COMPEL Group - lean, mean and now a fighting machine

Hi Sheik. On face value it's slow - but that's because the brokers have factored in much higher tax charges. Charles Stanley said in their note that CGR is "not certain it will be able to utilise its tax losses", so it sounds like there's a possibility that the tax rate may not increase by as much as predicted.

Looking at the pre-tax profit, this is expected to rise from £2.6m to June'05 to ££3.43m to June'06 and £4.23m to June'07 per Charles Stanley. Which is pretty dramatic growth.

CGR also acquired Hire IT on June 28th for £3m cash as an immediately earnings-enhancing acquisition with £3m of net assets! Not a bad deal....getting a profitable business for nothing.

CGR still have a load of net cash to play with - £6.3m at 30/6/05 against a £30m m/cap. Plus they are highly cash-generative - they generated operating cash inflows of £5.6m in H1 last year, so current net cash should be well over £10m.

The AGM statement was reassuringly positive. CGR is nice and cheap anyway on fundamentals, but it's the cash-generating and acquisitive side of the business (the latter of course carrying its own risks) which leads me to hope that the forecast PBT growth may be even better than forecast.