Last week Markets gyrated but showed resilience perhaps as core investors focused on longer term objects. Given the circle of uncertainty it was a considered performance as the FTSE 100 at 5718 fell -1.9%, the FTSE 250 declined -0.9% and the Aim All Share at 883 drifted down -1.1%.
The stand–out day should be Wednesday as there is the Budget and the MPC minutes. It may still be too early in the recovery for interest rates to rise but maybe the Chancellor can convince with a pro-growth strategy. Markets may be driven by the safety of the Fukushima Nuclear plant and the prospective effects of a radioactive meltdown on the world’s No 3-economy. The Libyan threat while likely to ultimately prove ‘shallow’ is coming to a crescendo but the Middle East remains unsettled. Thus we see the markets ending the week lower.
Cello (CLL) – £33.2m at 54p
Market research and consulting group Cello’s focus on the pharma sector seems to be paying off and its latest acquisition provides even more exposure to the sector. This has offset the fall in public sector revenues which have declined from 20% to 6% of the total. Revenues and gross profit were relatively flat at £125m and £60.3m respectively. However, a fall in admin e expenses helped underlying operating profit improve from £6m to £7.3m. The growth in profit came on the research and consulting side where pharma and healthcare accounted for 42% of its revenues. The purchase of MedErgy for $5.5m in cash and 5.8m shares will mean that pharma will be the majority of the division’s revenues. MedEergy provides exposure to the west coast of the US, where there are a number of biotech companies. Profits for the full-year to December2011 are forecast at £7m and an EPS of 7.15p which gives a prospective P/E of 7.6x.
A placing at 52.5p a share has raised £2.8m to help finance the purchase of MedErgy. The placing price was well below the market price, although the latter has fallen back towards the placing price. On top of that there is up to $3.5m of deferred consideration that could be paid for MedEergy.At the end of 2010, net debt was £8.8m, although there is deferred consideration on top of that.
GGG Resources (GGG) – £50.9m at 35p
Gold explorer, GGG has launched a bid for Auzex Resources, its 50/50 joint venture partner in its Bullabulling gold project in Australia. GGG is offering seven of its shares for every five Auzex shares. The bid was worth A$94.9m, 87 cents a share when it was launched. The Auzex shareholders will own around 49% of the enlarged company.
This is not an agreed bid, although the two sides do agree on the logic of the merger because it will be difficult to finance the project with the current ownership structure. The only real difference is timing. Auzex’s board want to wait until more drilling has been done and a higher resource estimate has been calculated. Auzex’s unwillingness to sign off on a proposed two year exploration budget for the project and this has delayed the introduction of GGG to the ASX. GGG has already done work on its ASX listing prospectus so a lot of the requirements for the bid document are already covered. There are several common shareholders in Auzex and GGG, which itself owns a 8.5% stake in Auzex. David McArthur has been appointed as finance director of GGG.
The cost of developing the mine will be around A$100m. GGG has raised cash ahead of its ASX listing and has around A$23m in the bank and Auzex has around A$7m.
IS Solutions (ISL) – £9.9m at 40p
Analytics is the growing sector for internet services group IS Solutions and it is benefiting from a strong recovery in demand from the financial services sector. IS has increased its exposure to the analytics sector by taking a 10% stake in Speed Trap, which provides software that helps companies to understand their online customers and target them with specific offers. Revenues rose from £9.78m to £11m in 2010, with underlying pre-tax profit improving from £594,000 to £684,000 for a historic P/E of 14.9x. The purchase of the company’s head office property the previous year reduced admin expenses and there was a small increase in interest charges. Managed services will provide the main growth for the business. IS has first rights to provide managed services for all of SAP’s CXA (Customer Experience Analytics) software sales in the rest of the world outside America. Forecasts of £0.9m for Dec 2011 pit the shares on a prospective P/E of 12.6x.
Net debt was £836,000 at the end of 2010 following the £700,000 investment in Speed Trap. Cash generation remains strong and IS should be in a net cash position by 2012.
Synchronica (SYNC) – £23.3m at 23.75p
Mobile services group, Synchronica had a strong fourth quarter to 2010 in revenue terms even though Canada-based iseemedia, which was acquired in October, made a modest contribution to the period. Push email and instant messaging services provider Synchronica reported a 57% increase in fourth quarter revenue to $5.2m, while full year revenue was 84% higher at $10.9m. The final quarter included restructuring costs and much higher amortisation charges and they contributed to rise in the full year loss from $5.18m to $7.29m. The pre-amortisation loss fell from $4.17m to $3.63m. Costs are increasing but at a slower pace than revenues.
There are 83 mobile operators that use Synchronica’s services plus eight handset makers that install them in their phones. The latter accounts for around one-third of revenues. In February, Synchronica acquired the customer base and technology of Neustar NGM for $251,000. The deal brought with it Rich Communications Suite (RCS), an important new technology. There are also 11 contracts with mainly Europe-based mobile operators. Synchronica now supplies all four major Russian mobile firms. Synchronica is in the process of integrating everything into the Mobile Gateway 6 product. The fourth quarter always tends to be the strongest period, however, the trend is positive. Break-even for the year to 2011 is the current forecast.
There was $1.18m in the bank at the end of 2010.