Charles Taylor investing for the future

This remains a work in progress and significant changes in the way that the group operates have already been introduced to improve cross-selling and expansion into new business areas and regions, such as recent investments in Saudi Arabia and Columbia. Benefits are already starting to show through, with adjusted pre-tax profits in the first half of the year up 25 per cent at £5.5m, while the attractive dividend is being maintained. And with management's efforts expected to lead to a pick up in EPS growth rates from 2014 onwards, and possibly the resumption of dividend growth, the rating of less than 10 times forecast earnings looks too low.

The biggest service that the group provides is loss adjusting on big insurance claims, which , accounts for almost half revenue. While the number of claims trailed off in the second half of 2012, the group maintained its drive to recruit more senior adjusting specialists, which has paid off nicely this year. Indeed, a pick up in claims activity pushed up operating profits by almost two-fifths to £3.6m, although the cost of employing more professional staff is expected to trim a little from second-half profits.

Much the same picture can be seen on the management services side - around a third of group revenue - where the group delivers a complete outsourced management service including the marketing and management of underwriting and claims through to regulatory, accounting and administrative operations. Turnover has been building steadily but the costs relating to employing more staff meant that operating profits in the first half slipped from £2.5m to £2.2m. This part of the group also provides services for groups who set up their own insurance cover, notably the Standard Club, which provides liability insurance to almost 10 per cent of world shipping - despite tough trading its insured tonnage grew 9 per cent in the first half to 135m tonnes. Expansion plans here include the recent launch of a new hull and machinery insurance cover for members of the club, with the first client already signed up.

The group also operates an insurance run-off business comprising companies that are closed to new business. While operating profits grew in the first half from £100,000 to £400,000, full-year profits will be down because last year's numbers were boosted by a one-off cash release. Progress on the insurance support services side has been relatively slow, but an important Lloyd's claims management client was signed up in the first half, and after breaking even last year, first-half profits grew to £200,000.

The group's balance sheet is also strengthening, with net debt at the half-year stage down from £29.5m at the end of 2012 to £19.7m, although this was mainly due to an advance payment by a mutual insurance company client. The group's pension liabilities also fell to £23.2m, from £38.8m a year earlier.