Last week

The FTSE 100 closed at 5770.98 which was a 0.5% gain on the week while the AIM All-Share at 720.4 was 2.2% higher. The BOE kept interests rates at 0.5% but has stopped Quantitative Easing as the economy ‘so far’, is taking a V-shape . The Greek debt burden keeps afloat but perhaps with an IMF lifeline.

This week
This pre-election week has few economic highlights but there will be more activity next week, when headline data on UK inflation, unemployment and the initial reading of first quarter GDP will be announced all heavy with economic and political implications. On Thursday the eurozone will release its balance of trade statistics and the latest reading of its consumer price index, while the European Central Bank issues its own report.

Pause for thought
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Company Reports

SciSys (SSY) £15.67m@50.5p
IT services provider SciSys employs nearly 450 staff and is a developer of Information and Communications Technology services, e-Business and advanced technology solutions. SciSys returned to profit in 2009. Revenues grew 9% to £41.7m, while a loss of £1.16m was turned into a profit of £510,000. The improvement partly came from a reduction in exceptional charges and amortisation. Operating margins rose from 2.3% to 4%. The order book was worth £34.7m at the start of this year, of which £17.6m should be delivered in 2010. A recent announced win was a four year framework contract with the Environmental Protection Agency (EPA) in Ireland to provide design, development and reporting services in the areas of Regulatory Systems and GIS. The first half should be strong but there is uncertainty about public spending after the general election. Full year profits to December 2010 are forecast at £1.9m for an EPS of 5,62p giving a prospective P/E of 9x with 1.2p dividend giving a 2.2% yield.

The net cash position improved from £1.4m to £2.4m during 2009.

Symphony Environmental Technologies (SYM) – £11.8m@9.63p
Revenues grew by 31% to £7.04m in 2009. The d2w additive is sold in more than 90 countries. Central America and the Middle East are the most important markets. There was a swing from a loss of £398,000 to a profit of £638,000. Earnings per share are flattered by deferred tax credits. There are £12m of tax losses in the group and there is a £993,000 deferred tax asset on the balance sheet. The rest of the tax losses have not been recognised yet but they could reduce significantly over the next couple of years as profits build up. The carrier bag market is still the core business. Symphony is critical of the Department for Environment and Rural Affairs’ recent report ‘Assessing the E vironmental Impacts of Oxo-degradable Plastics Across their Life-Cycle’. Symphony believes that the report did not appreciate the benefits of oxo-degradable plastic when compared with compostable hydro-degradable plastics. The company’s management has had its first meeting with the Minister following this report and they believe that he has a better understanding of the technology.

Net debt fell from £1.25m to £971,000 during the year.

CBG Group (CB) – £8.07m@51.5p
Corporate insurance broker CBG Group reported more than halved profits in 2009. Revenues slumped from £11.1m to £8.96m, while underlying profits fell from £2.25m to £1.03m. Around two-thirds of the annualised cost savings of £1.4m showed through in 2009. Revenues and profits declined in all divisions of the business. Healthcare was one of the only bright spots anywhere in the business. Non-core personal insurance business has been sold since the year end but that should not hit profits. Daniel Stewart forecasts 2010 profits of £1.5m, which mainly reflects the additional cost savings giving EPS of 1.8p and a prospective P/E of 7.6x with a 0.7p dividend so yielding 1 .7%

The outsourcing of the premium finance operations to Close Brothers did not affect the trading outcome but it has improved the balance sheet. Working capital has been reduced and net debt is down to £891,000. Deferred consideration was £1.06m at the end of 2009 and one-half of that has already been paid.

Alliance Pharma (APH) – £75.5m@35.5p
Pharma products distributor Alliance Pharma reported a 44% increase in revenues to £31.2m in 2009 thanks to a combination of organic and acquisitive growth. Pre-exceptional profits jumped from £2.4m to £8.6m, although that doesn’t include a £2.8m write-off mainly relating to the capitalised development costs of a drug. Alliance specialises in mature drugs and treatments which have a solid revenue base. Some of its drugs are more than 50 years old but they still have significant revenues. The recent purchase of Cambridge Laboratories for up to £16.4m has added cancer drugs to the portfolio. Profits for December 2010 are forecast at £10.8m giving an EPS of 4.3pand a prospective P/E of 8.2x

Pro forma net bank debt is £26.9m. There is also £6.8m of convertible loan stock.

Croma (CMG) – £4.2m@2.25p
Security products and services Croma Group used to be a group of underperforming security-related businesses but chief executive Sebastian Morley has turned it into a profitable business. Revenues edged up from £3.25m to £3.35m in the six months to December 2009. The profit increased from £17,000 to £209,000. Gross margins improved. Unprofitable operations have been ditched and there are three main operations left. They are involved in asset protection, avionics and biometrics. Since the end of 2009, Croma has won £4.5m worth of orders. One of these contracts alone is worth £3.4m a year but the full effect of this will not be seen until 2010-11. The contract involves manned guarding services for properties in London and Edinburgh.

Net debt was £1.41m at the end of 2009. This debt is predominantly convertible loan stock. This debt may be refinanced. Croma intends to start paying dividends in the future but no firm decision has been made yet.

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