Office2office's first half was not quite as bad our table indicates as the results were marred by the stationery supplier taking a £1.8m set-up cost of a new contract as one big hit rather than spreading it over the contract's lifetime.
Teething troubles with the contract meant it made a small underlying loss on revenue of £14m, but it is now profitable following renegotiation of contract terms. The rest of the managed procurement division suffered because of the structural decline in the market and, overall, a 15 per cent rise in divisional revenue to £76.8m translated into a 9 per cent fall in underlying operating profits to £6.1m, excluding the set-up costs. The business critical services division did much better. It reported a number of client wins and revenues were up 11 per cent to £36.5m while profits rose 14 per cent to £3.6m.
Cash generation was poor and, despite a favourable £1.4m movement in working capital over the past 12 months, the high level of net debt has risen by another £1.3m to £30.2m. What's more, during the half year, when the set-up charge was taken and the working capital went against the group to the tune of £849,000, operating cash flow was down £4.3m at just £2.1m. This is a concern as the dividend is a key attraction for shareholders.
Broker WH Ireland forecasts underlying pre-tax profits of £9m and EPS of 18.2p (from £8.4m and 20.7p in 2011).
| Office2office (OFF) | ||||
|---|---|---|---|---|
| ORD PRICE: | 146p | MARKET VALUE: | £53m | |
| TOUCH: | 144-148p | 12-MONTH HIGH: | 167p | LOW: 125p |
| DIVIDEND YIELD: | 7.8% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 57p* | NET DEBT: | 147% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 99 | 2.83 | 5.9 | 3.6 |
| 2012 | 113 | 0.65 | 1.3 | 3.6 |
| % change | +14 | -77 | -78 | |
Ex-div: 3 Oct Payment: 9 Nov *Includes intangible items of £58m, or 160p a share | ||||
