Infomedia (ASX:IFM) share price up 7% on contract win

Infomedia share price has surged after it announced a pan European contract with Ford Europe to provide its electronic parts catalogue.

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Infomedia Limited (ASX: IFM) has signed a strategic pan-European contract with Ford Europe to provide the next generation (Next Gen) of its Microcat electronic parts catalogue (EPC) in the region. In trading so far today, the Infomedia share price has leapt up by 7.5%.

What's moving the Infomedia share price?

Infomedia is a leading software provider in parts, service and data insights to the global automotive industry. Moreover, its software includes an electronic parts catalogue, a service-selling product, a lubricant selection product, and a CRM. The company has 180,000 users across 186 countries and 80% of its revenue is from outside Australia. Greater than 95% of the company's revenue is recurring and its 10-year average operating margin is 43%.

The total contract value of this strategic win is approximately $14 million over 5 years; revenue will begin to ramp up from January 2021. Infomedia believes its EPC is mission-critical aftersales software. It identifies the precise part and accurate pricing of those parts for every vehicle, based on the vehicle identification number. This enables dealers to provide timely, efficient and cost-saving benefits to customers.

The company declared a profitable year in its FY20 annual report. Revenue was up by 12% against the previous corresponding period (pcp). In addition, earnings growth was up 15% pcp. Also, cash earnings before interest tax, depreciation and amortisation (EBITDA), rose by 11% pcp. 

Infomedia has attributed this success to a range of reasons. On the sales side, it was the ability to do remote and hybrid installs while the world was locked down. In addition, an increased focus on debt collections. 

The Infomedia share price is currently trading at a price-to-earnings (P/E) ratio of 29.1, and has a trailing 12-month dividend yield of 2.16%.

Management commentary

Commenting on the deal, Infomedia CEO Jonathan Rubinsztein said:

This is a very significant achievement for Infomedia because it demonstrates that we are delivering on the strategic objectives we set for the business.

Over the last four years, we have been investing in our global platform to ensure our systems, architecture and resources would support global growth. The delivery of the Next Gen platform is the final stage of that strategy. The win with Ford Europe demonstrates how Infomedia will continue to take advantage of significant change impacting the global automotive industry with innovative technology solutions,

This is an exciting win for Infomedia and heralds in a new era for our Next Gen EPC platform, as the innovation and functionality of the platform differentiates Infomedia from its peers by taking an essential but siloed reference tool and turning it into an integrated parts selling platform.

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Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Infomedia. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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