Brammer eyes outsourcing deals
Article Date: Aug 17 2001Equipment services group Brammer is expected to unveil some useful outsourcing contracts when it reports its half year figures early next month, writes James Crux.
Chief executive Ian Fraser has already hinted that fully listed Brammer (BRAM) has won a number of outsourcing contracts. These would add to recent good news at Livingston, the group's outsourcing division, which continued to benefit from outsourcing trends in the European IT and telecom markets last year.
Livingston provides computer equipment management and rental services as well as test equipment management and calibration functions. Its sales rocketed by 52 per cent to £113.4 million last year, with strong results wrought from France, Germany and Holland.
Livingston also clinched an equipment management contract with Cisco. This entailed managing its demonstration inventory and shipping, recovering and managing its stock levels covering Europe, the Middle East and Africa.
One slight worry is Livingston's exposure, around 30 per cent of its business, to the telecom and computing markets. Back in June, Brammer warned that Livingston had 'seen continued weakness in the telecommunications market', which prompted analysts at HSBC to trim its 2001 pre-tax estimate from £28.2 million to £26.4 million.
The house broker had previously published an upgrade on bullish full year figures in March. However, the outsourcing division has a broad customer base and scope to develop relationships with each of its customers across Europe, and Fraser argues 'the telecoms market will come back'.
Profits fell in 1998 and 1999 because Brammer Industrial Services (BIS), its distribution division, was 'significantly dependent' on a depressed UK market. Last year, Brammer moved to expand BIS in Europe and invest in Livingston, and now 52 per cent of sales come from the Continent.
Profits for 2000 were above expectations, up 24 per cent to £23.9 million pre-tax on sales almost 20 per cent ahead to £287 million. HSBC says that earnings should come in at 38.3p a share for 2001.
The shares fell by 1.50p to 351.5p in today's trading. This puts the group on a prospective p/e ratio of 9.18, which friendly analysts see as attractive given the 23.78 services sector average.
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