Superannuation software company Class Ltd (ASX: CL1) has reported its half-year profit results to the market. The Class share price could enjoy a good day of trading on the ASX as a result.
Here are the key takeaways:
- Revenue rose 31.8% over the prior year's result to $14.2 million
- Net profit rose 28.1% to $3.6 million
- A dividend of 1 cent per share payable in March was declared
- It reported a record 17,775 additions to the number of billable portfolios, taking the total to 130,216
- Its market share of self-managed superannuation funds (SMSFs) increased to 21.7% from 19.2%
Class believes its share of the cloud SMSF software market (meaning those that provide access to superannuation software from any device) was 68% at 30 June 2016, up from around 65% in the year prior.
According to the next chart, Class also believes it has captured all (meaning not only 'cloud' software) of the SMSF market's growth for a number of years.
"It has been another strong six months for the Class team," CEO Kevin Bungard said. "We have continued to experience record growth in billable portfolios on Class Super, and recorded the strongest period to date for the Class Portfolio product."
"Our data shows that 36% of SMSFs added during the December 2016 quarter were from new business won by accountants who have used Class for more than 12 months," Bungard added. "The typical accountant using Class for more than a year grows their businesses at 20% per annum or more than three times faster than the industry growth rate."
Buy, Hold or Sell
I suspect Class Ltd shares will rise today and indeed over the long-term. The reference, which suggests accountants are using more of Class and therefore creating new business, means that it is a self-fulfilling cycle – a network effect. The more accountants using Class now the more billable portfolios they will get tomorrow.
If you are looking for a solid growth stock that isn't necessarily a bargain, I think Class could be worth some investment dollars today.
