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Software outsourcing firm Escher Group Holdings (LSE: ESCH) has been flying lately, its stock jumping almost 40% in the last four months. However, this follows a bumpy five years and today’s share price of 190p is still some way below the 220p it traded at half a decade ago.

In the post

Today Escher published its results for the six months ended 30 June 2017 but the market response has been underwhelming, with the stock down 2.5% at time of writing. It could have been worse given that Escher, which provides point-of-service software for use in the postal, retail and financial industries, reported a drop in first-half revenues from $12.34m to $9.39m year-on-year.

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Software licence sales fell from $3.62m to $840,000, while adjusted EBITDA fell from $3.35m to $1.36m, with a $30,000 loss before tax, against last year’s profit of $1.81m. That is despite a small drop in operating expenses from $6.39m to $5.83m. It leaves the company with the same net cash position as last year, $100,000.

Smart Riposte

Escher is a small player with a market cap of just £38m and chief executive Liam Church says that customer spending patterns make its traditional business model inherently volatile. “Our licence sales in the first half were modest as compared to those of H1 2016. Nevertheless, we were able to deliver US$1.4m in adjusted EBITDA.”

Church is banking on additional licence sales  from the company’s pipeline of opportunities to meet full-year expectations. He says the company’s recent investment in moving its Riposte platform to Android and IOS devices has been “keenly received” by customers, while recent operational highlights included the new licence sale of its mobile platform to the world’s largest – but unnamed – postal organisation. You can expect volatility with a stock like this, but so far the risks have outweighed the rewards, while the valuation looks high at 28 times earnings. 

Nice bite

Animal feed producer Anpario (LSE: ANP) is a much livelier beast with its share price up almost 12% at time of writing after it reported strong sales growth in today’s interim results to 30 June. Highlights include a 39% increase in revenue to £14.8m, a 42% rise in gross profits to £7.3m and 31% improvement in adjusted EBITDA to £2.6m. Management also unveiled a maiden interim dividend of 2p a share. The cash balance now stands at £12.6m up from £11.1m.

Anpario has been boosted by strong sales growth in Asia, the Americas and Middle East as it looks to raise its international profile with global branding and set up new subsidiaries in Thailand and Indonesia. Chairman Peter Lawrence hailed the firm’s strong balance sheet and positive cash generation, and said this gives it a sound platform for further acquisitions and investment in recruitment and infrastructure.

Growth story

He said the company’s first interim dividend reflected its strong growth prospects as it looks to drive sales by building stronger and closer relationships with customers. The AIM-listed group has a market cap of just £86m but share price growth has been strong, rising 50% in the past year to today’s 370p. It is still risky but trading at 19.88 times earnings and with dividend prospects, it may merit further investigation.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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