What: Shares in finance company Silver Chef Limited (ASX: SIV) surged 8% on Friday morning after the group released a strong set of half-year earnings and announced an increase in full year profit guidance. The company operates two brands, Silver Chef Hospitality Financing and Go Getta Rent.Try.Buy. financing, which focuses on transport and construction financing.
So What: Silver Chef has been a solid performer over the last 12 months but investors have been concerned that slowing growth in the group's hospitality division and an expansion into Canada could see the company miss earnings guidance.
But investors needn't have feared!
Silver Chef's expansion of hospitality financing services into both Canada and New Zealand remains on track, with Canada having achieved breakeven cashflow in the half and New Zealand's progress 'within expectations'.
The highlights of Silver Chef's results were:
- Revenue increased by 23% to $83 million
- Rental assets growth of 19% to $335 million
- Net profit after tax of $7.1 million, up 9%
- Earnings per share up 13% to 24 cents.
- Fully franked interim dividend of 16.0 cents per share, up 14%
Investors might have noticed the proportionally small increase in net profit compared to revenue and rental asset growth. Silver Chef's management pointed to increased bad debt and impairment provisioning, costs sunk as a result of establishing offices in Canada and Auckland, and the establishment of asset reconditioning facilities in Canada and Melbourne.
What Now: The outlook for the next 6 to 12 months remains strong following record GoGetta acquisitions, up 51% on the second half of FY14 and an increase in borrowing facilities to $140 million.
Silver Chef's management believes net profit will be significantly higher in the second half as a result of the massive jump in assets on its books. They have boosted full-year guidance from a range of $13.75m to $14.25m to a range of $15.2m to $15.7m.
The mid-point of this range would indicate earnings per share of 52 cents for the full year, putting the company on a price to earnings ratio of 14.3, not bad for a company growing earnings at 22% a year and offering a 4% yield!
