase on the prior corresponding period. The dividend will be paid on 28 September 2026, with a record date of 31 August 2026.

Strategic Shift Towards Product Evolution and AI Integration

CEO Andrew Russell highlighted the company’s shift from business simplification to product evolution and sustainable growth. The recently mobilised partnership with Thoughtworks aims to accelerate product delivery and embed AI across engineering and client solutions, including AI-enabled adviser workflow tools and enhanced client portals. While near-term revenue growth is expected to remain measured, management reaffirmed its target of a 25% Cash EBITDA margin exit run-rate by the end of 2026.

Looking ahead, the company plans to increase capital expenditure in the second half to support product innovation, while continuing to realise efficiency gains and strengthen customer engagement. The balance between investment and cost discipline will be critical to sustaining the momentum in earnings quality and margin expansion.