Graham Spooner, investment research analyst at The Share Centre, outlines why Chesnara is share of the week this week:
Life and Pensions consolidator Chesnara is our share of the week this week, courtesy of first half results posted to the market late last week, which were stronger than expected. The company reported that profit before tax rose to £51.6m for the first six months, compared to £0.2m for the same period in 2016, with the company noting that overseas operations in Sweden and Holland made a significant contribution to cash, dividend and value generation. The news was welcomed by the market, as was an announcement that the company was able to pay a dividend of 7 pence a share, an increase of 2.9%.
Chesnara highlighted that the first half numbers were boosted by the acquisition of Legal and General Nederland, renamed Sclidon, which the group purchased earlier this year for £137.5m. The company will no doubt be pleased given that this new business was hoped to be a strong fit and a complimentary platform to the Waard Group which already operated in the Netherlands. Investors should also acknowledge that the CEO John Deane pointed to the fact that the group will continue to focus on maximising value from all existing business as well as remain on the look-out for further acquisitions.
The share price is up by around 130% since our first recommendation and hit a new all-time high in August. This is a company that has the potential for building a strong proposition in its particular market segment and has confirmed it is continuing its search to add value through acquisition opportunities. Combine this with an attractive dividend yield and healthy cash generation, we recommend Chesnara as a ‘buy' for medium to high risk investors seeking income.