… a bounce back but it is far from sufficient and not guaranteed.
…the FTSE 100&250 fell -5.6% and -5.9% while the Aim All Share at 719 was down -6.6%. Markets faced the triple fears of sovereign debt, banking crisis and global recession. The BOE are considering QE2 due to a gloomy outlook for demand which was piled on by the Federal Reserve downbeat assessment of US growth followed by similar recessionary gloom from the IMF on China and Euroland.
…a Greece structured euro 340 billion default and a three trillion euro Bank recapitalisation package could to reduce financial fears. Otherwise we can hope that this week’s economic newsflow, which is dominated by Euroland will be mixed enough to be no worse than expected. In the UK Consumer Confidence on Friday which follows House Price and Mortgage Data. US Consumer Confidence is on Tuesday could hurt. We repeat last comment that markets could tread water this week a recovery is anticipated.
Ultimate Finance Group (UFG) – £8.59m at 17.25p
An eight month contribution from Ashley Commercial Finance helped trade finance provider Ultimate Finance Group to more than double its profit in the year to June 2011 but the full integration benefits of the acquisition will show through this year. Around one-quarter of the £400,000 of expected cost savings from integrating Ashley came through in 2010-11 and the rest will boost this year’s profit. Ultimate increased its underlying profit from £523,000 to £1.16m in 2010-11, while revenues grew from £6.44m to £9.33m. Recruitment has always been a key sector in terms of Ultimate’s customer base but the manufacturing sector is becoming increasingly important. The lack of confidence that small companies have in the banks is making them look elsewhere for funding and this is helping Ultimate. Analysts forecast for the June 2012 year/ end a profit of £1.9m for a prospective P/E of 6.1% with a 4.6% yield, rising to £2.3m in 2013.
Ultimate has a £34m lending facility with Lloyds TSB Commercial Finance and £6.3m of this remains unused. It will be enough for Ultimate’s current requirements. The facility expires in July 2013. Last year’s dividend was 0.7p a share and Ultimate intends to pay a significant proportion of its earnings in dividends. The shares yield just over 4%.
Brightside (BRT) – £106m at 23p
Insurance broker Brightside is gaining market share on the back of its technology that helps to weed out car owners that are giving false information so that they get lower car insurance quotes. This is a problem due to online self-certification and insurers have been making large losses due to fraud. Some insurers have pulled out of areas where fraud is most prevalent. Brightside has reduced the number of fraudulent applications it accepts by using its Red Eye technology that monitors behaviour during the online quote process. Further insurance companies are joining Brightside’s eCar insurance panel due to the company’s validation processes.
Revenues grew 50% to £39.8m in the six months to June 2011 through a combination of acquisitions and organic growth. Earnings per share increased 69% to 1.1p a share. The losses of the life assurance operations have been stemmed. For the December 2011 year end EPS of 2.82p are forecast which gives a prospective P/E of 8.3x
The business is cash generative and there was £15.8m in the bank at the end of June 2011. There are £30m of facilities for the support of primary finance activities.
Altitude Group (ALT) – £12m at 28.5p
Altitude Group is widening the customer base for its small business software and increasing the potential size of its market. Altitude sold its promotional products business in order to focus on the development of its software business. The software was initially aimed at promotional products suppliers, which use it to handle supplier orders, customer relationship management, accounts and ecommerce. They pay a monthly fee for the software. It can be integrated with accounting software Quick Books. The promotional products market for the software is worth £100m but newer areas, such as print management. Revenues grew from £2.19m to £2.46m in the Altitude runs a profitable trade only show every January. This grew its revenues from £456,000 to £726,000 so it effectively accounted for the growth in group revenues. Now that management can concentrate on the software business this should fuel the growth this year. The first major US customer, iPromoteU, should launch in the fourth quarter. Profit fell from £262,000 to £63,000 but that was due to one-off expenses and an amortisation charge. Profits / break-even is forecast for the 2012 year-end
There was an overdraft of £1.12m at the end of June 2011 but there was consideration for the disposal due after the period end and £2.2m has been received.
eg solutions (EGS) – £8.79m at 61.5p
Back office optimisation software provider eg solutions nearly doubled its profit in the six months to July 2011 and it is on course to meet expectations for the full year. Revenues grew 10% but a greater proportion were software licences so gross margins improved. Lower margin services contributed 19% of revenues compared with 30% in the corresponding first half. Operating costs were held steady and this enabled profit to rise from £78,000 to £279,000. House broker Arbuthnot forecasts a full year profit of £600,000 on revenues of £5.9m which gives a prospective P/E of 14x. The company has already secured two-thirds of the revenues figure and the business has always been second half weighted.
Cash flow was strong and cash increased from £487,000 to £916,000 at the end of July 2011 even after £351,000 was spent on buying back shares.
Bond International Software (BDI) – £16.4m at 44.5p
Acquisitive recruitment and human resources software provider Bond International reported a much improved interim performance. Revenues increased 40% to £18.4m in the six months to June 2011, which includes organic growth of 13%. The acquisitions of US software business VCG and the remaining 50% of Strictly Education contributed the rest of the growth. The comparative figures were for a weak trading period so the improvement is effectively a recovery from a low point. Recurring revenues are £11m and VCG brought additional software rental sales. Underlying pre-tax profit rose from £264,000 to £1m. Bond is cautious about short-term prospects in the US and UK but it believes that growth will come from Asia Pacific in the medium-term. The education outsourcing business continues to win new schools as customers. For the December 2011 year end PBT of £2m gives an EPS of 2.92p and a prospective P/E of 15.2x while yielding 2.1%.
Net debt was £2.3m at the end of June 2011. The disposal of Abacus Software raised £1.8m.