2015 has started 'positively'
ServicePower provides complete end-to-end software for the scheduling and management of mobilised service professionals. This includes both employees and subcontractors within the repair, maintenance and installation sectors. Although headline sales declined -9% to £12.7m and adjusted EBIT fell to -£0.9m (vs £0.2m), there were signs of positive momentum, as H2'14 turnover at £6.5m rose sequentially 6% on H1'14 (£6.2m). Plus the large deals which were deferred at the year end are still being actively pursued, and we hope to hear more news in due course. With regards to industry recognition, the firm was named as a 'Visionary' by Gartner in the Magic Quadrant for Field Service Management, and also received the M2M Evolution for "Internet of Things" Excellence Award from TMC and Crossfire Media. We view this as anecdotal evidence that ServicePower's competitive position is on an upward path. We believe our forecasts are conservatively biased, anticipating turnover to rise 4.1% this year to £13.25m, and then grow 7% in 2016, and 10% pa thereafter. Meaning that by 2019, assuming all goes to plan, the firm should be generating sales and adjusted EBIT of £18.9m and £2.7m (margin 14.2%) respectively. Using a DCF model with a 14% discount rate and a blend of 2019 multiples (2x sales, 10x EBITDA and 12x EBITA), we maintain our target price of 10p/share.
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