Public Policy Holding Company’s maiden purchase as AIM company

Public Policy Holding Company Inc (LON: PPHC) is acquiring California-based KP Public Affairs in an earnings enhancing deal, which is the first since the December 2021 flotation on AIM. The acquisition could cost up to $35m and enhances earnings by 2% in 2022 and 9% in 2023.

Washington DC-based Public Policy Holding Company provides public affairs, crisis management and lobbying services in the US. Founded in 1996, KP Public Affairs provides a foothold in the largest individual US economy. Clients are involved in technology, renewable energy and resources sectors.

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KP Public Affairs generated pre-tax profit of $3.2m on revenues of $10.9m in 2021. The initial cost is $11.4m – 90% cash and 10% shares. The additional payments will depend on profit levels in the years to 2026.

Stifel forecasts a dip in full year pre-tax profit from $31.9m to $31.1m before rising to $35.8m in 2023. The acquisition enhances earnings by 2% in 2022 and 9% in 2023. A full year dividend of 13.5 cents a share is forecast.

Public Policy Holding Company raised £11.1m at 135p a share when it joined AIM. There should still be net cash of $15m at the end of the year, so there is plenty of scope for further deals. Free cash flow could be $26m in 2023.

At 143.5p, the shares are trading on eight times prospective 2022 earnings, falling to seven for 2023. The forecast yield is 9%.

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