Metrofile expects return to profit
Headline earnings rise on demand for digital services
Documents specialist Metrofile says it expects to return to its normal levels of profitability in the first quarter of the 2021 financial year, led by increased demand for its digital services business. Yesterday, the firm said its business model has proved to be resilient.
Documents specialist Metrofile says it expects to return to its normal levels of profitability in the first quarter of the 2021 financial year, led by increased demand for its digital services business.
On Monday, the company — which provides services for the storage, retrieval and dissemination of documents, among other things — said its business model to date has “proved resilient and this will be further strengthened by our recent acceleration of our digital offerings that will also be based on a subscription model”.
The extensive cost-reduction exercise recently concluded will ensure that profitability “is protected despite the expected economic challenges”, it added.
Metrofile, headed by Pfungwa Serima does not expect Covid-19 to affect its performance significantly in the short term. Headline earnings rose 20.5% to 24.8c in the group’s year to end-June, with the group experiencing an 11% fall in net debt to R524m.
Revenue for the year fell 1% to R903m upon the lockdown measures that negatively affected the digital services and products and solutions revenue streams. As a result, operating profit from continuing operations decreased 3% to R217m. It declared a 7c final dividend for its year to end-June, up from 5c in the prior period.
The group said volumes in April were particularly hit by Covid-19, but have since recovered.
Metrofile said that after focusing on costs it should return to historical profitability in the first quarter of its 2021 year.
Anthony Clark, an independent analyst at Smalltalkdaily Research, said Metrofile earnings were in line with expectations based on trading updates given by the company.
This shows “how resilient Metrofile is and that its re-engineered business model and focus on cash management & debt management has paid dividends. The Metrofile of old with its cast-iron business model and annuity-type earnings base is seemingly back,” Clark said.
Metrofile is in the middle of a takeover by US-based Housatonic Partners, which made an offer in the second half of 2019.
The private equity investment firm has more than $1bn in capital under management, investing globally from its offices in San Francisco and Boston. It targets growing, profitable companies in the recurring business services, technology and health-care sectors. The deal has been delayed because of the pandemic.
Given the Covid-19 crisis, Housatonic Partners wanted assurances that Metrofile is trading well in a distressed economy. Clark says the company has proved it is and “is in a solid financial position with improving prospects”.
He believes that Metrofile is on the mark and ponders if Housatonic Partners will continue with is due diligence.
What could be of interest is that Metrofile has shown it is resilient and has a solid business model, Clark said. “With the stock trading at 240c per share with a price to earnings ratio of 9.7x and a dividend yield of 5.4%, could that attract other suitors to look at Metrofile aside from Housatonic Partners?”
With the rand materially
BUSINESS MODEL HAS PROVED RESILIENT AND WILL BE FURTHER STRENGTHENED BY OUR RECENT ACCELERATION OF DIGITAL OFFERINGS
weaker against the dollar and euro since the start of 2020, “perhaps these very results may draw out new-suitors for Metrofile”, he said. Whatever the case, “deal or not”, Clark believes Metrofile has shown its renewed resilience and again looks like an appealing long-term portfolio investment. Shares in Metrofile were 4.8% firmer at the close of trade on Monday at R2.40, giving the company a R1.09bn market value. / With Karl Gernetzky