This morning, MYOB Group Ltd (ASX: MYO) released their profit report for the full year ended 31st December 2018. Here’s what you need to know.
MYOB is one of Australia’s largest accounting and business software solutions firms. MYOB currently has over 50 products covering solutions for accounting, payroll, payments, retail point of sale and professional tax solutions.
Here Are The 5 Key Points
- Revenue increased 7% to $445 million
- Underlying EBITDA was flat at $190 million
- NPATA was up 2% to $104 million
- Online subscribers increased 57% to 628,000
- Operating expenses increased by 13%
Analyst Targets
Estimates from both Bloomberg and Bell Potter for NPAT were $98.6 million. MYOB’s reported NPAT was $63.8 million, up 5%, and NPATA was $103.6 million. Estimates for dividends were $0.117 per share.
MYOB has not announced a final dividend for the financial year ending 31st December 2018 as they must have written consent from KKR & Co L.P. to announce any dividend. There is more information on that agreement below or in this Rask Media article.
Digging Deeper
Taking a closer look at the results, some important figures are uncovered. Net tangible assets (NTA) decreased from negative $0.69 per share to negative $0.78 per share, a decrease of 13.33%. MYOB states that most of their assets are intangible and predominantly made up of goodwill, which is not included in NTA.
Turning to the balance sheet, FY18 shows an increase in revenue but a slight decrease in profit before tax, from $85.48 million to $85.18 million. A smaller tax bill results in the 5% increase in profit after tax from $60.68 million to $63.785 million. That increase masks the increase in operating expenses that saw MYOB make less profit from more revenue.
The cash flow statement reveals a decrease in cash and cash equivalents from $54.779 million to $34.914 million. This result is due to a decrease in operating cash flows and a 38% increase in financing activity outflows.
Going Forward
Looking ahead, MYOB has refined previously stated 2019 guidance. Organic revenue growth in 2019 was previously estimated as “high single digit”, which has now been revised to be 6%-8%. For 2018, this figure was 6.8%. Their target for 2022 is also given as “high single digit”.
The underlying EBITDA margin for FY18 was 42.6% and for FY19 it is expected to be greater than 38%. Again, this suggests that higher operating costs may be hurting MYOB’s margins.
Free cash flow for FY18 was $107 million and guidance for FY19 is greater than $100 million.
The big news going forward is the Scheme Implementation Agreement with KKR & Co L.P. If the agreement goes ahead, MYOB shareholders will be entitled to $3.40 in cash per MYOB share, assuming no full-year dividend is paid. MYOB Directors are recommending that shareholders vote in favour of the scheme. The share price at the time of the release of the report was $3.41 per share.
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Disclaimer: At the time of writing, I do not own shares in any of the companies mentioned.
