HiTech delivers 16% profit growth

By Trevor Hoey. Published at Aug 15, 2018, in Features

Name: HiTech Group Australia (ASX:HIT)

Market Capitalisation: $46 million

Closing Share Price: $1.18 (Current share price ($1.10)

After delivering profit growth of 16% for fiscal 2018, shares in HiTech Group hit a 12 month high of $1.18, and they closed at that level on Monday. Management declared a final dividend of 4 cents per share, bringing the full year dividend to 8 cents per share, representing an attractive yield of 6.8% relative to Monday’s closing price.

The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Consensus forecasts indicate that the full year dividend will increase to 9 cents per share in fiscal 2019, implying a yield of 7.6%.

The company provides both permanent and contract staff from its recruitment database of 340,000 specialised information and communications technology professionals.

The HiTech client base, of over 490 active clients, is well established, with strong representation by prominent technology companies and banking/financial services companies, as well as Federal Government departments and agencies.

HiTech has also entered into preferred supplier agreements for the supply of staff in both the public and private sectors.

Permanent recruitment, which comprises the search and selection of candidates for full time employment, is characterised by high profit margins.

Management has been and will continue to develop this side of the business as demand improves.

ICT contracting, comprising the provision of ICT professionals for temporary and other non-permanent staffing needs of clients for specific projects, has continued to supply HiTech with steady cash flow.

However, it is a relatively high volume business with lower margins relative to permanent recruitment revenue.

There is a place for both types of business, and management continues to grow the contract business, with a view to generating increased revenue, even though it offers lower margins.

Revenue targets are speculative, so investors should seek professional financial advice for further information if considering this stock for their portfolio.

Having finished the year with cash of $5.8 million, representing an increase of 13% compared with the previous corresponding period, management could choose to grow either business segment through acquisitions.

It also provides the capacity to sustain a robust dividend stream.

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