Leading online learning provider, 3P Learning Ltd (ASX: 3PL), has today reported a strong set of financial results for its most recent half year.
In the six months to 31 December 2014, the recently-listed 3P Learning achieved revenue growth of 21%, to $18.4 million, and a net profit after tax, or NPAT, of $4.1 million (excluding non-recurring items) – up 29% on the prior corresponding period.
The $330 million company listed on the ASX in July 2014 and has since seen its share price drift slightly higher.
3P Learning provides an online learning environment for schools with a key focus on developing students' proficiency in mathematics (Mathletics), spelling (Spellodrome), reading (Reading Eggs) and science (IntoScience).
A recent independent study by the Australian Catholic University's Dr. Tony Stokes, "found that the results of Mathletics students are up to 9% higher in external standardised testing," according to the company's results presentation.
Whilst no dividend was declared, there were a number of positives to take away from today's report. For example, 3P Learnings EBITDA (earnings before interest, tax, depreciation and amortization) margin widened to 34.1%, from 28.1% a year earlier.
Average revenue per user, ARPU, increased to $8.40, above expectations of $8.32. This is especially important because as CEO Tim Power says, "Our retention rates to date have not been significantly impacted as a result of the changes in pricing, including February renewals in ANZ." This type of demand side competitive advantage can be a significant driver for company earnings over many years, provided the privilege it is not abused.
During the half, all of 3P Learnings product groups saw revenue growth whilst geographically, all regions experienced a double-digit expansion of revenue. Licence numbers grew by 199,000 during the first half, to 4.865 million.
Pleasingly, IntoScience is showing early signs of positive growth, with a total of 46,000 licences.
Commenting on the results, Mr Power said, "HY 2015 results were pleasing. The seasonality of our sales dictates that the second half is the major contributor to our overall financial results and licence growth. The first half result combined with strong trial activity and trading momentum in first two months of 2015 provides us with confidence that we are on track to meet our prospectus forecast."
He said the group will continue targeting North American schools as well as middle years for students in Australia, USA and UK. "Our plans for North American expansion are proceeding with specific enhancements to our products to target school districts combined with the steady scaling of our sales personnel," Mr Power said.
Should you buy 3P Learning shares?
Looking ahead, the company said it is on track to meet FY15 prospectus forecast guidance and will consider a dividend of between 20% and 30% of NPAT at year end.
Whilst the company is not short of growth potential, 3P Learning will need to continue to grow earnings strongly in coming years to maintain its current share price of $2.61. However if you're looking to add a speculative element to your portfolio, 3P Learning is worthy of a closer look.
