Cover-More Group Ltd reports interim results: Here's what you need to know

Not even double-digit earnings and revenue growth could save Cover-More Group Ltd (ASX:CVO).

Ryan Newman (TMFNewmy)

Ryan Newman (CFA) is the Director of Research of The Motley Fool Australia, and Portfolio Manager for the Pro and North Star services. Ryan’s interest in investing and stocks began at a young. His journey with The Motley Fool started first as a member but when the company first came to Australia he joined the team as one of our writers. Recognising his investing talent and passion, it wasn’t long before he was approached to join the investing team as a research analyst on Pro. Ryan is passionate about learning and continual development. He earned his Chartered Financial Analyst (CFA) designation in 2022, and has completed his Bachelor of Accounting and his Graduate Certificate of Corporate Finance. Ryan loves spending time with his young family as well as non-fiction reading, catching the latest movies and following his sports team, the St Kilda Saints (AFL).

Published February 20, 2015 10:49 am AEDT

Cover-More Group Ltd (ASX: CVO) shares have fallen heavily today despite having reported strong double-digit revenue and earnings growth for the six-months ended 31 December, 2014. The stock tumbled more than 11% to just $1.77 after having closed at $1.99 on Thursday.

So What: Cover-More, which is Australia's largest travel insurance group, reported a 26.6% lift in net profit after tax (NPAT) to $11.9 million which came on the back of a 10.7% increase in net revenue of $112.7 million. Travel insurance sales were up 12.5% versus the prior corresponding period (pcp), while medical assistance sales jumped 6.6%.

Commenting on the results, Group CEO Peter Edwards said: "These are very pleasing results, given the current trading environment with outbound travel demand softening in the first half due to falling consumer sentiment in our major market, Australia, and the appreciation of the US dollar."

Pleasingly, Cover-More's investments in India and China are paying off with high rates of growth tipped in both markets, which will help reduce its reliance on its core Australian market. Further, it will also reduce its reliance on any one customer, including its major Australian customer Flight Centre Travel Group Ltd (ASX: FLT) which has also suffered lower-than-expected sales recently.

The company declared an interim fully franked dividend of 3.2 cents per share, in addition to a special fully franked dividend of 1.8 cents per share.

Now What: Rather than acknowledging the company's strong results, investors are clearly focused on the outlook provided by Cover-More Group. It said that it expects conditions in Australia to remain tough in the second half of the year, citing factors such as weak consumer confidence (and a low Australian dollar), as well as terrorism and other events that may have spooked travellers recently.

Cover-More Group is a high-quality company with strong growth potential and long-term investors should view this dip as a perfect opportunity to take a bite.

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