The Motley Fool

Infomedia’s online transition to boost sales, customer numbers

Investors looking for companies that are growing their business online and boosting their bottom line will be interested in Infomedia (ASX: IFM). It provides information systems for vehicle after-car sales parts and services both here and overseas, with about 45% of its revenue from Europe, about 27% from the Americas, and remaining approximate 27% from Asia Pacific.

Perhaps the car manufacturing industry in Australia is not as strong as it once was, but cars in use here and abroad still need spare parts and servicing, and that is the market where the company thrives. In 2013 it grew its net profit after tax by 19% to $10 million from $8.4 million in the previous year, with sales revenue rising 6.5%.

The company is a consistent earner, and has had an attractive dividend yield for a number of years. In 2013 it had a yield of 6%, and its payout ratio of earnings was 85.7%. Its share price has risen from about $0.20 in August 2012 to its current price of $0.58.

Since a majority of its revenue is from overseas, a weaker Aussie dollar would benefit it. With the exchange rate getting down towards $0.90 to the US dollar, that will lift earnings when they are translated back into Aussie dollars, and make the company more price competitive in its markets.

In the past, the auto parts and services information had to be updated frequently, requiring the company to issue new CDs to its customers with the most up-to-date data, but this year the company concluded its transition to offering a “software-as-a-service” implementation.

Now, over the internet information can be easily accessed through a web browser, and is updated by the company on a more frequent basis. More customers will be attracted by the reliability and predictability of information they need to do their business.

Foolish takeaway

From June 30, the S&P All Ordinaries Index (ASX: XAO) has risen 12.3%, but Infomedia has climbed 20.8% during the same period. Moving its information services to an online platform is a great step to bring in more customers, and that will only add to the bottom line.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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