Companies: SPI   

Strong organic growth and cash conversion rates represent investment pluses at utility support services group Spice, which grew pre-tax profits by 62% during the half to 28 October.

Profits spiced up from £6.1m to £9.9m during a half in which 100% of operating profit was converted into cash (the inflow from operations increased by £5m to £10.3m) and organic growth was impressive at 30%. Having used AIM to complete a raft of canny acquisitions, Spice provides services through seven businesses including energy, facilities, gas, electricity, telecoms and water services, as well as billing services, a business created through the October acquisition of Revenue Assurance Services (whose expertise lay in billing consultancy, debt resolution and meter point services).

Chief executive Simon Rigby insists that there’s plenty for Spice to play for, with industry drivers remaining strong and cross-selling potential continuing to excite – for instance the margin-enhancing RAS deal will allow Spice to take billing services into the electricity sector. ‘We have not overly penetrated any of the markets that we are in,’ opines Rigby, ‘so there is plenty of growth to go for and plenty of tendering activity in every market that we are in.’ Investors should expect further earnings-boosting acquisitions, as well as a move to the Official List this year.

For April 2008, profits of £22.2m, earnings of 28.1p (22.7p) and a 4.6p dividend are predicted, although contract wins and acquisitions could prompt upgrades. First recommended by Growth Company Investor at 197.5p, Spice isn’t especially cheap on a forward price to earnings ratio of 18.4. However, earnings are growing fast and this is a business with an exceptional track record. Following a recent pullback in price, the shares are a buy once more.

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Spice	LSE	£289.72m	83.00p	-1.75p
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