“We do not invest in oil and gas or mining and that has helped performance.” Cazenove UK Small Companies Fund explaining its 16.8% rise this year

Last week …

UK markets declined marginally with the FTSE 100 at 5714 falling -0.9% and the FTSE 250 lower by -1.1. The Aim All Share Index at 855.1 fell -2.4%. Unemployment is usually a leveraged indicator but the largest quarterly fall in UK unemployment in a decade to 7.7% was offset by high inflation at 4.5% and the Greek loan crisis potentially leading to a Spanish infection of Euro defaulters.

 

This week …

… as Greece fights austerity measures there is potential for market destabilizing political posturing. In the UK strike action may impact GDP growth while the BOE Interest rates decision minutes will be reported on Wednesday. The pressure for a rise in rates form 0.5% is receding into 2012. We hope for an upward move in a sideways drift.

 


Company Reports

Brulines (BRU)£28.2m at 100p

Brulines has made a significant investment in its remote machine monitoring technology and it should start to pay off over the next couple of years. The Vianet business has had £16m invested although most of that was spent before Brulines bought the business. A number of pilots have started and these could turn into proper contracts over the next year or so. Brulines believes it can supply 150,000 units over five years – 50% of the addressable market. That would make the business a significant contributor to group revenues and profit. A decline in the pub market has hit the business. Although the installed base in pubs is declining, sales of more advanced monitoring and measurement equipment are rising. On top of the decline in the pubs market there were costs of integrating the fuel solutions businesses that have been acquired. That was why profit fell from £5.1m to £3.9m even though revenues grew from £19.8m to £24.3m.  The fuel solutions division should move from loss to profit this year. House broker Cenkos believes that the 2011-12 profit will recover to £4.5m  which gives an EPS of 11.4p so a prospective P/E of 8.8.

Finance

Net debt was £1.2m at the end of March 2011. The total dividend was edged up by 3% to 5.65p a share.

 

InterBulk Group(INB)£25.4m at 8.38p

Intermodal transport equipment and services provider InterBulk Group reported a 16% rise in first half revenues and a recovery in profit due to lower interest charges.  Revenues grew from £126.3m to £146.2m in the six months to March 2011. Operating profit edged ahead but margins declined. The bulk of the underlying pre-tax profit improvement from £662,000 to £2.11m was due to lower interest charges. Earnings per share trebled to 0.51p. The liquid bulk transport operations improved their contribution but dry bulk made a lower contribution due to cost pressures. Shareholders have agreed to the £18.15m cash injection at 11p a share from Chinese transport group Sinotrans. This will help to reduce interest charges by a further £2.8m a year. The German authorities have given their blessing and the shares are about to be issued.  Finals for the September 2011 year end are forecast at £3.8m giving an EPS of 0.87p and a prospective P/E of 9.6%

Finance

Net debt was £106.5m at the end of March 2011 but pro forma debt, after the placing, would be £89.1m.

 

Dillistone (DSG)£13.4m at 79p

Executive search software supplier Dillistone Group has managed to narrow its spread by giving shareholders two shares for each share they owned and thereby reducing the share price. The shares had closed at 212.5p each on Monday and the bid/offer spread was 20p. The bid offer spread was 3p when the shares opened after the two-for-one bonus issue but it widened to 72p-77p by the close. That still represents a narrowing of the percentage spread on the previous day. Dillistone expects a stronger first half in 2011 but the full year outlook is still for a flat profit of £1.2m. The shares are trading on 14 times prospective 2011 earnings.

Finance

There is still £2.15m in the bank even though the dividend costs nearly £600,000 a year and development spending has increased. The dividend will be maintained at 3.5p a share. The yield is 4.8%.

M&A

Dillistone wants to make earnings enhancing acquisitions of recruitment software companies. The launch of FileFinder 10, the latest version of Dillistone’s software will make it easier to add new pieces of software to the product offering. Dillistone has talked to companies in the UK, Europe and North America. A deal may require further cash to be raised through a placing. That might help to improve liquidity.

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