Baycorp Advantage Increases Profit by 13 Per Cent
Media Release Friday, February 17, 2006
Increases Profit by 13 Per Cent
Strategic Change Program on Track
- Revenue growth and margin improvement underpin strong core trading performance
- Growth in new business intelligence solution products drives revenue diversification
- Collection Services continues profitability improvements; separation expected to be completed by end of the financial year
- B3 change program on track
- Further capital management initiatives to be determined after BCS separation
- Declares interim dividend of 6 cents per share
Australasia’s leading provider of credit information and business intelligence services, Baycorp Advantage, today announced a 13 per cent increase in core net profit(1) to $19.1 million for the six months to 31 December 2005.
Earnings before interest and tax(EBIT) increased by 17 per cent to $27.4 million(2).
Group revenues increased 6 per cent to $99.8 million. EBIT margin increased from 25 per cent to 27 per cent. Earnings per share (EPS) increased by 13 per cent to 8.4 cents per share(3).
The Board of Baycorp Advantage has declared an interim dividend of 6 cents per share, fully franked for Australian shareholders and 25 per cent imputed for New Zealand shareholders. The dividend is at the top end of the company’s target payout range and will see total cash returned to shareholders in this financial year rise to almost $146 million.
Baycorp Advantage Managing Director Andrew Want said: “Against the background of the extensive change and investment program underway throughout the business, this is a strong trading performance that underscores the strength of the Group’s franchise and its capacity for accelerated growth.
“We are not yet seeing the full benefits of the investments we’re making to accelerate revenue growth, but we are gaining traction in key areas and the momentum in the business is continuing to build."
Key features of the half year’s performance include:
- Group revenues from continuing operations up 6 per cent to $99.8 million.
- EBIT up 17 per cent to $27.4 million.
- Core net profit and EPS each up 13 per cent, to $19.1 million and 8.4 cents-per share respectively.
- Information Services and Solutions (ISS) revenues up 7 per cent to $73.6 million; EBIT up 10 per cent to $27.5 million.
- Continued strong growth in commercial business intelligence services driven by product and sales initiatives.
- Baycorp Advantage Collection Services (BCS) delivers profitable growth with revenues up 6 per cent to $27.1 million and EBIT up 193 per cent to $1.9 million.
- Net cash inflow from operations of $30.6 million.
- Directors declare 100 per cent franked (Australia) and 25 per cent imputed (NZ) interim dividend of 6.0 cps
- Selected B3 projects prioritised with an emphasis on revenue growth capabilities and synergies.
Strong results in core businesses
Mr Want said “Operating performance is strong in all business units and that strength continues to underpin the significant investment we’re making across the Group. We’ve maintained exceptional cash generation, improved operating margin and lifted overall sales performance.
“We’re particularly pleased to see the benefits beginning to flow through from initiatives to improve margin and accelerate revenue growth in key areas, such as our commercial services in the ISS business.
“We know we are not yet where we want to be in terms of top line growth. We’re confident that the full benefit of the investments we’re making in revenue driving capabilities will see revenue growth continue to accelerate in the second half and into FY07."
Mr Want said: “BCS is now a profitable, growing, financially robust business. We’ve rebuilt BCS conservatively, for sustainability as well as for growth. It’s pleasing to see the results of all that hard work paying off.
“BCS’s management team has largely completed the separation activities that will allow the business to operate independently of the Group. On a stand-alone basis we believe the underlying profitability of BCS and the productivity and performance of the business can be competitive with leading industry peers."
“We’ve made good progress towards achieving a new ownership structure for BCS,” Mr Want said. “A limited number of potential trade buyers are undertaking detailed review and due diligence of the business and in parallel we’re actively progressing plans for a potential IPO in New Zealand. At this stage there’s good reason to believe the sale or IPO of BCS can be concluded prior to the end of the current financial year."
Mr Want said the Group would continue to actively manage its capital structure and would review capital management requirements following the BCS separation.
“We’re now focused on ensuring that the cost base the Group retains after the BCS separation is reset at a level that preserves the profitability and earnings power of the ISS business for FY07 and beyond,” said Mr Want. “We know there is a $6 million annualised cost overhang after BCS is separated, and we are developing detailed plans to extract those costs."
B3 change program positions Baycorp Advantage for next phase of growth
Mr Want said: “As the result of a lot of hard work over the last few years the Group is now in very good shape financially, and now we’re working to leverage that sound financial platform for the future”.
In August 2005 Baycorp Advantage announced the completion of a concentrated review of its strategy and operations which produced the Baycorp Advantage Business Change Blueprint (or B3) Program.
“B3 is a major three-year program of investment and restructure that was begun in mid 2005 with the aim of positioning Baycorp Advantage as the leading provider of business intelligence services and solutions in our region,” Mr Want said. “Our financial results to 31 December demonstrate that we’re achieving profitable growth while undertaking a significant strategic change and investment program."
“To date we’re tracking to plan in relation to our major deliverables in the B3 Program. We’ll continue to revalidate the identified benefits as the Program progresses, and we’re confident that B3 will deliver the projected benefits."
Mr Want said that based on the first-half trading results and the current outlook for the second half of the financial year, he remained confident that Baycorp Advantage was on track to achieve the EBIT forecast of $58.6 million(4) outlined in the Target’s Statement issued to shareholders on 30 August 2005.
1 Net profit after tax, excluding significant items of income and expenditure. Referred to as “adjusted” profit in 4D.
2 Compared to the previous corresponding period.
3 Referred to as “adjusted” EPS in 4D
4 EBIT of $58.6 million is stated before taking account of takeover defence costs and the impacts of the BCS separation and sale process