Well placed and with good prospects

Metrofile operates in a growing industry that is continually enhanced by advances in digital communications and storage technology. It is 57,4% black-owned; its empowerment partner, the Mineworkers Investment Company (MIC), owns 37.24% of its equity.

Metrofile reported earnings growth of 19.8% to R456.1m. Its EPS were up 11.4% to 18.6c and it maintained its dividend at 13c/share. However, headline EPS were down 6.5% to 15.6c/share owing to the exclusion of the one-off gain of R12.5m from the sale of Rainbow Paper Management.

Cash generated from operations before net working capital changes were relatively unchanged at R129.1m, while cash generated from operations decreased 13.6% to R119.6m.

Net cash inflow from operating activities dropped markedly to R72.25m from R96.36 in the prior 12 months. This is concerning, though the company maintains a great dividend.

Metrofile says it intends to grow by targeting organic increase in SA, boosting its product offering, placing greater emphasis on technology and expanding in Africa and the Middle East through acquisitions and partnerships.

In accordance with this strategy the group acquired a 100% interest in Tidy Files, a leading provider of end-to-end document management and storage, for R77.9m from cash resources in July 2017. It also took on the minority shareholder’s interest in Cleardata for nominal value.

As part of its digital transformation in November 2017 a new digital company was launched utilising cloud-based software, infrastructure, security and data platforms to service the Metrofile customer base and to provide cloud-based digital solutions to other companies. The company will provide enhanced offerings to the data it has through artificial intelligence as well as predictive analytics.

During the year, 5m shares were acquired at an average price of R3,99 (416m shares are at present in issue).

Growth in Botswana is seen as limited owing to competition. However, prospects in Zambia, where there is no electronic document retrieval system in place for some of the largest banks, are great.

Though the outlook is good, operating in Nigeria requires a reputable strategic partner.

Mozambique is a new market, offering significant growth potential as firms begin to understand the benefits of document storage and retrieval.

Metrofile remains well placed and foresees stronger second-half earnings.

We must wait and see whether increased cash flow will result from its current acquisitions, the Mozambican and Zambian operations and the new digital company on top of its existing operations, and whether it can maintain its great dividends.