Gold was the surprise victim of the market sell-off

… losing 9% of its value in a week to $1,620.  Cazenove Capital may look to buy again at the $1,400 level

Last week….

…..the FTSE 100 improved 1.2% to 5,128.5 the FTSE 250 was unchanged while the Aim All Share at 700 fell 2.7%. There was a little movement on Eurodebt concerns as Germany is supporting a financial stability fund. In the US consumer confidence improved while US GDP forecast for 2011 are recalibrated at a modest 2%-2.5% but with an uninspiring outlook.

This week….

….. UK GDP will be announced on Wednesday and likely to be 0.7%. On Thursday the monthly BOE meeting on Interest Rates will leave the rate unchanged but there could be increased talk of QE. On Wednesday there are US Jobless claims and no growth is anticipated.  An increased focus is likely to be German PMI (Purchasing Managers Index)  a forward looking indicator of growth  which is reported on Tuesday so a fall would be upsetting. Ignoring Greek default markets could show improvement this week.


Company Reports

Nationwide Accident Repair Services (NARS) – £40.2m at 93p

Revenues rose 6% to £92.3m in the first half of 2011. The core insurance market is declining so a 1% increase in revenues was a good performance. The main growth came from the fleet and retail markets. Underlying pre-tax profit rose from £3m to £3.5m. That excludes £514,000 of restructuring and site closure costs. Nationwide has won a contract from Hastings for the provision of glass services and another contract with LCM Aviva. Nationwide will not be hit by the ban on referral fees. Other prospects include RBS and Liverpool Victoria. New fleet customers include West Mercia Police, Norfolk CC and Avis. Profits for the year December 2011 are forecast at £7.0m giving an EPS of 11.7p and a prospective P/E of 8x.


Net cash was £7.29m at the end of June 2011. One customer has changed its payments system and subsequent problems with it have led to higher debtors at the end of June 2011. Nationwide continues to increase its dividend. The interim rose from 1.8p a share to 1.9p a share.

The pension deficit has fallen from £17.9m to £9.36m.


Motivcom (MCM) – £20.2m at 69.5p

The first half of 2011 was a disappointment for incentives and events provider Motivcom.  Events are highly operationally geared so a fall off in revenues can have a significant effect on profit. Events had a particularly strong recovery in 2010 and were behind the strong result last year. Events revenues improved but they did not match expectations and could not cover additional costs.

Revenue grew from £47.3m to £52.6m including an initial contribution from childcare vouchers business Allsave. The sales promotion business started the year well but did not have the expected repeat business from two clients. Brands are becoming more cautious about spending on promotions. Pre-tax profit fell from £2.35m to £1.28m. House broker Numis had expected an improvement on the 2010 profit of £4.7m but now forecasts a 2011 profit of £3.8m giving an EPS of 9.5p for a prospective P/E of 7.3x with a potential yield of 5.3% if the dividend is 3.7p.


Net cash was £7.2m at the end of June and since then £1.5m has been spent on the acquisition of Goldserve, which generates event enquiries and leads. Motivcom continues to increase its dividend. The interim was 15% higher at 1.15p a share and the full year total dividend is expected to be 3.68p a share.


Motivcom is still keen to make acquisitions. It has made two so far this year and believes that there are more realistic valuations and opportunities at the moment.


Ultimate Finance Group (UFG) – £8.6m 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 a profit of £1.9m in 2011-12 for a prospective P/E 6.1x yielding 4.6%, rising to £2.3m and 4x in 2012-13.


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.


Highams Systems Services Group (HSS) – £1.8m at 2.625p

Nakama is reversing into fellow technology recruitment services provider Highams Systems Services Group via an all share deal that should be earnings enhancing.  Nakama’s boss Stefan Ciecierski will take over as chief executive of the combined entity which will be known as Nakama Group to reflect the greater international presence of the brand. Highams became aware of Nakama a year ago but the business was still relatively new and serious talks did not start until a couple of months ago.

The deal is valued at £1.28m at the current share price of 2.625p. The shares issued for Nakama are equivalent to 41.4% of the enlarged share capital.

Nakama only started trading in October 2009 but it is profitable and Ciecierski and the other founders have significant experience in the recruitment sector. Ciecierski helped to build up PSD Group and he was still there when it floated in 1997 so he has some experience of a quoted environment.

Nakama initially opened a London office and then expanded in Melbourne and Sydney last year. The Hong Kong office opened in March and Highams may use this as a base to service existing clients with operations in Asia. Further international expansion appears to be on the cards. The insurance sector is the main customer base for Highams’ technology consultants, while Nakama specialises in the digital media sector, as well as financial services, retail and travel sectors. There may be some cross-selling opportunities. Nakama is one of the main recruitment agencies in the digital media sector and this has helped it grow rapidly.

House broker Seymour Pierce had been forecasting a 2011 profit for Highams of £400,000. At the current share price of 2.625p, that had put the shares on just over five times P/E a and this deal should be earnings enhancing. Nakama made a profit of £234,000 on revenues of £4.7m in the eight months to August 2011. Trading remains strong and Nakama could make £350,000 profit or more this year. On top of that there are some cost savings from integrating the businesses. Back office work can all be done at Highams’ Caterham site and Nakama’s London office can be shared.

This suggests that the group is trading on a modest multiple of the potential 2012 profit. There is also potential for additional bolt-on acquisitions.

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