Monday 28th September 2009

The FTSE closed down -1.9 on the week while the Small Cap was -2% lower with the Fledgling down -0.9%. There is plenty of opportunity for spotting Green Shoots this week with 2nd Qtr GDP figures likely to be verdant but what are the clues for 3rd Qtr figs? Well pointing the way will be Land Registry, an indication for house prices, then Consumer Confidence followed with Purchasing Mangers Index on Friday. The state of the global recovery may be summed up by US September Unemployment figures. Unemployment, as a lagging indicator, is likely to continue to increase, but markets will be hoping that the rate of increase is slowing. The picture could remain mixed.

The rules covering Directors Dealing makes this a more useful as a medium term indicator.

– Argo, 88k@17p
– Capital Regional, 4.5M@24p
– CustomVis, 80k@1.28p
– Cyprotex, 121k@4.45p
– Johnson Press , 79k@40p
– Merchant Securities, 520k@9p
– Oneline Publishing, 265k@0.75p
– PureWater, 12m@2p
– Turbotec Products, 50k@28p

– Anglo Pacific, 1m@210p
– Care Uk, 14k@300p
– Kopane Diamonds, 500k@16p

Mission Marketing TMMG – £13.3m@ 34.5p – National marketing communications and advertising group
Good news is expected to follow the bad after Mission Marketing Group reported lower interims and the scrapping of its dividend. They have come through what they described as the toughest trading conditions in the advertising industry for many years. Operating income fell 17% to £18.6m down from £22.5m. Profits are down 65% to £1.7m from £4.9m but the good news is that they see the rate of deterioration bottoming out .
Mission Marketing is a national group of digital, brand, marketing, advertising and full service agencies and could be well positioned to benefit from an improvement in confidence and when clients spending levels begin to increase. There are signs of improvement in some sectors and industries although the investment spending levels are likely to only improve gradually . So the shadow of green shoots a plenty. The Broker Seymour Pierce is forecasting of £4.8m for the year to Dec 2009 giving an EPS of 9.8p and a prospective P/E of 3.5x. These forecast seems to imply a stronger second than these figures strictly justify.
The debt of £14.5m that was build up in an aggressive acquisition spree is being paid down although there are further acquisition liabilities of £6m. Mission seem to have managed the integration of acquisitions better than most but they have stated that further acquisitions are presently on hold.

Intelligent Environments (IEN) – £19.6m@11.75p – Software
Intelligent Environments increased its interim profits by one-third to £458,000. The online savings and investments applications software provider increased recurring revenues by 21% and this means that 30% of total revenues of £3.2m in the six months to June 2009 were recurring. Transactional revenues were lower than in the second half of 2008. IE receives a payment every time there is an application for savings and investments. A reduction in applications hit transactional revenues but this should be a short-term blip.
The profit was struck after capitalising development costs of £356,000 – net of amortisation. The amortisation charge and the capitalised costs should move towards cancelling each other out by 2011.
Banks are keen to attract more funds from investors and they also want to reduce their costs. These are both arguments for installing IE’s software. IE is extending its coverage to mortgages and insurance.
The contract with National Savings and Investments has been completed in the second half. The premium bonds module went live in September 2009.
House broker FinnCap forecasts an increase in full year profits from £1.3m to £1.7m in 2009. That puts the shares on just over ten times forecast 2009 earnings. IE will need to win a couple of new contracts by the end of November to achieve that target. A maiden dividend of 0.1p a share is forecast.

IE has net cash of £1.05m and this is expected to rise steadily. Cash flow tends to be strongest in the second half. There are still more than £7m of tax losses available.

Autoclenz ACZ – £4.73m@45.5p – Motor vehicle retail, franchised dealership, rental and distribution
Interims reported a 19% fall in sales to £13.7m but due to improved systems and efficiency the gross margin increased from 17% to 27% so that profits came out at £707k against a loss of £475k. The business which includes Rental, Valeting, AC SMART, Movements and Auction business saw a decline in sales mainly due to some account rationalisation of poorer performing parts of the business and a decline in car sales. The most notable sales decline was within Rental and Movements due to customers reducing fleet size to “recessionary” levels. Sales levels in the core Valeting and Auction business sectors fell slightly which in light of the economic climate is a better performance than most market place trends show. React is the non automotive part of the business and is the specialist cleaning decontamination service, is showing some increase in sales and profitability as the new sales and operational structure are implemented. The company are looking to expand the non auto part of the business.
Good cash generation reduced net debt from £2.7m at the year end to £2.2m the target is to reduce net debt below £2m by the year end. There are no forecast but the (ADJUSTED) interims EPS of 4.9p is well on the way to the 2007 full year EPS of 6p. There seems to be room for further recovery momentum.

smartFOCUS (STF) – £11.25m@12p – Consumer relationship software
SmartFOCUS continues to provide positive surprises for investors.
The marketing and consumer relationship software provider reported a swing from a loss of £649,000 to a profit of £154,000 at the interim stage. Revenues improved from £4.96m to £5.63m in the six months to June 2009 even though smartFOCUS is still working through the switch from perpetual licences to a Software-as-a-Service model. Recurring revenues account for 61% of group revenues. Many newer customers are taking email services and these may upgrade to higher margin software in the future.
This has been enough for house broker Arbuthnot to upgrade its profit forecast yet again this year. The broker increased the 2009 forecast by £100,000 to £400,000. The company has already secured 87% of the revenues it requires to make that forecast. The 2010 profit forecast is £640,000. Two-thirds of 2009 revenues should recur in 2010.
The shares are trading on 17 times forecast earnings for 2010.
There was £1.54m in cash in the bank at the end of June 2009.

Seeing Machines (SEE) – £6.24m@2p – Technology
Seeing Machines fell into loss in the second half of its financial year after reporting a profit in the fist half.
Seeing Machines designs integrated software and digital camera technology that tracks facial movement and reactions. The main source of revenues comes from supplying devices fitted in vehicles to assess driver distraction and drowsiness. Even so, the contract with Dycom Industries has not generated revenues at the pace originally expected. There is still some way to go in the roll-out across its fleet of vehicles.
Seeing Machines went from a profit of A$327,000 in 2007-08 to a loss of A$5.61m in the year to June 2009, although that includes a net write-off of development costs of A$5.04m. This means that there are no capitalised development costs on the balance sheet.
The TrueField Analyzer is launching later this year. It is designed to detect glaucoma. Seeing Machines is talking to global distribution partners.
Seeing Machines recently appointed Daniel Stewart as its broker. The new house broker forecasts a profit of A$700,000 in the year to June 2010. This assumes at least one new vehicle fleet contract. That puts the shares on 17 times forecast earnings for 2009-10.
Net cash was $679,000 at the end of June 2009. Management believes it has enough cash for the company’s needs. If it meets forecasts the cash pile should be higher at the end of June 2010.

Asia Digital Holdings (ADH) – £9.1m@1.625p – Online advertising services
Growth in Asian markets helped Asia Digital Holdings to offset the loss of a major customer in Australia.
The online advertising and marketing services provider says that its businesses in Singapore and India account for more than one-third of revenues compared with nothing two years ago. There is not as much competition in these markets as there is in a mature market such as the UK. Asia has the largest and fastest growing internet user base in the world. Asia Digital will move into other Asian markets – possibly through partners.
Revenues grew 28% to £8.6m in the six months to June 2009. The loss increased from £743,000 to £1.14m, which is due to spending on expanding the Asian operations. There was also a one-off charge of £90,000 relating a new IT system. The loss-making South African business has been offloaded.
The Australian operation has managed to replace the lost business. Australia is the largest part of the business but that may not still be true by the end of 2010.
Asia Digital is on course to move into monthly profit before the end of 2009. House broker Daniel Stewart forecasts a profit of £100,000 in 2010, rising to £1.4m in 2010.
There was £674,000 of cash in the bank at the end of June 2009. This figure is expected to increase to £800,000 by the end of 2009.

Medgenics Inc (MEDG) – £6.3m@7.125p – Biopharmaceuticals
Medgenics Inc says that one patient has lasted nearly 11 months on one EPODURE treatment and this is helping the company to advance its discussions with pharma companies. Israel-based Medgenics is a biopharmaceutical company, which has developed a technology that could replace regular injections as a treatment for various ailments. The first product is called EPODURE, because it produces EPO (erythro-protein) to treat anaemia.
The 72 year old patient has previously needed regular EPO injections. Many patients need three injections each week. Most of the other patients in the clinical trial have also gone longer than normal without injections. The trials need to be expanded to a broader range of patients to further prove the efficacy of the treatment.
Medgenics is in talks with a major pharma company to co-develop a treatment producing Factor VIII protein for treating haemophilia, a market worth more than $3.5bn a year. An Asian biopharma company is interested in doing a deal that would involve treatments for Asian markets and an investment in Medgenics.

Vindon Healthcare (VDN) – £14.2m@16p – Environmental control products and services
Vindon Healthcare reported a fall in interim profits but this was in line with August trading statement. Revenues were flat at £2.59m but profits dipped from £828,000 to £497,000 in the six months to June 2009. There was a lack of higher margin environmental control cabinet sales plus some duplicate costs relating to the move to new premises.
Customers are taking their time to make up their minds when to trigger equipment orders. They are still likely to happen but timing is uncertain.
Sales of cabinets in the US are building from a low base and this will be used as a springboard for a storage services operation – possibly later in 2010.
Sometimes an expected equipment order does not happen but the customer outsources the storage business to Vindon instead. This provides recurring revenues even if short-term margins are lower.
The new premises provide additional storage capacity and Vindon has added cryogenic facilities. As well as pharma and healthcare customers Vindon is adding customers in the heritage area. The Irish storage business has moved into profit.
Vindon has committed second half revenues of £1.3m, compared with £796,000 at the same time last year. Vindon has not replaced all the committed revenues at the time of the 2008 results but they are still £3.9m.
Vindon should still achieve profits of more than £1m, down from £1.5m in 2008, for the full year. That puts the shares on nearly 20 times prospective 2009 earnings.
Most of the cash generated from the business was taken up by increased working capital. Even so, net debt only edged up to £2.66m.

WIN (WNN) – £6.55m@74.5p – Mobile telecoms services
WIN reported reduced interim profits but this should mark the bottom of its fortunes.
The mobile content and distribution services provider reported a fall in interim profits from £416,000 to £28,000, after £177,000 of exceptional charges relating to cost cutting. Annualised costs have been reduced by £200,000. Revenues edged ahead from £19.4m to £19.7m in the six months to June 2009.
Newer, higher margin operations are becoming more important to the group and WIN’s recovery will be based on these operations. The premium rate phone numbers business is declining. The managed services business has won new contracts from Vodafone, T-Mobile and Sony Ericsson
House broker Arden forecasts a dip in full year profits from £1.8m to £1.2m in 2009. The broker expects a recovery in profits to £1.9m in 2010. The shares are trading at less than eight times prospective earnings for 2009.
The interim dividend is maintained at 1p a share. Net cash was £933,000 at the end of June 2009. The cash position has improved since then.

Nationwide Accident Services (NARS) – Crash repairs – £43.4m@101.5p
The crash repairs business was hit by lower claims volumes and the work that is coming through requires more parts and less higher margin labour.
Profits declined from £3.89m to £2.41m in the first half of 2009 even though revenues rose from £88.3m to £90.9m. The main reason for the profit fall was a reduction in margins. There was also an increased pension charge. In the first quarter there were good volumes but poor margins while in the second quarter volumes were weak and margins improved.
Nationwide expects to win work as smaller repairers exit the market. A reduced cost base will help the second half performance.
Working capital has been reduced so the cash pile has increased to £7.88m. The interim dividend is unchanged at 1.7p a share.

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