Morningstar identifies Xplan as Iress’ trump card

Notwithstanding posting a significant hit to its half-year profit, Iress has received solid backing from research and ratings house, Morningstar, largely predicated on the continuing dominance of Xplan.

According to Morningstar, because of Xplan “Iress’ moat is intact, with no signs of diminishing pricing power or a decrease in the platform’s essentiality to users”.

“Overall churn remains low,” the analysis said. “Notable for Xplan, the number of core licenses kept growing and it was mainly less usage of ancillary features that dampened revenue growth.”

“We expect revenue growth for the trading and wealth platforms to rebound as market volatility diminishes, a development we expect to unfold in 2024 and gain momentum in 2025.”

The Morningstar analysis conceded that the Iress 2023 interim result had disappointed but said “we don’t see tis signalling a permanent earnings decline for the core Australian business, which we expect to make up more than two thirds of group gross profits on a normalised basis”.

It said that Iress’ new management was still in the early stages of restructuring the company and noted that the firm had faced cyclical challenges “that dampened revenue across the wealth management sector”.

“We maintain conviction in management’s ability to improve Iress’ profitability,” the analyst report said.