With annual company reporting season now behind us for another year, it’s important to reflect on some of the headline themes that dominated the period, as this is likely to influence performance throughout the remainder of FY2015.
One notable trend was small caps outperforming their large cap counterparts for the month of August, after two years of underperformance. During the reporting period, the four major banks and mining companies had a softer month relative to the overall market.
The darlings
Standout small caps include Slater & Gordon Limited (SGH, see Russell Muldoon’s article today) and Ardent Leisure (AAD), both of which attributed a focus on acquisitions activity for their strong performance. The result announced by Slater & Gordon exceeded the expectations of the market, beating the forecast by 3%. It was a positive end to the year for the consumer law firm, supported by the company’s UK operation, which has made several acquisitions over the past two years, including law firms Russell Jones and Walker, Panone and Fentons. As part of its results announcement, Slater & Gordon also advised it has two more acquisitions planned for the Australian arm, which is expected to drive growth throughout the remainder of FY2015.
Ardent Leisure announced a strong result, posting a 38% increase in full year profit. Along with theme parks Dreamworld and WhiteWater World, the group also owns AMF Bowling, GoodlifeHealth Clubs and Main Event, the latter of which heavily contributed to the result. The company undertook a $50 million capital raising in early August, which was predominantly aimed at funding the acquisition of select FitnessFirst WA gyms.
Print services business CSG Limited (CSV) released its full year results to the market mid August, delivering a performance above guidance. The company has experienced rapid growth in its financing book and with a quality management team in place, guidance of 10% – 15% growth for the current financial year is more than achievable.
Suppliers of Electronic Parts Catalogue Solutions to automotive manufacturers, Infomedia (IFM), also provided guidance for FY2015, which was above market expectations. The company has recently increased its range of product offerings, adding a number of new modules that can be sold into the automotive industry. As part of its results announcement, Infomedia Ltd also advised it’s participating in new pilot programs in FY2015, which will lead to a further increase in sales.
Corporate Travel Management’s (CTD) full year result came in at the top end of their upgraded guidance issued in November. The company announced an underlying EBITDA of $28.9 million, representing 47% growth on FY13. And 37% growth has been forecast for FY2015, which is at the mid point of the company’s guidance. As with Slater & Gordon and Ardent Leisure, acquisitions activity is expected to drive this level of growth for the company.
Credit reporting specialists, Veda Group Limited (VED), delivered results above those outlined in the prospectus forecast by all measures and provided strong guidance for FY2015 of low double-digit growth. The Comprehensive Credit Reporting regime, adopted by the Federal Government in March 2014, aims to provide financial lenders and consumers with greater transparency in the accessing and treatment of credit records. As a result, Veda Group Limited has been investing to take advantage of these reform measures and early results are promising.
Manager and marketer of the Peppers, Mantra and BreakFree hotel brands, Mantra Group Limited (MTR), also announced its results, which were ahead of the prospectus, and reconfirmed guidance issued for FY2015. The company has a strong balance sheet capable of driving growth by acquisition. While parts of the domestic travel market remain flat, the company has been able to snare market share from competitor hotel providers.
These seven companies show that good things can definitely come in small packages.