• Just some time ago shares in the company hit a high of $6 but now it is trading at just over $ 3. The company is engaged in taxi related services, as well as bus and coach services and is perceived as being vulnerable to both legislative change and disruptive competition.A large proportion of its profit has historically been derived from the 10% fee it levied for credit card transactions on its electronic payment system in taxis.State governments across Australia have progressively legislated this free down from 10% to 5%, which has had an impact on the bottom line though the effect has been mitigated to some extent by an increased turnover at the expense of smaller competitors.Operators like Uber have also had a disruptive influence on the traditional taxi industry and it is difficult to determine the long-term impact on the company. However, Uber faces its own set of problems in legislative challenges and concerns about passenger safety.the company appears to be responding to the challenges in the industry and is increasing its diversification into the bus and coach business. It is also continuing to develop and improve various aspects of its taxi related businesses such as payments, training and communications.

• The key numbers for the year included revenue of $ 188 million down 4.7% over the previous year, reported NPAT of $ 46.8 million down 16.6% over the previous year including an impairment charge of $ 10.3 million, net debt of $ 104.3 million reduced by $ 12.9 million over the previous year resulting in a net debt/equity ratio of 26% and a final dividend fully franked of $ .10 per share taking distribution for the full year to $ .20 per share fully franked. Other highlights include record fleet growth in taxi services to 7259 cars, an increase of 533 cars or 7.9% over the previous year. Taxi fares processed continue to grow and increased 8.6% to $ 1.11 billion. The decline in the accounts has been addressed and stand at (0.4%) for the year compared to (4.8%) for the previous year. A payments switch has also been operationalised.

• Though revenues were down over the previous year, the company continued to win market share in the changing market as taxi fares processed grew by 8.6%. However, the resulting service fee revenue fell by 15.3% because of limits introduced in Victoria, New South Wales and Western Australia. The increase in the taxi fleet resulted in a 2.6% growth in revenues from members taxi related services. Cash operating expenses were down 1.8% over the previous year excluding impairment charges on investments in associates and depreciation and amortisation but including redundancies, new hires, the build of the payment switch. Initiatives previously announced reduce the annualised costs by $ 7 million and reduced costs for the year FY 2015 by $ 4.5 million. The reported NPAT included an impairment charge of $ 10.3 million on investments in associates and, excluding this charge,, the figure was $ 57.1 million down 13.3% over the previous year. The reported EPS came to 38.9 cents per share compared to 46.6 cents per share in the previous year. Cash generation from operations continued to be robust at $ 50 million and with the debt reduction, net debt/equity ratio improved as at 30 June 2015.

• Turnover for the year through company payment terminals in Victoria increased by $ 63.8 million or 22.6% over the previous year. The combination of this growth and the price limit on service fees resulted in a net reduction in income of approximately $ 5 million. In New South Wales, the government introduced a law to limit prices on taxi service fees to 5% including GST with effect from 12 December 2014. However, turnover through company payment terminals increased by $25 million or 15.9% for the year and the combination of increased turnover and price limits resulted in a reduction in income of approximately $ 7.2 million. The government of Western Australia introduced laws to set a price limit for taxi service fees to 5% including GST and though turnover through company payment terminals increased by $ 5.3 million or 17.5%, the combination resulted in a reduction in income of approximately $ 1.4 million.

• The previously announced initiatives on costs resulted in the achievement of annualised savings of $ 7 million with the impact on FY 2015 being a reduction of $ 4.5 million in cost. Transaction processing expenses increased $ 0.8 million because of the take-up of the contactless FasteTicket. Excluding this item, cash expenses were restricted to an increase of 1.4% or $ 1.6 million to support increases of $ 2.5 million in taxi network revenue, $ 1.8 million in other revenues as well as investment in revenue and product focused initiatives. The company is committed to improving the efficiency of the operating costs and the productivity of its assets.

• ComfortDelGro Cabcharge Cabcharge reported revenues of $ 345.6 million ($ 356 million), EBIT of $ 55 million ($ 68.3 million), profit before tax of $ 43.5 million ($ 54.3 million) and NPAT of $ 31 million ($ 38 million). The company share of 49% came to $ 15.2 million ($ 18.9 million). The decline was due to the costs associated with the new Region 4 contract and compressed margins as well as the loss of Regions 1 and 3. The net debt to equity ratio was 38% (37%). CityFleet UK accounted equity net profit was $ 1.4 million, 15.5% lower than the previous year, the impairment charge reflects the downturn in the oil and gas industry on profits from taxi services in Aberdeen and competitive pressures on services in London.

• We believe that the full impact of the reduction in service fees will only be manifested in FY 2016 and this means that earnings will slip again in all probability by another 6% or so. This talk is cheap in P/E terms but this is not a meaningful valuation in a background in which earnings are dropping. Moreover, the impact of competitors like Uber have still to be fully evaluated. We give a sell recommendation at the current price of $3.00.

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