The People Infrastructure Ltd (ASX:PPE) share price is up 250% since March, despite headwinds from COVID-19. Let’s take a closer look.
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ASX workforce management and staffing solutions company People Infrastructure Ltd (ASX:PPE) has faced plenty of challenges this year.
With the onset of national coronavirus lockdowns back in March and April, it looked like People Infrastructure’s business model would come under severe pressure. Reduced staffing needs across multiple sectors, particularly the hospitality industry, meant revenues were drying up. As you might expect, its share price plummeted, from a mid-February high of around $4 all the way down to just $0.90 by late March.
Things weren’t looking good.
But in the months since the company has been able to turn its fortunes around. With a diversified customer base serving many large-scale corporations, People Infrastructure was able to generate significant revenue growth despite the impacts of COVID-19. And its share price zoomed. Opportunistic investors who snapped up shares in People Infrastructure back in March are now sitting on gains well in excess of 250%.
So how did the company do it?
Although COVID-19 did negatively impact People Infrastructure’s business, the effects were relatively short-lived. More than half of People Infrastructure’s business is generated by healthcare and community services, while a significant chunk also comes from information technology.
Despite a ban on elective surgeries, healthcare staffing requirements have remained high throughout the pandemic. And many companies operating in the information technology space have seen business increase during lockdowns, due to increased demand for IT infrastructure and support services.
What were its FY20 results?
Revenues were up 34% year-on-year to $374.2 million, while normalised earnings before interest, tax, depreciation and amortisation (EBITDA) expenses jumped by 49% to $26.4 million. Normalised net profit after tax but before amortisation expenses also soared 53% to $18.4 million. The fact that earnings growth outpaced top line revenue growth is a positive sign, showing both the scalability of the business, and also its success in driving down costs.
People Infrastructure is cautiously optimistic about FY21. Despite continued market volatility caused by COVID-19, People Infrastructure’s management team is focussed on pursuing organic growth opportunities. It also has $80 million to $90 million at its disposal to pursue acquisitions and is already conducting due diligence on a number of targets.
The company’s positive results for FY20 earned it a place on Motley Fool’s Dividend Investor scorecard back in August. At that point, it was paying out a dividend yield of 3.8% fully franked on a share price of $2.23.
Since our Foolish analysts recommended it, People Infrastructure’s share price has jumped a further 55% to $3.45, which means the dividend yield has dropped down to about 2.4%.
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Returns As of 6th October 2020
Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia has recommended People Infrastructure Ltd. 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.