Gateley, Sureserve and Centaur – all three heading higher in price
Gateley (Holdings) – 104.5% growth in consultancy revenues drives half-way profits
As the company continued to execute its diversification and growth strategy, Gateley, the legal and professional services group, saw strong trading in the first half-year to end October 2022.
Against the backdrop of an uncertain macro environment, its activity levels, revenue and profitability were advancing once again.
Its results showed through with a 22.2% uplift in revenues at £76.1m and a 12.9% improvement in the group’s adjusted pre-tax profits.
Earnings per share were 6.8% better at 6.15p, while the interim dividend was increased 10% to 3.3p per share.
Gateley (Holdings) (LON:GTLY) has over 1,400 people, 1,000 of whom are fee earners, across offices in 15 UK locations and another in Dubai.
The group’s business is predominantly legal services through Gateley Legal, advising over 5,000 clients across its four core business Platforms including Property, People, Business Services and Corporate.
Going forward it looks to expand its strong organic growth trajectory across all of its Platforms and it retains significant facility headroom in order to further expand its sales resilience through acquisition.
Chief Executive Rod Waldie stated that:
"During the Period, we saw political and economic instability manifesting in uncertainty and temporary paralysis in a number of sectors. This is an ongoing situation and the economy is approaching a fork in the road where in all likelihood there is a wide range of possible outcomes across different sectors.
In the meantime, we continue to invest in our offering and in our people so that our business remains fully equipped to deliver as positions settle in our target markets.
The combined legal and consultancy offering on our Platforms, remains unique and the outlook on each of the Platforms is positive. We look forward to 2023 with a degree of cautious confidence."
Brokers View – 320p Target Price
James Allen at the group’s corporate brokers Liberum Capital has a strong Buy rating out on the shares, with a Target Price of 320p a share.
For the current year to end April 2023 his estimates are for revenues to rise to £162m (£137m), while pre-tax profits could increase to £26.1m (£21.6m), worth 16.5p (14.3p) in earnings and covering an increased dividend of 9.6p (8.5p) per share.
For the coming 2024 financial year Allen goes for £178m sales, £28.9m profits, 16.9p earnings and a 10.1p dividend per share.
My View – looking for an early rise to 230p
This group’s shares deserve a much higher multiple rating, especially so considering its impressive cash generation and its ongoing year-on-year revenue and profit growth record, despite the economic environment.
The shares, at 190p, should soon be heading back up towards the 230p level achieved in May last year, then even higher.
(Profile 18.05.20 @ 155p set a Target Price of 195p*)
Sureserve Group – excellent order book offers growth
Ahead of this social housing energy services group, next Tuesday morning, declaring its final results for the year to end September 2022, its broker has previewed the company positively.
The Sureserve Group (LON:SUR) CEO Peter Smith, when previously commenting upon the 2022 trading year, stated that:
"The results for the year confirm a good trading performance and demonstrate Sureserve's resilient business model, which is to provide energy services to the Social Housing sector.
Our £585m order book provides good visibility of future earnings and our strong cash generation sets us up well to deliver on our growth targets."
Brokers View – undemanding rating
Citing the continuing growth in current year demand and beyond, Shore Capital analyst Alastair Stewart considers that the current rating for its shares is undemanding given the cash-rich group’s growth prospects and revenue visibility.
His estimates are for £269.5m revenues for 2022, £13.8m adjusted pre-tax profits, worth 6.9p in earnings per share.
For the year now underway he goes for £283.6m sales, £16.0m profits and 7.6p in earnings.
My View – heading above 100p shortly
Currently, at just 89p, these shares are wrongly priced.
More items of good corporate news will be just enough to tip the shares above the 100p barrier and head up to my recent Target Price of 106p.
(Profile 14.01.20 @ 36p set a Target Price of 50p*)
(Profile 06.01.23 @ 85p set a Target Price of 106p)
Centaur Media – resilient 2022 outcome plus a Special payment
The big news yesterday from this business information, training and consultancy specialist was that it was declaring a 3p a share Special Dividend to be paid out on 10 February.
The year to end December saw a good growth in revenues, profits and cash performances in spite of the general backdrop.
Swag Mukerji stated that:
"Centaur continues to perform well despite the macroeconomic uncertainty that characterised 2022 for our customers. During this time, we have taken operational and financial steps to improve the quality and efficiency of our business.
Whilst there remains a lack of visibility around how the macroeconomic landscape will shift in 2023, I am pleased that the Group's strong balance sheet and sustainable cashflows have given the Board the confidence to return over £4m to our shareholders.
As a business we remain focused on our strategic objectives and achieving our ambitious MAP23 targets."
Brokers View – current price a compelling entry-point
Caspar Erskine at Singer Capital Markets has a Buy note out on the group, looking for 78p a share.
His estimates for the year to end December 2022 are for revenues slightly higher at £41.1m (£39.1m) but with adjusted pre-tax profits rising to £4.5m (£2.9m), generating earnings of 2.4p (1.9p) and paying a maintained dividend of 1.0p per share.
For the current year he lifts his sales to £45.0m, profits to £6.6m, earnings at 3.3p and a 1.41p dividend, before adding in the 3.0p special payment per share.
The 2024 year could see £48.3m revenues, £7.5m profits, earnings of 3.7p and paying a 1.55p dividend.
My View – heading even higher
That was a very positive Statement yesterday, which was quickly reflected in a 6.5p price rise to see the shares close at 54.5p last night, up nearly 11% on the day.
On the basis of the Singer Capital Markets estimates it would appear that this group’s shares are heading even higher yet.
(Profile 03.03.21 @ 33p set a Target Price of 41p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)