Group NBT

BUY

01/10/2008 Oliver Haill

Shares in February 2007 recommendation Group NBT have bounced back, after a small tumble to below 200p earlier this year, as the business proves its resilience and growth credentials.

Fresh results from the internet domain name expert for the year to June show it fizzing with health, with sales swelling 58% to £35.3m, boosted by 19% organic growth and the first major contribution from January 2007 acquisition Ascio. Many of Ascio’s customers have now been ‘migrated’ over to the group’s domain name management service, Platinum, which makes up 45% of revenues and grew 38% year on year.

The group remains strongly cash generative and £7.8m flowed into the business during the year, after a 49% increase in profits before tax and exceptionals to £5.5m. Having topped up cash balances to £4.7m and trimming debts to £4m, the group returned to a net cash position.

All divisions are performing as planned, with managed hosting increasing revenues 43%, as factors such as the growth in online shopping and penetration of broadband drives new custom. The reseller arm inherited from Ascio, which provides domain name service to internet service providers and telecoms companies, enjoyed a 20% sales increase, as it began to extend into new markets.

Online services remained flat, but continue to generate high margins and feed other parts of the business. Finally, last year’s other acquisition, brand protection specialist Envisional, remains loss-making but was relaunched a month ago, and chief executive Geoff Wicks says, ‘We sold a few, but it’s early days and I’m confident that there is a big market for this.’

Outstripping a fast-growing market and with strong levels of recurring revenues, Group NBT is proving its defensive capabilities and is conservatively forecast by house broker Numis to make 16.2p of earnings per share this year. The shares therefore look unfairly undervalued. Buy.

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