Recall Holdings Ltd (ASX: REC) is a provider of information management for business records and documentation receival, storage, secure destruction and disposal. Listed on the ASX, it is headquartered in Atlanta, Georgia, in the US.
It operates in 23 countries with leading positions in North America, Europe, Brazil, Australia and New Zealand. About 41% of its revenue comes from the Americas.
ASX listing and company spin-off
It listed on the ASX in December after spinning off from Brambles Limited (ASX: BXB), the supply chain logistics company, and has a market capitalisation of $1.38 billion. It services a wide range of customers, which include about 80% of Fortune 100 companies and over 65% of Fortune 500 companies.
Market demand and growth potential
The demand for information management is growing because companies must keep all manner of records, receipts, correspondence, etc, to maintain a paper trail of the business conducted. According to Recall, the global market for its kind of information management services is estimated to be about $20 billion a year, and still about 65% of this market is done in-house, not by third-party service providers, so there is definite room for growth in its industry.
Financials
In its pro-forma financial statements, over the last four years pro-forma sales revenue has risen 18.6% from $708 million to $840 million. 2013 pro-forma underlying profit of $142 million was down 16% from 2012's $169 million.
The company remarked that the pro-forma sales revenue decline in FY13 was principally due to reduced transactional customer activity in the information management industry and the first-half impact of weaker selling prices for destroyed paper. Pro-forma net profit for 2013 was $79 million.
It has $550 million in pro-forma long-term debt that it anticipated to be drawn down relating to the demerger from Brambles. It also has a $44 million cash position on its pro-forma balance sheet.
Foolish takeaway
Spin-offs of successful business segments of companies usually offer investors good investment opportunities. Commonly, the spin-off company can outperform the original company because it is more focused on its core business, which was probably doing well in the first place since it was listed rather than just sold off.
The growing digitisation of information and record storage means the company can use the experience of being part of a major supply chain logistics company like Brambles, and offer better, more cost effective management solutions for customers whose own data capacity needs and requirements are growing.
