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Sureserve Group eyes opportunity in UK energy transition

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What Sureserve Group does:

Sureserve Group Plc (LON:SUR) is a leading compliance and energy support services group for UK customers in the outsourced public and regulated services sectors.

The AIM-listed firm employs over 2,100 people and its group of specialist companies has knowledge and expertise in improving, maintaining and developing buildings and services for social housing, schools and colleges, public buildings, energy services and industrial and commercial buildings.

Sureserve’s executive chairman, Bob Holt, who has been in charge since in July 2016, is an experienced manager and developer of service businesses, with a career in the service sector spanning over 35 years.

His stated aim is to provide experienced executive leadership to navigate the business through challenging market conditions whilst setting a clear strategic direction for the group for the medium term.


How is it doing:

In its preliminary results for the 12 months to September 30, 2020, the company reported that profit before tax from continuing operations had risen 45.9% to £7.8mln from £5.3mln a year earlier, while stripping out exceptional items and the amortisation of acquisition intangibles saw it rise to £9.4mln from £8.3mln the previous year. 

Revenue from continuing operations was down 7.7% to £195.7mln from £212.1mln the year before reflecting the significant impact of the coronavirus (COVID-19) pandemic.

The order book ended the fiscal year with a value of £355.8mln, up from £333.2mln a year earlier.

The group added that it started the current year strongly and has proposed a doubling of the dividend to 1p.


What the boss says: chairman Bob Holt

“We have a solid platform for further growth, underpinned by our continued focus on regulatory-driven sustainable revenues and targeting growth both organically and through acquisition. We have started FY21 strongly and, with 77% of revenues covered by our £355.8m order book, we look forward to the business continuing on this growth trajectory,”

“During 2021 we are focusing on making further gains across both Energy Services and Compliance, particularly given our crucial work in helping the UK reach its commitment to create a net-zero carbon economy by 2050. In this vein, it was pleasing that the group reported carbon-neutral operations during FY20. We also remain committed to helping tackling fuel poverty across the UK over the years ahead.”


Inflexion points:

  • Dividend payments resumed
  • Further growth in Compliance unit
  • Energy Services revenue to improve


What the broker says

In a note to clients following the company’s results, City broker Peel Hunt raised its estimates and target price reiterated a ‘buy’ rating on Sureserve.

Analyst Andrew Nussey said: “Momentum in Compliance remains impressive with EBITA +40% to £11.8m and margins 8.6% vs 6.4% (benefiting from its exposure to essential services and engineer productivity). As expected, Energy Services were impacted by project deferral (lockdown restrictions) with revenues reducing 27% and profits falling to £0.8m (vs £4.3m).

“The outlook is upbeat with an attractive order book of £356m (+7%) – providing 77% FY21E revenue visibility. We increase our September 2021E PBT from £10.4m to £11.7m to give EPS of 6.0p from 5.3p. Trading on 10.3x revised September 2021E, the shares continue to offer value and we increase our target price from 60p to 70p.”

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