PSG Solutions, recommended by Growth Company Investor at 70p last year, has seen its share price and financial progress pegged back by the housing market downturn as well as the introduction of home information packs (HIPs) for every house sold.

However, in the long-term the HIPs requirements are expected to play into its hands and, given the resilience of recent annual numbers, the shares look oversold. Backed by, among others, renowned smaller companies investor Bob Morton, the group’s cash-generative core business, PSG, is the largest private provider of home property searches to UK conveyancers and has already established itself as a leading supplier of HIPs. Indeed, the final roll-out of HIPs set for December is expected to boost its business.

The downturn in the residential housing market and the January 2008 introduction of HIPs made trading conditions tough towards the end of last year. Nevertheless, financials for the year to March proved robust, with the group posting modestly reduced pre-tax profits of £3.24m (2007: £3.52m), on turnover of £14.47m (2007: £14.57m) as the core business marginally grew pre-tax profits.

Finishing the year with improved net cash balances of £2.25m, PSG attributed the disappointment to poor trading at non-core Audiotel, its maker of surveillance and counter-surveillance equipment for commercial clients and government agencies, where operating profits almost halved. Elsewhere, the Moore & Buckle packaging operation ‘continues to thrive’ in its niche market.

Given the cash-generative characteristics of its core business, the longer-term trends playing into its hands and the group’s balance sheet strength, we consider PSG unfairly unloved and still worth buying (or holding).

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PSG Solutions	AIM	£8.18m	32.00p	0.00p
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Other company articles:
PSG Solutions			30/07/2008
HIPs creaking already			29/05/2007
PSG shakes its HIPs appeal			28/03/2007
PSG in profits search			23/08/2006
Company watch review of 2004			01/02/2005