Last week
Was last week fun? Up to a two year high and down again with FTSE 250 -1.9 lower and FTSE100 off -1.3 %. After the QE2 stimulation Sovereign debt problems, Chinese Wonga Wars (currency) and in the UK inflation are concerns. The Aim Index at 850.2 up 1.5% on the week and 29.8% higher on the year and seems to be the place to increase holdings.

This week
UK Inflation on Tuesday is likely to be (well) above 3% this limiting the BOE policy options on QE and interest rates. On Wednesday UK unemployment is likely to show an increase if 5,000. In The US Mortgages Applications are on Wednesday and as a forward indicator on consumer confidence it may explain a further explanation for the FEDs move on QE2.

Pause for thought
Ireland’s current deficit is an unprecedented 32% of gross domestic product, if the one-off cost of bad debts in the Irish banking system is included.

Company Reports

IS Pharma (ISPH)£29m at 82p
Speciality pharmaceuticals supplier, IS Pharma reported a 10% rise in revenues to £6.53m in the six months to September 2010. That includes the £400,000 final payment relating to the disposal of Volplex and Isoplex but the corresponding figure includes revenues from those products, so the continuing drug portfolio grew its revenues. Sales of Variquel, a treatment for uncontrolled bleeding from oesophageal varices, continue to grow strongly in the UK and European markets where it has been launched. Episil, the oral spray for oral mucositis, and Aquora, a treatment for dry mouth, will not make a significant contribution until next year. Pre-tax profit was 170% higher at £1.41m, helped by the £400,000 payment for the products sold and other income of £234,000, which is an accounting adjustment relating to the disposal.

Finance
IS Pharma is raising £12.5m to give it a war chest to back up its search for product acquisitions.

IS Pharma placed the new shares at 80p each. Last month, IS Pharma raised £3.6m from the issue of shares at 77p each to healthcare investor Abingworth. This was at a premium to the then market price. The management talked to existing shareholders at that time and decided it would be a good idea to take advantage of the appetite for shares from other investors. There was £5.11m in the bank at the end of September 2010, prior to the two fundraisings, but there were also financial liabilities of £13.3m, which include contingent payments for some past acquisitions. At the end of March 2010, these contingent payments totalled £9.54m. Some of the cash will be used to cover these contingent payments. IS Pharma intends to starting paying dividends next year. The ividends will be well covered by earnings and cash because the company wants to use most of its money for acquisitions. However, the dividend payment should grow as the business grows.Even so, there will still be plenty of cash left and this will make potential sellers of products and businesses treat IS Pharma more seriously, especially if there is a rival buyer who has not yet secured the finance that it would require.

Printing.com (PDC)£16.2m at 36.5p
Printing.com is expanding into the Netherlands through the purchase of print marketing business Media Facility Group BV for €2m in cash and shares. MFG is a young business and it increased its sales from €2.3m in 2008 to €6.7m in 2009, when it made a small profit. Managing director Hans Scheffer will join the Printing.com board. The consideration is half in shares at 33.2p a share, €500,000 in cash and €500,000 in convertible loan notes – convertible at 33.2p a share.

MFG does not do any of its printing, which cost €4m last year. Some of this printing could be transferred to Printing.com’s facility in Manchester. There was a sharp difference in trading between the South East and the rest of the UK, with the former 5.9% ahead and the latter down 4.5%. That meant that UK sales were 2.6% lower. Promotions have helped to retain business but margins have been eroded. Current trading is following the same pattern. Printing.com’s revenue was flat at £7.1m in the six months to September 2010. Pre-tax profit fell from £870,000 to £619,000 after some initial deal costs for the MFG acquisition. The expectations for March 2010is a PBT of £1.63m for an EPS of 2.65p giving a prospective P/E of 13.8x.

Finance
Printing.com is maintaining its interim dividend of 1.05p a share even though it is not covered by earnings. There is still £1.61m in the bank after paying out £932,000 on last year’s final dividend of 2.1p a share. MFG is a cash generative business and even after its acquisition Printimg.com will have net cash. There is no requirement for capital investment so the business can generate significant amounts of cash.

Datong (DTE)£7.33m at 53p
Surveillance equipment supplier , Datong says that its business is recovering and there is a substantial improvement on the previous year. The US market is showing signs of recovery although it is difficult to predict what will happen following the recent mid-term elections. The strategic defence review in the UK should be positive because of the increased focus on homeland security. Spending by the police is being delayed, though. Results will be published on 7 December. The interims reported a 48% increase in turnover to £7.41m with an operating profit of £0.52m compared to £0,15m). Net cash stood at £1.67m

M&A
Datong says that it has a short list of possible acquisitions. Companies involved in equipment or software that would help to widen the product and services base will be the main focus.

ASOS (ASC )£1,020m at 1364p
Online fashion retailer, ASOS continues to grow strongly with revenues 45% ahead at £139.7m in the six months to September 2010. International sales more than doubled and they are set to overtake UK sales in the next year or so. The new US site has been launched. Pre-tax profit increased from £4.4m to £7m but ASOS makes most of its money in the second half of the financial year. Full year profit could improve from £20.3m to around £27m.A mobile phone service has been launched and ASOS plans to launch an online marketplace for small brands and individuals wanting to sell clothes and a Fashion Finder service that includes non-ASOS retail clothing.

Finance
Net cash has fallen back to £4m because of a large increase in inventories. ASOS is also staring to spend money on the new distribution facility with more likely to be paid out in the second half. ASOS has no intention of paying a dividend.

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