Companies: JDG   

Roxanna Mohseni analyses Jordec's £15.4m reversal into support services group MacLellan.

Jordec (JDG), another Bob Morton turnaround venture, recently came into its own with the £15.4 million reversal into MacLellan. The deal has been in the pipeline for nigh on two years. Its conclusion marks another step toward fulfilling Jordec's long-stated aim of positioning itself within the wider support services industry.

Today's interim pre-tax profits are largely meaningless given that they reflect the old Jordec rather than the new MacLellan. Nevertheless, pre-tax profits for the six months to March were up 165 per cent to £138,000 on turnover ahead 25 per cent to £18.1 million.

The new enterprise, renamed MacLellan, is split into two divisions, integrated services and engineering services. Chief executive John Foley is clearly focusing on expanding the cleaning and maintenance services undertaken by the much bigger integrated services division. The fifth largest player in the UK, it is up against such stalwarts as MITIE, Carlisle, and parts of Rentokil. The integration of Jordec's three cleaning businesses will allow cost savings of about £500,000. With its steady and predictable cash flow, MacLellan boasts recently-won contracts with the Ministry of Defence and the Bluewater shopping centre. This division is expected to bring in the bulk (about £70 million) of the £100 million full-year turnover forecast by house brokers Williams de Broe. Pre-tax profits are expected to come in at £3.2 million.

Foley is clearly scanning the landscape for further growth market opportunities. Admitting that he misread the nuclear industry, Jordec's previous focus, where government involvement created a controlled market, he's taking his time considering two potential gold mines - car parks and airports. Further acquisitions are expected despite £4 million in debts. Gearing could easily be extended and covered by MacLellan's strong cash flow.

Shares, which reached a high of 92.5p when the deal was announced back in March, have fallen with the market and now languish at 52p, putting them on a lowly prospective p/e of 9.6. It looks a good opportunity to get in at the beginning of an ambitious project.