Integrated Research Limited

ASX code: IRI www.ir.com
Image of a line graph titled “Integrated Research—monthly,” in which years are marked on the x-axis and share prices in dollars are marked on the y-axis. The line graph shows a steady increase in prices till about the first half of 2018, when they start to decline.
Share price ($)   2.96
12-month high ($)   3.50
12-month low ($)   1.48
Market capitalisation ($mn)   508.7
Price-to-NTA-per-share ratio   10.9
5-year share price return (% p.a.)   27.8
Dividend reinvestment plan   No
Sector: Information technology Company Sector
Price/earnings ratio (times) 23.3 29.4
Dividend yield (%) 2.4 1.6

Sydney-based Integrated Research, founded in 1988, is a software developer. Its main product, Prognosis, provides performance monitoring, diagnostics and reporting functions for an organisation's IT systems. It has particular application for high-volume environments, including ATM and EFTPOS systems, telecommunications networks, IT server infrastructure and internet services such as online banking and travel booking services. The company maintains offices in Australia, Britain, Germany, Singapore and the United States, and exports to more than 60 countries, with overseas business accounting for more than 95 per cent of company turnover. Customers include many of the world's largest organisations, such as stock exchanges, banks, credit card companies, airlines and universities, as well as government departments.

Latest business results (June 2019, full year)

Revenues and profits rose in a good result, driven by 19 per cent growth in licence fees to $62.8 million, and greatly enhanced by the weakness of the dollar. Maintenance fee revenues fell 3 per cent to $25 million. Testing service revenues also fell, down 4 per cent to $5 million. Consulting services were flat from the previous year, at $7.4 million. The company segments its sales into three broad product lines. The largest of these, communications, saw sales down 7 per cent to $51 million, with growth from Cisco customers offset by lower licence sales for Avaya and Microsoft Skype for Business customers. By contrast, sales to infrastructure customers rose 28 per cent to $26.3 million, as existing customers added extra modules to their purchases. The payments segment achieved the best result, with revenues soaring 92 per cent, with nine new customers during the year, and existing customers buying more. The company maintained its high level of research and development spending, up 17 per cent to $17.9 million.

Outlook

Integrated Research supplies software that monitors IT systems and thereby enables clients to improve customer service as well as avoid the risks associated with computer outages. Thanks to strong relationships with key hardware suppliers and the high reputation of its products it is experiencing steady growth in demand, with a long-term recurring revenue base of licence fees that will underpin future expansion. Renewal rates for its services remain at around 95 per cent. The company also finds that though a customer's initial purchase may be small, subsequent purchases will often include additional modules. It is introducing a new Software-as-a-Service business, with the launch of a cloud-based platform. At June 2019 Integrated Research had no debt and more than $9 million in cash holdings.

Year to 30 June 2018 2019
Revenues ($mn) 91.2 100.8
EBIT ($mn) 25.8 28.9
EBIT margin (%) 28.3 28.7
Profit before tax ($mn) 26.3 29.6
Profit after tax ($mn) 19.2 21.9
Earnings per share (c) 11.19 12.72
Cash flow per share (c) 17.36 19.32
Dividend (c) 6.5 7.25
  Percentage franked 100 100
Net tangible assets per share ($) 0.21 0.27
Interest cover (times) ~ ~
Return on equity (%) 36.1 34.2
Debt-to-equity ratio (%) ~ ~
Current ratio 1.5 1.8