The OFX Group Ltd (ASX: OFX) share price is up 11% to $1.57 this morning after the money transfer business reported its results to the market for the financial year ending March 31 2019. Below is a summary of the results with comparisons to the prior corresponding period.
- Statutory net profit of $17.6m, down 5.8%
- Underlying EBITDA of $32.2m, up 8.1%
- Total fee and trading income of $128.7m, up 8.2%
- Net operating income of $118.7m, up 8%
- Turnover of $23.7b, up 11.9%
- Total transactions 1,049k, up 8.8%
- Average transaction value of $22.6k, up 2.2%
- Transactions per active client up 12.6% to 6.7
- Cash on hand of $58.6 million, no debt
As we can see this is another year of decent if unspectacular growth for OFX Group across most of its key operating metrics, however, the bottom line actually fell mainly due to what it (previously) disclosed as “corporate action costs” of $4.3 million.
The group’s CEO also noted that markets in the second half of the year to March 31 2019 were softer than expected. No explanation was given for this as far as I could see, although any number of reasons could explain a decline in spot transactions across the industry.
The group also has a strong balance sheet and on the surface its disruptive nature, scalability, and capital light business model may make it look attractive to many investors.
However, the stock is actually still down around 20% from its 2013 initial public offering price and I have covered many times before some of the weaknesses in the business model in particular around conflicted remuneration that would not be obvious to the untrained eye.
Culturally, OFX is also now a different business to the one that achieved a $2 IPO price in 2013 when many insiders and founders sold down nearly all of their stakes in what was supposed to be a business positioned to continue growing.
This show how founder sell downs at the IPO stage should be taken as a cue for investors to look a little deeper into the story behind a potential investment opportunity.
I have also covered previously the legislative factors that may have been behind the decision to IPO when it did. It’s also notable that OFX has seen a high management turnover seen its IPO, with today’s management team almost entirely different to that in 2013.
I mention all of this because the business model and history is still relevant to the outlook for OFX in my opinion.
Overall, I’m not a buyer of OFX shares, although in fairness this is a reasonable result for the business.
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You can find Tom on Twitter @tommyr345
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 Scott Phillips.