Market Cap £53.1m, EPV (8%) £78.1m . Whilst not declared yet I believe results for the year should be over £7m PBT. So not a high PE. I am a big fan of EPV and it is rare in my experience to find companies that substantially exceed their market cap on an EPV basis.
The company is capable of delivering cash profits and that allows a dividend with a 2.5% yield.
On the downside the balance sheet is not properly supported, in that it is negative after the removal of intangibles. Intangible valuation is invariably very difficult so I tend to ignore it unless I can see real value in it (Coca-cola). The company is also indebted (£4m). Though given the cashflow and the payment of dividends that is not a difficult amount for the company to carry. Particularly in a low interest rate environment.
I also note that the company likes to talk about Headline Operating Profit. This is a made up measure that excludes very genuine costs incurred in obtaining the profit. So it’s a highly bogus measure though easy to see through. I consider this use of dodgy measures to be the companies biggest drawback. And it will be the area I look most at when the company releases its results in April.
So a company that seems very cheap on an expectation of no growth, that is growing by 10% (revenue) and 10-20% (profit), both from the January TU. Neither the balance sheet nor the cash position are something to write home about, but that is reflected in the Market Cap. Management are prepared to use numbers that do not reflect real costs.
I have taken a small “watching” position. Unlike many of my holdings that are in for the next year, (more or less come what may, unless they hit my sell price), and then start getting more thoroughly reviewed the dubious accounting means that this is very much a watching brief. The auditors are PKF Francis Clark.