IRESS Market Technology has recorded solid results for its 2011 financial year, despite volatile markets and negative exposure impacting on demand for the firm's new services and staff headcount.
The company's results were hit by exposure to Minc Financial and MF Global, two broking groups that collapsed in 2011, resulting in lost recurring revenue for the group as well as sizeable bad debts.
"Until this year, bad debts of this magnitude were unprecedented for the consolidated entity," IRESS managing director Andrew Walsh said in the company's financial report.
"In the broad, 2011 was a tough year for the financial services sector, which generally translated into softer demand for new services and some cancellations.
"Despite this, opportunity and demand for our leading solutions in segments remained most noticeably in expanded requirement for retail wealth management technology and services."
The company's Australian and New Zealand operations reported a 4.2 per cent increase in revenue to $108.9 million in the year to 31 December 2011, while segment profits fell 4.4 per cent to $56.3 million.
"Revenue growth was strongly associated with project deliveries in the commencing and final periods of the second half, driven by client preparation for multiple trading venues late in 2011," Walsh said.
"While headcount did increase during 2011, it was also impacted by the full-year impact of the headcount increases late in [the second half of 2010], which was largely to support project work associated with the move to multi-markets."
The collapses of Minc Financial and MF Global resulted in a $519,000 bad debt expense, he said.
"The combined impact of these resulted in a margin decline from 56.3 per cent to 51.7 per cent," he said.
The company's Australian and New Zealand wealth management operations experienced a 12.2 per cent increase in revenue to $49.1 million, with segment profits up 8.7 per cent to 20.3 million.
"The business has continued to perform well, with revenues driven by transitional rollouts as well as solid organic growth across the broader client base," Walsh said.
"Demand for services continues to be driven by the efficiencies available through the suite of technology offerings. Growth in headcount to support the large number of migrations saw margins decline marginally from 42.6 per cent to 41.3 per cent."
Meanwhile, IRESS's offshore operations returned mixed results, with revenue for the group's Asian financial markets decreasing due to MF Global's collapse and bad debt of $262,000.
The group's South African wealth management division experienced a 15.3 per cent drop in revenue, with segment profits down 31.6 per cent.
"The known loss of two clients produced a financial outcome inconsistent with the level of activity and work performed on Xplan rollouts and responding to client requirements and opportunities. With modest cost increases, margins decreased from 35.0 per cent to 28.4 per cent," Walsh said.
The company's United Kingdom wealth management operation, which was founded in November last year, generated no revenue in the period.
