Aerial mapping company Nearmap Ltd (ASX: NEA) reported a 32% increase in revenue to $23.6 million and an 82% fall in profit before tax to $0.6 million in its 2015 financial results. Revenue rose as the Australian business continued to grow, whilst the setup costs of the US business caused a drag on profits.
The company is debt free and had $17.2 million in cash at the end of the financial year, although this fell by 26% compared to last year. This is because cash inflows from operations were just $0.1 million, but cash outflows from investing activities were $7.1 million.
On the balance sheet there was a sharp rise in plant and equipment up 212% to $4.4 million and intangible assets up 114% to $11.3 million. The reason for this is that software development costs, image capture costs and money spent on camera systems all exceeded the amortisation and depreciation charged against these assets during the period. This is to be expected given the expansion into the US, but over the long-term depreciation and amortisation should match up with expenditure on non-current assets.
Total remuneration of directors and key management was $4.1 million, up 26% on last year. Of this total, $2.1 million was in the form of share-based payment options up 27% on last year. In particular, CEO Simon Crowther's total package rose 42% to a cool $1.4 million including $0.7 million worth of options. In total, 13 million options were awarded to key management and directors during the period with a weighted average exercise price of 90 cents.
Simon Crowther's outlook statement included a downgrade to the aspirational Australian revenue run-rate target set two years ago. The company now expects annualised revenues to be in the range of $28 million to $32 million by December 2015, down from $30 million to $50 million.
First revenues in the US were captured during the year and the company reconfirmed its revenue run-rate target of $30 million to $50 million in America by December 2017. Thanks to improvements made to its camera system, Nearmap was able to capture a population area of 170 million people in the US, well above its target of 100 million for the year.
In the investor presentation released alongside the accounts, the company states that earnings before interest and tax (EBIT) for the Australian business were $14.8 million, up 20% from $12.4 million last year. There was no US business last year and the reason 2014 Australian EBIT does not equal group EBIT is mainly because business overheads were excluded from the regional calculation.
Business overheads rose 10% to $12.2 million during the year. The company advised that capture and capital costs for the US expansion were $6.2 million which is under its $8 million budget. However on another slide, it is revealed that total cash invested in the US was $11.3 million which is more than the $8 million budget. Maybe the budget wasn't intended to reflect the full cost of the expansion, but in that case it seems a fairly useless piece of information to provide investors.
Still if Nearmap can repeat the success it achieved in Australia in the much larger US market then shareholders buying at today's prices will do very well indeed. If not, then the Australian business alone goes a long way towards justifying the current share price.
