You are here:

Spice to enter the big league

Created:
14 July 2008
Written by:
Algy Hall

Utilities outsourcing provider Spice enjoyed another bumper year thanks to strong end markets, acquisitions and cross-selling. The group's cash profits were up 84 per cent - with organic growth impressive at 19 per cent - as operating margins leapt to 9.5 per cent.

Advertising

The group made 12 acquisitions throughout the year, stumping up a total of £124m plus a further £32.6m if performance targets are met. By far the largest purchase was high-margin billing provider Revenue Assurance Services (RAS) for £101m. RAS is already proving its worth, though, helping Spice increase its market share in the gas sector from 40 per cent to 89 per cent, and in electricity from 8 per cent to 35 per cent over the past six months. That said, it will take about two to three years before these gains translate into profit growth.

Confidence is running high across the group thanks to its exposure to the public sector and regulated industries, where demand for outsourcing is rising. Broker Investec forecasts adjusted EPS of 35.2p this year (from 28.6p in 2008).

SPICE (SPI)
ORD PRICE: 511p MARKET VALUE: £307m
TOUCH: 511-514p 12-MONTH HIGH: 673p LOW: 400p
DIVIDEND YIELD: 1.2% PE RATIO: 20
NET ASSET VALUE: 213p* NET DEBT: 99%

Year to 30 Apr Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2004 83 2.4 6.0 2.2
2005 86 5.2 10.8 2.6
2006 133 6.8 12.6 2.6
2007 229 12.2 19.7 4.0
2008 312 17.1 25.8 6.0
% change +37 +40 +31 +50

Ex-div: 27 Aug

Payment: 16 Sep

*Includes intangible assets of £258m, or 430p a share

Click here for a guide to the terms used in IC results tables.

TIP UPDATE

Buy

Spice looks set to enter the FTSE 250 when it moves to the full list later this month, which could attract new fans to its defensive growth characteristics. The shares have climbed 21 per cent since we suggested buying them, and are still a buy.

Last IC View: Buy, 424p, 28 Mar 2008

  • Back to top

GLOBAL BANKING CRISIS

Get the latest news here!

Promotional Feature

The world's oldest pets

We all want our pets to live long and happy lives. One of the easiest ways to help your four-legged friend get over life's many hurdles is to get them covered with pet insurance.

by Sainsbury's

Promotional Feature

Turkey Resort Round-up – Beyond Istanbul

Holidays to Turkey tend to focus on the country's magnificent coastline. Dotted with coves and lined with sandy beaches, Turkey is a sun-worshipper's paradise.

by TUI