NZX top performer considers tasty treat for investors
Shareholders in Diligent Board Member Services have been handsomely rewarded with the software company ranked top performing NZX stock two years running.
Attention is now focusing on the company’s growing cash position and the prospect of potential dividend payments to investors.
That would be a remarkable turn of events for Diligent, which got off to such a rocky start when it listed on the NZX main board in December 2007.
Chief executive Alex Sodi acknowledged that a dividend policy was being considered when NBR raised the question today following the company’s announcement of another strong quarter of sales growth.
“It’s something we’ve started to discus, and as a company we are starting to consider,” he said.
“Certainly when you are starting to generate this much cash … to get any kind of return without risk is very hard these days.”
“Having said that we have noticed a lot of companies in our situation tend to wait until they have a base of at least 15% of valuation in cash before they really feel its prudent enough to start serving a dividend.”
Diligent’s share price was further boosted today on the back of fourth quarter sales soaring 287% against the same period last year and new sales of $US6 million ($NZ7.6 million) up $1 million on the third quarter.
Diligent shares were up 5c to $2.40 at 3.15pm having gained 183.8% in calendar year 2011.
The company said its fiscal 2011 sales of $US15.9 million are now more than four times the 2010 figures and Diligent is set to record its first profitable full year when it next reports in March.
The company’s cash position increased by more than $US4 million in the fourth quarter versus an increase of $US900,000 in the third quarter. The company now has $US9 million in cash on hand as at December 31, 2011.
“Most importantly, Diligent has not sacrificed profitability for growth,” the company noted in its reporting summary.
Positive growth story
With its Apple iPad application driving demand for its corporate governance tool, the company says it sees momentum continuing.
'We expect positive trends in cash flow and improved balance sheet flexibility to continue in 2012 and feel we are well-positioned to deliver another year of exceptional performance and outstanding value to our clients and shareholders,'' Diligent said.
Mr Sodi told NBR the sales growth has been achieved on a relatively flat cost base, which is now being reflected in margins.
“This has been the first quarter that we are really starting to see the cash growth and turnaround, which is really the story of the model we’ve got.
“From the beginning we’ve always said the margins are always increasing and once you turn the corner it really starts generating a lot of free cash, which is how, unlike some other industry, the software as a service is valued.”
Diligent now serves over 1000 public and private companies with more than 1500 boards and 27,500 users in the US, Canada, UK/Europe and the Asia Pacific region.
During the quarter the company signed 203 new licenses compared to 59 in the same quarter last year.
It now has 163 Fortune 1000 companies, 53 NYSE companies, 23 Nasdaq companies and 20% of the FTSE.
Mr Sodi said the company was targeting government entities as well and had recently signed the New Zealand Transport Agency in New Zealand.
“We’re happy with the growth, where the growth is coming from, across all entities both public and private.”