What: Cover-More Group Ltd (ASX: CVO) today delivered its first annual report since listing on the Australian Securities Exchange, and its results were well received. On the back of a net profit of $25.1 million (up 14.1% on the prospectus forecast of $22 million) and a 20.1% rise in gross travel insurance sales to $369.1 million, the shares rose as much as 8.6% to $2.15 before settling back to $2.08.
So What: Shares of Australia's largest travel insurance company were slammed a couple of months ago following a profit warning from Flight Centre Travel Group Ltd (ASX: FLT) and rising concerns of less outbound travel. Despite this, financial year 2014 proved to be a very successful year for Cover-More.
The group managed to report results ahead of forecasts outlaid in its IPO prospectus for each of its operating and geographic segments. Although the company did report some domestic softness, this was offset by strong growth in Asia and growing operations in India. As it continues to reduce its reliance on any one business segment, Cover-More's position in the market will only continue to strengthen.
Here are some of the other highlights.
- Basic earnings per share of 6 cents, up from 3.4 cents in 2013
- Investors will be very pleased with its 7.2 cent per share dividend, 100% higher than the prospectus forecast (comprised of an ordinary 4.0 cent dividend and 3.2 cent special dividend)
- 26.9% growth in pro-forma EBITDA to $51.9 million (supported by a $3.4 million EBITDA benefit from an underwriter profit share relating to FY2012), up 9.7% on prospectus forecast
Now What: I named Cover-More Group as my top stock pick for August due to its leading position (46% share) in a growing market and expectations of high levels of international travel being sustained. It is very pleasing to see it progressing along its growth path. With the stock still trading 16.8% below its 52-week high price, I believe Cover-More Group is presenting as a compelling buy right now.
