4 February 2012

Group NBT

HOLD

13/03/2008

The popularity of online shopping and ever widening broadband penetration are enabling internet services expert Group NBT to maintain its rapid growth rates.

Two earlier acquisitions that outperformed, allied to organic growth of 17%, were behind a 98% sales surge to £16.5m for the half to December. Flat pre-tax profits of £1.9m reflected restructuring costs and a small loss from last July's Envisional acquisition. However, underlying profits actually rose 43% and good cash generation swelled the coffers to £3.5m and halved debt to £1m.

European domain name manager Ascio, loss-making prior to its purchase last year, is now 'solidly into profits’, according to chief executive Geoff Wicks, and contributed to a 39% sales rise in the Netnames division, while Wicks predicts further efficiencies to come from the integration process.

Elsewhere, the Netbenefit managed hosting arm, where broadband proliferation and the growth of online shopping are drivers that should see strong growth continue for some time, advanced 58% with the assistance of 2006 acquisition Exalia’s full integration. House broker Numis sees the managed services sector as prime for consolidation due to the increasing costs of data centres driving out the small fry. Wicks adds that current economic conditions, although not conducive to acquisitions, ‘might create a few bargains’.

Recommended by Growth Company Investor at 253.5p in February last year, the shares gained over a third to 346p in May before falling back in volatile markets. On full-year forecast earnings of 13.8p from Numis, rising to 17.9p in 2009, the shares are a firm hold.

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Sector: Software & Computer Services

Companies: Group NBT (suspended on 24 November 2011)

Market cap: £55.57m

PE Forecast: 16

Share price: 221p

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