Finweek English Edition - - Companies & markets - MARC HASENFUSS

IT’S TAKEN A WHILE, but fi­nally se­cu­rity ser­vices provider Com­mand Hold­ings is start­ing to re­sem­ble a busi­ness with real prospects. And that’s no doubt why resur­gent black em­pow­er­ment group Cape Em­pow­er­ment Trust (CET) has se­cured a strate­gic stake in the busi­ness fol­low­ing a re­cent cash-for-shares is­sue.

The most en­cour­ag­ing as­pect of Com­mand’s latest in­terim re­sults (to end-De­cem­ber 2006) is that while turnover in­creased by 20% to R45m, the mar­ket share gain wasn’t achieved at the ex­pense of mar­gins. Op­er­at­ing profit was up 60% to R15,7m – rep­re­sent­ing a much-im­proved in­terim trad­ing mar­gin of 34% (pre­vi­ously 26%). The bal­ance sheet is also in much bet­ter nick.

In­vestors now need to de­cide whether Com­mand – which has seen its price surge to the 60c/share mark on the JSE – still of­fers value. If the group can – as it nearly did last year – dou­ble earn­ings to around 8c/share (with com­men­su­rate cash flows con­firm­ing the qual­ity of earn­ings) then Com­mand can’t be con­sid­ered dear at cur­rent lev­els. OP­POR­TU­NI­TIES • Com­mand re­mains the only listed se­cu­rity and guard­ing

ser­vices provider on the JSE. • The group’s em­pow­er­ment sta­tus – now re­in­forced by CET’s eq­uity par­tic­i­pa­tion – should help in se­cur­ing new niche con­tracts for the core guard­ing di­vi­sion. RISKS • Cash flow was neg­a­tive to the tune of R1,3m, which is dis­ap­point­ing con­sid­er­ing the growth in op­er­at­ing prof­its. With ac­counts re­ceiv­able swelling to nearly R30m in the in­terim pe­riod, col­lec­tions sim­ply must im­prove in the sec­ond half.


Source: I-Net Bridge

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