|
Support service stars
Outsourcing remains a hot topic in the City, with a slew of companies successfully tapping into this exciting and growing trend. A trio of fully listed small cap ventures, each benefiting from the outsourcing trend, have caught my eye of late.
First up is Tribal, the public sector support services outfit that said profits would be unsatisfactory back in November, a statement that hit the share price. The company, which provides a range of public sector services in education, local government and housing, subsequently reported a loss of £4.4 million.
Yet chief executive Henry Pitman recently reawakened my interest with news that trading in the year to March beat downgraded expectations and turnover for the year topped £228 million, a 23 per cent-plus rise on 2004.
Issues that once plagued the company have been resolved and Pitman says acquisition activity is on ice for now. I would argue that is great news for investors, since the group already has major positions in growth markets and margin enhancement from previous deals has yet to fully come through.
When the numbers are unveiled in June, they will show profits coming in higher than the £17.5 million mooted at the interim. Analysts are going for £17.6 million and earnings of 15.4p, before an upswing to £18.9 million and 15.6p for March 2006, giving Tribal a forward rating of 10.5 for 2005 and 10.3 times for 2006 at the current 161.5p share price.
Nord on the up
Another outsourcing counter emerging from troubled times is Nord Anglia, the education, training and childcare company that warned in March of a ‘sudden and marked decline in occupancy’ at its nurseries. This prompted analysts to slash forecasts dramatically.
Yet my fears were allayed by a subsequent pick-up in trading in the nursery division. Occupancy rates, which fell as low as 60 per cent in January, have recovered to 63 per cent. And readers might remember the international schools and outsourcing divisions have been stellar performers; the outsourcing division has received a fillip with a major school inspection contract award by Ofsted worth £26 million over four years.
Nord Anglia, which was marked down to 94p following the warning, has recovered some lost ground at 122p. On current year forecasts – the house broker suggests profits of £3.8 million pre-tax on £111 million turnover, giving earnings of 9.5p a share – the prospective rating is an undemanding 12.8 times, falling still further to a budget 10.4 times for 2006 on estimated profits of £5.1 million. Again, I think that is good value.
Get Carter (and Carter)
Peterborough-based Carter & Carter, which floated on the main board earlier this year at 235p, has enjoyed a strong run, accelerating further still to 325p in the wake of maiden interim numbers to January. Founded by Phillip Carter, the company provides outsourced services to major car makers (it boasts an ‘apprentice learning’ alongside its ‘outsource services’ division), and reported 23 per cent turnover growth to £23 million, and a 60 per cent jump in pre-exceptional pre-tax profits to £3.2 million.
For the full year to July I believe profits will reach £8.4 million, giving earnings of 19.2p and a prospective rating of 17 times. Pricier than my first two situations admittedly, but Carter & Carter has yet to blot its copybook and has an apprentice learning arm benefiting from the Government’s commitment to vocational learning. I am convinced there is more growth to come.
|
|
