Taking A Look 16 September 2015
There are a couple of snippets of news from today that are worthy of a mention, along with a comment regarding a previous subject that reported results yesterday.
CNIC Interim Results 15 September 2015
Shares in CentralNic, the diversified internet domain name focused company have enjoyed a strong since my first highlighting in the weekly column back in April at 29.5p, now sitting at a more healthier 61p, despite dropping back 12p today.
More On CNC 2 September 2015
CONCURRENT TECHNOLOGIES has been a familiar subject for me this year, where having first covered the stock in the weekly column, I subsequently followed by taking an interest in the shares.
Catching Up 9 September 2015
Its been a busy start to the week for me, with a number of calls being received with companies either delivering on news or updating me on progress.
While I know some investors do argue that it isn't always the best way to form an opinion on a companies prospects, as managment tend to paint their buinsess in the best light, from a personal perspective I confess to finding it highly useful, productive and hopefully informative for readers.
There are links below to articles that have resulted from speaking this week, along with the Private Punter column from yesterday, which although featured in the paper itself, hasn't as yet been loaded on the Cambridge News site due to their extremely busy load.
There have of course been a number of companies reporting, which I would like to have added some comment, but suffice to say time is against me at present.
That said, it has been pleasing to see CENTRALNIC continue its recent good run with a decent jump today and I will be speaking with CEO Ben Crawford again on results day.
In recent months, various consumer groups have been sounding a warning bell over the potential issues arising from an impending rise in interest rates.
This comes on the back of the revelation at the beginning of the year, that Britons had also run up their highest level of debt in November 2014 for seven years, where it hit £1.25bn.
As a result of such news and statistics, one quoted player that operates in and around the space of debt advice, management and solutions, could be well worth a much closer look as an investment proposition.
Fairpoint Group, which is headed by Chris Moat floated back in 2002 having been born out of Debt Free Direct and where the focus of the business was in and around the provision of Independent voluntary arrangement (IVA’s).
That brought mixed success, Fairpoint’s share price often languishing on a lowly rating, which was effectively anchored by limited prospects for real growth within the IVA market.
Recognising a need to address the issue in order to drive the business forward and deliver sustainable shareholder returns, Fairpoint under Moat’s guidance embarked upon a diversification process into other areas of and around the sector.
This, amongst others, resulted in the acquisition back in 2010 of moneyextra.comfollowed by four further buys a year later in the debt management space, along more recently with a buy in the area of consumer legal services.
Today, the company has within the group, other names such as Clear Start, Lawrence Charlton, Simpson Miller and Writefully Yours, which has opened up channels into new but complementary markets.
The result of this widening group and extended offerings has been something of a transformation of the business and its model, where a former reliance on the IVA business has been greatly reduced.
Advice to consumers on clearing or managing their debt, putting into place suitable arrangements for making payments along with providing expert legal advice, are just parts of the now enhanced Fairfield business.
But, it is an emphasis on the consumer legal services aspect of its operations which looks set to provide the real driving force for increased revenue and profits in the coming years.
Moat, who has been at the helm since 2008 and has extensive experience within the Financial services space including time spent at Prudential and Direct Line informed me that it is very much a focal point of the business going forward.
“Within the legal space there are numerous small operators, which means, it is really ripe for consolidation, where through a process of acquiring we can quickly leverage a move to scale”.
This aspect and area of its business, has recently been significantly boosted and enhanced, the company’ completing just last month the major acquisition of Manchester based Coleman’s legal services group.
Being a consumer-focused legal services provider it brings with it an extensive focus on conveyancing and travel law, along with management of personal injury claims.
Such a diversification is already bringing about tangible returns as demonstrated by Fairpoints most recent results and which is now expected to see the legal services arm accounting for circa 65% of the total group revenue.
That should increase further over the coming years, where Moat explains that although regarded as a different field to its more traditional business, it actually provides some strong cross correlation which in turn presents an opportunity for growth.
The Coleman purchase has already been viewed very favourably by the market, Fairpoint paying just 3.6x trailing EBITDA on the initial consideration of £9m.
Although the IVA and associated debt management side of business has been a more difficult area in which to operate due to such a low interest rate environment, the CEO acknowledges that any change in the direction on rates will no doubt have an effect on homeowners, which would in turn translate into a rising requirement for such debt management solutions.
Additionally, more stringent rules on those permitted to operate in the debt management and advice sector could well see smaller players squeezed out of the market, which could provide uplift potential for the company.
However, Moat says he is cautious on this front and that they haven’t pencilled in any potential upside in this area.
And, looking at its recent impressive trading performance, it appears to be performing well enough.
Announcing its half year results just last week, the company delivered significantly increased revenue of £22.9m representing a 64% jump, which also saw a 21% rise in adjusted pre-tax profits which came out at £4.1m.
Although the IVA business segment has as expected demonstrated a further decline, new markets have more than compensated for this and following a previously bullish trading statement profits came out better than earlier forecasts.
That appears to have set a positive trend which now sees analysts forecasting full year adjusted pre-tax profits of £10.5m being achieved on the back of £54m in revenue.
With EPS of 18.4p pencilled in for this year, the shares trade on a PER of little more than 9 at today’s price of £1.76p which falls below that figure to 8.7 based on next year’s expectations of pre-tax profits coming in at £11.8m.
The sector average of speciality finance where Fairpoint resides is closer to 15, which suggests that despite its shares trading at the top if its 52 week range, they represent decent value, with prospects for both near and longer term upside.
The company is also a decent yielder with the dividend currently providing close to 4%, where it operates a progressive policy.
Moat is mindful of that, striking a balance between maintaining a healthy return on this front for shareholders supported by solid cover, while also targeting cash to fund further strategic acquisitions.
Looking to the longer term Moat sounds a confident note, as the company marries its small team of consultant practitioners to larger debt management and claims contact staff in order to maximise efficiency.
Equally, specifically designed packages and offerings for customers in and around the legal arena should see further business wins with decent margins being achieved.
A number of well respected Institutional shareholders have a significant holding, headed by Gervais Willaims Miton on 24% followed by Henderson on 5.7% and Schroders wth 4.5%.
The Right Connections 1 September 2015
A somewhat busy morning for me, what with catching up with MACFARLANE GROUP and IDEAGEN, which has left little in the way of time for commenting on much else.