A few interesting company results today

Friday, 4th September 2015 14:15 - by David Harbage

The following companies announced trading results today, and merit a brief mention for various reasons:

Empresaria, the international specialist staffing group, pleased the market when reporting a 33% increase in pre-tax profits to £2.7m and a 45% hike in earnings per share to 3.2p.

This arose despite a currency translation hit (notably Euro weakness versus sterling) and an absence of top line growth. A reorganisation of its portfolio of overseas offices over the past 18 months - which saw closures of its relatively small operations in the Czech Republic, Slovakia and Malaysia - has improved the group's exposure to regions and areas of business offering higher growth. The latter include opening in Dubai, and good performances in IT digital & design in Australia, executive search in Thailand and offshore recruitment in India.

Ahead of probable additional bolt-on acquisitions, the balance sheet appears strong and market conditions are described as "favourable, although the economic situation in South East Asia could lead to a slowdown in that region". Management expressed confidence that full year results will be ahead of current market expectations, prompting a 15% rise in the share price today. At 82.5p, the shares have doubled since the writer flagged the stock as one to follow at the beginning of the year. One to hold for the longer term, with an industry consolidator probably having to pay £1+ to have any prospect of success.

Fairpoint
Another stock mentioned in the 15 January '15 blog was this unfashionable debt solutions and consumer legal services business. Again growing via selective purchases of solicitors and similar firms, profits in the first half of 2015 exceeded expectations with earnings per share rising 19% to 7.38p. Strong cash generation has seen net debt fall to £5.2m, with funding available to facilitate further expansion. Since the half year end, Fairpoint have completed a £9m acquisition of a consumer professional services business Colemans, which will add £19m in annualised revenue and specialises in volume personal injury claims, volume conveyancing and travel law. Panmure Gordon have been appointed today as joint (with Shore) broker to aid expansion efforts.

The prime attraction of this stock is its valuation, as well as potential to build a business via immediately earnings-enhancing 'bolt-ons'. Fairpoint shares have progressed from 113p in mid January to a new all-time high (up 4p today) of 175p, but they remain on a single digit multiple of 9.3 times forecast earnings for the full year. With EPS of 20p likely for calendar 2016 the stock is on a lowly multiple of 8.6, with a 7.1pence dividend forecast to provide an appealing 4.5% yield.

Elsewhere today, the writer was reassured by positive trading updates from two other growth businesses, which this blog has previously commented upon (in favourable terms): budget airline easyJet and Redde. The latter provides accident management and legal services, typically working with insurance companies, brokers and motor dealerships. Both appear well positioned to make further progress in the coming year, with low oil prices set to aid the airline's efforts to keep a lid on its costs and Redde having made a substantial £43.2m acquisition of a complimentary fleet accident management business, FMG, in August.

easyJet stock rose 6% today to reach 1771p, a fair price given likely 142p of earnings in the year to 30 September 2016 equating to a market average PE of 11.8 times. Investors will be hoping for higher dividend payouts over the next few years, as the business becomes more mature and profit quality (which equates to reliability) improves.

Redde shares have trebled, in a near straight line trend, over the past year as brokers have issued regular earnings upgrades - the prime fundamental driver of share prices, incidentally. In the following year to 30 June 2016, EPS of 9p is predicted putting the stock on a rather demanding earnings multiple of 17.6 times. The recent growth record means that a premium rating is deserved, but taking a partial profit after such a strong run - "leaving something for the next investor" - makes sense. Meantime the high dividend yield (almost all profits are returned to shareholders), of 5.2% currently, make this a favourite within tax wrappers such as ISAs and SIPPs.

Find out more about the companies mentioned in this article using the links below:

Empressaria - http://www.lse.co.uk/SharePrice.asp?shareprice=EMR&share=EMPRESARIA

Fairpoint - http://www.lse.co.uk/SharePrice.asp?shareprice=FRP&share=FAIRPOINT_GROUP

EasyJet - http://www.lse.co.uk/shareprice.asp?shareprice=EZJ&share=easyjet_plc_ord_27_2/7p

Redde - http://www.lse.co.uk/SharePrice.asp?shareprice=REDD&share=REDDE

Writen by David Harbage

3 September 2015

See how your shares are doing at www.lse.co.uk/share-prices.asp

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.