Last week
The FTSE 100 fell 0.5% to 5743-Goldman Sachs is being charged with fraud by the SEC and maybe also be investigated by the UK’s SFA so opening a complex Pandora’s door for tougher banking regulation. We will be tracking the FTSE 250 which is more representative of the UK economy for which we do try and second guess cause and effect. The FTSE 250 was – 0.1% lower at 10447.8. The Aim All Share Index, is where we try and make a living, at 726.2 improved 0.8% and there ‘green shoots’ of renewed interest.

This week
The UK’s economic calendar this week includes the consumer price index on Tuesday, retail sales on Thursday, Wednesday there is employment data, but the main event of the week will be Friday’s estimate of first quarter GDP gross domestic product. The estimate is for between 0.2% and 0.5% quarter-on-quarter for the first three months of 2010. If it’s anything less the political tide may turn the floating voter against Labour’s economic management.

Pause for Thought
A business that makes nothing but money is a poor business.
Henry Ford


Westhouse Holdings (WHL) – £7.16m@62.5p
Aim adviser Westhouse Holdings expects to start making markets in shares in the next few weeks. Westhouse is waiting for regulatory clearance and hoped to receive it before it released its 2009 results. Simon Doyle has been employed to start up the operation. Westhouse will make markets in its clients and companies it researches. Revenues moved ahead from £4.48m to £4.78m in 2009. There was a sharp improvement in the second half. Corporate finance income fell due to a lack of flotations but equity commissions grew. Westhouse is widening its research capabilities and this should help to increase commissions. Wages were temporarily reduced during the period. This helped the business to effectively breakeven in 2009. A loss of £709,000 was turned into a reported profit of £1.17m, but this figure includes a notional gain of £1.24m because the reverse acquisition of SovGEM was done at a discount to net asset value. Westhouse reversed into investment company SovGEM in June 2009. The figures cover Westhouse for the whole of both periods but just six months of SovGEM. Westhouse still has an investment portfolio worth £4.36m.

Westhouse chief executive William Staple acquired 17,000 shares at 59.96p a share, taking his stake to 8.93%. Non-executive director Andrew Beeson bought 50,000 shares at the same price. Beeson owns 1.31% of the company. Staple believes that there are signs that there will be an improvement in the Aim new issues market. So far this year, Westhouse has floated the ASX-listed Scotgold Resources on Aim this year and it has more new companies in the pipeline. China and India could be important sources of new companies. Westhouse already has more Chinese Aim clients than any other broker.

Finance
There was a cash outflow from operations in 2009 but cash the £1.23m raised from asset sales helped increase Westhouse’s cash pile from £610,000 to £1.75m. One of SovGEM’s main assets is its stake in Russian Timber, which had planned a flotation a few years ago. This investment has been written down by 50% to £233,000. However, the auditors say that it is not possible to put an accurate valuation of this investment so the accounts have been qualified.

Networks International (NWKI) – £ 27m@29p
This technology recruitment company finals showed a profits before tax, excluding the £0.39m profit on the disposal of subsidiary, came in at £3.98m against £5.57m last time. This is a relatively robust performance in a difficult year for recruitment. An investment decision to open four new international office s India, Russia and Canada and a second office in China bringing the total number of offices to 14 in 11 countries could pay back in the current year. As tise formerly acquisitive group diversifies its earnings base. It has used its strong cash flows to make early repayments of its bank loan. The original £16m loan was taken out in December 2006 to fund the acquisition of MSB and will be fully repaid during the current period, a full year before its original due date. The gross profit margin increase from 15.9% in 2008, to 16.3% in 2009 as Networks focus on higher value and higher margin business such as the expanding the energy division. Profits for 2011 are forecast at £3.7m for an EPS of 2.6p and a prospective P/E of 11.2x.

Financials
Strong balance sheet and good liquidity with net assets of £15.1m, net debts of £2.76mand net current assets of £9.6m.

Bond International Software (BDI) – £23.5m@71p
Constellation Software Inc has added to its holding in Bond International Software following the recruitment software provider’s 2009 figures. The stake has gone up from 10.35% to 12.95%. Constellation recently won its bid battle with membership software provider Gladstone, which admitted defeat earlier this week. Constellation has told Bond that it views its stake as an investment. Revenues edged ahead to £32.5m in 2009 but the lack of licence sales meant that margins fell. Recurring income accounts for 53% of revenues and covers two-thirds of overheads. The main growth in revenues was from outsourcing but its profit contribution was lower as interest on client money declined. Payroll software increased its profit contribution on flat revenues because costs were reduced. Underlying group pre-tax profit fell from £3.1m to £1.3m. The decline would have been worse without the diversification away from the core recruitment software business.

According to chief executive Steve Russell Bond where overwhelmed by pent up demand at the end of the last recession. There is no guarantee that will happen again, though. The general election is likely to hold back any progress for the time being. The recovery has to be sustainable for the recruitment companies to increase their software spending and buy new systems. Additional user licenses are being bought by existing customers. Contracts are being won and a six and a half year contract with Remploy – Bond’s first government client – will boost the 2010 figures. Michael Page will be another important client in 2010. House broker Cenkos forecasts a rise in underlying profit to £2.3m, which is still well below the profits reported in 2007 and 2008. Cenkos expects cash flow to improve and for Bond to move into a positive cash position in 2011.

Finance
Net debt was just under £3m at the end of 2009. Bond has renewed its £6m of bank facilities for a further three years at a slightly more expensive rate. The dividend has been halved to 0.8p a share.
M&A
Bond is interested in acquisitions that would add further operations in the human resources area to the group. Psychometric testing has been mentioned in the press.

Intelligent Environments (IEN) – £17.3m@9.875p
Losing out a contract with Chelsea Building Society meant that Intelligent Environments reported flat revenues and lower profits in 2009. The merger of the Yorkshire and Chelsea building societies meant that Chelsea did not buy the software it intended to.

Although revenues were virtually unchanged at £5.42m, recurring revenues edged up 3% to £1.92m. Profits fell from £1.18m to £862,000. There was an additional £300,000 spent on research and development. IE has developed a mobile banking platform that could compete with Monitise. IE’s mobile software can be integrated with the systems of banks. A pilot programme has started. This year’s R&D spending will be around £1m with three-fifths of it going on the mobile platform.

Finance
Cash in the bank edged ahead from £985,000 to £1.08m at the end of 2009.

Walker Greenbank (WGB) – £20m@34.5p
There was an impressive second half from this luxury interior furnishings group whose brands include Sanderson, Morris & Co., Harlequin and Zoffany. A fall in operating profits to £2.42m against £3.56m should not have been much of a surprise but a return to paying a dividend was a strong signal of recovery/growth. There was s strong recovery in the second half with manufacturing significantly improved on a reduce the cost base with increased efficiency and helped by a return in customer confidence increasing revenues. Second half profitability was substantially improved, with a first half operating loss before exceptional items of £84,000 being turned into a full year operating profit before exceptional items of £633,000. Forecast for the January 2001 year-end are £3m giving an EPS of 3.87p so a prospective P/E of 8.8x while yield 1.4%.

Financials
Gearing was reduced from 31% to 17% there are total bank facilities of £16.5m. Walker Greenbank’s strong balance sheet will help it to prosper, especially as many competitors do not have the cash to invest in their product design allowing earning enhancing acquisitions to be considered.

Totally (TLY) – £0.41m@ 0.45p
Totally, the niche publisher and digital marketing agency reported a marginal but significantly a profit for the year end December 2009. On turnover of £1.78m profits after-tax were £141,000 giving EPS of 0.002p so an historic P/E of 2.1x. The publishing business which is focused on the Jewish community has a strong established reputation and influence in this niche sector of the community but struggles to find a commercial return. The digital marketing business continues to make some decent profile business wins such as JP Morgan and the Ghurkha Welfare Trust and reported operating profits at £205,000 up 12% could become a stand alone business. Following the issue of the new warrants there are warrants outstanding for over 132,637,165 shares, equivalent to 144 % at exercise prices ranging from 1p to 5p per share.

Financials
The short term borrowing of £432,000 are underwritten with personal guarantees. The company is seeking to make the most of its Aim quote and would suit a similar but profitable private business that could use £4.9m of tax losses.

Proactis (PHD) – £9.32m@30p
Proactis edged up its revenues and profits in the six months to January 2010. The spend control software supplier grew revenues by 10% to £3.47m, including recurring revenues of £1.62m. There were 16 new licence deals in the period. Investment in marketing increased expenses. Pre-tax profit still improved from £377,000 to £382,000. Control of spending will become increasingly important, particularly in the public sector. House broker Daniel Stewart expects full year profits to increase from £1.1m to £1.3m. Proactis is about to start to pay tax so earnings per share will be held back. The shares are trading on less than 10x prospective 2009-10 earnings – based on an 18% tax charge.

Finance
Net cash was £2.35m at the end of January 2010.

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