The FTSE 250 at 10366 fell -0.3% while the FTSE 100 was down -1.1% at 5,553.3 its lowest level for 2 months. Although US GDP increased at a 3.2% annual rate in January through to March, it was slightly lower than the expected. The AIM All Share at 729.1 was off -0.4%.
Wednesday UK Consumer Confidence will be report. The market is likely to rally on Friday if there is a clear election winner and rally higher if it is a Tory winner. The BOE Interest Rate Decision will be postponed until next Monday when it is likely to remain unchanged (for now).
Pause for thought
A sense of humour is a major defence against minor troubles.
Character Group (CCT)-£36m@ 121.5p
Interims showed an extremely strong turnaround to profits of £3.73m against a loss. Character Group is the owner of an established portfolio of toys and products based on strong children’s brands including Doctor Who, Peppa Pig and Scooby Doo, all show staying power and provide a platform for sustained sales growth. A cautious approach was taken to Christmas 2009 so the interims for the 6 months to 28th February showed a strong improvement with a 14.1% increase in sales and profits improved to £3.73m against a loss last time of £3.84m. Trade was helped by the boost to sales provided by Zhu Zhu Pets but the other brands also performed strongly and ahead of expectations. The strategy of developing own product lines and selectively distributing third party lines has produce a significant turnaround. The portfolio is broadly based so that no fewer than five products will produce sales in access of £10m. Character has grown the depth and width of an established product portfolio of ‘raising stars’ and ‘cash cows’, allowing for a wider range of price points. Profits for the August 2010 full year are forecast at £6m giving and EPS of 15.2p and a prospective P/E of 8x.
The strong cash position with net cash of £7.1m and cash generative nature of the business has allowed Character to follow a strategy of share buybacks, which is set to continue.
Asia Digital (ADH)–£firstname.lastname@example.org
Internet advertising services provider Asia Digital’s operations have moved into profit and it is launching in China this summer. Both the Australian and the newer Asian operations were profitable in the fourth quarter. Australia is starting to recover from a decline in its business earlier n 2009. Group revenues increased 28% to £18.9m in 2009. Asia Digital still reported a loss of £2.6m, although this was slightly lower than 2008’s loss of £2.8m. The top client generated 28% of revenues and the top 10 clients generated just over half of the total. These figures are still high but they are much lower than in 2005.
Net cash was £1.07m at the end of 2009. There was a cash outflow from operations but last October’s £1.2m share placing has replenished the bank account.
Further restructuring was reported at Intellego, who have been though a series of changes since last August. As this staff training solution software and services group’s attempt to move to break-even/ profits. Last week Intellego sold its UK distribution rights for the EKP range of Learning Management software back to Aim listed NetDimensions. This includes the business and assets, goodwill and customer list. These changes will allow both Intellego and NetDimensions to concentrate on their strategic objectives. Intellego is focussed on the provision of performance enhancing solutions through training – it will increasingly now sell the higher margin services and proportionately less of the growth will be achieved through software distribution.
The value of the sale is £464,000 with £276,000 being payable on completion to be offset against the balance owing to NetDimensions and performance based payments of up to £94,000 on the next two anniversaries of the sale. The proceeds will help pay down debt and allow further focus on moving the services business forward.
The transformational Group reported finals which are not summed up by losses of £1.85m on £0.4m turnover . The consolidated figures include 49% owned TrainFX Limited business for four months and RAM Vision Limited for two months. The headline loss includes a prudent impairment of share investments of £224,243 and a non cash share option cost of £103,799. The two significant developments of last year were the acquisition of 49.9% of TrainFX and gaining board control with the option to acquire the balance of the equity as well as the establishment of a 100% owned subsidiary RAM Vision These two businesses are complementary and form the base for expected growth over the next few years.
£2.5m net cash was raised in 2009 and mainly invested in acquiring an interest in TFX and developing its business with the balance for working capital. Ram intends to raise sufficient finance for the working capital to develop the businesses including the capital expenditure needed by Ram Vision to extend its screen network and by TFX to commence the installation of digital screens onto its first London commuter rail line.
Pan Pacific Aggregates (PPA)-£email@example.com
Aggregates producer, Pan Pacific Aggregates started production at Quadling (formerly Pumptown) Quarry in March. Permits have been obtained, a road built, finances sorted out and litigation settled. Pan Pacific has overcome all of its problems and is set to expand by acquisition. Pan Pacific has acquired new equipment that will enable it to sell aggregates for asphalt. This achieves a higher selling price than basic stone products for road building.
Demand in the south of British Columbia is strong because of infrastructure spending. This spending has continued since the Winter Olympics in Vancouver. Investment in highways should generate aggregates demand for the next five years. Pan Pacific has another site where it has a production permit and this could be operating by the fourth quarter. Further expansion will come from acquisitions. There are a number of small quarries in the region.
The quarrying subsidiary gave creditors 9 cents in the dollar to settle claims and get the business back on a firmer financial footing. Pan Pacific redeemed £5.13m of convertible loan notes owned by RAB Capital in return for 53.7m shares issued at 6.03p each and £750,000 in cash. Last year, Pan Pacific raised £4.1m from share issues and had £1.66m in the bank at the end of 2009. Mortgages and other payables total just over £1m. Building the new road to the quarry cost around £300,000 this year.
Advanced Power Components (APC)-£2.69m@11p
Electronic components distributor, APC is about to reap the benefits from the imop, or inductive motor optimisation panel, which makes sure that the power factor of a motor is optimised. It is a box that is installed next to electrical equipment and it stores reactive energy and supplies it to the equipment’s motor. If the imop is not installed some of the electrical energy will be lost as the wires between the electricity supply and the machinery heat up – that reduces the power factor. Even if voltage optimisation equipment is fitted in the premises, the imop will still save power and money.
APC says that the savings by industrial companies can be between 6% and 25%. Each piece of equipment normally requires one imop unit. By increasing the power factor it also means that the motors do not get as hot so they should last longer. That provides additional benefits but these are more difficult to quantify.
APC has the rights to the technology outside of North and South America and has made improvements to the design and mounting of the imop. APC has made sure that the imop can be added to in a modular fashion so that it can cope with different sizes of motor. APC owns the rights to those improvements although the agreement with the technology owner means that the two sides have to make available to the other any improvements they make. APC will manufacture the imop in Rochester and then sell it to a company called Minimise, in which APC has a 19% stake. Minimise, which is based in the same building as the manufacturing facility, is effectively the sales company for the imop. APC will make a profit from manufacturing the imop, which it will share with the owner of the original technology. On top of that it will gain from the success of Minimise through its equity stake. Marginal losses are forecast for the year–end August 2010 but with convertible debt in place 2011 ‘s recovery could be accelerated with this new ‘green tech’product.