Shearwater Share Discussion Threads

[mr mole] 04/6/2006 08:55

Just back from hols. Interested to see another acquistion while I was away. Looks like cash from IPO is being invested quite quickly. I wonder what else they will announce over coming months.

[petemorr] 15/5/2006 11:40

Looks like you are right!

[kenmill] 13/5/2006 14:25

SCSW, after their comment in the April issue, has confirmed in its May issue that it has put the shares in its growth portfolio. With their track record, it should support the price in a falling market.

[petemorr] 10/5/2006 21:50

Yeah - I think you might just be right :)

[sheik yerbouti] 10/5/2006 18:48

Some of those will probably be buys reported as sells in error.

[petemorr] 10/5/2006 16:36

Lots of sells today and the share price goes up. Anyone got any thoughts?

[sheik yerbouti] 02/5/2006 08:12

Another major contract win:

[tole] 28/4/2006 20:21

Scott Wilson targets growth
24.04.06 Edmond Jackson

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors and if in doubt an investor should seek advice from a qualified investment adviser.

The support services sector has proved a useful source of growth shares over the years and it is worth keeping an eye on flotations to see which companies might be getting into a growth mode. There have been disasters, such as Jarvis, but at least a few setbacks prevent the sector's share ratings from becoming expensive. It is up to investors to be selective.

Scott Wilson (SWG) is an interesting 'new kid on the block', which floated on the Full List in March. Be alert for fresh stories in the stockmarket as they often exercise a keener grip on investors' imaginations, relative to companies carrying the baggage of a history. All businesses acquire it in the fullness of time, but in the early quoted years there are usually no black spots to inhibit enthusiasm.

This recent March flotation, which raised £68m via a placing at 158p per share, introduces a well-established company that appears to be in a firm growth phase. Investors should bear in mind that consulting engineers can be volatile according to the business cycle and government spending. It would be unfair to brand them as plain cyclical shares, however, since government contracts can be a source of stability in a wider economic slowdown.

Scott Wilson is the UK's ninth largest consulting engineering firm, on the tails of WS Atkins, WSP and Mouchel Parkman. Projects have been diverse, such as highways, airports, landscaping, water supply and property development. The group has a strong background in highways infrastructure projects, which have benefited from government spending; and the aim is to extend its progress to new fields such as rail and resources. Selective acquisitions have complemented organic growth and enabled a broader reach.

Despite being a new name in the quoted arena, Scott Wilson was founded in 1924 and is widespread in the UK, which represents two-thirds of group turnover. Visit www.scottwilson.com for further information including the group's international capability. You should also access and digest the listing prospectus, which has a good exposition of the risk factors on pages 13 to 20. The prospectus clarifies that £23.4m of funds recently raised are to help resolve the group's pension fund deficit. The money raised has been applied largely to tidy up group finances and provide additional working capital, with an objective for Scott Wilson to be an industry consolidator: i.e. make acquisitions.

Being involved in designing and planning, the business tends to have more one-off and shorter-term projects than classic outsourcing - the mainstay of various support services growth shares. Scott Wilson has still managed to double its order book to £166m over the last year, with over 60 agreements lasting at least eight years. Over the last five years (to end-April), profit has grown by 25% a year to £6.8m, on turnover up 14% a year to £160.0m (latest figures 2004/05 year). Such growth has been achieved with the help of cost cutting and better controls, yet it signals genuine commercial momentum. At about 190p per share, the group is capitalised at £140m.

Obviously an investor needs to question for how long these good times may last, especially the extent of government spending on improving roads, rail and inner cities. About 25% of Scott Wilson's revenue relates directly to this, and as life cycles of Labour governments go, the liberal spending years are meeting the reality of how to pay the bills (and remain in power). Scott Wilson cites prospects in Eastern Europe, the Middle East, India and China and South East Asia as these countries pursue ambitious development supported by agencies such as the European Union and the World Bank. The group already has an extensive overseas network and management concedes it could make this side of the business sweat more. In 2005 it achieved a margin of just 3% on sales of £22m.

Institutional investor appetite was keen for the placing, for example Artemis Investment Management acquired 8.5% of the enlarged share capital - a committed stake and firm bet that Scott Wilson's momentum has further to go. The demand is reflected in the shares having attained a prospective p/e in the mid-teens, which to cautious investors may look fully priced. Yet the rating is justified when you consider the group has completed just one year of a five-year strategic plan to grow sales by 10% a year until 2009 and also improve margins to 6% (from 4.2% in 2005). Such bold targeting may continue to attract investors while Scott Wilson has a clean track record as a quoted company.

On pure financial reasoning, the upshot of Scott Wilson's five-year plan is earnings growing in excess of 20% compound a year; indeed, pre-tax profit for the latest year to end-April is forecast to reach £10.5m and £12.1m in the 2006/07 financial year, on turnover of £177m and £195m respectively, for earnings per share of 10.1p and 11.4p. Hence a prospective p/e in the mid to late teens looks fair enough, and good value if Scott Wilson can deliver.

There is an intention to pay dividends, which reflects sound financial controls and cash flow.

This type of share is likely to interest medium-term momentum traders who can tolerate a higher risk/reward profile on a share, relative to long-term conservative investors. Ultimately, a growth rate as implied by Scott Wilson's targeting has to slow. Yet in comparison with, say, certain early stage resources companies where investors are gambling on profits many years away, Scott Wilson has demonstrated earning power. Its preliminary announcement in July should be interesting, with potential to attract more investors as the growth record continues.

[mr mole] 28/4/2006 19:33

Compared with general holdings of Directors these share options are set at employee share save scheme level. Really not very exciting in the overall scheme of things.

[geezermatic] 28/4/2006 18:50

Just looked in after reading a write up in SCSW as posted above.
Seems a good solid buy - any reason for mark up today? Other than Directors wanting options?
TIA

Good Luck

[petemorr] 21/4/2006 14:57

Got in today. Wish I had got in earlier...

[petemorr] 21/4/2006 14:57

Got in today. Wish I had got in earlier...

[sheik yerbouti] 20/4/2006 11:53

Nice, plenty of buys today, I wonder if they have been tipped again.

[gucci] 20/4/2006 11:09

sharp breakout!!!

[gucci] 20/4/2006 10:24

flying today
chart breakout

[stevemarkus] 10/4/2006 09:20

They actually said they were looking for an opportunity to add it to their portfolio, implying perhaps that they didn't want to buy at the current price, or at least until the initial selling by people participating in the flotation had dried up a little.

[sheik yerbouti] 10/4/2006 08:09

Yep, main tip plus they are looking to put it in their portfolio.

[rhianna1] 09/4/2006 19:27

Strong repeat tip for SWG in Sharewatch over the weekend.

[sheik yerbouti] 07/4/2006 14:38

Sharewatch is out tomorrow - they might give an update.

[diazma] 07/4/2006 14:37

Wow, look at this!

[petemorr] 07/4/2006 14:36

Thats true! Looking for a point to get in....

[sheik yerbouti] 07/4/2006 13:01

What slump? They are only down 2p!

[petemorr] 07/4/2006 09:57

Any ideas on why the slump?