So is this an earnings downgrade you announce while not announcing one?
Traders on the ASX yesterday clearly thought so and gave shares in financial services group, Iress a bit of a shaking, with a fall of more than 5% at one stage after the company indicated that business conditions were not as rosy as there seemed to be a couple of months ago.
"In August 2017 IRESS provided guidance that second half revenue and Segment Profit growth would be strong and that this would, in turn, lead to strong full year growth on a constant currency basis,” the statement started..
"Momentum of revenue growth has increased in the second half and IRESS expects full year 2017 revenue will be between $435m and $440m (on a constant currency basis), which represents 12-13% growth on 2016.
However, IRESS expects a softer Segment Profit result for the full year of between $123m and $128m on a constant currency basis. This is because in addition to normal operating costs during the year, investments were reasonably made during 2017 to achieve revenue above the top-end of the range indicated.
"Despite stronger levels of client activity and projects in the second half, the timing of client decisions means IRESS does not expect to achieve revenue over and above this range.
"Cost growth in the second half has been moderate and largely reflects the impact of hiring decisions from the first half and annual salary adjustments.
IRESS CEO, Andrew Walsh, said: “Our integrated products are market-leading and long-term drivers of revenue and earnings growth and we continue to have a strong pipeline of short-medium term opportunities including in key markets, for 2018 and beyond.
"While period on period revenue and cost growth will always remain subject to the timing of client implementations and significant regulatory change, we continue to make investment decisions for the medium to long term,” the statement ended.
Clearly from that there’s been a slowdown in momentum in the current second half and the company will fall short of expectations. The final figures won’t reveal a fall in revenues and profits it will be more like slower growth than anticipated.
Investors took that to mean a sharp fall in earnings and sent the shares down more than 5% to $10.86. Then second thoughts were had and the shares slowly regained lost ground to end at $10.95, down 5%.
