Forest Support Services

Traffic management specialist Forest Support Services grew earnings in the traditionally weaker first half and offers decent organic growth potential in resilient road repair, maintenance and improvement markets.

Formerly Transport Systems, Newport-based Forest operates in Wales and the South and West of England, where its activities include the design of traffic management systems and the supply of temporary fencing and road signs, as well as work on road framework projects. In an encouraging first half, pre-tax profits accelerated from £42,000 to £186,000 on turnover increased 25% to £4.34m (2008: £3.46m), with cash at the half-year improved to £421,000 (2008: £377,000).

Christopher Powell, chairman, flagged up strong trading at the Newport depot, driven by burgeoning sales from existing framework contracts and a pleasing performance over the summer. Meanwhile, trading at depots in Bristol and Winchester was in line with expectations.

Though the second half is historically stronger, the beginning of this year’s latter half has been 'less strong’ than in previous years, with Forest encountering project delays, and public spending cuts could constrain earnings. Having said that, infrastructure maintenance investment is largely non-discretionary and Forest’s recent financials have impressed, with the company moving from losses of £366,000 to profits of £215,000 in the year to last March, despite a drop in revenues to £6.75m (£6.8m).

With a tiny market capitalisation, Forest represents a high-risk punt, although given its recent growth journey and the fact the shares sell for less than nine times historic earnings, it is worthy of a speculation.