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Business services and software group Christie, with origins in the Christie & Co concern founded before the Second World War, is a well-diversified business with three complementary divisions driving exciting growth. Listed on the London Stock Exchange since 1988, the company migrated to AIM in 2005.

Expanding geographically – its office network now covers a number of European economies such as the UK, France, Germany, Belgium, Italy and Spain, as well as Canada – Christie’s main business is the provision of business services to blue-chip clients across a number of sectors including leisure, retail and care.

Hitherto, Christie has hidden its light under a bushel in terms of the City (although it has a terrific profile and reputation in its markets), but the business should be on investors’ radars given its diverse earnings streams, strong track record and good organic growth prospects. A modest stock market rating and a progressive approach to dividends add to the investment appeal.

Strategy
The core professional business services operation is Christie & Co, a business property services expert that values and sells businesses and appears to be doing well, despite the gloom associated with the property sector and the global credit crisis.

‘Christie & Co was the first business within the group and it is the largest business agency in Europe,’ insists chief executive David Rugg, pointing out that Christie & Co, which actually transacts more than half of the asset sales in the UK healthcare market, has no exposure to either commercial or residential property. ‘We value and sell businesses – we are not into commercial property and we are not in residential, and the core in the middle of our business is fine’. Recent blue-chip clients to have employed its services include Hilton and Thistle, on whose behalf Christie has sold hotels, and Punch Taverns, for whom it has marketed pub portfolios.

The professional business services division boasts a corporate finance arm – which acts as lead adviser and project manager on an array of acquisitions, disposals and management buy-outs, as well as finance and insurance operations – and also Pinders, ‘the largest business appraiser in the UK’. Rugg insists the Pinders brand name has been synonymous with business appraisal and valuation for nearly 40 years.

Within the stock and inventory division sits Orridge, Europe’s longest-serving stocktaking business. It was actually founded by Queen Victoria’s pharmacist and is now the largest stocktaker in the UK – clients include B&Q, Arcadia, Boots and Superdrug. Meanwhile, Venners is a software and systems specialist whose technology helps hotel chains, pub companies, health and fitness clubs and sports stadiums to control stock and improve margins.

Finally, VCSTimeless forms the software solutions division. It specialises in sophisticated IT systems for merchandise management, optimisation of the supply chain and point of sale.

It captures and controls data and this helps clients maximise returns.

The board’s strategy involves the ongoing development of these three autonomously run divisions in ways that encourage cross referrals between them. Rugg argues that the group’s services are most effective when two or more group companies combine their skills.

Further European expansion is another core strategic tenet and one that de-risks the group, since it means revenues and earnings are wrought from a broad spread of economies, as well as from a portfolio of businesses and services offered to three key sectors.

Organic growth, rather than acquisitions, through expansion and product and service development, is the name of the game for Christie, because there are not many suitable targets for it to buy. ‘We are quite a niche company, but in our sectors we are market leaders,’ explains Rugg.

Management
No one knows as much about the group as David Rugg, who has been with the company since 1972, becoming managing director in 1985 and then chief executive in 2000. As well as running day-to-day operations, Rugg is ideally placed to take a strategic overview of where Christie is headed, as he either chairs or sits on the boards of all the group’s individual companies.

Overseeing the financials is the affable Robert Zenker, a chartered accountant and member of the Chartered Institute of Taxation. Zenker, a former Deloitte man, has previously picked up experience at corporate giants such as Sainsbury’s and Virgin Group.

Chairman Philip Gwyn, a barrister and merchant banker by training, has the responsibility for strategy and planning. Gwyn is a non-executive director of premium building products group Alumasc and a director of a number of private concerns.

Christie’s management team can call upon an impressive batch of non-executive directors, including Peter Lane (Lord Lane of Horsell), formerly senior partner of Binder Hamlyn accountants and a seasoned chairman within the quoted company sphere. His fellow non-executive, and a Chevalier de la Légion d’Honneur, is Michael Likierman, the founding chief executive of Habitat France who later co-founded the French-based owner of Vision Express. The other independent director adding corporate nous is Tony Chambers, former head of banking at Robert Fleming and currently a director at fund management giant F&C.

Prospects
Christie’s prospects are underpinned by the strength of its brands, as well as the diversity arising from numerous income streams.

The core professional business services arm is robust, making money from a variety of transactions, ranging from business sales and valuation work to acquisitions and disposals, which take place at all points throughout the economic cycle. It is also important to note that by focusing on the sectors it knows best, Christie has a depth of understanding that competitors cannot match. The geographic coverage and pan-European scale of its operations give it overall strength.

An examination of its financial track record speaks volumes. For 2006, the company achieved record results, with sales moving 12 per cent higher to £87.1 million and operating profits increasing by 38 per cent to £6.1 million. More recently, robust interim figures to June 2007 were unveiled. From revenues of £46.1 million (2006: £45 million), pre-tax profits increased from £3.1 million to £4.3 million and earnings grew by more than 40 per cent to 10.64p. Investors were treated to a 20 per cent increase in the interim dividend to 1.5p.

In particular, the numbers demonstrated a good balance within the professional business services operations, where rising sales volumes in Europe offset rather flat individual business sales in the UK, with Christie also benefiting from a busy period for corporate mergers and acquisitions activity and advisory work.

Valuation
Results for the 2007 calendar year are expected shortly, with forecasts issued following the interim results suggest another exciting profits performance is in store.

Analysts are looking for pre-tax profits maintained at around £6.2 million from £95 million of sales, ahead of an improvement to £6.5 million in 2008 and £6.7 million in 2009, although those numbers should soon be updated.

Shares in Christie have plummeted from a 52-week high of 257p amid market turbulence and trade on a very undemanding 2007 multiple of 8.3 times, falling to just 7.2 and seven for the next two years.

Christie’s market valuation of £31.5 million represents a discount to the £39.9 million of total assets (including £9 million of cash) on its balance sheet (at the half-year). Moreover, it fails to take into account any of the upside from the group’s undoubted growth potential and strong positioning. It appears even more miserly considering the company’s good recent record of dividend progression, with Christie having paid out 4p in total dividends for 2006, 3.5p for 2005 and 3p for 2004.

The valuation anomaly likely reflects a lack of investor awareness regarding the company, the absence of comparable like-for-like quoted peers and unwarranted concerns about its exposure to all things ‘property’. On the positive side, it provides investors with a terrific buying window.