The Countplus Ltd (ASX: CUP) share price traded flat in early trade on Thursday after the accounting and financial services aggregator handed down its 2017 half-year results.
In the lead up to Thursday's results, Countplus' shares were down 15% over the week (based on Wednesday's closing price of 68 cents) after management revealed that an ongoing ASIC investigation for member firm Total Financial Solutions Australia Limited ("TFS") is likely to result in increased legal and associated costs for the company.
Even so, Thursday's results demonstrate why the professional services aggregator remains a buy in my books.
Here are the some key takeaways from its results:
- Profit from operations before tax was up 9% at $4.2 million
- Net profit after tax was down 67% to $2.1 million
- Total revenue down 1% to $45 million
- Total operating expenses decreased by 1.7% as a result of tighter cost control
- Interim dividend cut by 50% to 1 cent per share
It's no secret that I've been a long-term supporter of the Countplus business model. Like fellow companies Mortgage Choice Limited (ASX: MOC), Retail Food Group Limited (ASX: RFG) and Mantra Group Ltd (ASX: MTR), Countplus operates a capital light business model which leverages the success of its member firms.
The owner operator model invariably fosters a high performing culture as the business owners (i.e., the partners of member firms) have a self-interest in doing well. Although it's inevitable that sales pressures and KPIs associated with this may sometimes cause adverse consequence, such as the behaviour of a rogue advisor at TFS, on the whole, Countplus stands to benefit from empowering its business owners to prosper.
In my opinion, Thursday's results are a testament to that. Whilst Countplus' headline results looked poor because of the weak performance of its investment in innovative SMSF-administration provider Class Ltd (ASX: CL1), the underlying business remains in robust shape, with underlying NPAT largely flat on the prior period. Although sales revenue declined in its financial planning and property divisions, Countplus' flagship accounting services business reported revenue growth of 1.6%, boding well for long-term earnings stability as its other divisions rebase.
Foolish takeaway
Though investors may be spooked by Countplus axing its dividend in half as a result of Monday's revelations around TFS' ongoing ASIC investigation, the underlying earnings of the business remain stable. Therefore, I'd imagine management will reinstate the dividend once the size of the ASIC audit becomes clear.
In the meantime, investors are compensated with a handy quarterly income stream equating to a trailing 4.95% yield (fully-franked). That's a winning formula in my opinion as the business is adjusting to changing times.
