A wave of initiates are to be launched ahead of March 25th Budget to prove the Government have a coherent growth strategy.

Last week
Renewed fear of Middle East genocide saw the FTSE 100 fall back by -0.2, while the FTSE 250 improved 1% and the AIM ALL Share at 938 increased 1.4%. The economic newsflow was generally positive with surveys showing a strong rise in export orders and new car registrations reported to be increasing. Although that is ignoring weaker house prices and lower mortgage lending but markets should have been mildly impressed by US employment growth.

This week
This Thursday there is the pre –Budget interest rate decision and the balance of no-change is generally being challenged as three of the nine bankers were in favour of a rise. Decisive factors include; Inflation which is running up perhaps to 7%, says the BOE ( Bank of England), also the speed at which GDP will bounce back in the first quarter and the ECB’s (European Central Banks) President is minded to seek a Eurozone interest rate increase. This week we are more negative and expect markets to fall back.

Company reports

Praesepe (PRA) – 6.63p at £27m
A weather handicapped trading update from the largest UK operator of UK gaming venues with 7,000 gaming machines, was sweetened with the news of a substantial new contract. Praesepe has a highly experienced management team and has already built a sizeable group and the new contract is for 75 gaming venues from Agora Gaming. Since November Praesepe have aggressively expanded the estate with the acquisition of 22 High St gaming centres for £2.3m and with the new contract, venues have increased from 96 to 171. Finals to December are to be announced in 27th April and should not be materially below expectations which are for a marginal profit although clearly not helped by November and December’ poor weather. Significant profits growth is, however being anticipated in 2011 which will be helped by the full year contribution from acquisitions, synergy savings and benefiting from proposed new rules that will increase the stakes and pay-outs from machines. Profits for Dec 2011 are forecast at £3m on turnover of £49m giving an EPS of 0.69p and a prospective P/E of 9.6x. Before further consolidation acquisitions and the highish gearing it seems likely that there will be a period of consolidation.

Financials
Net debt £43m with gearing over 100% with an NAV of 10p a share and the convertible loans are at 9p.

Staffline (STAF) – £44.3m at 195.5p
Temporary staff provider Staffline Group slightly beat upgraded expectations in 2010 following a year of strong growth. Acquisitions have helped but there is undoubtedly organic growth as well. Many customers are experiencing a recovery in demand. Revenues rose 79% to £206.2m, while pre-tax profit doubled from £3.5m to £7m. OnSite business accounts for 89% of group revenues. The number of sites has risen by 16 to 135. The full benefit of those new sites will come through this year.

Food is still the predominant sector but business is becoming more diversified. Acquisitions have taken Staffline into new sectors. Qubic, which was acquired in November, adds manufacturing customers, while this year’s purchase, Kelburn, adds a North East branch and an automotive supply customer base. Management expects another good year of trading with market share growing. December 2011 PBT is forecast at £8.8m giving an EPS of 27,8p so a prospective P/E of 7.0x.

Finance
Net debt stand at £2,4m allowing dividends to be doubled from 3.1p a share to 6.2p a share.

Fiberweb (FWEB) – £34.6m at 81.5p
Nonwoven fabrics manufacturer Fiberweb continues to improve its performance and revenue grew from £454.2m to £463.2m in 2010, while the underlying pre-tax profit rose from £11.1m to £13.6m even though interest charges were £3.4m higher. Restructuring costs and one-off costs fell from £17.2m to £6.5m. The South American joint venture contributed £4m to profit, against £2.5m in 2009. The JV’s revenues rose 12% to £274.5m. Both the industrial (filters and construction products) and hygiene (nappies, etc) divisions made higher revenue and profit contributions. Margins also improved even though polypropylene prices rose sharply at the beginning of 2010. Hygiene operating margins rose from 5.2% to 6.3% but they remain below the target of 8%. The industrial division improved its margins from 8.1% to 10.5%. There was a recovery in the weak American market. Fiberweb maintained its final dividend at 2.5p a share, taking the total for the year to 4.2p a share.

Finance
Fiberweb has launched a deeply discounted rights issue to raise £25.4m gross to help to finance acquisitions. The one-for-three rights issue at 60p a share and will raise £23.9m after expenses. The rights issue closes on 17 March. Heavy capital expenditure pushed up net debt from £136.6m to £151.2m by the end of 2010. Fiberweb hopes to undertake a sale and leaseback of its steam and chilled water plant for one of its factories in the US. This asset has been written down by £600,000 to £15m and the deal might be finalised in the first half of 2011.
M&A
Fiberweb is well within its loan covenants but the extra cash will give it more flexibility with bolt-on acquisitions. The owners of international companies do not tend to be interested in Fiberweb shares. Further earnings enhancing UK acquisition are being sort. The focus of the expansion will be the industrial products business.

Dawson International (DWSN) – £4.28m at 1.9p
Cashmere knitwear and furnishings supplier Dawson International says that figures for its 2010 financial year were held back by rising cashmere and cotton prices and things are not getting any better. One pound of cotton used to cost 74.5 cents early last year but it now costs 178 cents. This is the first time that cotton has risen above $1/lb since 1994. Cashmere prices have risen from $80/kilo in mid-2009 to $140/kilo now. Revenues from ongoing businesses edged up from £64.7m to £65.7m the previous year. The branded home furnishings business revenues dropped from £8.18m to £1.17m and there will be no more this year. The underlying pre-tax profit fell from £1.75m to £740,000.

All the continuing operations reported lower profits, or in the case of private label home furnishings a bigger loss. There were also higher pensions costs.

On the bright side, there was a net exceptional credit. A further £1.6m was paid by King Deer, which is slowly paying off money owed to Dawson, and this offset reorganisation and environmental costs. Dawson needs to try and pass on price increases to remain profitable but that won’t be easy. Retail buyers may decide to buy alternatives to cashmere products if they become too expensive. US knitwear sales are likely to be much lower in 2011. Costs are being reduced. The year end is being changed to March and the current quarter is always loss-making. Guinness Peat appears to have taken Brookwell shares for its 5.18% stake in Dawson.

Finance
Dawson had net cash of £11.6m at the end of its 2010 financial year. There was a further £1m of King Deer’s payment received after the year end. That is the high point for the year, though, and it dips into its borrowing facilities in July, August and September. Dawson also has pension concerns. The IAS 19 pension deficit has fallen by £6.9m to £12.3m but Dawson is still paying out £1.5m each year to reduce the deficit. It is not as if the pensioners get all of that money. The government’s pension levy takes £600,000 and admin and adviser fees consume a further £500,000. That leaves the pensioners with £400,000 of the cash. Dawson wants to do something about this but it has not managed to agree anything with the pension fund’s trustees.

Toumaz (TMZ) – £45.6m at 7.25p
Toumaz has developed ultra low power wireless technology and its initial focus is on the consumer and healthcare sectors. Consumer offers earlier revenues but healthcare is likely to be a more lucrative market. The platform technology is called Sensium.

In the case of healthcare the analogue information provided by the body has to be analysed digitally and Toumaz has managed to combine the two through what it calls its AMx engine. Toumaz has designed a ‘digital plaster’ that includes its technology and this can be used to measure heart rate, respiration, etc. The ‘digital plaster’ can last for five days. Toumaz has licenced the hospital-based uses of its technology to CareFusion, which is owned by Cardinal Health. The ‘digital plaster’ will be pre-launched in the second quarter and the full launch will be at the end of the year. CareForce will sell ‘digital plasters’ plus Sensium gateways – one will be needed for each ward that uses the ‘digital plasters’. Toumaz will receive revenues from the sale of Sensium chips as well as a share of gross margin from sales. There will be revenues generated from initial component sales to CareFusion this year but it will be 2012 when they become more significant. The monitoring technology could also be used in the home. Toumaz has linked up with Asia-based electronics manufacturer Quanta to enter this market. The first product is likely to be a monitor for Type 2 diabetes, which transmits data via mobile phone. This year the majority of revenues will come from digital radio and internet connectivity applications but healthcare will become an increasingly important revenue generator from 2012 onwards.

Finance
Home healthcare technology partner Quanta Computer has subscribed £1.2m for shares in order to take its stake to 2.22%. At the same time an institutional investor invested £600,000 at 8.83p a share. In February, Dr. Patrick Soon-Shiong invested £1.3m. He is developing Toumaz’s technology for use in the sport sector.


There was £2.75m in the bank at the end of 2010.

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