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SafeCharge transactions charging ahead

The payments technology group saw transaction numbers improve by more than half
September 13, 2018

There was little to bemoan within SafeCharge’s (SCH) half-year results, with transaction numbers and values up by more than half to 118m and $6.7bn (£5.1bn), respectively. Of these volumes, more than a quarter were processed via SafeCharge’s own acquiring platform – representing $1.8bn, more than double the prior year's. 

IC TIP: Buy at 318p

In turn, revenues and gross profits enjoyed strong momentum, although the gross margin declined from 57.3 per cent to 54.8 per cent. The payments group attributed this to the “higher-quality and lower-risk” nature of the overall customer base, as it focuses on winning new clients and entering new markets. Brokerage Shore Capital thinks this will “wash through in due course”. 

Admittedly, pre-tax profits declined – the result of both higher amortisation and depreciation costs, and currency-related finance expenses. By comparison, a year earlier the company benefited from $1.4m in finance income. But on the bright side, cash conversion – denoting SafeCharge’s ability to convert operating profits into cash – improved from 79 per cent to 82 per cent. While net cash fell from $113 to $86.1m, the group remained debt free and proposed a generous dividend hike.

House broker Shore Capital forecasts adjusted pre-tax profit of $29.6m and EPS of 17.1¢ for 2018 (from $29.2m and 17.8¢ in 2017).

SAFECHARGE (SCH)   
ORD PRICE:318pMARKET VALUE:£470m
TOUCH:315-320p12-MONTH HIGH:355pLOW: 250p
DIVIDEND YIELD:4.4%PE RATIO:26
NET ASSET VALUE:106¢NET CASH:$86.1m
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201753.013.58.27.7
201866.813.28.18.9
% change+26-3-1+15
Ex-div:27 Sep   
Payment:12 Oct   
£1=$1.31