Xafinity Plc (LON:XAF), which was listed on the LSE on 16 February 2017, has reported its results for the year to 31 March 2017. Highlights include:
1 Revenue of £52.0m (Zeus forecast of £52.2m);
2 Adjusted EBIT of £16.5m (Zeus forecast: £16.2m);
3 EBIT margin of 31.6% (Zeus forecast 30.9%);
4 Cash conversion of 91% (Zeus forecast 90%);
4 Stub DPS of 0.73p per share (Zeus forecast: 0.70p per share);
5 Development of proprietary Radar software.
The investor presentation outlines a growing number of client wins and the transformation of the pipeline of new opportunities. Key to this success is Xafinity’s proprietary Radar software, which will be rolled out to existing clients during 2017.
Zeus view
Investors should remember that Xafinity’s revenues are non-cyclical in nature.
Good progress in Xafinity’s new business wins is encouraging, especially as it is accompanied by maiden results, which are in line with expectations set at IPO.
In our view the most important developments since IPO are the investment in people (e.g. the recruitment of David Hodges from Zurich as Head of National Pensions Trust) and investment in technology (e.g. Xafinity’s Radar software). Radar enables Trustees and Sponsors’ to see the asset and liability movements together on one screen: to consider investment and actuarial advice together; to see opportunities for de-risking Defined Benefit (DB) schemes.
As we are only halfway through the first half to 30 September, we leave our forecasts unchanged. We expect interim results to 30 September to be published at the end of 2017 calendar year.
Valuation
Xafinity Plc shares have performed well since IPO: up 24.5%, which is up 21.8% relative to the FT All Share.
We see Xafinity as a core holding with both growth and dividend attractions. The combination of 6% organic revenue growth, benefits of scale, a 1.5x cover dividend policy and attractive yield should deliver strong returns.
