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PayGroup (ASX:PYG) share price falls despite positive update

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PayGroup Ltd (ASX: PYG) shares are falling today following the company’s release of its quarterly update to the market. At the time of writing, the PayGroup share price is down 3.45% to 56 cents.

Let’s take a deeper look and see how the human capital management (HCM) solution company performed for Q2 FY21.

Q2 result

For the period ending 30 September, PayGroup reported substantial growth, most notably from its software-as-a-service (SaaS) offering.

Operating cash flow for the three months achieved a surplus of $1.1 million, up 10% on the prior quarter. This was represented by volume increases of its Astute SaaS timesheets due to improved business confidence. Further support of growth in this segment is forecasted as a result of government budget initiatives.

TalentOz, which was acquired by PayGroup in July this year, has made progress offering 11 new complementary HCM modules, taking the total number offered by PayGroup to 27 modules.

The company won $5.4 million in contracts for the first half of the year, equivalent to 98% of total contract value in FY20. Last week, PayGroup secured a contract win with Volvo Group Singapore, valued at $120,000. This also has the possibility of further opening up a new addressable market within the automotive industry. 

Costs associated with running the business were broadly in line with Q1 FY21. PayGroup said it will continue to execute its cost efficiency plan, with expected savings of $1.5 million for FY21. This will be realised in areas such as hosting technology and corporate costs.

PayGroup closed the quarter with a cash balance of $5.3 million, supported by a successful capital raise that was undertaken in September.

Outlook

PayGroup advised it is on track to continue its momentum in H2 FY21. The creation of its ‘hire-to-retire’ HCM module is seeing a significant number of new customer signings across the Asia Pacific region.

PayGroup Managing Director, Mr Mark Samal, commented on the company’s performance and ongoing opportunities, stating: 

Our recent contract wins, with high quality customers such as Volvo Group Singapore, are testament to our expansion strategy and goal of offering our customers a full-service solution. Not only does this increase our addressable market but gives us significant scope to increase revenue opportunities from existing clients. We are also seeing Asian and Middle Eastern economies rebound strongly and expect continued growth momentum in H2 FY21.

PayGroup share price summary

The PayGroup share price has been on a rollercoaster ride for shareholders this year. The company’s shares were averaging around the 70 cent price mark from late last year until COVID-19 took effect.

Reaching an all-time low of 43.5 cents in March, its shares quickly recovered. In the months following, the PayGroup share price hit a 52-week high of 90.5 cents, before gradually falling again to 56 cents at the time of writing.

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Motley Fool contributor Aaron Teboneras has no position in any of the 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 Scott Phillips.

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