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Mixed set at Servelec

Buoyant healthcare growth offset the impact of deferred energy orders at Servelec
August 28, 2015

Delayed orders from oil and gas companies and water utilities weighed on first-half automation sales at Servelec (SERV). Nonetheless, strong demand for its electronic-record and patient-administration software drove underlying operating profit up 26 per cent to £6.3m. Investors promptly sent the technology group's shares up 6 per cent.

IC TIP: Buy at 295p

Organic sales rose 34 per cent in the key health and social care segment as the company re-signed 20 out of 30 NHS trusts in London that exited the national procurement programme. The division's gains drove total order entry up 52 per cent to about £44m. And its acquisition of software developer Aura Healthcare allowed it to integrate patient-flow and bed-management software into its flagship Oceano and RiO products.

Sales in the automation segment - which designs and sells monitoring and shutdown systems - fell 18 per cent as tepid demand from energy and utilities clients hampered both the controls and technologies subdivisions. But operating profit was essentially flat due to improved efficiency and distribution in the technologies division, and management has seen a recent pick-up in technologies orders.

Further gains could flow from AMP6, the UK water industry's investment programme - Panmure Gordon values that opportunity at up to £120m. The broker expects pre-tax profit of £15.2m this year, giving EPS of 17p (from £12.3m and 14.5p in 2014).

SERVELEC (SERV)
ORD PRICE:295pMARKET VALUE:£205m
TOUCH:292-300p12-MONTH HIGH:326pLOW: 257p
DIVIDEND YIELD:1.6%PE RATIO:23
NET ASSET VALUE:82p*NET CASH:£5.7m

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201425.04.45.01.50
201530.04.85.31.65
% change+20+9+6+10

Ex-div: 24 Sep

Payment: 23 Oct

*Includes intangible assets of £47.5m, or 68p a share