Well having put on my Specsavers I see the share price after such a wonderful result is 49c. Oh well, it must be that I don't understand.
All things aside here is a brief set of issues:
1. The current price was last seen in November 2015. That doesn't suggest we are doing that well on our 20-mile walk. Actually, have they ever quantified how far we are in this walk or is it really just a nice slogan. 2. A few years ago the trustee business was the reason they purchased Diversa - Now they are selling it. Yes, they may have anticipated the Hayne commission but they were wrong vertical integration hasn't been outlawed. If it was a cornerstone then what changed. 3. I like presentations to flow from one to the next these do and don't. You sort of get that its apples and oranges and this time I must look at the oranges. However page 6 this time versus page 5 a year ago. Our growth is 31% ( Continuing) but the big kicker is our margin is dropping. That's a huge number in the context of valuing an annuity business that is supposed to be growing very fast. The other issue is that as management explained it's been a very tough half year with the royal commission attacking two of OVH clients AMP and NAB. So yes I see the 6 months as treading water. Its been a hard period but I had expected the NAB contract to have delivered more. 4. Sometimes management get ahead of themselves - ( My opinion) they flagged a dividend after the first lot of disposals and then did not do it. They stopped talking about it and did not say they had decided not to do it. They brought to book the value of the Tax assessed losses at 2018 1H and yet even today some 12 months later they are not actually profitable. I had expected them to be profitable this half not adjusted this and that. Markets like to see actual profits... 5. I don't see the dividend as an intention to start paying regular dividends it's really to use the Franking credits and paid out of the sale of the Trustee business. The share buyback will be to prop up the share rather than a genuine capital management program in my opinion. So nothing has changed from a year ago. They still dont flag when they will become profitable... 6. The "step change" in costs was raised in the conference call and it was a bit of a shock as it seems that we are not yet at the level where the system can handle volume increases,we are still having to add structure, overhead and people almost at the same level as when we have been building. I don't think it was well answered and in my opinion, they chose not to answer the question clearly. They could have said We don't expect to have to incur as high a cost for additional revenue in this division but chose not to amplify their comment. 7. I tried to register for the live teleconference but the link did not work. I also wanted info about their AGM and was using their website last year to advise of the date only to find out that the update on their website was not working and thus the AGM was the next day. All of this in an IT-driven company.
So personally I did expect more and even if they did massage analysts towards their results it was the actual teleconference that brought home to me how little interest there is ion OVH. I think they had one or two questions in total...
Probbaly its all said in the headings of the slides year on year:
"Strong revenue growth with high net cash position"
Actually, they dont have a high cash position as that deal is still to settle. Then add to the fact that 31% growth isn't that much considering that it's apples and oranges as in comes KPMG and out goes Trustee... So growth is really relative and the margin is down. The volumes suggest a lot of investors are unhappy.
OVH Price at posting:
49.0¢ Sentiment: None Disclosure: Held
