Companies: VTS   

This acquisitive accountancy concern has enjoyed an exceptional run since last May’s canny deal to buy Numerica, with the shares shooting up by two thirds to 225.5p. Vantis splashed out £15.8m for its AIM-listed rival but immediately sold on certain unwanted assets to BDO Stoy Hayward for £12.1m, making a net cost of just £3.7m to acquire £27m of revenue.

Latest interim figures show that the group has already completed most of the integration process and is still demonstrating strong underlying growth. In the six months to October turnover rose 79% to £32.9m. Organic growth from Vantis’ existing businesses was still 27%, if the Numerica element of these revenues was excluded. And after stripping out an exceptional charge of £2.1m relating to the deal, profits before amortisation, interest and tax rose 83% to £5.5m.

At the current level the shares have doubled from our original recommendation price of 111p in June 2004. Gearing has increased, as most of the Numerica deal was funded through borrowing, but interest payments are comfortably covered 5.3 times by earnings. The acquisition will enhance earnings for the full year with house broker Charles Stanley forecasting an impressive 54% leap to 16.6p a share. That produces a p/e of 13.6.

With the higher margin business recovery and tax consultancy arms in particular trading strongly, the shares remain a firm hold.