Solid interims. War chest bolstered. Primed to scale.

Tatton delivered solid interim results for the 6 months period ending 30 September 2020, showing double-digit growth on most key metrics, despite very challenging market conditions. It also announced that it has secured a £30m credit facility to pursue organic and acquisitive growth. That, in addition to its accumulated net cash pile of £13.3m, is a significant ‘war chest’. In today’s uncertain and volatile economic environment, finding reasonably valued or even under-priced opportunities to deploy some of this capital is a realistic expectation.

Tatton’s share price of 284p remains below our fundamental valuation of 300p, which we believe is conservative and does not take into account any large, value-enhancing acquisitions. Additionally, its price-earnings ratio of 18.9 is only slightly above a peer group median of 18.2, while being far below its highest rated peers which have PE ratios in the 40s and 50s. If Tatton continues to build scale, enhance its margins, and successfully execute further acquisitions, there is potential for further significant re-rating of its share price.