Fulcrum is a leading provider of utility connection services across the UK. It has a strong recent track record, with adj. operating profit growing organically from £1.1m to £6.5m over the last two years. The Group has two segments, Infrastructure Services (high margin utility connections business) and Asset Ownership (recurring revenue at a very high margin as gas and electric flows through installed networks), and it recently acquired an electricity connections business named Dunamis. Fulcrum’s operating margin is sector leading at 17.2% in FY’17 vs. the construction peer group at 5%, and it operates a cash generative model. We expect continued growth as management implements its strategy to win market share and forecast PBT to grow to £12.4m by FY’20 from £6.5m in FY’17. We set our target price at 80p and initiate with a Buy recommendation.
