SO far so good. Tenon’s buyout of RSM appears to be having the desired effect, with cost synergies on track to total more than £10m a year. Getting accountants from both companies to gel was always going to be tricky, but the business is performing well.
Some government contracts will be chopped come October’s spending review, but RSM Tenon is diversified enough to grow organically elsewhere. Margins are also looking healthy, growing from 11.7 per cent to 12.7 per cent over the year.
Shares in the firm have performed well since the merger, rising some 55 per cent since late-June to near 10-month highs. But this stock likely has some way to go. Numis says RSM Tenon is being valued by the market at 6.8 times prospective earnings, compare to a sector average of 9.7 times – even though it is forecast to grow earnings by almost 30 per cent this year. The well-covered dividend is just the icing on the cake.