In a world of information overload it is good to know there are specialists such as Information Services Corporation (TSE:ISV) to make life easier.
It's a Saskatchewan-based business services provider that administers registries, such as land titles, as well as corporate and personal property (e.g. vehicles) registries, and it also maintains geographic databases.
All of this useful information is then made easily available to the general public.
If that sounds like the sort of service that is typically performed by local government, that's because it is. The Province of Saskatchewan was ahead of the curve, however, in hiving off the organization responsible for maintaining all of these records, and thus Information Services Corporation (ISC) floated on the Toronto Stock Exchange in 2013.
Prior to that it was a Crown corporation, a kind of government organization that operates at arm's length from the government.
Upon becoming a publicly listed company ISC executed a 20-year agreement with the Province of Saskatchewan to be the exclusive provider of the Province’s land titles registry, land surveys directory, personal property registry and corporate registry.
That mandate provides a solid bedrock upon which it can grow its business, both organically and through acquisition.
In essence, the company has two paths to growth: increase the range of services it provides, and expand the number of regions in which it provides them.
An example of the former was the completion in May last year of the development & implementation of the Saskatchewan Asbestos Registry, and other contracts with Saskatchewan were signed throughout the year, so the province is clearly a happy customer.
“What we do, we do very well,” said Jonathan Hackshaw, of ISC's Investor Relations department.
“When we were a Crown, we ran the business as if people had a choice, and that approach to customer service has continued and served us well,” Hackshaw added.
Its expertise in maintaining and providing key search and registry information services should prove appealing to other government agencies looking to outsource.
“We assume the operation and management of the services, integrate the people and the systems, and leave the government agencies to focus on what they do well,” Hackshaw explained.
Outsourcing the services also frees the government organizations from having to constantly upgrade their technology.
This being local government with very long sales cycles, this transformation in modus operandi is not going to happen overnight, but the pressure on government budgets is surely going to increase and the outsourcing option will look increasingly enticing under that scenario.
The acquisition in October 2015 of ESC Corporate Services, a company so complementary its name was virtually identical to ISC's, diversified the revenue stream and, importantly, expanded the geographical footprint beyond Saskatchewan.
ESC provides law firms, corporations, financial service institutions and others with services across Canada and around the world.
It has offered these corporate services in Ontario since 2009 in Quebec since 2014.
Diversification is important for the company, because although it has a solid revenue stream that comes from providing essential services that individuals and corporations will always need, growth is undeniably easier when economic activity is rising.
In a Canadian economy that has been hit by the downturn in commodity markets, the importance of not relying too much on one sector has been underlined.
“Saskatchewan is a very diversified economy,” Hackshaw stressed. “We have broad resource and industry sectors, such as mining and agriculture, which can help weather a downturn.
Perhaps there is a reason why the company features wheat fields on its web site rather than oil derricks …
Nevertheless, it is undeniable that ISC had to do a lot of running to stand still in 2015.
Revenue for the year was C$78.3mln, down 2.7% from the year before, while adjusted underlying earnings (EBITDA) eased to C$30.4mln from C$31.6mln the year before.
The adjusted EBITDA margin held up well, declining only a little to 38.8% in 2015 from 39.2% in 2014.
This looks a very suitable stock for the proverbial widows and orphans, with a full-year dividend pay-out of 80 cents, maintained from the year before. At the current share price of around C$15, the stock offers a yield of 5.3%.
“Despite a year-over-year decline in revenue, ISC generated C$21.5mln in free cash flow in 2015 and has generated nearly C$69mln since going public in July 2013,” chairman Joel Teal told shareholders in the company’s latest annual report.
That free cash flow enabled the company to shell out C$14mln in dividends in 2015, and over a nine-quarter period as a public company it has paid out more than C$31mln in dividends.
Meanwhile, the company has got off to a solid start to 2016.
Both the Registries and Services segments performed well in the first quarter and made strong contributions to results. The year-over-year improvement in free cash flow and margins is a reflection of the addition of ESC to the revenue stream, as well as prudent management of expenses, which continues to serve the company well in a flat economy.
Revenue and earnings growth may have stalled last year but while pocketing the dividends, shareholders can also look forward to the possibility of a return to revenue and earnings growth, as the company pursues its steady-as-she-goes growth strategy.