One to Watch: Spice

Published on Monday 5 January 2009 20:20

86.75p +0.75p Scotsman says HOLD

SPICE provides security support services largely in the UK.

The group is organised into seven operating businesses – billing, energy, facilities, gas, electricity, telecoms and water.

In the context of ghastly investment markets, Spice's share price has held up pretty well, its current level comparing with a price of about 100p a year ago.

This seems no more than justified by the group's performance.

Although not a client of my firm, Brewin Dolphin's analysts follow the company and voted on the group's recent interim results. These were ahead of our forecasts with a pre-tax figure of about 14 million against a forecast of 13.6m.

The exceptionally strong performances in electricity and energy offset a weakness in facilities and we are now reasonably confident that the company will meet our expectations for the full year, a pre-tax figure of 33.5m and earnings per share of 7.2p.

Revenue increased by 34 per cent with the supply division seeing both billing and energy delivering strong performances.

We like Spice's business model with long-term contracts and recurring revenue streams providing support.

A new wave of nuclear power stations would require even greater levels of investment in the electricity network. The Climate Change Act is also expected to create a range of legislate drivers and opportunities for Spice, particularly its energy consultancy services.

True, Spice's dividend yield is somewhat thin but this is a quality company which, if not recession-proof, appears to have defensive characteristics in these uncertain times.

&#149 The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.