Cavendish raised its price target on Optima Health PLC (AIM:OPT, OTC:OHLTF, FRA:J3N), the occupational health provider, after full-year profit came in ahead of the broker's forecasts and it signalled growing confidence in the company's medium-term targets.
The AIM-listed group reported adjusted earnings before interest, tax, depreciation and amortisation of £20.1 million for the year to March, around 12% above Cavendish's estimate and roughly 10% ahead of wider market expectations.
Cavendish lifted its target price to 302p from 271p and reiterated its buy rating, implying about 22% upside to the current 247.5p share price.
The result was flattered by £4.7 million of income from the final settlement of a Department for Work and Pensions procurement dispute, but the broker said underlying profitability improved materially through the year.
Stripping out that settlement, second-half margins rose to 15.4% from 10.1% in the first half, despite higher employer National Insurance and wage costs.
The figures follow Optima's transformational £100 million acquisition of PAM Healthcare, which completed in March and established the group as the leading outsourced occupational health provider in Britain.
Cavendish said around £2.1 million of annualised cost synergies had already been delivered or were in progress, against a medium-term target of £5 million.
Management reiterated its medium-term goals of £200 million in revenue, £40 million in adjusted earnings and a 20% margin.
Cavendish introduced 2029 forecasts, pencilling in revenue of £244.9 million and adjusted earnings of £38.4 million.