Procurement delays at healthcare, energy and water companies battered Servelec (SERV) in the first half of 2016. The confluence of challenges reduced the software group's organic sales by 12 per cent, driving underlying operating profits down 28 per cent to £4.5m.
Pressure on NHS budgets and the postponement of system upgrades pushed healthcare sales down 4 per cent, as hospitals and clinics refrained from buying patient management systems. Revenues tumbled 14 per cent and profits fell even further in the controls division due to depressed oil and gas activity. And technologies turnover dipped, reflecting sluggish spending on remote telemetry units (RTU) among UK water companies.
On the bright side, Servelec inked healthcare contracts with NHS trusts in Shropshire and North Devon, as well as Scottish Child Health after the period ended. Deals with SSE Generation and Sellafield fuelled record nuclear and power orders, too. The technologies segment benefited from robust international demand and landed a £5m RTU supply deal with Anglian Water. Management also refocused staff and resources on sales rather than project implementation.
Broker N+1 Singer expects adjusted pre-tax profits of £13.4m for the full year ending December 2016, giving EPS of 15.9p, up from £15.5m and 19.4p in 2015.
| SERVELEC (SERV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 283p | MARKET VALUE: | £196m | |
| TOUCH: | 279-283p | 12-MONTH HIGH: | 393p | LOW: 208p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 93p* | NET DEBT: | 20% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 30.0 | 4.8 | 5.3 | 1.65 |
| 2016 | 28.4 | 1.7 | 2.0 | 1.65 |
| % change | -5 | -64 | -62 | - |
Ex-div: 29 Sep Payment: 28 Oct *Includes intangible assets of £71.0m, or 102p a share | ||||
