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Here’s how SAI Global Limited grew profits 23.6%

Credit: Benny

SAI Global Limited’s (ASX: SAI) market capitalisation is closing in on the $1 billion mark today after the company reported a strong set of results which has led to the share price lifting around 1% by mid-afternoon trade on Tuesday.

The leading provider of information services and solutions for managing risk, achieving compliance and driving business improvements has reported the following profit results…

Full Year results:

  • Revenue grew 3.8% to $547.7 million
  • Underlying net profit after tax surged 23.6% to $55.6 million
  • A final dividend of 9% (80% franked) has been declared. An interim dividend of 7.5 cps was also paid during the financial year, bring the total dividends for the year to 16.5 cps, up one cent on the prior year.

Here’s how SAI achieved the stellar results:

  • The group has successfully rolled out an operational efficiency program. This has resulted in a reversal of the declining margin trend which has been a negative factor in recent years.
  • The program has also laid the foundations to grow top line revenues at a faster rate.
  • These operational changes have in turn boosted operating leverage with the underlying earnings before interest, tax, depreciation and amortisation (EBITDA) margin improving by 2.8% to 23.1%.

What’s next:

  • The share price of SAI is still down close to 6% over the past year which is slightly worse than the performance of the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) which is down around 4%. The past year has seen significant adjustments occur at SAI and the takeover approach by Pacific Equity Partners has helped the market wake up to the underlying value in SAI’s business units.
  • Management has provided guidance that it expects continued growth in both revenues and profits with the weaker Australian dollar expected to positively contribute to the financial year 2016 results. It’s possible that the market will underestimate the earnings growth that may be achieved as SAI leverages off its turnaround strategy, this could provide investors with an opportunity to buy into a quality business at a reasonable price.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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