Good morning! Shareholders in Savile (LON:SAVG) are being put out of their misery with a takeover bid from larger competitor Penna Consulting (LON:PNA). This makes complete sense in my view, as it had become fairly obvious from recent performance that Savile was not a viable standalone business. So the generous 115% takeover premium should be warmly welcomed by holders in my view, as the alternative would have been a de-Listing and the likely 50%+ fall in share price beforehand.
Lo-Q has changed its name to £ACSO, and there is an announcement today confirming that the change is effective as from today. They also issue a trading update covering the 52 weeks to 3 Nov 2013, which reads very positively. The market cap is currently £135m at 685p per share, a valuation which is about 4-5 times what the historic figures would support, so clearly the company has to deliver significant growth just to stand still in terms of share price.
Group revenue has grown 29% year-on-year, through organic growth and the acquisition of accesso LLC in Dec 2012. So by my calculations that puts turnover at £37.5m, so the PSR (price to sales ratio) is a pretty racy 3.6 (anything above 1 tends to indicate expectations of growth, but it depends on the operating profit margin achieved, so a higher PSR is usually given to companies with high operating profit margins).
As the saying goes, turnover is vanity, and profit is sanity. So in this case shareholders will be pleased to note that adjusted profit;
"is expected to be comfortably ahead of current market expectations and at least 48% ahead of the performance achieved in 2012"
So looking back to their 2012 results, I cannot see adjusted profit disclosed, but ordinary profit before tax was £3.15m. So assuming that is the correct comparative to use, then this implies a rise to about £4.7m for 2013. Last year the tax rate was exactly 20%, so assuming the same rate this year, then that takes earnings down to £3.76m. So at a market cap of £135m the PER is now just under 36. So that's an aggressive valuation, that factors in continued strong growth. Paying up-front for several years' future growth just is…
