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Sureserve Group looking to rejoin dividend list as performance defies pandemic

Snapshot

  • Leading UK compliance and energy support services group
  • The AIM-listed firm employs over 2,100 people
  • Executive chairman Bob Holt is an experienced manager and developer of service businesses
Housing

Quick facts: Sureserve Group Plc

Price: 48.5 GBX

AIM:SUR
Market: AIM
Market Cap: £77.34 m
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What Sureserve Group does:

Sureserve Group Plc (LON:SUR) is a leading compliance and energy support services group for UK customers in the outsourced public and regulated services sectors.

The AIM-listed firm employs over 2,100 people and its group of specialist companies has knowledge and expertise in improving, maintaining and developing buildings and services for social housing, schools and colleges, public buildings, energy services and industrial and commercial buildings.

Sureserve’s executive chairman, Bob Holt, who has been in charge since in July 2016, is an experienced manager and developer of service businesses, with a career in the service sector spanning over 35 years.

His stated aim is to provide experienced executive leadership to navigate the business through challenging market conditions whilst setting a clear strategic direction for the group for the medium term.

 

How is it doing:

Even in the face of the coronavirus pandemic lockdown, Sureserve put in a good performance in 2020, helped by the classification of its gas, water and electrical service businesses as key services.

In a trading update in early October, the company said trading for the financial year ended September 30, 2020, was in line with management's expectations. 

Net cash stood at £3mln at the year end, having paid off all its borrowings earlier in the year, while the order book was at £375mln, boosted by more than 21 new contracts since May.

In anticipation of identifiable increased market opportunities, the group said its bidding teams have been strengthened in both divisions, while there has also been significant investment in apprenticeships and training.

The company also said that its strong trading performance over the last 12 months has enabled its board to consider a sustainable dividend policy, which is more than adequately covered by significant earnings per share and regular recurring cash flows.

In the first half ended March 31, 2020, the company posted revenue of £109.8mln, up 7.1%, while pre-tax profit more than doubled to £2.6mln with a boost from a significant improvement in performance from the Compliance division.

 

Inflection points:

  • Dividend payments resumed
  • Further growth in Compliance unit
  • Energy Services revenue to improve

 

What the boss says:

In October's trading update, executive chairman Bob Holt told investors: “I am happy to report that the group is delivering a consistently strong performance, which highlights the nature of the essential services we provide to homes and communities. 

“This hard work has been achieved across the business and I would like therefore to thank each of the staff for their contribution. 

“As ever, we are a business which wants to develop talent in house and so we have launched a number of new initiatives in terms of apprenticeships, training and in-job support to join us on this group's future growth journey.”

 

What the broker says

Peel Hunt upped its target price to 60p from 50p and retained its 'buy' recommendation after October's update, maintaining its forecast for £8.7mln of profit before tax for the year, which is below the City consensus for £9.2mln.

The analysts said they see "upside risk" to their September 2022 profit forecast of £10.4mln, which would give earnings per share of 5.3p.

The shares, trading on 9.8 times next year's earnings "look good value given the operating momentum and cash flow", the analysts added.

 

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