…..The FTSE 100 gained 0.46% while the FTSE 250 was unchanged. Greek 10 year Government Bonds jumped to a record high of 16.5% as their credit rating was reduced to B+, while US economic releases were weak. As largely anticipated UK inflation increased to 4.5% and may peak at 5%, unemployment edged down and consumer spending remained robust. The Aim All Share at 880 lost 0.73%
…. revised 1st quarter UK GDP may not show much improvement on the previous 0.5% when reported on Wednesday. It is hoped that US GDP to be announced on Thursday will be revised up. Markets are likely to marginally improve ahead of the Spring Bank-Holiday.
Sanderson Group (SND) – £12.8m at 29.5p
Enterprise software supplier Sanderson Group improved its interim profit even though revenues declined. Revenues from the manufacturing sector are recovering and the order book has strengthened. March, April and May have been particularly strong and the order book continues to rise. The retail sector remains tough and that order book is flat. Group revenues fell from £13.3m to £13.1m in the six months to March 2011. Sanderson sold more of its own software so gross margins improved from 67.1% to 70.6%. Underlying pre-tax profit improved from £756,000 to £891,000. The improvement in profit is mainly down the retail division and lower interest charges. The retail division also supplies software to catering operations’ including NHS Trusts which are using the software to reduce wastage in their kitchens. Sanderson’s power management software can save £29 of power per electronic till each year. There is plenty of scope to increase sales of this product. Full year profit is expected to rise from £1.9m to £2.4m giving EPS of 5.2p and a prospective P/E of 5.7x.
The interim dividend has been raised by 20% to 0.3p a share. Net debt has fallen to £7.2m at the end of March 2011. Sanderson is considering refinancing its borrowings. The pension deficit is £3.96m.
Sanderson believes that it can continue to grow organically but is also considering small, add-on acquisitions.
YCO Group (YCO) – £6.2m at 12.88p
Yacht services provider YCO Group sharply increased its profit in 2010, which was the first full year since Charlie Birkett became chief executive. YCO targets the super-yacht market and the core business reversed into Aim-quoted yacht fuel supplier Deuxmil Marine in May 2008. YCO manages yachts in return for a fixed monthly fee and also project manages the construction of yachts for clients. YCO also generates brokerage fees on yacht sales and income from the chartering of vessels. YCO also supplies crew and other services to its clients. Europe is the core business region but YCO is expanding into the Middle East and North America. Pre-tax profit jumped from £31,000 to £588,000 and that was after a £330,000 exceptional charge relating to asset write-offs due to office closures and a potential VAT liability. There was a swing from a foreign exchange gain of £128,000 in 2009 to a £111,000 loss in 2010. Revenues grew 9% to £27m in 2010 but a large chunk of those revenues are fuel sales, which contribute little in terms of profit. YCO has 58 contracted yachts and 175 charter weeks were sold last year. A new sales team has been taken on to increase that number. House broker Arbuthnot upgraded its 2011 profit forecast from £600,000 to £900,000 for an EPS of 1.3p and a prospective P/E of 9.9x.
There was net cash of £487,000 at the end of 2010. YCO has used up most of its tax losses but it still has some in its foreign subsidiaries.
YCO is more likely to add teams of people providing additional services to its client base, rather than acquiring businesses. The fuelling business looks non-core and the capital tied up in the operation could probably be put to better use elsewhere.
Source BioScience (SBS) – £15.5m at 7.62p
Source BioScience’s acquisition of German DNA business imaGenes provides a number of avenues for expansion. The Berlin operation provides a base from which to expand into other parts of Europe. A new DNA sequencing machine, costing around £600,000, has been acquired for Berlin. The German business covers humans and plants. Source has not been involved in plant genetics before and this will provide another avenue for acquisitions. There is also the opportunity of building up the combined group’s online genomic resource sales. Source has the opportunity to be the equivalent of Abcam in this area, although the potential market is much smaller being worth tens of millions of pounds. Source has more than 20m clones (bits of DNA), which is more than anybody else in the world.
Acquisitions and investment in equipment have reduced the company’s cash pile but there is still £4.17m in the bank. There is £432,000 of debt on the balance sheet.
Source is keen to increase its size and acquisitions will probably require share issues as well as using up some of the cash in the bank.