Business supplies group office2office (o2O) kept its trading update short and sweet, saying it expects to meet the management's lowered expectations, as laid out in its October interim management statement.
The shares hardened by 4.5p to 136p, as the market reacted with relief that a second profit warning was not forthcoming.
It was left to the firm's corporate broker, Panmure Gordon, to put a bit of flesh on the bare-bones of the trading statement, and act as cheerleader for the stock while it was at it.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
"As we have written in the last week already, we believe o2o continues to make
material progress. While initial volumes from new contracts may have been slower to get to expected levels that initially anticipated (resulting in a downgrade in Q4 [fourth quarter]), trading has continued as expected, with what we believe are additional benefits from further take up of mandated departments into the new contract. In addition, we believe the Advantia contract shows encouraging trends," the broker said.
o2o signed a four year contract with Advantia back in May to supply and distribute office products. The contract, which is for a minimum period of four years commencing 1 January 2012, is anticipated to generate revenues in excess of £25m per annum.
Panmure Gordon, which, not surprisingly, has a "buy" recommendation on the shares, said the current economic conditions made it more or less inevitable that a business linked to employment and office activity would be having a few problems, but in the house broker's view, the current rating already more than reflects this.
"However, what remains even clearer is that o2o has more top line visibility than most as a result of contracts won in 2011, and should be able to focus more on margins and bottom line profits as a result. These new contracts and visibility of sales should more than compensate for any weakness elsewhere, a situation we feel remains generally unappreciated," the broker said.
jh
-
Rural homes beat urban properties for price growth – where are house prices soaring?We look at the top performing rural local authorities for house price growth
-
Santander axes 1% cashback on spending for Edge account customersSantander will stop awarding cashback on everyday spending for its Edge customers, limiting cashback to just bills
