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Charles Taylor drives revenues and expands offering

Cash raised to buy businesses has flattered the balance sheet in recent years
March 10, 2017

Although Charles Taylor (CTR) has increased revenues at its core professional services division, that growth hasn't been replicated at the operating level, as full-year profits fell 6 per cent to £14.3m. This anomaly was largely down to a near-doubling in amortisation writedowns following the acquisition of CEGA, a medical assistance and travel claims management company, which was part-funded by the proceeds of the 2015 rights issue. The group's solid trading performance is more accurately reflected in a 4 per cent increase in underlying pre-tax profits to £14.8m.

IC TIP: Buy

The insurance services provider deemed the CEGA acquisition "strategically important", as it provides exposure to a fast-growing segment of the insurance market. The group is still actively looking at bolt-on acquisitions, but the main focus is on organic growth in existing businesses. To this end, it developed capabilities in business process outsourcing, third-party administration, insurance technology and medical claims and assistance over the course of 2016.

Management said that net debt is now in line with levels before the CEGA acquisition, while the fall in gilt yields meant that the retirement benefit obligation increased to £52.5m, up from £39.6m at the previous year-end.

Analysts at Numis are forecasting adjusted pre-tax profit of £15.2m in 2017, giving diluted EPS of 18.9p (up from £14.8m and 15.7p last year).

CHARLES TAYLOR (CTR)

ORD PRICE:243pMARKET VALUE:£164m
TOUCH:235.25-243p12-MONTH HIGH:330pLOW: 202p
DIVIDEND YIELD:4.3%PE RATIO:15
NET ASSET VALUE:101p*NET DEBT:53%

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2012**1086.613.48.85
2013**1146.912.68.85
20141229.717.89.42
201514312.818.610.00
201616910.715.910.50
% change+18-16-15+5

Ex-div: 27 Apr

Payment: 26 May

*Includes intangible assets of £92m, or 137p a share **Adjusted for 2015 3-for-7 rights issue