Small cap share tips: Northbridge and Staffline
Our weekly review of the latest developments and hottest tips in the exciting world of the Alternative Investment Market is written by analysts at the UK's leading authority on fast-growing companies, Growth Company Investor.
Buoyant markets buoy Northbridge
Strong cash flows, and an exciting consolidation opportunity in some buoyant markets underpin the investment case at Northbridge Industrial Services.
Maiden figures for the year to December, based on only nine months' trading from the core Crestchic business (acquired for £6.7m at float in March), revealed an encouraging £1.1m pre-tax profit from £6.9m sales. A full year of Crestchic would have contributed sales of £8.7m, representing impressive 40% sales growth, with its pre-tax profits surging 49% north to £1.88m.
Crestchic makes and rents loadbank equipment used to test diesel generators and gas turbines when they are installed or maintained. Global demand for loadbanks is buoyant, particularly in the US and South-east Asia.
Factors fuelling demand include the need to continually test and maintain independent and standby power systems, rising reliance on power-critical technology used in the banking, medical, marine and defence industries, as well as the ongoing oil and gas boom.
Fattened by £892,000 of cash from operations, Northbridge's coffers were replete with £1.1m net cash at year-end, and a maiden dividend of 2p was proposed. Alongside the figures, the £900,000 acquisition of Loadbank Hire Services was announced, cementing the group's leading position in the loadbank market.
This year, Charles Stanley envisages a rise in pre-tax profits to £1.6m from revenues of £9.6m, ahead of £1.9m off a top line £10.7m for 2008.
Based on those numbers, the shares trade on forward multiples of 10.9 and 9.4, undemanding for a high-margin buy-and-build business enjoying bumper demand for its services. Net assets of £7.2m support the valuation and acquisitions in the industrial equipment space should provide added earnings spice.
Market cap - £11.82m
Price/earnings forecast - 10.9
Share price - 160p
Recommendation -
GROWTH COMPANY INVESTOR OFFER: Subscribe to Growth Company Investor for immediate access to many more small-cap recommendations. Click here.
Staffline
Blue-collar agency Staffline Recruitment recently served up another year of double-digit growth for shareholders, achieved entirely through organic development. Calendar 2006 figures from the group were significantly ahead of 2005, with pre-tax profits sparking up by 35% to £3.4m on turnover lifted 37% to £84.1m. Earnings soared more than 40% higher to 11.3p, enabling a hike in the total dividend to 2.7p (1.9p), representing growth of 42%.
Accompanying the numbers was news of the group's first acquisition on Aim since its float in 2004 – OnSite Partnership, a Market Harborough-based recruiter – which should boost earnings in 2007.
Annual highlights were led by significant growth in the number of OnSites – the group's outsourced service where it manages the temporary recruitment for clients on their own premises – where a net increase of 18 drove the year-end total to 71, as well as a star turn from Staffline's reorganised industrial branch network.
Representing the real growth engine of the group, it is encouraging to hear that the current pipeline of OnSite prospects is 'stronger than it has ever been', suggesting a strong 2007 awaits investors.
At the current 142.5p, the shares trade on a historic price/earnings of 12.6 with a decent yield. Investors already enjoying the fruits of growth should consider topping up their holdings.
Share price – 142.5p
Market cap – £29.8m
Recommendation – Add
Mavinwood moves on '06 figures
Document handling and emergency repair player Mavinwood – floated on Aim in 2004 as a support service sector focused shell – has started to stir, with the shares responding to strong calendar 2006 figures
On turnover of £42.4m, underlying 'adjusted' pre-tax profits surged from £1.5m to £4.96m and earnings advanced more than 50% to 0.8p. Under chief executive Kevin Mahoney, Mavinwood continues to buy and build strong positions in its target document handling and emergency repair markets.
Three highly cash generative businesses were bought last year – Wansdyke (£11m), Independent Inspections (£10m), and Mono (£6m) – all are performing well, and further integration benefits have yet to shine through. Encouragingly, the emergency repair arm enjoyed dramatic sales and profits growth, boosted by a twelve-month contribution from ANSA, which specialises in drainage surveys and repair, as well as contributions from Independent Inspections and Mono.
Within document handling – where customers include law firms, financial services players and councils – turnover grew from £2.3m to £7.94m boosted by £3.8m of sales from the acquired Wansdyke business, with EBITA surging from £614,000 to more than £2.4m. All the acquisitions Mavinwood has made are throwing off cash, and Mahoney argues the group's £17.6m of debt still leaves plenty of scope to complete further acquisitions for cash.
For the current year, Seymour Pierce's Alan Matthews will look for a rise in profits to £7.4m from a top line £65m, ahead of £8.9m the following year from £74m sales. Sit tight.
Share price – 18.5p
Market cap – £83.7m
Recommendation – Hold
Growth Company Investor offers unrivalled insight into small-cap companies. Click here to find out more.
Most watched Money videos
- The new Volkswagen Passat - a long range PHEV that's only available as an estate
- Mini Cooper SE: The British icon gets an all-electric makeover
- Mail Online takes a tour of Gatwick's modern EV charging station
- 2025 Aston Martin DBX707: More luxury but comes with a higher price
- Land Rover unveil newest all-electric Range Rover SUV
- MailOnline asks Lexie Limitless 5 quick fire EV road trip questions
- BMW's Vision Neue Klasse X unveils its sports activity vehicle future
- Tesla unveils new Model 3 Performance - it's the fastest ever!
- Mercedes has finally unveiled its new electric G-Class
- Mini celebrates the release of brand new all-electric car Mini Aceman
- Leapmotor T03 is set to become Britain's cheapest EV from 2025
- 'Now even better': Nissan Qashqai gets a facelift for 2024 version
- Future shares jump after publisher declares £45m share...
- Chevron to sell its oil and gas assets in the North Sea...
- Stock market chief insists there is a 'strong cause for...
- Young drivers can't afford to insure their cars: Number...
- BUSINESS LIVE: GSK sells Haleon stake; Sainsbury's agrees...
- Superdrug unveils plans to open 25 new stores this year -...
- Reality TV stars charged by City watchdog over...
- Time to wind back the tourist tax, says Watches of...
- Turbulence at Easyjet as boss stands down sending share...
- The future of the Royal Mail is not just a matter for the...
- Another stink at United Utilities: Water giant pays £340m...
- BT proves investors wrong as shares soar 17% in boost for...
- HSBC eyes victory in battle to keep its Asian business as...
- GSK completes sale of Haleon shares having raised £3.9bn...
- Sainsbury's and Microsoft sign five-year artificial...
- David Beckham teams up with Hugo Boss to design menswear...
- MARKET REPORT: Dow Jones tops 40,000 as investors bet on...
- Can we really buy a house with a 1% deposit? DAVID...