Making a comeback

As a result, Weir’s profits collapsed. The company earned £334m in 2013 and £73m in 2014. By 2015, it was making a loss, to the tune of £179m for 2015.

Earnings started to recover in 2016, but it’s taken three years for Weir to get back to where it was in 2013. For 2019, the City is expecting the firm to report net income of £233m, or earnings per share of 94p. Based on these figures, the stock is trading at a forward P/E of 15.8.

Further growth is predicted for 2020 as demand continues to improve. Analysts have pencilled in growth of 19% for the year, taking earnings to 112p per share. I’m confident Weir can hit this lofty growth target. After years of cutting back, it now looks as if the mining industry is starting to spend again, which is good news for the company.

Spending money

Indeed, today the group announced it had received its largest ever single order ($100m) from one company to provide industry-leading, energy-saving solutions to the Iron Bridge Magnetite Project in Australia. If this trend continues, I think there’s a good chance Weir could outperform City expectations for 2020.

With the stock currently trading at a forward P/E of 13 (for 2020) in line with the sector average, there’s a good chance its shares could jump higher if it beats the City. A yield of 3.2% sweetens the appeal, in my view.

Niche business

Another FTSE 250 growth stock I think would be a great addition to any portfolio is Equiniti (LSE: EQN). You might not have heard of this business, but there’s a good chance you’ve made use of its services.

Equiniti provides complex administration and payment services for the financial services industry. It takes on the jobs other companies don’t want, such as pension administration, share registration, and international payments to corporate clients. These are hardly exciting businesses, but they’re essential, and Equiniti has carved out a highly profitable niche for itself here.

Following a significant acquisition in the US, Equiniti’s revenue has jumped from £382m in 2016 to £530m for 2018. It’s projected to hit £560m in 2019, according to City analysts. Thanks to deal synergies, net income will more than triple in 2019, from £18m last year to £72m for 2019.

Based on these forecasts, the stock is currently dealing at a forward P/E of just 11. That’s just too cheap, in my opinion, for such a high-quality, niche business that’s set to triple net income for 2019. As well as the discount valuation, shares in the administration giant also support a dividend yield of 2.8%.

The post £2,000 to invest? Here are 2 FTSE 250 growth stocks I’d buy right now appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of Equiniti. The Motley Fool UK has recommended Weir. 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.

This year, City analysts are expecting the company to report earnings per share of around 19.8p, up a staggering 520% from 2013’s reported figure of 3.2p. 

And it looks as if Ibstock is well on the way to meeting this target. A few days ago, the company informed investors that it has made a solid trading start to the year and expectations for the full year are unchanged, although it does expect earnings to be weighted towards the second half of 2019.

Rising income

Thanks to its explosive earnings growth over the past five years, Ibstock has also become one of the FTSE 250’s best income stocks. It first started paying a dividend to investors in 2015, distributing 4.4p per share. Last year it paid out 16p, giving a historical dividend yield of 6.8% on the current share price. 

It would appear as if this trend is going to continue. After selling its Glen-Gery US business for £76m last year, it ended 2018 with net debt of £48.4m, down from £117m at the end of 2017. This debt reduction has reduced interest expenditure by around £7m a year, which is enough, according to my figures, to pay an extra 1.7p a year to shareholders boosting the annual dividend by a little over 10%. 

Considering all of the above, the company’s cash generation, earnings growth and dividend expansion, I think shares in Ibstock are a steal today as they are dealing at a forward P/E of just 12.

A unique business

I also think investors should consider FTSE 250 financial services group Equiniti (LSE: EQN) for their Stocks and Shares ISA.  

This is a somewhat unique business, which is why I think it could be an excellent investment for any portfolio. Equiniti provides complex administration services for companies, such as US banking giant Wells Fargo. It agreed to acquire the bank’s share registration business for $227m in 2017 and has today announced that the integration is complete, a development management describes as an “exciting milestone” for the group. 

Thanks to the contribution from this new business, Equiniti’s top line expanded by around a third in 2018. Analysts are predicting even faster growth in 2019 as the integration reaches its conclusion. The City has pencilled in earnings per share of 19.2p for full-year 2019, up 307% year-on-year.  

Booming business

Based on the City’s growth targets, the stock is currently dealing at a forward P/E of 11.8, which looks to me to be a steal for such a critical business.

Without Equiniti’s services, a large number of financial service companies would have to bring administration back in house, which would cost significantly more. In other words, Equiniti’s size and scale in the market gives it an edge which is difficult to replicate. On top of the company’s attractive valuation, it also supports a dividend yield of 2.6%, with the payout covered 3.3 times by earnings per share, leaving plenty of room for further growth in the years ahead.

The post 2 FTSE 250 dividend growth stocks I’d buy in a Stocks and Shares ISA today appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of Equiniti. 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.

The group, which produces everything from replacement knees to airport scanners and industrial pumping equipment, has seen the value of its shares fall by 20%, excluding dividends, over the past six months, following a profit warning.

Growth halt 

At the end of September, Smiths told the market that fiscal full-year sales had declined 2%, while pre-tax profits were down 28%. Investors were also less than impressed by management’s prediction that sales for this financial year would grow by “at least” 2%. Although shareholders had expected more, sales growth has averaged just 0.7% for the past five years. 

Nevertheless, despite the firm’s outlook, I believe that this could be a fantastic opportunity for long term investors.

After recent declines, shares in the industrial conglomerate are now changing hands for just 13.2 times forward earnings. That’s not cheap, but it’s significantly below the five-year average of 16.9. As well as being cheap compared to its historical average, I believe recent investor disappointment will push management into action to try and improve growth. 

Analysts are speculating a breakup or sale could be on the cards, potentially unlocking billions in extra value. And while shareholders are waiting for a value-crystallising event to emerge, they can pocket a dividend yield of 3.6%.

So, after considering the firm’s historically-cheap valuation and level of income on offer, I reckon this could be an opportunity that’s too good to miss. 

Upcoming buyout? 

Another company that’s also currently the target of bid speculation is Equiniti (LSE: EQN). 

It’s been reported that the Chicago-based private equity shop GTCR is considering making a £1bn offer for the share registrar, with some big names helping put together a proposal. 

As of yet, no concrete offer has been announced, although I can see why private equity might be attracted to this business. Equiniti dominates the share-registrar business in the UK (it provides share registration for around half the FTSE 100) and has strong relationships with many pension funds, investment funds and banks. These factors all mean that the enterprise has an exceptional competitive advantage and, with this being the case, I think shares in the company are currently undervalued, changing hands for just under 12.8 times forward earnings.

With earnings per share (EPS) set to expand at a mid-teens rate for the next two years, I reckon the stock deserves a growth premium. For income investors, there’s also a 2.5% dividend yield on offer. As the payout is covered 3.2 times by EPS, there’s lots of scope for further growth.

Considering these numbers, I think that even if a bid for Equiniti doesn’t emerge, as a stand-alone investment, this company has many attractive qualities. And with its leading position in the market, the group should remain relevant for many years to come, producing steady returns for investors through a combination of both income and growth.

The post This FTSE 100 stock is down 20% in six months. Is it an opportunity that’s too good to miss? appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of Equiniti. 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.

Market leader

Equiniti is the UK’s leading provider of share registration services, holding over 70m shareholder records and providing investor services for around half the firms in the FTSE 100. Expanding its services in recent years, the £760m market cap group also now provides a broad range of technology solutions that help organisations with administration, payments, digital transformation and regulatory change.

The last time I covered it was back in late May after portfolio manager Neil Woodford had just dumped the stock. At the time, I said that I was surprised that Woodford has sold out of the company and that I thought it was worth holding the shares for further gains.

However, since that article, the shares have been stuck in a short-term downtrend and have declined over 20%, making Woodford’s call look pretty good. Yet today, the shares have bounced sharply on this morning’s half-year results. Let’s take a closer look at the numbers.

Half-year results

They look pretty impressive. Revenue has surged 30.4% to £254m on the same period last year, and underlying EBITDA has climbed 31.4% to £55m. While profit after tax is down heavily on last year, falling from £7m to £2.7m, this reflects the £14.1m of non-operating charges associated with the group’s acquisition of Wells Fargo Shareowner Services (EQ USA) that was successfully completed in February. Underlying earnings per share rose 13.2% to 7.7p and the dividend was increased by a healthy 11.6% to 1.83p per share.

Commenting that the first half of 2018 was Equiniti’s “strongest reporting period yet,” Chief Executive Guy Wakeley said that full-year earnings are expected to be “towards the top end of market expectations” and that the group has “multiple opportunities for future growth.”

A further announcement this morning advised that the Equiniti Group Employee Benefit Trust plans to buy 6m ordinary shares in the company in order to satisfy share entitlements and awards under the company’s share scheme arrangements.

Worth buying?

Today’s results suggest to me that the growth story here is still intact. The group has a market-leading position in share registrar and related services here in the UK, and looks set for further growth with the recent acquisition of EQ USA. If Equiniti can begin selling some of its other technology solutions to firms in the US alongside its share registrar services, revenues should continue to climb in coming years.

The stock’s valuation looks undemanding after the recent share price fall. With City analysts expecting earnings of 16.7p per share for FY2018, the forward-looking P/E ratio is just 14, which I believe offers value. A prospective dividend yield of around 2.5% also adds weight to the investment thesis. For patient investors, I think Equiniti offers a decent long-term investment opportunity.

The post This stock just surged 17%. Did Neil Woodford make a mistake selling it? appeared first on The Twelfth Magpie.

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Edward Sheldon has no position in Equiniti. The Motley Fool UK owns shares of Equiniti. 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.

Softcat

UK IT infrastructure specialist Softcat is a company that I have historically been very bullish on. For example, I highlighted the stock as a top technology stock for 2017 in January last year when it was trading under 300p. Today, the shares change hands for over 714p, so it’s likely Neil Woodford made a decent profit when he sold the stock recently. But should he have held on?

A brief trading update for the quarter ending 30 April released today suggests he may have been better off doing so. Indeed, the update revealed that momentum within the business is strong at present and that the board is confident that the company will deliver full-year results that are “ahead of expectations.” The group advised that “market conditions and customer demand have both remained strong” and that it still has a “considerable market share opportunity.” The stock has jumped 8% today.

But what about the valuation? Maybe Woodford sold as he thought the stock was too expensive? Well, City analysts currently expect the group to generate earnings of 23.4p per share for the year ending 31 July. At the current share price, that places the stock on a forward P/E of 30.1. While that’s clearly not a bargain valuation, I’m not sure it’s overly expensive either, given Softcat’s recent growth and strong financials. For example, in the last three years, revenue has grown 65% and net profit has increased 46%. Return on equity last year was 46% and the company has no long-term debt. These numbers warrant a premium valuation, in my view.

I don’t own Softcat shares but if I did I wouldn’t be selling just yet. With demand for cybersecurity and networking solutions likely to remain strong in the future, I’d be holding on for further gains over the medium-to-long term.

Equiniti

Woodford’s sale of Equiniti shares also surprises me. It provides technology to a broad range of financial services companies and has a market-leading position in share registrar services in the UK, providing investors services for around half the firms in the FTSE 100. And after the key acquisition of US-based Wells Fargo Shareowner Services in February, the group looks to have attractive growth prospects internationally.

Equiniti recently advised that 2018 had started well, and that it was building on the momentum established last year. It also noted that it had recently made several new clients wins including Bodycote, Hiscox and Rentokil in the UK, and Mastercard in the US.

Woodford most likely made a decent profit on the sale of his Equiniti shares, as he doubled up on his holding back in mid-2016 when the stock was trading at a much lower price than it is today. Yet with the stock currently trading on a forward P/E of just 16.6, I believe there could be further gains to come for patient shareholders. If I was a shareholder, I wouldn’t be selling just yet.

The post Did Neil Woodford make a huge mistake selling Softcat shares? appeared first on The Twelfth Magpie.

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK owns shares of Equiniti. 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.

2018 was the first year in a decade that the bank returned to profit, generating attributable earnings of £752m for the full-year, significantly better than the £592m loss expected by analysts and far better than the attributable loss of £7bn reported for 2016.

However, while there is some light at the end of the tunnel for RBS, the bank still has a considerable amount of work to do before it’s in the clear. There are still multi-billion-pound mortgage litigation suits to settle with the US Department of Justice, and last month the bank was accused of “certain widespread inappropriate treatment of SME customers” in a Treasury select committee report. This is just one of the many reasons why the bank was forced to set aside another £764m for conduct and litigation charges in the fourth quarter.

And it looks as if shareholders are going to have to wait for a few more years before they see a return from RBS’s shares as, until the full impact of the DoJ settlement is known, management is unlikely to announce a dividend. 

So, as RBS continues to deal with the fall out of its part in the financial crisis, I believe investors would do well to avoid the business and instead commit their cash to one of the firm’s banking sector peers.

Critical service 

Strictly speaking, Equiniti (LSE: EQN) isn’t a bank but it does work in unison with many of them, providing complex administration and payments services. It also administers the shareholder services for around half of the FTSE 100 constituents. 

According to the company’s full-year 2017 earnings release, which was released today, Equiniti managed to retain all of its FTSE 100 clients last year and added several new businesses to its registration business including Howdens Joinery, Jardine Lloyd Thompson and Rentokil Initial. This helped the group grow organic revenue by 2.9% for the period. Overall revenue, including the impact of acquisitions, expanded 6.1% year-on-year and underlying earnings per share rose 7% to 16.7p.

Deals, deals, deals 

Equiniti’s largest acquisition last year was the Wells Fargo Shareowner Services business. Completed at the beginning of February, City analysts expect this acquisition to help the company grow earnings per share by 11% in the first year of its operation. The enlarged group’s top line (which in this case is a better indicator of growth as the deal was funded with a rights issue) is expected to grow by more than 20%. 

Based on these growth estimates, shares in Equiniti are currently trading at a 2018 P/E of 17, which is hardly cheap. But when you consider the group’s dominance of the share registration business, the multiple is easy to justify. It’s highly unlikely that the company will be displaced by a new upstart anytime soon, so Equiniti should be able to continue to use its established businesses to fund growth through bolt-on acquisitions. 

As well as a market-leading position and double-digit earnings growth, the shares also support dividend yield of 2%. That might not seem like much at first, but the payout is expected to grow by around 25% over the next two years.

The post Why I’d sell Royal Bank of Scotland Group plc to buy this hidden banking stock appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of Equiniti and Jardine Lloyd Thompson. The Motley Fool UK has recommended Howden Joinery Group. 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.

Overseas expansion at last 

For Equiniti, whose shares have returned over 45% in the past year, my bullishness is driven by its market-leading position in the UK, where it serves some 70% of FTSE 100 firms, and its impressive growth prospects in the US.

At home in the UK, Equiniti provides firms with services it aptly describes as non-core but mission-critical. This means providing corporate customers with services as varied as share registration, pension administration and regulatory compliance software.

The company already has market-leading positions for several of its core offerings. But it is still growing sales at a steady clip through bringing on board new clients, including 75% of all new IPOs in 2017, adding on new services and cross-selling existing services to other customers.

On top of this organic growth, Equiniti now has access to the world’s largest market for its services, the US, through the £176m purchase of Wells Fargo Shareholder Services that is expected to close in Q1 2018. This business is already profitable but as a small, non-core part of Wells Fargos’ larger banking group it was relatively under-invested.

Equiniti plans to change that and is in the process of migrating over the variety of additional services and software that it offers in the UK to the US. This should help the firm gain market share as clients prefer a one stop shop for many of their back office needs.

With growth at home and in the US on tap, a stable balance sheet and impressive defensive characteristics, I reckon Equiniti’s impressive 2017 performance can be more than repeated in 2018.

Taking market share from the big guys

Discount retailer B&M’s stock price rose by over a third in 2017 on the back of store expansion and strong like-for-like sales growth from its existing estate. With consumers still attracted to discounters’ pricing and product offerings and plenty of room for continued expansion, I reckon it could end up performing just as well in 2018.

In the half year to September, it ginned up a stunning 7.5% increase in same-store sales for its eponymous UK brand, while the continued rollout of new stores at home and in Germany and the acquisition of Heron Foods led to group sales rising 21.7% to £1.3bn.

Gross margins did slide a bit from 34.7% to 33.9% due to rising input prices and a shift towards more grocery products in stores, but EBITDA margins remained very high for the sector at 8.6%. This is higher than competitors’ margins and gives B&M significant scope to absorb rising costs without passing them on to consumers. This should drive further market share gains.

With a strong management team and consumers attracted to its offerings in bull and bear markets alike, I fancy B&M’s prospects for continued market outperformance in 2018 are looking quite good.

The post 2 top growth stocks I’d buy in 2018 appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of Equiniti. 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.

Repeating figures first published several weeks ago in a trading update, Record reported that assets under management rose to $61.2bn from $58.2bn at the end of March, although in sterling terms, AUM declined to £45.6bn from £46.6bn. 

Still, despite the lacklustre AUM performance, pre-tax profit increased marginally to £3.8m from £3.6m in the prior year period, as revenue expanded to £12.2m from £10.7m. 

Off the back of these upbeat figures, management has declared a dividend of 1.15p, up 39% year-on-year.

Commenting on the figures, CEO James Wood-Collins said: “Overall it was encouraging to maintain revenues at levels consistent with the second half of last year despite the remaining UK-based Dynamic hedging clients deciding either to switch to lower-margin Passive hedging or to terminate their mandates during the period.“

Growth slowing, cash returns rising 

For the past few years, Record has been going through a transition. As the company’s clients have become more conscious of cost, they’ve been switching to lower-cost (and lower-margin) passive hedging strategies helping the firm grow AUM. But profits have come under pressure. 

Nonetheless, overall profits have been ticking higher, and the company has been returning any excess cash to investors. 

The interim dividend hike follows a £10m tender offer for shares earlier in the year. Based on today’s payout rise, the shares currently support a dividend yield of 5.5%, with the payout covered 1.2 times by earnings per share, and backstopped by a debt-free cash-rich balance sheet. 

Even if growth remains sluggish in the years ahead, as an income stock that has a record of returning excess funds to shareholders, Record deserves a place on your watchlist. 

Boring but essential 

As well as Record, I’m keeping an eye on fast-growing administrator Equiniti (LSE: EQN). 

Its business of managing the administrative side of pensions and investments is exceptionally boring, but it’s essential. The group’s size and experience mean that it dominates the market. Management is buying other similar businesses where the company can use its expertise to lower costs and improve margins. 

As Equiniti already has the processes in place, it can cut costs and improve margins quickly at the acquired businesses.

For example, the group is currently planning the $227m cash acquisition of Wells Fargo‘s share registration services business, which is expected to be earnings accretive in the first year. By stripping out duplicate functions, management expects $10m of cost synergies. 

At first glance, shares in Equiniti might seem expensive, as they trade at a forward P/E of 20.1. However, considering how one-of-a-kind this company is, it deserves a high valuation. Increasing growth acquisitions should help drive earnings rises over the years, ahead and when the company decides to dial back its expansion, dividends should follow. The stock currently yields only 1.5%. 

The post 2 hidden growth & income stocks that could still make you a million appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of Equiniti. 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.

Cash king 

Equiniti should benefit as, aside from its core share registration business, it also offers a bevy of related critical but non-core technology applications to more than half of the FTSE 100. That includes pension administration, employee share plans, regulatory compliance software and payroll solutions.

Some of its many offerings mean it holds a significant amount of cash for clients. In H1 2017 it held some £1,700m of client cash on its balance sheet and received £4.7m in income from investing this cash in short-term securities. This income was 19% lower than the year prior due to the BoE’s rate cut in August 2016 following the Brexit vote. And while two-thirds of this cash is invested in fixed rate securities, Equiniti will see rising income from the rest as we go forward.

Now, Equiniti also has roughly £450m in debt, so it will see interest payments rise for any portion of this debt that has a floating rate. However, this debt level is comfortable for the firm due to its steady recurring revenue, high cash flow and the fact that £120m of it is related to the recent acquisition of Wells Fargo Share Services. This deal has made Equiniti the third largest provider of such services in the US and marks its entry into the world’s largest market for them.

Equiniti’s share price has risen by 55% over the past year and its shares are now priced at a full 19 times forward earnings. That said, I see plenty to like about the firm and believe it has stellar growth prospects as it cross-sells its array of services into the US and builds on its dominant market position in the UK.

A most welcome surprise 

As a pureplay retail bank, interest rates are very important for Metro Bank (LSE: MTRO) as it gives the company more room to increase the spread between the interest rate at which it borrows money, ie deposits or corporate borrowings, and the rate at which it lends it out.

Taking the difference between these two and then dividing by the bank’s total interest-bearing assets is referred to as the net interest margin (NIM), and with interest rates at rock bottom levels for years, banks’ NIM have been very low. Indeed, in the quarter to September, Metro Bank’s statutory net interest margin fell from 1.95% to 1.94% year-on-year.

However, this figure is a bit distorted by the BoE’s own term funding scheme. The bank’s underlying NIM based purely on its main source of funding going forward, actual customer deposits, was a heartier 2.22% and was growing even without the interest rate hike. Needless to say, this semi-unexpected rate hike should further benefit this metric.

There’s plenty of other moving parts to consider with fast-growing Metro Bank, but with interest rates rising and a compelling rollout plan, I’ll follow the challenger bank closely, even if its 3.92 price/book ratio has it very, very highly valued.

The post 2 growth stocks benefitting from the Bank of England’s interest rate hike appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of Equiniti. 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.

Neil Woodford is a portfolio manager that is not afraid to stray from the herd. Whereas most income fund portfolio managers generally prefer to invest in mainstream high-yielding FTSE 350 stocks, a glance at the portfolio holdings of both Woodford’s Income Focus and Equity Income funds reveal that the portfolio manager holds many smaller companies. Here’s a look at one of his latest buys.

GYG an income portfolion addition?

In July, Woodford added £63m market cap GYG plc (LSE: GYG) to his Income Focus portfolio. A £63m market cap small-cap stock for an income portfolio? You heard right.

GYG is a provider of painting and maintenance services to the superyacht industry. Woodford stated in his July portfolio update: “It is a cash generative business, which is expected to pay an attractive dividend and support a progressive dividend policy going forward.”

The superyacht specialist today released its first set of interim results, since coming to the market in early July. How do the numbers look? In my view, they paint a mixed picture. While group revenue increased 19.4% to €33.9m, the company generated an operating loss of €1m, due to €3.2m of exceptional items mainly related to the IPO. The group’s net cash balance fell to €4.7m, from €6.2m six months earlier. Chief executive Remy Milliott commented: “The Board remains confident about the future as we enter our busy post-summer season.”

There’s several things I like about this business. The company currently has a 17% market share of the superyacht refit market and services 25 out of the 50 largest superyachts. According to GYG, superyachts require a major survey service every five years to comply with class, maritime and insurance requirements. Yacht owners typically undertake annual maintenance as well to keep their vessels in optimum condition. As a result, recurring revenues should be strong. City analysts expect GYG to reward shareholders with dividends of 2.8p and 5.8p this year and next, yields of 2.1% and 4.3%, respectively.

Having said that, while GYG looks to have potential for both capital growth and dividends going forward, personally I’d wait for the company to be profitable before investing.

Equitini growth to come?

One Woodford small-cap I would buy today is investor services specialist Equiniti (LSE: EQN). I last covered the stock almost a year ago, when it was trading near the 200p mark, however, since then the shares have risen over 40% to now trade just below 290p. Despite the gain, I believe there could be more share price growth to come.

The company appears to have strong momentum at present, recently winning new clients such as Aon Hewitt and House of Fraser, and boasting an impressive 100% client retention with new client wins across all divisions.

Furthermore, the group recently announced a deal to acquire the share registration business of US bank Wells Fargo for £176m. Equiniti believes the acquisition has “compelling strategic rationale” and should be “strongly earnings accretive in the first full year of ownership.” If the deal is approved by shareholders at the company’s general meeting scheduled for later this week, Equiniti will become the third largest share registrar in the US and a key multinational player.

Trading on forward looking P/E ratio of 18.1, Equiniti isn’t the cheapest small-cap around, however, given the company’s growth potential, I believe the valuation looks reasonable.

The post Neil Woodford just bought a small-cap stock you’ve likely never heard of appeared first on The Twelfth Magpie.

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK owns shares of Equiniti. 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.