… we did not taste Adversity, Prosperity would not be so welcome.”
…the FTSE 100 at 5529 was 0.4% lower. The FTSE 250 was -1.7% lower while the Aim All Share Index at 700 was hardly changed. No clear market driver emerged from the plethora of events; the Eurozone cut interest rates by 0.25% and made an attempt on public agreement on fiscal and political integration. The US unemployment claims fell more than expected giving an unemployment rate of 8.6% down from 9.0%. The UK’s BOE did not increase QE, despite a sharp fall of 0.7% in Industrial output but Retail Inflation eased to 2% and the Trade Deficit narrowed sharply to £1.6bn from £4.3bn.
…in the UK Inflation Figures, will be reported on Tuesday, Unemployment on Wednesday and Retail Sales on Thursday. There are a number of EuroZone statistics on Production and Prices while in the US there are Retail Sales and Balance of Payments numbers. Politics may move to center stage but unlikely to add much light. The global narrative is that there is a slow-down from earlier growth expectations but perhaps not leading to a double dip recession in 2012. So markets could trend down before moving ahead.
Sanderson (SND) – £12.4m at 28.5p
Although enterprise software supplier and IT Services group Sanderson reported reduced revenues in the year to September 2011 it generated a higher profit. Revenues fell from £27m to £26.4m, while underlying profit improved from £1.9m to £2.29m. Sanderson is getting the benefit of reducing its borrowings through its strong cash flow. This has reduced interest charges and they will fall further this year, helped by renegotiated bank facilities. Sanderson has ditched £600,000 of revenue because it was not making money on the business. Sanderson has already covered three-fifths of forecast 2011-12 revenues of £27m .Sanderson provides a wide range of software solutions to the multi-channel retail and manufacturing markets. These solutions comprise primarily the Group’s own software often integrated with other market-leading products, which are installed, supported and serviced by Sanderson staff. The efficient provision of cost effective solutions with an emphasis on quality, consistency and reliability, continues to ensure both a very high retention of customers, as well as acting as an excellent reference base for new customers. Forecasts of £2.9m for the September 2012 year end give an EPS of 6p for a prospective P/E of 5x.
Net debt fell from £7.84m to £6.72m by the end of September. It could fall by a further £1m this year. The debt is less than 1.5 times operating profit – management believes the optimum multiple is one times operating profit. The dividend has recovered from 0.6p a share to 0.75p a share and the plan is to increase it to 1p a share this year. That is below the peak dividend level but it is a prospective yield of 3.4%.
Management is seeking small, bolt-on acquisitions.
Chamberlin (CMH) – £9.5m at 122p
Improved trading by the company’s foundries helped Chamberlin to nearly quintuple profit in the six months to September 2011. Revenues were 25% higher at £23m, while underlying pre-tax profit jumped from £163,000 to £797,000. All the castings businesses are doing well. The light castings business in Walsall continues to benefit from growth in demand for turbocharger castings. The heavy castings business in Scunthorpe has grown is revenues significantly over the past 18 months and sales are running at more than £1m a month. The Leicester foundry returned to pre-recession volumes at the end of the interim period. There was a mixed performance from the other activities. The Petrel hazardous lighting business performed poorly but the security and safety business benefited from the recent add-on acquisition. Chamberlin is paying an interim dividend of 1p a share. Last year’s final dividend was the first distribution since the end of 2008. finnCap forecasts a profit of £1.6m for the year to March 2012 for an EPS of 14.9x so trading on 8.2x prospective earnings for 2011-12.
Net debt fell from £2.88m to £2.04m, helped by the £500,000 share issue in the period.
Management would like to make acquisitions but two have fallen through in recent times. The most attractive of those targets was a machining business where the asking price proved too high. Acquiring a machining business will enable Chamberlin to offer finished product to customers.
i-design (IDG) – £8.6m at 61p
Cash machine advertising technology developer i-design has moved into profit and a Canadian deal means that it has started the current financial year strongly. Revenues were 62% ahead at £3.52m in the year to September 2011. A loss of £962,000 was turned into a profit of £105,000. This turnaround was helped by the fact that software sales rose 87% to £987,000. The sustainability of profitability still demands on significant software sales this year. As other revenue streams grow i-design will become less dependent on one-off software sales. One-third of the software revenues are already maintenance and support based. The majority of revenues come from advertising sales and this should continue to grow – Edison forecasts a 20% rise for this year to £4m. The Canadian contract was won thanks to the new joono software. This is the first significant joono deal. No figure has been put on the deal which was won through IBM. Edison forecasts a maintained profit for 2011-12 of £100k for EPS of 0.9p (P/E 68x) but additional software sales could lead to upgrades .
Net cash was £928,000 at the end of September 2011. This should provide enough cash for the company’s working capital requirements. A cash small outflow is forecast by Edison for this year.
Armour Group (AMR) – £3.15m at 3.25p
Revenues down by 25% and underlying pre-tax losses at just over £2m, Armour had a difficult year. The group’s Automotive division delivered a useful recovery with revenues up by 8% to £14.4m, contributing to a sharp recovery in operating profits from £0.16m to £0.77m. Falling sales at the Home division, this has led to major restructuring. The group incurred exceptional costs of £1.4m in cutting ongoing group operating costs by over £2.5m. The immediate trading outlook remains uncertain, with consumer spending still under pressure. Investment in next generation products continues, most recently with award winning
Q Acoustics range However, with the much reduced cost-base, Armour should be close to break-even in the current year to August 2012 on revenues of £40m.
Net borrowings rose by £1.2m, year-on-year, to £6.9m at August 2011, despite a £2m fund raising and gearing is 24%. Facilities are based on unpaid sales invoices and stock held in UK warehouses.