Last week
After a strong start, helped by improved employment figures the FTSE 100&250 nearly reached year highs, but then slipped back to close up at 0.1% and 0.4% respectively. Watchers of the CPI (Consumer Price Index) hoping for a reduction from 3.1% were disappointed at the unchanged number. As food, airlines tickets and clothes going up the CPI is unlikely to fall by much anytime soon. The Aim All Share Index at 756.1 improved 3.1% making a 9.6% gain overt the last three months.

This week
The UK economic dashboard has a number of solid indicators this week with Retail Prices on Tuesday, BOE Minutes on Wednesday reporting on the next instalment on QE and Mortgage Lending on Friday. In the US there are New Homes Sales on Friday which could be a ‘lowlite’.

Pause for thought
The price of gold hit an all-time high of $1,274 per troy ounce on September 14th. As central banks would be net buyers of bullion in 2010 for the first time in twenty years. A rise of 15% since January.

Company Reports

Regenersis (RGS) – £20.7m at 46.25p
Repair and support services group Regenersis reported a higher profit in the year to June 2010 as an initial contribution from Total Repair Solutions offset a decline in the equipment recycling business. Revenues grew from £98.3m to £116.4m. The main growth in revenues came from Poland and TRS. Underlying profit rose from £4.79m to £5.37m. The business has been reorganised into three divisions which are mobile communications, media and entertainment and information technology. Mobile accounts for two-thirds of revenues. Regenersis has invested in automated testing equipment to improve its efficiency. House broker Arden forecasts a profit of £5.4m this year implying a prospective P/E of 6x.

Finance
The lower margin mobile phone recycling services are being run down and that has had a negative effect on working capital in the short-term. This is unwinding over the next few months. Net debt is just short of £4m and it is expected to be a similar figure at the end of June 2011.

Globo (GBO) – £20.3m at 13.5p
Athens-based e-business and mobile software provider Globo has continued to grow in the first half of 2010 despite the problems of its home market. This is because the private sector has more than taken up the slack of the public sector in Greece. The CitronGo! mobile platform is also a more significant contributor providing €1.1m of total revenues of €12.5m, up from €8.34m in the first half of 2009. Profit jumped from €908,000 to €1.42m, helped by lower interest charges. Globo expects rapid growth in revenues from the CitronGo! mobile platform. It has contracts with 13 mobile networks operators around the world, with 205m subscribers in 20 countries. Many of these contracts are not yet earning revenues but Indonesia was a major contributor in the first half. Globo shares the subscription revenues with the network operator. Telenor Serbia has launched the Telenor KLIK service using the Globo platform and it is heavily advertising the service. The second half is always much stronger than the first. House broker Daniel Stewart forecasts a doubling of full year profit from €3.2m to €6.4m. The shares are trading on 5x prospective earnings for 2010.

Finance
Cash flow is still not as good as it could be. Public sector debtors were reduced by €1.9m but there is still €3.14m outstanding. The remaining debtor could be collected this year, which would strengthen the balance sheet. Net debt was €12.9m at the end of June 2010.

InterQuest Group (ITQ) – £18.7m at 59.5p
IT recruiter InterQuest Group had a strong first half of 2010 but it warns that visibility is limited.

All sectors are showing growth except the public sector. Management says that many bank and financial services projects that were on hold have been switched back on. The permanent market has recently stepped up markedly according to InterQuest. Net fee income rose 14% to £7.04m in the six months to June 2010 and pre-tax profit increased 16% to £1.06m. The start-up businesses owned by the IQ Equity division made a small loss. August was quiet and that makes the company cautious for the short-term but it should be able to ride the normal cyclical upturn of the recruitment sector. House broker FinnCap forecasts a rise in full year profit from £2.8m to £3.7m. The shares are trading on less than 8x prospective 2010 earnings.

Finance
Net debt was £2.7m at the end of June 2010. The increased business levels mean that more working capital is required and borrowings have increased. There are total debt facilities of £12m. A maiden interim dividend of 0.5p a share will be paid on 28 October.

M&A
InterQuest is keen to look for acquisitions. It believes that valuations are more realistic than they have been in the past. Ideally, acquisitions would be specialist IT businesses with an operating profit of between £400,000 and £2m. InterQuest would also like to grow its operations where it handles the onsite requirements of customers.

STM (STM) – £9.9m at 23p
Gibraltar-based trust and corporate services provider STM Group knows that it has to rebuild investor confidence in its business after last year’s disappointments and the interim figures make a good start. Revenues grew 13% to £4.66m and underlying profit improved from £182,000 to £569,000. Cost cutting and reduced losses from newer operations STM Life and STM Swiss helped the recovery in profit. Those newer businesses should reach breakeven by the end of 2010.

There was some benefit from CGT changes but there should be a more sustained flow of new business following the rise in the top rate of UK tax to 50%.

Costs would have been even lower if it were not for the April acquisition of Zenith in Jersey. This has been integrated with the rest of the Jersey business to make a much more substantial operation.

There is a strategy to widen the number of introducers of new business and reduce dependence on the UK. There are also plans to gain regulatory clearance for an operation in Malta. Evolution forecasts a full year profit of £1.3m, while fellow joint broker is more optimistic with a £1.6m target. The shares are trading on less than 9x prospective 2010 earnings.

Finance
There is £4.94m of cash in the balance sheet with around £2.7m of that cash required as regulatory capital for STM Life. There were short-term loans of £727,000 and there was £2.2m of loan stock issued in the first half. There is also £3.46m of deferred consideration payable. The interim dividend is maintained at 0.2p a share.

M&A
The acquisition of Luxembourg-based Citadel for up to €1.88m was announced in July 2009 but has still not been completed due to delays in gaining certain regulatory approvals. It is uncertain whether this deal will go ahead.

CBG Group (CB) – £4.68m at 29.5p
Cost cutting has helped offset the decline in revenues from £4.63m to £4.09m. All of the decline was in the insurance broking division with financial services revenues holding up. There has been no hardening of insurance rates and this does not look like changing in the short-term. A new management structure should make it easier to win new business and help to retain existing business. Costs could fall further but some of the benefits will be reinvested in parts of the business. Underlying pre-tax profit improved from £39,000 to £332,000. House broker Daniel Stewart has cut its 2010 revenue forecast from £8.8m to £8.1m. That means that the profit forecast has been reduced from £1.5m to £1.1m. The dividend is expected to be maintained at 0.72p a share. The shares are trading on less than 6x forecast 2010 earnings.

Finance
Net debt was £666,000 at the end of June 2010. There is no more deferred consideration payable so the cash generated from operations can go towards paying off borrowings. CBG should reach a net cash position next year. The cash could go on acquisitions but CBG is not seeing anything that it wants to buy at the moment.

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