Interactive Investor

The small companies showing strength in the face of Covid-19

7th January 2021 15:20

Graeme Evans from interactive investor

Loading

Share on

From packagers and marine services to virtual exhibitions, plenty of modest-sized firms deserve the limelight too.

AIM-traded Mpac Group (LSE:MPAC) whose technology is used in packaging Glenfiddich whisky and Gillette razors, was today among small-caps showing resilience against Covid-19 disruption.

Others included marine services business James Fisher (LSE:FSJ) after disclosing a robust finish to 2020, while Judges Scientific (LSE:JDG) forecast better-than-expected full-year earnings.

High-flying Mpac shares posted the biggest gain of the trio as the specialist in high-speed packaging and automation solutions put the City on standby for 2020 profits ahead of hopes.

Trading continues to be resilient as Mpac serves the essential healthcare, food, and beverage markets. Margins have benefited from a favourable mix of sectors. The order book going into the new year remains strong at £55.5 million with no work cancelled due to Covid-19.

Virtual exhibitions for customers to demonstrate the range of newly developed products should mean the company is well placed when the market returns to higher levels of activity. The acquisition of US-based Switchback, which completed in September, has also gone well.

House broker Shore Capital today upgraded its 2020 earnings per share forecast by 2% to 27.1p and reintroduced forecasts for 2021 with a figure of 32.5p, adding that there was potential for a dividend based on the strong net cash balance sheet.

Analyst Robin Speakman added: “Mpac appears very well positioned to us with a strong reputation among its blue-chip client base in defensive strategic segments. The group has built the foundations for long-term growth addressing changing technology opportunities.”

Shares have more than doubled since July and are now at their highest level since 1997. Today’s latest 10% rise to 461p also represents a further positive contribution to fund manager Hugh Sergeant’s River and Mercantile UK Recovery Fund.

Judges Scientific, which acquires and operates small scientific instrument manufacturers, is trading at a multi-year high despite seeing Covid-19 force the closure of universities and cancellation of scientific conferences.

Order intake fell 13% in 2020, but the company has started the new year with a “comfortable” order book equivalent to 14 weeks of budgeted sales, rising to 15.5 weeks when strong bookings by recent acquisitions are included.

Having delivered significant profit in each month of 2020 and with cash generation remaining healthy, the group anticipates that earnings per share for the year will top current market expectations of 151.8p. Shares rose another 60p to 6,360p, having been 3,400p in March.

Analysts at WH Ireland said the shares now trade on 33 times 2021 earnings, which eliminates the rating gap with peers. But given the strength of the business and balance sheet, and with the company’s continued ability to do deals at single digit earnings multiples, they see fair value for the stock at 7,000p. Counterparts at Liberum have the same target price.

There’s been no let-up in the challenging conditions facing James Fisher, particularly a shortage of subsea projects in both offshore wind and oil and gas. Its shares still rose 9% today, however, after a 7% rise in quarterly revenues was aided by a robust performance in tankships and offshore oil, leading to a figure 16% lower across the whole of 2020.

With the company taking swift action to reduce overheads, operating profits for the year should now be at the top end of the £35 million to £40 million range disclosed in November.

Subsea work continues to be disrupted by Covid-19 restrictions, but the recent recovery in oil price to above $50 (£36.85) a barrel has the potential to boost industry demand. Peel Hunt has reiterated its ‘buy’ recommendation and target price of 1,350p, compared with 1,002p after today’s big jump.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. 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.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Get more news and expert articles direct to your inbox

Sign up for a free research account to get the latest news and discussion, and create your own virtual portfolio.

Free Sign Up