The FTSE 100 fell -1.2% to 5732.83 while the less internationally focused FTSE 250 was -0.4% lower. Attention was focused on Ireland’s bail out, China’s inflation and to a lesser extent on US Consumer prices which grew at a deflationary 0.6%. The Aim All Share at 855.3 improved 0.59%.
The US 3rd Qtr GDP on Tuesday could be revised upwards from 2% to 2.2% Then on Wednesday the Fed’s Monetary Policy Committee will report before the US is closed for Thanksgiving Day. On Wednesday in the UK 3rd Qtr GDP at will show a weak growth at 0.8%. The Irish relief rally may not run for too long.
Pause for thought
The New Economic Foundation (NEF) is building a model to measure General Well Being (GWB) as a supplement to GDP ( Gross Domestic Product). An early attempt ranked the UK 13th out of 22 European Countries .
Trifast (TRI) – £40.5m at 47.5p
Fasteners distributor Trifast’s interim figures have prompted house broker Arden to increase its full year profit forecast. Arden has moved its 2010-11 profit forecast from £3m to £3.5m, and its 2011-12 forecast from £3.8m to £4m giving a prospective P/E of 13x. Even though trading is better than expected fasteners manufacturer and distributor Trifast’s management says that there is still more that can be done to improve the company’s logistics and software as well as operations in Europe and the US. Generally, though, Trifast is upbeat about its prospects and its opportunities to grow in automotive.
Revenues jumped from £39.9m to £52m in the six months September 2010. This represents a continued half-by-half recovery with revenues 13% higher than the second half of last year. The same is true of profit where underlying breakeven in first half of last year was followed by a £920,000 profit in the second half. The latest underlying profit is £1.72m. The UK returned to profit and Asia almost doubled its contribution. Mainland Europe and the US remain loss-making.
Restocking meant that there was a cash outflow in the first half. Net debt is £5.63m and it should stay around the £5m level even though working capital requirements will increase on the back of expected growth.
Victoria (VCP) – £16.3m at 235p
A strong profit performance in Australia offset losses in the UK and Ireland and helped carpet manufacturer Victoria to improve its overall profit in the first half of the financial year. Revenues grew from £30.2m to £33.3m, with Australia contributing £20.9m – one-fifth higher than the year before. However, the Australian increase was flattered by foreign exchange movements, so in Australian dollars the increase was 2%. Pre-tax profit improved from £202,000 to £561,000 and this has enabled Victoria to increase its interim dividend by 15% to 3p a share. Last year’s total dividend of 8p a share was not quite covered by earnings but this year an increased dividend should be comfortably covered.
Rising wool prices hit the first half but price rises have been pushed through recently. The UK is technically out of recession but consumer confidence is still fragile. Carpet sales were slightly lower but that was more than made up for by doubled yarn sales to competitors. A new contract with the biggest carpet claims handler in the insurance replacement market has helped to boost carpet sales and there will be more benefit from the contract in the second half. Chief executive Alan Bullock believes that Victoria’s move into synthetic carpets through the launch of the EASICARE brand will help to boost sales. Victoria will concentrate on the higher end of the synthetic market with its polypropylene product. Any sales will represent gains in market share. Sales continue to decline in Ireland but cost cutting has reduced the loss. House broker Arden forecasts a rise in profit from £1.1m to £1.6m in the year to March 2010 then to £2.2m giving prospective P/Es 17.5x and 12.7x. That is still relatively low compared with the profit made a few years ago so there is plenty of scope for further recovery.
There was a cash outflow in the first half because of a build up in stock of new products ahead of pre-Christmas trading. Net debt was £8.55m at the beginning of October 2010, which is lower than 12 months before. Depreciation is much higher than capital expenditure so the net debt should be lower at the end of the year.
Stratex International (STI) – £18m at 6.28p
Gold explorer Stratex International has agreed to earn a 75% stake in the AbiAdi-Gichke gold project in the Tigray province in northern Ethiopia. Stratex is keen to gain additional licence areas in Ethiopia and it will earn the 75% stake if it invests $1m over 36 months, including 3,000 metres of drilling. Stratex will spend $50,000 on due diligence over the next three months. LozBez Mining currently owns the licence which covers 967 sq km. If the deal progresses a joint venture vehicle will take over ownership of the project and Stratex can earn an additional 10%, taking its stake to 85%. This interest will be held through Stratex East Africa, where Thani Ashanti is taking a 5% stake in return for spending $500,000 of its $1m first year commitment on the Afar project. Thani Ashanti can earn 51% of Afar by spending a total of $3m and if it spends $4m on any one licence it can earn 70% of that licence. Hot springs have brought gold to the surface in Stratex’s Ethiopian licence area. Areas where there used to be hot springs provide an indication of potentially commercial gold projects.
Thani Ashanti is investing $500,000 directly into Stratex International. This will take Stratex’s cash to more than £2m so it can easily afford its commitment for AbiAdi plus other exploration spending. Joint Venture partner NTF will finance the short-term exploration and development of Inlice and Altintepe in Turkey. Canterra is financing the exploration of Oksut and Teck the spending on Hasancelebi, the two other main projects in Turkey.
CSF (CSFG) – £116m at 72.5p
Malaysian data centre operator and designer CSF Group reported a sharp increase in interim profit thanks to a sale and leaseback transaction and higher utilisation rates at its data centres.
Total income jumped from £6.58m to £12.7m in the six months to September 2010, due to a £4.59m gain on the sale and leaseback of CX1, the company’s first data centre. Underlying revenues improved from £6.58m to £8.08m. Other operating income jumped from £488,000 to £1.76m but this is the money paid by data centre tenants for electricity. The associated expense is in admin expenses and that explains why those admin expenses appear to have grown so sharply.
Pre-tax profit jumped from £942,000 to £6.65m but, even stripping out the sale and leaseback gain, the underlying profit more than doubled – partly thanks to the swing from an interest charge to interest received. CSF joined AIM on 22 March 2010, when it raised £28m – £25m net – at 55p a share. CSF was founded in 1991 and it has constructed more than 200 data centres. CSF’s first owner/managed data centre was completed in 2003. It is currently building its fifth data centre – the first three are in Malaysia and the fourth is in Hanoi, Vietnam. The new data centre has already sold one-third of its capacity. Contracts tend to last for three years. CSF is the biggest data centre operator in Malaysia. There are plans for more data centres in Malaysia, Singapore and Thailand.
The sale and leaseback and the flotation proceeds have left CSF with net cash of £26m, including restricted cash of £1.24m, at the end of September 2010. CSF plans to pay out one-third of its earnings in dividends. House broker Cenkos forecasts a dividend of 1.7p a share out of 2010-11 earnings of 5.3p a share – including the disposal gain.