office2office - 152p

We covered office2office in both June 2008 and September 2007, with the share price at the time being 180p and 191p respectively.

Given the fact that the broad stock market has been weak in the recent past, it is no surprise that the share price has fallen further and now stands at 152p.

This does represent a considerable improvement on the low of 51p reached in February, but we believe the shares continue to represent good value.

Although trading conditions have been tough, the company has responded well to the challenge so far.

One slight concern is the fact that public sector spending may be restricted in the medium term, but office2office has a broad and attractive offering which should see it come through the current tricky patch with flying colours.

The subdued share price, with the shares trading on a multiple of little over six times earnings, also suggests that this fear is already priced in.

There were a number of encouraging signs in the interim results for the first half of 2009, which were released on August 27.

Revenue jumped from £84.0 million in the same period a year earlier to £96m.

Although profit before income tax fell from £5.6m to £4.5m, the underlying figure was £6.4m if exceptional and non-recurring costs are excluded.

Basic earnings per share were 9.1p versus 11.2p a year earlier, which means that the increased interim dividend of 3.6p per share is well covered.

Net cash generated from operating activities was £3.9m and this allowed net debt to be contained at £30.2m.

The business has the ability to generate strong cash flow and this means that the debt should not cause a problem.

Although sizeable acquisitions were made at a time when valuations were perhaps higher than they may have been now, the businesses bought should fuel future growth.

Analysts are now anticipating an improvement on last year’s dividend payout of 11.0p in total.

With the shares already yielding over seven per cent based on historic figures this makes the shares look attractive to investors seeking income.

With solid performance from the business continuing the share price should continue to move in the right direction and it is unlikely that it will plunge into double figures again.

Those wishing to receive the interim dividend should note that the ex-dividend date is October 7 this year. WARNING: Opinions expressed are the writers’ judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek professional advice as to the suitability of the investments.