The Myob Group Ltd (ASX: MYO) share price fell 1% to $3.34 this morning after the company released its first half results. Here's what you need to know:
- Revenue grew 14% to $204 million
- Net profit after tax (NPAT) grew 13% to $28 million
- Earnings per share of 8.1 cents, up 6%
- Interim dividend of 5.75 cents, up 5%
- Net debt of $395 million
- Outlook for 13% to 15% revenue growth over the full year
- Expect to spend up to 16% of revenue on research & development (R&D)
So what?
A strong result from Myob with a combination of new customers, higher prices, and the migration of new customers to online benefiting the company. Myob also acquired a payments provider, Paycorp, during the half and hopes to grow customer numbers via cross-selling, lifting transaction numbers and profits overall.
Myob has now lifted its SME Enterprises business (the biggest earner) to 601,000 paying users, with a retention rate of 99% and 90% of users now on the cloud. This should increasingly allow the company to lower its costs and cross-sell existing customers.
Now what?
Myob also announced a buyback of up to 30 million ordinary shares (up to $102 million), which reflects approximately 2/3rds of the company's full year free cash flow. It could be seen as a sign of faith in the company, whose share price has fallen around 17% this year. If you use the management's underlying profit measure NPATA, Myob is not too expensive at around 21x estimated full year profit. There could be substantial growth yet to be realised if the company is able to generate meaningful revenues from its Myob Platform and convert 'legacy users' (people still on the old desktop software) into paying customers.
Even so, I think that Myob's strategy carries risks as the company is pivoting into new businesses with which it has not traditionally been involved. Myob also carries a lot of debt which heightens the risk of the company, even though it is profitable and pays dividends.
