“The US numbers are obviously good and one can hope that we will continue to see the market rise in continuing months”

said Bernard Baumohl, MD of Economic Outlook Group

Last week….
…any caution for the world political scene was misplaced at the FTSE 100 added 101 points to close at 6,009 gaining 1.8%. The FTSE 250’s more moderate improvement was 0.7% while the Aim All Share at 905.7 gave back -0.2%. News that average UK income fell 0.8% year-on-year which is the first decline in 30 years depressed domestic orientated indices. On Friday,  better than expected US employment  showed 216,000 new jobs created  in March giving a 0.1% fall in unemployment  to 8.8%  suggesting  a soundly  job based recovery is underway.

This week….
….. the main event will be Thursday’s  UK Interest rate decision which is likely to remain unchanged for 26 months in a row at 0.5%. It seems, however that Europe, with inflation at a mere 2.6% may raise its interest rates on Thursday by 0.25% to 1.25%.

Company Reports

Pilat Media Global (PGB) – £27.1m at 46.5p
Broadcast business management software provider Pilat reported record revenues in 2010 and 2011 should be even better. Two major licence sales contributed £2.8m of the revenues. Total revenues improved from £19.3m to £21.9m and operating profit before amortisation jumped from £1.2m to £3.2m even though R&D spending increased. Foreign exchange losses and fair value adjustments meant that underlying profit £1.7m to £3.3m. Contracts were signed with Prime in Australia and AT&T in the US. Pilat will be getting the benefit of the late contract wins in 2011. The timing of further licence sales is difficult to predict. Even so, recurring revenues are one-quarter of current revenues and more than 50% of 2012 revenues are already covered through recurring revenues and confirmed implementation revenues.  House broker Shore Capital has edged up its 2011 earnings per share figure from 3.9p to 4p giving a prospective P/E of 11.6x.


Pilat is improving its cash collection and net cash was £4m at the end of 2010. A foreign currency loan has been taken out to reduce the impact of forex movements.

Northbridge Industrial Services (NBI) – £33.9m at 221.5p
An initial five month contribution from Australian oil and gas tools hirer Tasman supplemented the underlying revenue growth of 22% in 2010. Revenues rose from £12.7m to £19.3m, while pre-tax profit improved from £2.21m to £3.68m. Earnings per share grew from 18.9p to 25.5p.

The core business manufacturing and hiring loadbank equipment, which is used to test generating equipment, continues to perform strongly particularly in the Middle East. The equipment is depreciated over 10 years but it has a much longer life because there are few moving parts. The main customer base is power generation and oil and gas companies provides Northbridge with growth opportunities.   Forecasts for Dec 11 of £5.35m would give a prospective P/E of 8.3x.


Cash generation is strong but most of that cash is reinvested in increasing the size of the hire fleet. Net debt was £5.8m at the end of 2010, including deferred consideration for Tasman. Northbridge has already paid £1m of the deferred consideration. The total dividend is 4.6p a share – Northbridge tends to distribute one-fifth of earnings.

Northbridge is looking for bolt-on hire acquisitions which have a worldwide customer base and are capable of organic growth.

Personal Group Holdings (PGH) – £84m at 281p
Health insurance provider and employee benefits provider Personal Group Holdingsreported record pre-tax profit for 2010. Revenues grew 2% to £27m. New annualised premiums of Personal’s own products are running at £7.2m, with most still coming from the hospital plans. Pre-tax profit grew from £8.54m to £9.38m with the IFA business making a smaller profit contribution. Voluntary group income protection products are not growing as fast as hoped but the related costs have fallen.
This year’s rise in insurance premium tax rise from 5% to 6% will be absorbed by Personal and that will knock £175,000 from profit. There will also be increases in costs relating to the VAT rise and higher employers’ National Insurance contributions. Panmure Gordon has edged down its profit forecast for 2011 because of the increased costs related to the tax changes. Pre-tax profit should still edge up to £9.8m in 2011 for a prospective P/E of 12x with a yield of 6.2%

Personal has £14.6m of net cash and, even excluding goodwill of £3m for the IFA business, £20.5m of net assets. Personal has already paid total dividends of 17p a share for 2010 and a first quarterly dividend of 4.35p a share for 2011. Assuming the other three dividends are the same amount the 2011 dividend will be 17.4p a share. Cash generated from operations more than covers the cost of the dividend.

Ultimate Finance (UFG) – £7.59m at 15.8p
Trade financier Ultimate Finance Group is already seeing the benefits of its acquisition of Ashley Commercial Finance last October. The trade finance provider reported an underlying increase in profit of 163% in the six months to December 2010. Revenues grew from £2.85m to £4.32m, while the profit jumped from £191,000 to £502,000. Ashley’s profit contribution was £228,000.

Ultimate hopes to make annualised cost savings of more than £400,000 from integrating the businesses – they already share offices in Manchester. Around £100,000 should show through in this financial year. Ashley fits well with Ultimate because it deals with smaller clients that Ultimate would have passed on. Profits are forecast at £0.8m for the June 2011 year end which gives a prospective P/E of 8.7x. Joint broker WH Ireland has sold all or most of its stake in Ultimate. The broker was one of the original backers of the business when it floated in 2002 and it owned 5.18m shares. The stake has gone below 3% and Special Situation Funds has increased its holding to 17.9%


The group has a £34m bank facility and there was still £6.2m to spare at the end of 2010.

The interim dividend has been raised from 0.3p a share to 0.35p a share. Ultimate had a policy of paying 50% of its earnings in dividends but it adapted this when it was about to buy Ashley. Even so, this year’s dividend could still be around 40% of earnings.

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