The company reported a statutory net profit after tax (NPAT) of $ 31.2 million for the half-year ended 31 December 2014. The results are a reflection of the revenue decline arising out of a price cap on service fees in Victoria and New South Wales as well as lower contribution from associated companies. This NPAT translates into an EPS of 25.9 cents per share and reflects a 13.4% decline on the figure from the first half of 2014. The Board of Directors has declared a fully franked interim dividend of $ .10 per share.
This NPAT is down 6.5% on the first half of 2014 because of the cap on service fees imposed by Victoria as well as New South Wales (for part of the period). With the loss of bus contracts in regions 1 and 3 of Sydney and the implementation costs connected with the new contract for region 4, equity accounted net profit contribution from associates declined by $ 3.3 million to $ 8.4 million, a decline of 27.7%.
CEO Andrew Skelton said that the company is re-energising its approach to taxi services to build a platform on the basis of which customer interaction can be improved for each taxi network. He is pleased by the early signs of fleet growth and a broadening of network offerings which he believes will translate into revenue improvements in future. The rest of this financial year will reveal the true impact of government changes in Victoria, New South Wales and Western Australia. The company continues to review its cost base but believes that the long-term solution to revenue challenges will come from new revenue streams and is determined to leverage its payment capabilities outside the taxi business.
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Financial Highlights (Source - Company Reports)
Revenue and other income fell by 2% to $ 100.5 million, EBITDA by 6% to $ 42.2 million and profit before tax by 6.3% to $ 32.5 million. EBITDA margin fell from 43.3% to 42% in the effective tax rate remained virtually unchanged at 29.8%. The growth in taxi related service revenues from the addition of more taxis to the networks was more than offset by the decline in taxi service fee income because of the caps in Victoria and New South Wales. Operating expenses were under control and appropriate action has been taken to reduce these costs in the future.
Turnover Growth (Source - Company Reports)
Revenue from taxi payments declined by 9.3% to $ 44 million because the Effective Service Fee Rate outweighed the growth in turnover. Turnover by category rose to $ 616 million compared to $ 550 million in the second half of 2014. However, this was more than offset by the decline in the Effective Service Fee Rate from 8.1% to 7.7%. The turnover growth for the first half of 2015 compared to the first half of 2014 was (2.4%) in CAB accounts, 3.5% in Third Party accounts and 16.5% in Bank Issued.
Revenues from taxi services grew by 1.6% to $ 49.7 million because of the increase in the size of the fleet. The total fleet size increased by 503 cars to 7163 cars of which New South Wales increased by 117 cars to 4221, Victoria by 387 cars to 2634 cars and South Australia decreased by 1 car to 298 cars.
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Network Fleet Growth (Source - Company Reports)
Cost initiatives yielded a total of annualised savings of $ 7 million of which the principal components were savings of $ 3 million on the discontinuation of the taxi driver bonus scheme in Sydney and $ 3 million by way of reduction in merchant processing fees to taxi networks.
The balance sheet showed total assets of $ 581.9 million including cash and cash equivalents of $ 24.2 million (down from $ 41.9 million) and investments in associates of $ 284.5 million (up from $ 274.8 million). Total liabilities worth $ 175 million (down from $ 194 million) of which loans and borrowings amounted to $ 139.7 million (down from $ 159.1 million). Consequently, net assets were $ 386.9 million compared to $ 366.3 million.
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Cabcharge Balancesheet (Source - Company Reports)
Net cash from operating activities was $ 25 million (previous period $ 27.4 million) of which net cash used in investing activities was $ 11.3 million because of additional short-term advances to an associate and capital expenditure while net cash used in financing activities amounted to $ 31.4 million as a result of debt reduction and dividend payment. Cash conversion remained robust at 59% compared to 62% for the previous period. The company also continues to maintain a conservative balance sheet in relation to debt and leverage as indicated below:
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Debt asnd Leverage (Source - Company Reports)
Associates
ComfortDelGro Cabcharge (CDC) reported revenues of $ 173.2 million compared to $ 190.5 million in the previous year, EBIT of $ 27.7 million ($ 38.5 million) and NPAT of $ 15.6 million ($ 22.2 million). The 49% share amounted to $ 7.6 million ($ 10.9 million). The equity accounted net profit declined due to the loss of bus contracts in regions 1 and 3 in Sydney as well as the costs incurred in the transition to the new region 4 contract and the compression of margins. The balance sheet remains strong with net debt to equity ratio at 41.2% (42.9%).
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Taxi service fee income (Source - Company Reports)
CityFleet (UK) equity accounted profit contribution was $ 785,000, an increase of 4.1% over the previous period because of favourable exchange rates. Operations continue to be profitable despite the difficult business environment and the balance sheet is strong with no external debt.
Outlook
The government of Western Australia has imposed a price cap of 5% including GST on service fees and the impact is expected to be around $ 4 million. The company will continue to review the cost base in view of the outlook on revenues. The payments expertise will be leveraged outside the taxi business and there will be a coordinated approach to technology to broaden the offerings of taxi network services. Competitive pressures continue and the company believes that its best response is retention of existing customers through improvements in services and offerings.
Cabcharge Daily Chart (Source - Thomson Reuters)
We believe that the fall in revenues and profits is the result of the regulatory uncertainty faced by the company. The company operates in a highly political and therefore highly regulated environment and, at this stage, we would view the stock as
expensive.
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