Christie Group – Going for a song?

“A pleasing 1st half year performance with both revenues and profitability increasing. We have strong demand for our services and continue to win notable assignments. Despite the economic clouds gathering, we anticipate a successful full year performance.”

Those comments came from David Rugg, the Chairman and Chief Executive of the Christie Group (LON:CTG) when the company declared its interim results to the end of June two weeks ago.

The group’s full year figures to end December will probably show a profit standstill at £3.9m pre-tax, despite a 16% anticipated improvement in revenues at around £71m.

However, the £30m capitalised business had £8.6m of cash in its coffers at the end of June and the coming year is expected to show a good advance in sales, profits and earnings.

The Business – 176 years old

The Christie Group is a holding company that operates through several subsidiaries to provide professional and financial business services, as well as stock and inventory systems and services primarily to UK, European and North American companies.

The group, which can trace its origins back to 1846, operates from 40 offices in the UK and Europe (where it gets most of its sales), Canada, and the Middle East. It has some 1,400 employees across its offices.

The various companies in the Christie Group focus on three main sectors: leisure, retail, and care, the first two together account for about 85% of sales.

So exactly what does it do?

Christie’s services include surveying, finance, insurance, inventory control, business appraisal and valuation, and development of retail and hospitality software.

Across its subsidiary operations, it is engaged in valuing, buying, selling, developing, financing, and the insuring of various businesses.

It also provides business valuation and appraisal, consultancy and agency, and mortgage and insurance broking services.

The company advises and supports business owners in its chosen sectors, from supporting them in buying a business, to helping them secure funding and arranging specialist insurance cover, and then working with them to market and maximise the value of their assets should they choose to sell.

Recent contract wins – big fee-earning potential

In the middle of June, the group announced that, on behalf of the St Modwen property group, it had been instructed to sell The Trentham Estate.

The estate is a major visitor attraction, a leisure-based outlet retail and garden centre, which attracts over 3m people each year, with some 760,000 of them paying as visitors.

I understand that the estate is valued at around £30m, so handling this sale would be a very healthy fee-earning opportunity for the Christie Group.

Later that month the group announced that it had been instructed by the Four Seasons Health Care Group to sell a portfolio of 111 freehold care homes located across England, Scotland and in Jersey.

Unfortunately, I could not identify the potential sale value of the various properties, but again I assume that the aggregated fees from these disposals will contribute a healthy entry into the group’s coffers.

The Equity – lack of professional investors

There are some 26.53m shares in issue, however the shareholder’s list has a distinct lack of professional investors, instead the bulk are private holders.

Major shareholders include Philip Gwyn (27.93%), J P Rugg (6.00%),
David Rugg, the Chairman & Chief Executive (4.98%), Lord Lee of Trafford (4.26%), Hwfa Gwyn (3.87%), Katie Gwyn (3.87%), Anna Ross (3.87%), Christina Bretten (3.82%) and Andrew Muir (3.18%).

Broker’s View – 149p ‘fair value’

Peter Ashworth, analyst at Shore Capital, the company’s Nomad and Broker, considers the group’s shares to be significantly undervalued.

He has a ‘fair value’ out on the group’s shares at 149p, which is substantially ahead of the market price of 111.5p.

His estimates for the next year are for revenues to increase to £76.0m and profits up to £4.8m, lifting earnings up to 15.0p against an estimated 12.2p for this year, with a dividend of 4.0p per share in 2023 (3.5p est 2022).

Reflecting the group’s organic growth Ashworth goes for £81.2m sales in 2024, £5.4m profits, 16.0p earnings and 4.5p of dividend per share.

My View – well worth a much higher rating

This is yet another company that I have followed for years.

Its range of services is very professional and quite encompassing for most businesses.

My price objective set at this time last year has still not been achieved, they peaked at 135p in early Spring this year, but I still retain my view that the shares are worth a much higher rating that the current 111.5p at which they traded last Friday.

(Profile 06.10.21 @ 124p set a Target Price of 155p)