Well placed and with good prospects

Financial Mail - Investors Monthly - - Analysis - Paul Baise

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.

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