Hasgrove

ADD

17/04/2008 James Crux

Our faith in pan-European marketing and communications group Hasgrove has only strengthened following strong 2007 results. Pre-tax profits, adding back non-cash charges, rose 44% to £2.6m, on 42% top line growth to £21.7m (compared with a ten-month period to December 2006).

As well as decent like-for-like growth, this was a year in which the ambitious venture integrated four substantial acquisitions – Cabinet Stewart, Odyssey, Amaze and Pavilion, the latter two beefing up its presence in the high-growth digital space – from which Hasgrove has already begun to see synergistic and new business benefits.

Annual highlights included strong 63% profits growth in Hasgrove’s public affairs and corporate communications division, consisting of Interel, Cabinet Stewart (an acquisition consolidating Interel’s standing as one of the leading EU Public Affairs consultancies in Brussels) and Odyssey. Sales growth in the digital and communications division was impressive, up 44% to £6.2m with operating profits growing by 22% to £614,000.

Under Rod Hyde, the architect of the group’s astute organic and acquisitive growth strategy, focused on high-growth, niche areas of the marketing sector where the company has the potential to be a market leader, further takeovers are planned. The latest addition to the fold was February’s £2.7m-to-£3m acquisition of Politics International, a London-based public affairs consultancy.

Based on last year’s earnings figure of 9.8p the shares, backed by Growth Company Investor at 144p early last year and now dividend paying, trade on a modest historic p/e ratio of 12.7 times. The de-rating reflects lack of liquidity perhaps, as well as wider investor disaffection with small caps and uncertainty regarding the marketing sector. However, with the financial firepower in place to fund further astute deals, the modestly priced shares should have further to go and the shares are certainly not to be sold. Existing investors might even consider averaging down.

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