Results announcement

Reporting on Monday was building services company Bilby (LSE: BILB). The company announced full-year results which showed that it has made progress when compared to the prior year. As part of its growth strategy, the company acquired DCB for a maximum consideration of £4m, as well as Spokemead for a maximum consideration of £8.7m. They have enabled the company to expand its range of services, which may help it to broaden its customer base and geographical reach.

Furthermore, the company achieved significant contract momentum in the second half of the year. This should help to underpin additional growth in future years, while investment in operational systems and efficiencies during 2017 enabled it to increase its cash reserves to £1.9m by the end of the year. This should provide additional capital which could be used for more growth over the medium term.

In terms of its growth potential, Bilby seems to have a bright future. It is expected to report a rise in its bottom line of 10% in the current year. This puts it on a price-to-earnings growth (PEG) ratio of 0.9, which indicates that its share price could see a recovery following a 45% fall in the last year. Certainly, it is a smaller company which, by its very nature may be high risk. However, the returns on offer may also be impressive.

Low valuation

Also offering strong earnings growth potential is strategic planning and management services provider Impellam (LSE: IPEL). It is forecast to increase its bottom line by 8% in the current year, followed by further growth of 10% next year. Despite this above-average growth rate, the company trades on a discount valuation. For example, it has a price-to-earnings (P/E) ratio of just 7.7, which suggests its share price could rise significantly even after gaining 127% in the last five years.

As well as high growth potential, Impellam also has a relatively sound income outlook. It currently yields 2.8% from a dividend which is covered around 4.5 times by profit. This indicates that it could increase shareholder payouts at a much faster pace than profit growth, while maintaining high investment in the business for long-term growth. With inflation moving higher, this could prove to be a fillip for the company’s investors. As such, buying the stock now for the long run could be a shrewd move owing to its potent mix of income, value and growth appeal.

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Both companies published full-year results this morning, but is either company a buy?

Bilby

Bilby shares touched 100p this morning, after the firm published its first set of results following its March IPO.

Bilby operates as a gas heating and building maintenance services provider in London and the south east. The firm’s trading business, P & R Installation Company, is focused on contract work with housing associations and local authorities, and provides services to more than 100,000 homes and commercial properties.

Impressive results

Bilby’s results made for impressive reading, in my view. The firm’s operating margin rose to 13.4% in 2014/15, from 8.8% in 2013.

Bilby has changed its year-end date so today’s figures cover 14 months, compared to 12 months for last year’s figures. This means that you can’t readily calculate percentage increases on last year’s sales and profits, but the upward trend is obvious.

Turnover was £14.91m, up from £9.73m during the previous year. Operating profits rose from £0.86m to £2.0m last year, while pre-tax profits rose from £0.83m to £1.98m.

Earnings per share for last year were 6.1p, giving a trailing P/E of 14.8. That’s backed by a dividend per share of 2.32p, giving a yield of 2.6% at the current 90p share price.

Bilby’s attractions are enhanced by a strong balance sheet, with net cash of £1.7m and no debt.

Outlook

The only broker forecast I can find for Bilby is by the firm’s house broker, which was forecasting earnings per share of 3.15p for 2015/16 before today’s results.

I’d expect that forecast to now be substantially upgraded. Bilby says its current order book is worth £95m, or nearly eight years’ revenue based on last year’s figures. Bilby has reported several new contract wins recently, and I believe further growth is likely.

Bilby’s growth could slow if the housing market cools, but its focus on rented properties means that this is less of a risk than for companies that focus on owner-occupied homes.

Telecoms Plus

Shares in Telecoms Plus fell by 18% in one day in April, after the firm admitted that it would have to write off £11m of bad debt and said that profit growth for the year would be “significantly below market expectations”.

The group, whose main trading business is Utility Warehouse, issued its final results today. Investors appeared to be relieved, and the shares rose by 3.5% to 850p this morning.

Revenue rose by 10.5% to £729.2m, while reported pre-tax profits rose by 21.3% to £42.1m. Adjusted earnings per share rose 9.3% to 53.0p, in-line with recent forecasts but 16% lower than the 69p per share consensus forecast in place before April’s profit warning.

However, Telecom Plus did deliver its promised 14% dividend increase, taking the full-year payout to 40p per share. This gives a prospective yield of 4.7% that should rise to 5.4% in 2015/16, based on the firm’s commitment to increase the dividend by 15% to 46p this year.

The high yield on offer from Telecoms Plus looks attractive, but in my view the current valuation of 16 times trailing earnings is probably enough, making the shares a buy for income only.

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