American consumers are fragile, fatigued and …

… fed-up as consumer confidence slumped to 44.5 its lowest since April 2009. 

 

Last week….

….despite the 126 point fall on Friday the FTSE100 gained 3.2% while the FTSE 250 improved 3.8%. The Aim All Share at 770 increased 3.5%. The reported lack of US employment growth for August should not have been a  surprised although the downward revision of July’s numbers was. Surveys on Consumer Confidence in the UK and US are at recessionary levels an austerity mood prevails.

This week….

…..  this Thursday the Bank of England are likely to leave interest rates unchanged  and keep the Quantitative Easing option as a reserve strategy while seeking other fiscal measures to stimulate moribund growth while not accelerating inflation. There are UK industrial production figures on Wednesday. In China  inflation will be reported on Friday which is currently running at 6%. A moderate down week seems likely.

 

Company Reports

Biome Technologies (BIOM) – £13m at 0.22p

Biome Technologies has cut its interim loss and its bio plastics activities have made an operating profit for the first time. The Biome Bioplastics business increased revenues by 131% to £3.6m, while the 50%-owned manufacturing joint venture increased revenues 19% to £4.9m. The Biotec joint venture has been hit by raw material shortages, mainly starch, and that has held back its progress but these bottlenecks are easing. This did not harm Biome’s core business or its ability to satisfy demand. Biotec is running at less than 60% of capacity.  The whole bioplastics division turned a £492,000 loss into a £79,000 profit. Biome Bioplastics has been able to develop new variations of its technology so that biodegradable versions of coffee cup lids, food packaging, strimmer cords and plant pots can be made. The overall market is thought to be growing at up to 20% a year.  There was a particularly strong performance from the Stanelco RF Technologies division, which nearly doubled its revenues to £1.86m on the back of a recovery in capital investment. Asia is the main source of demand for its fibre optic furnaces and it almost trebled its operating profit to £450,000. Group revenues improved from £6.73m to £10.4m in the six months to June 2011. Admin costs have been kept down and this helped the interim operating loss from £1.16m to £382,000. There was also a VAT rebate during the period.  Daniel Stewart forecast that the underlying loss will fall from £1.8m to £1.1m in 2011 and then fall further to £300,000 in 2012.

Finance

Net cash was £3.45m at the end of June 2011. There was a small decline in cash in the period but house broker expects a bigger decline in the second half. There will be a further cash outflow in 2012 as Biome moves towards profitability but Daniel Stewart forecasts that there should be around £700,000 left at the end of 2012.

 

 Sefton (SER) – £7.63m at 2.73p

Interims from Sefton, a US based Oil producer showed a fall in net income to $73k from $335k a while production revenue increased 4.3% to $2.1m from $1.9m. The increased costs are results of the company building both corporately and adopting new production methods. The  reduced income should be seen  an investment in the future organic growth from  both its oil and gas assets.  Sefton own 100% of the Tapia field in Californian which has proven reserves of 3.77 million Bbls which given a PV10 is worth an estimated £83.9m. A steam pilot programme is expected to lead to an increase in the reserve value and production. Dr. Faroug Ali  has been commissioned to evaluate the full steam-flood  potential and results of his findings are expected by the end of October. Sefton also have a gas pipeline and reserves recently evaluated in a  competent person report by Dr. Nafi Onat  on a PV10 at £61.4m.Testing and repair of the pipeline  is underway and once completed will allow gas to flow.  Evaluation of an adjacent property to existing pipeline may lead to a further PV10 increase.

Financial

The reserves have secured a US $10m senior debt facility with the Bank of the West until June 2013 but due to be reviewed in February 2012. The loan is available to provide funds for the exploration, development and perhaps acquisition of further oil and gas properties.

 

Pilat Media Global  (PGB) – £20.3m at 34p

Decent interim figures to the 30th June from broadcast management software provider Pilat Media Global were overshadowed by its legal dispute with Fox TV in the US. Fox wants to stop using Pilat Media’s IBMS system from 30 September 2011. Fox is also claiming damages of an unspecified amount in connection with alleged breaches of contract. Pilat Media says that Fox is in breach of agreements. Pilat Media has written-off the £2.82m owed by Fox. Management believes that the dispute could be settled in months rather than years. Revenues rose 4% to £10.8m in the six months to June 2011, while pre-amortisation and impairment profit edged up from £1.02m to £1.05m.  Chellomedia  have renewed and extend their contract into Eastern Europe while a number of sales opportunities  are progressing and some of which  should convert to contracts. Sintec Media, which has previously made a bid for Pilat Media, is continuing to buy shares and it has taken its stake to 22.9% with the latest purchases at 33.25p. The forecast to December 2011 are for £3.3m which would give a prospective P/E of 8.5x

Finance

Pilat Media had net cash of £4.7m at the end of June 2011 so even if Fox does not pay up the balance sheet is strong enough to cope. Cash should rise by the end of the year.

 

Cupid (CUP) – £201.1m at 249p

Online dating agency Cupid is one of the best performers on Aim in the past 12 months when the shares 72p.  Its international growth is behind its success. Cupid purely focuses on online dating sites unlike competitors which also have non-internet operations. Cupid reported better than expected interim figures and it is on course to more than double its dividend this year. Interim sales rose 190% to £25.5m, while earnings per share increased 75% to 4.9p a share. Cupid has made a number of acquisitions but the majority of the growth has been organic with the international business contributing 53% of revenues. Peel Hunt expects full year earnings to grow 61% to 9.3p a share, providing more than adequate cover for the proposed dividend.  This gives a prospective P/E of 26.7x.

Finance

There was net cash of £8.4m at the end of June 2011. The business is cash generative but acquisitions take up this cash and more. Cupid does not pay an interim dividend but Peel Hunt forecasts that the final dividend will rise from 0.5p a share to 1.1p a share.

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