Last week
The FTSE 250 increased 0.3% while the FTSE 100 was up 0.5% and in first place was the AIM All-Share at 676.1 up 1.1%. The UK markets maybe going into low volume holiday mode but the US was troubled on Friday as consumer sentiment dropped from 76 in late June to 66.5 in a survey published by Reuters and a US University which hints at underlying economic tensions.

This week
The US economy may be the feature for the week as slowing growth is causing double dip worries and markets will wait until next Friday to hear the Fed’s chairman’s twice yearly economic report to congress. In the UK GDP figures on Friday may show the continuing slight growth with 0.6%, which will follow Thursday’s Retail Sales and Wednesday BOE Interest Rate Minutes.

Pause for thought
…. banks had borrowed too much and taken risks that neither they nor their regulators understood. This is how the fall in US Housing prices turned into an existential threat to the global financial systems.
…..Stress test exercises this week could lead to Banks being forced to raise more Capital.
FT Saturday

Synchronica (SYNC) – £14.5m at 1.75p
The interim figures from this Mobile messaging technology show strong growth in revenues but Synchronica still needs even faster growth in the second half. That depends on new deals and the rate of take-up of services that are up and running. Revenues grew from £1.33m to £3.43m in the six months to June 2010. The loss was reduced from £2.49m to £1.34m.

Finance
There was a cash outflow of £2.23m from operations in the six month period. On top of that, there was capitalised development spending of £1.5m. The majority relates to the purchase of Colibria earlier this year. Roughly £600,000 was for internal development and the spending continues at that rate. There was £781,000 left in the bank at the end of June 2010. Debtors jumped from £1.66m to £4.52m although around £500,000 has been paid since then. Management says that it does not need to raise more cash unless it is to finance a deal. However, it is likely to depend on how quickly the debtors are paid and how rapidly revenues grow. Most of the June debtors are expected to be paid by the end of 2010.

Byotrol (BYOT) – £16m at 19p
Recently appointed chief executive Gary Millar says he wants to emphasise the money saving benefits of Byotrol’s products rather than focus on the technology’s ability to kill the MRSA bug. He believes this microbial technology group will be a better selling point for hospitals and catering customers. Products are already being sold through wholesalers and jointly-branded products by Boots. Revenues more than trebled to £3.15m in the year to March 2010. Further increases in product sales will grow revenues this year but Byotrol is likely to continue to be loss-making.

Finance
There was net cash of £766,000 at the end of March 2010 but Byotrol will be in a net debt position by next year if it does not raise more money. A fundraising is likely sooner rather than later. A note is promised by new broker Arbuthnot and that could coincide with a cash call.

Electric Word (ELE) – £9.79m at 4.12p
Education and sport information Electric Word has reduced costs with marketing spending falling most sharply. The company has still been investing in new projects so it is not harming its longer-term prospects. Part of the reason for the improvement in margins is a switch from paper to digital publications. Prices of digital products tend to be lower but costs are also lower. Revenues fell from £8.72m to £8.18m in the six months to May 2010. The reported profit fell but the underlying profit excluding amortisation, write-downs and share-based payments rose from £832,000 to £925,000. All of the decline in revenues came on the educational side where some titles were consolidated. However, operating margins rose from 15% to 20% and this should be sustainable. Chief executive Julian Turner admits that government spending cuts could make the next 12-18 months difficult for the education side of the business. It will be more difficult to sell new subscriptions to publications and it is difficult to assess how renewals will go. However, longer-term there will be opportunities for new publications provided by the changes to school management. Online gaming revenues continue to drive the growth in the sport business division, which also contributed to the improved group profit. Investment in the consumer division has pushed it into loss. The My Child business sells to parents so is not hit by lower government spending. Forecast are for currently for £2m for an EPS of 0.8p giving a prospective P/E of 5.2x but are likely to be massaged down.

Finance
Net debt has fallen from £1.5m to £510,000 in the six months to May 2010. Cash generation was strong in the first half.

M&A
The strong balance sheet will enable Electric Word to consider acquisitions. Turner says that assets are coming on the market where prices are more realistic than in the recent past.

Electric Word can save costs by integrating the acquisitions. It has renewed the lease on its London office for a further five years and there is spare space.

AFC Energy (AFC) – £27.9m at 18.5p
Guildford-based AFC has generated its first commercial revenues from the deployment of one of its fuel cell systems at Linc Energy’s underground coal gasification (UGC) demonstration facility in Chinchilla, Australia.This generated £50,000 in the first half with the other £150,000 due to be paid in the second half. The loss still increased from £1.18m to £1.38m in the six months to April 2010. A pilot plant has been commissioned to produce up to 2MW of fuel cell systems a year. AFC does not intend to manufacture systems other than in this limited amount so additional production would be outsourced. AFC hopes to complete its large scale Beta modular fuel system development in 2011. This will be used for a multi-megawatt power station concept. Centrica has also reserved one of these systems. It is difficult to assess whether there will be any additional revenues in the second half. AkzoNobel is still testing its system, which enables it to use its waste hydrogen from chlorine production. If this proves effective it is likely to install the system in other plants and its rival chlorine producers are likely to be interested as well.

Finance
Cash is not a worry in the short-term. There was a £1.37m outflow from operations and capital expenditure but there is still £2.68m in the bank at the end of April 2010, thanks to the £2.01m net raised at 10p a share last December.

CINPART to be renamed Active Energy Group (CINP) – £9m at 8.75p
Recently raised £1.3m at 7p and on the 30th of July, Cinpart reflecting the change its business will change its name to Active Energy. The UK roll out of VoltageMaster is targeted at 400,000 large buildings that Active Energy say have the potential to reduce energy consumption significantly. A recent example is £375,000 worth of orders for the supply of VoltageMaster units to five prisons across the UK. The units are being made in the Scotland plant and the installation is set to be completed in October 2010 by the SEC (a divison of Scottish and Southern Energy). The SEC has generated orders worth around £150,000 and given the size of their client base more can be anticipated. This market is being driven by environmental and legislative pressure to reduce energy consumption, soft loans and higher energy costs. The pace of the UK rollout and the size of each contract are hard to judge. Cautiously a loss of £0.6m is forecast for December 2010 followed by a profit of £0.6m in 2011, which would give a P/E of 16x.

Financials
Estimated year end net cash is around £1.0m. The finals to December 2009 showed a 42% increase in turnover to £2.9 million and Active Energy contributed £1m whose gross margins are around 30- 40% on each unit.

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