In early afternoon trade one of the best performing shares on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has been iSentia Group Ltd (ASX: ISD). Its shares rocketed higher by over 13% today following the release of its full year results which revealed a 23.6% rise in net profit after tax to $24.3 million.
A few highlights include:
- Total revenue up 23% year on year to $156 million.
- Australia-New Zealand revenue growth of 15.9%.
- Asia/Rest of the World revenue growth of 51%.
- A 20% increase in earnings before interest, tax, depreciation, and amortisation to $51 million.
- A 23.6% rise in net profit after tax to $24.3 million.
- Diluted earnings per share of 12.1 cents.
- Expects EBITDA growth in the low to mid-teens in FY 2017.
It's fair to say that shareholders of this global leader in the delivery of crucial business intelligence haven't had the best of years so far. Prior to today its shares were down around 36% year-to-date, with many in the market appearing to be concerned that the company's domestic growth was slowing.
Whilst I do have concerns over the slowdown in its ANZ software-as-a-service (SaaS) revenues, I was pleased to see a big increase in its value-added services (VAS) and an above expectation contribution from its content marketing acquisition.
ANZ VAS revenues rose 19.5% year on year to $20.3 million and its acquisition of King Content boosted local revenue by $12.4 million. This helped offset the disappointing performance of its local SaaS operations, which saw revenue rise less than 1% to $86.7 million due to the transition of clients to fixed price contracts.
There was a much stronger performance from its Asia/Rest of the World operations though. International SaaS revenues rose 16.5% to $15.3 million, VAS rose 18% to $13.2 million, and inaugural content marketing revenues came in at $8.2 million.
I am a big fan of the company, but the lack of domestic growth in its SaaS does worry me. If you exclude the contribution of its newly acquired content marketing company, then domestic revenue only rose 3.9% year on year.
Based on today's result its shares are now changing hands at 28x full year earnings. For it to justify the premium to the rest of the market I would expect to see a marked improvement in domestic operations in FY 2017.
After today's result and its strong share price gains I am hesitant to recommend making an investment right away. Instead, I would recommend taking a look at shares such as Aconex Ltd (ASX: ACX) or Altium Limited (ASX: ALU).
