Good morning! Utilitywise (LON:UTW) issues results today for the year ended 31 Jul 2013. It's a utility cost management consultancy, so it sits between commercial customers, and the utility companies, and negotiates a more competitive tariff for its customers, and is paid a commission by the utility companies. I've written about Utilitywise five times this year so far, and although flagging up the value in the shares at 102.7p on 7 Feb 2013 on "Paul's Picks", have had nagging doubts which prevented me from buying any shares in it personally. That's a pity because these shares have had a good year (but so have most things!), although they have risen so much since the summer that it's difficult to see much more immediate upside. Here is the three year chart:


At 155p the market cap is £108m.

Strong growth has been delivered from a mixture of acquisitions, and organically, with turnover up 73% to £24.8m. Adjusted profit before tax of £7.0m shows both a very strong profit margin, and a remarkable 81% increase against last year. Difficult to argue with that!

As promised yesterday, from now on I'm looking closely at the widely abused adjustments made to reported figures, to ensure they are reasonable. In this case it looks OK. They have treated £800k of costs related to acquisitions as exceptional (which looks reasonable to me), and £0.2m of share based payment expenses (questionable, but it's not a huge amount) by-pass the P&L by being charged direct to reserves (the share premium a/c). It's just another form of remuneration for senior staff/Directors, so I don't really see why share based payments should by-pass the P&L, but that seems to be an accepted accounting method at the moment.

Another £0.2m of amortisation of acquired intangibles is excluded from adjusted profit, but that looks OK to me - it relates to intangibles (described as customer-related, so presumably values put on existing customer contracts & lists at the time the acquisitions were made?) acquired with the three acquisitions totalling £21.4m made during the year, as set out in note 6 to the accounts issued today.

So overall, I'm happy that the 7.9p diluted, adjusted EPS for the year ended 31 Jul 2013 looks OK. So turning to valuation, that puts them on a…

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