School communications business MGM Wireless Limited (ASX: MWR) today posted a net profit of $1.04 million on revenues of $3.87 million for the financial year ending June 30, 2015.
The profit and revenues are up 46% and 19% over the prior year respectively, with a final dividend of 1.3 cents per share declared, compared to 1.1 cents per share last year.
Report card
Its technology solutions are sold to schools across Australia and New Zealand to help electronically monitor attendance and communicate with parents and teachers on a timely basis.
One of the company's technology solutions allows roll calls to be recorded in the cloud for example, which helps a school save time and money on administration costs.
The full year revenue growth reflected the increase in contracted schools and the cross and up selling of new products, while cash flows were also strong at $1.69 million for the year, compared to $1.05 million in the prior year.
The main dent in the bottom line was an approximate quadrupling of amortisation costs to $638,356. This was attributed to additional charges associated with development expenditure capitalised in 2015.
The group also flagged a $150,000 provision for doubtful debts, but cash generation generally remains strong and the balance sheet healthy with net cash of $1.34 million after borrowings of $150,000.
Outlook
The business appears to have plenty of potential to fund growth and the outlook is for further spending on research to develop products that win customer acceptance and hopefully add shareholder value.
The business has posted an A- year, although management hardly inspired by stating 2016 will be a year of "consolidation and transition to the next phase of the company's development".
MGM Wireless sells for $1.44 today and with earnings per share of 12 cents a moderately accomplished maths student could therefore place it on a reasonable 12x trailing earnings. In my opinion it remains an attractive micro-cap given its outlook, cloud-based technology and reasonable valuation.
Another business far more advanced in selling cloud-based time and money-saving solutions to public and private sector clients is My Net Fone Limited (ASX: MNF), which recently announced it is to make a dividend reinvestment plan available to retail shareholders like MGM Wireless currently does.
