Topically we have had results from the £156m AIM listed Utilitywise (UTW). I say topically because as it has been a top scoring stock on the CIS for a while it made it into the Mechanical CIS Portfolio which I launched yesterday. However, personally I have not been able to bring myself to buy it despite the apparent value and growth on offer. So it will be interesting to watch this as a case study (and there are several others in the CIS Portfolio) to see if the Machine triumphs by not being prone to human biases.
In their announcement today they describe themselves as a leading independent utility cost management consultancy based in North Tyneside. The Group has established trading relationships with a number of major UK energy suppliers and provides services to its customers designed to assist them in achieving better value out of their energy contracts, reduced energy consumption and lower carbon footprint. Businesses large and small rely on Utilitywise for their energy management needs. Clients range in size from high street shops to multinationals with thousands of sites and cover the whole of the UK. In total, Utilitywise has over 23,000 customers.
So why haven't I bought it? Well I can't quite put my finger on it but there just seems something about the valuation and the price action in recent months. In particular the big fall from over 300p to around 200p and the subsequent volatile trading between 200p and about 230p, so the 12 month price momentum is poor albeit that it is now looking somewhat over sold. Now of course this may well prove to have been a great opportunity that I have missed.
My other reasons for being wary of it are the move to a new Head Office and a big ramp up in staff numbers as they seek to further their growth, although I guess you could argue that is fair enough. But it does require them to add lots of new clients without any slip ups or miss selling scandals, but so far they seem to be achieving this. Then there are all the issues surrounding energy prices, regulation and politics which quite frankly you never quite know where you are with any of that. In addition others in the past have also questioned some of their accounting policies and after the recent revelations at Telecom Plus (TEP) I guess this is something that needs scrutinizing.
However, having said that the results today seem to be pretty good on the face of it with more strong growth reported and a 55% increase in the interim dividend which is above the 37% growth forecast for the full year and in line with the rise last year. So I guess there could be some upgrades perhaps.
In addition to this they have also spent £10 million on the acquisition of t-mac technologies which they say has strong growth prospects in a very fragmented market and broadens the groups service offering into energy monitoring and control.
They also claim it will deepen the group's client relationships and enhance overall growth prospects.
The other positive aspect of this one is that some of the directors have reasonable stakes and have been buying this year while Woodford Asset Management also hold around 21% of the shares.
Summary & Conclusion
The strong looking results have been well received by the market and the shares are currently up by around 6% to 220p at pixel time. So 1-0 to the machine at the moment, but this one has been volatile like this recently so it will be interesting to see if it can maintain the rise and break out of its recent range or if it soon relapses again. I'm not a technical analyst but I guess if it can sustain a break above 230p then the 200 day at 260p and the 280p level from Q4 last year could be potential targets.
Just looking at the numbers before any changes on the back of today's figures it trades on 12.5x to July 2015 and perhaps 9x for the year to July 2016 if the strong forecast growth is delivered. The yield is also forecast to rise to 2.5% and 3.6% at the same dates. So an intriguing one which appears to offer strong growth and a reasonable price. I think I'll continue to watch it from the sidelines for now and see how the Mechanical portfolio does with it and if you are tempted then please do your own research.