SAFETY IN NUMBERS
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.