Education Development International (35.5p), which has been one of our favourite smaller companies for a long time, reported results for the year ended September 30, 2008, last week.

It has to be said that these were very impressive and it is only the current state of the stock market that has depressed the share price back to 35.5p, having been as high as 46p earlier in the year. By historical standards, this places a very low rating on the company, which has a market capitalisation of not much over £20 million.

In the last financial year turnover jumped by 34 per cent to £21.5 million and adjusted pre-tax profit rose by 58 per cent from £2.11m to £3.34m. This translated into basic earnings per share of 6.0p versus 4.4p a year earlier and adjusted earnings per share were 6.2p, up from 4.1p. The cash position of the business is very strong and Education Development International ended the period with net cash of some £3.23 million, having generated £4.46 million from operations over the course of the year. Although the dividend was fairly insignificant at 0.42p per share for the full year just gone, this is very well covered and looks set to continue growing at a decent rate.

Further growth is anticipated both in the current year and beyond, albeit it a slower pace than in the recent past. The market for UK qualifications alone is thought to exceed £750 million and the company also has a valuable presence overseas, in particular but not exclusively in south-east Asia. More acquisition opportunities may also arise and this is an area where additional value could be created.

All in all, this means that the company has demonstrated resilience at a time when the majority of businesses are feeling increasing pressure. The solid trading performance and reassuring balance sheet should ensure that this is high on the list of companies which investors in smaller companies will look to when confidence returns to this area of the market. The company’s track record would certainly support a higher share price given that it currently stands at a multiple of less than six times historic earnings. For anyone with a medium to long-term investment horizon we continue to believe that this is an interesting company and one which looks to represent very good value at the current share price.

WARNING: Opinions expressed are the writer’s judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek their own professional advice as to the suitability of the investments.