Financial software business GBST Holdings Limited (ASX: GBT) this morning posted a net profit of $15.3 million on revenues of $114.3 million for the full year ending June 30, 2015. The profit and revenues are up 52% and 16% over the prior year.
The board declared a final dividend of 5.5 cents per share to take the full year total to 10.5 cents an increase of 24% over the prior year.
GBST Wealth Management
The wealth management division which develops and sells the GBST-Composer software was the standout in the past financial year. The group had significant success selling the Composer wealth administration platform to providers of UK pension platforms, with international revenues up 41% to $50.1 million.
Earnings for the international wealth management division were up 74% to $11.4 million and the UK business wins powered the overall growth for the year. This was an outcome I repeatedly suggested was likely in a series of articles going back to beyond June 2014 when shares sold for around $3.50. Since then they went on to sell for as much as $6.84.
The Composer platform now has 10 pension administration focused clients in the UK and 30 Australian and New Zealand clients in an equivalent space. The good news is that the UK is a big market and given the business has some traction and a decent reputation it may kick on.
GBST Capital Markets
In my opinion this part of the business had a rather underwhelming year as its GBST-Syn product did not see the kind of sales traction expected. Revenues were flat for the year in Australia with margins consistent and Australian earnings of $9 million also took a $640,000 hit due to the bankruptcy of broker BBY Limited.
The international division's growth was the real disappointment as although revenues rose the annual loss blew out to $3.3 million as investment in the sales teams and technology is yet to pay dividends.
The business has been investing for growth in the US, but this is a tough market to crack with some strong competition. Europe also suffered from soft markets and an economic malaise that meant discretionary spending on new technology was not top of the agenda for many financial services businesses.
Outlook
Overall GBST posted a strong year and the business carries no debt with $7.5 million cash in the bank, while it continues to invest heavily in product development.
The company says its Capital Markets business has a strong international pipeline of potential new business in Asia, Japan and the US with substantial market opportunity. In my opinion GBST is the kind of business that should be assigned credibility in delivering on its projections and success here would be a major boost in the year ahead.
The Wealth Management business also has potential to keep on delivering and the group's core strengths in its home Australian market are the recurring revenues that should keep ticking over.
Selling for $5.31 the group is on around 18x trailing earnings per share of 28.9 cents. Its international exposure, high margins and healthy balance sheet means it remains one of the better small-cap opportunities on the ASX in my opinion.
