This training consultancy is one of Britain’s leading providers of IT, professional and personal-skills training, owning seven fully-equipped centres located around the country. From these sites, its 37 full-time, and 100 associate instructors teach over 500 different programs relating to many leading applications, including those offered by IBM, Microsoft and Oracle.
Gamble of the week: Xpertise Group (AIM:XPG)
Such is the quality of its courses that Xpertise has been selected three times as Microsoft’s European Gold Learning Partner of the Year, and in 2007 was chosen as IBM’s top UK reseller. Furthermore, the firm gained top marks last year when it lifted revenues by 40% to £22.3m (from £16.0m in 2006) and commenced dividend payments of 2.5p per share (equating to a 3% yield). Meanwhile, sales were boosted thanks to new contracts wins and the extension of existing client relationships, including the provision of substantial programmes for Accenture, BT, Dell, EDS, HM Revenue & Customs, HSBC and Sainsbury’s.
Even in this more austere climate, 2008 has begun brightly. At the group’s update in April, chairman Richard Last reported that, “Trading in the first quarter has remained strong, with revenues up 13% to £6.0m… and there has also been a slight improvement in our gross profit margin. The board is confident with regard to prospects for the remainder of the year.”
House broker Daniel Stewart is forecasting sales and underlying earnings per share of £24m and 12.0p for this year, rising to £26m and 15.4p in 2009. As such, the stock trades on miserly forward p/e ratios of 7.1 and 5.5, despite a healthy balance sheet with net funds of £2.1m as at December, or around 35p per share. And take away the distortive effects of a big cash pile and the forward multiple drops to an even more compelling five-times earnings.
There are, of course, some potential pitfalls. Being small, Xpertise could be squeezed by its larger rivals – particularly if competition intensifies as training budgets are trimmed. That said, there are few signs of this occurring on a large scale yet, which means that the recent softness in the share price probably presents a good entry point for the more adventurous investor.
Recommendation: SPECULATIVE BUY at 81p (market cap £4.6m)
• Paul Hill also writes a weekly share-tipping newsletter, Precision Guided Investments