The potential is in the personal details — yours
The company formally called Foneworx has rung the changes. Since bringing in Caxton as a new shareholder in 2013, it has gone on to change its name to Cognition, moved its listing from the AltX to the main board and taken holdings in three companies.
These changes are part of a broader transformation from a business that focuses on providing telecom-related services to one that uses the data it collects to build profiles of customers.
Before the change, the group was best known for entertainment services like counting the votes on SMS-based competitions and for business services like fax-to-email. It also provides secure document management and backup workspace for companies recovering from a disaster.
But in running some of these services, it realised it was collecting a lot of information on consumers that was largely going unused. “We would gather the data but nothing would be done with it after the promotion had ended,” says Cognition CEO Mark Smith.
This is changing as this kind of data is increasingly seen as an asset that can be used to drive growth. Cognition, for instance, is able to tabulate information like the location, age and gender of a consumer from various sources, and then use it to target promotions specifically for that person.
Smith says a retailer, for example, which has an oversupply of a particular garment would usually have to cut its prices by a significant and possibly loss-making amount to move the stock.
But if the retailer knew more about its clients, including where they were located, and had a means to contact them, it would be able to send a digital discount voucher specifically for this garment to consumers who were near stores where this item was overstocked. The advantage for the retailer is that it is able to preserve its margins.
The challenge for Cognition is to collect this data and still comply with the Protection of Personal Information Act, which regulates the processing of personal information. The act prevents the storing of information beyond a certain timeframe and requires consumers to give specific permission for their information to be used.
Smith makes the point that Cognition is careful in keeping within the law when it comes to how it collects and handles the profiles of 10m-15m people it has so far compiled.
To implement the changes at the group, it has created a new division, Knowledge 350. The companies it has taken holdings in — BMi Research, Livingfacts and BMi Sport — have become part of Knowledge 350 and help carry out the shift as they have expertise in analysing and collecting data.
The group also got a boost from media giant Caxton taking a 35% holding in it. These shares were initially held by Primedia founder Issie Kirsh and his son William Kirsh but that deal fell apart and eventually led to Caxton taking their holding in May 2013.
Despite its record of producing good results, Cognition lacked the scale to attract the attention of institutional investors. Smith says this is changing as the new strategy, Caxton’s involvement and the shift to the main board have attracted a little more attention from institutions.
With annual revenue now hitting R118m and a market cap of R330m, investors can no longer claim the company is too small.
It also has a habit of paying handsome dividends. It increased its annual dividend from 7c/share to 12c/share, giving it a dividend yield of 5%.
Its latest numbers show it is able to change direction without losing momentum. Though revenue was down 1,31% to R62,4m it still managed to increase profit after tax 12% to R21,2m for the six months to end December.
With a PE of 11,42 at a share price of R2,40, there is still some upside to it.