Gruden Group poised for strong second half
Provider of fully integrated fintech and digital marketing solutions, Gruden Group (ASX: GGL) released its first half result for the six months to December 31, 2016 after the market closed on Tuesday.
On 26 May 2016, The Gruden Group Ltd (previously known as Exoma Energy Limited) completed the acquisition of 100% of the shares of Blackglass Pty Ltd, Mobile Den Pty Ltd, Gruden Pty Ltd and Ixion Interactive Pty Ltd for a consideration of $5,691,552, settled by issue of shares in The Gruden Group Ltd.
This is the first half-year reporting of the results of the combined entity, and while the group’s headline figures of a loss of $2.5 million from revenues of $7.5 million aren’t impressive on face value, they are not indicative of the company’s future performance.
Revenues from new contracts to be realised in the second half
More specifically, revenues will be substantially higher going forward as the benefits of contract wins gain traction. Importantly, a significant proportion of new revenue will be of a recurring nature, providing earnings predictability.
Also of significance, is the fact that initial costs incurred in restructuring the businesses and rightsizing the resource base to service new contracts were recognised in the first half without the benefit of related revenues, which will start to flow in the second half of fiscal 2017.
The 50% spike in GGL’s shares over the last fortnight is perhaps recognition of this unfolding trend as it came on the back of the award of a number government digital transformation contract.
It should be noted that share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.
Integration process complete with the second half to benefit from cost-outs
Now that the integration process is for the best part complete, management said that actions have already been taken to reduce employee costs by $1.8m going forward. Revenue has increased and GGL is now delivering over $1.3 million in monthly revenue, equating to annualised revenue of more than $15 million.
The key income driver in the first half was the group’s Government business unit, accounting for 27.2% in revenue. This can be attributed to a number of contracts won during and prior to the period including one with the Public Record Office of Victoria (PROV) to create a closed-based environment that will make all its records available online.
GGL expects further revenue conversion from its strong sales pipeline, successfully leveraging cross selling opportunities between business divisions and growing its established presence with key platform builds for State and Federal Government.
The establishment of a Canberra presence and an indigenous joint venture is expected to enhance the group’s ability to win government contracts.
Growth strategy for mobileDEN at the advanced planning stage
GGL is in the advanced planning stages of defining its growth strategy for its intelligent, next generation mobile engagement and transactional platform, mobileDEN, which offers integrated marketing capability. mobileDen is relevant to multiple vertical markets including food & beverage, hospitality, hotels and stadiums.
Looking to the future, GGL’s chairman, Gary Castledine said, “Gruden is a business with a revenue model that combines an attractive balance of high growth transaction fees and recurring licensing and consulting fees”.
He highlighted the company’s achievement in becoming one of only six Australian providers accredited by the AWS Government Partner Program. GGL is also a Premier Google partner, Sitecore Gold Implementations partner and an Oracle Gold Partner.
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
Conflict of Interest Notice
S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.
The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.