It should never have happened…

… a  Rogue Trader managed to lose UBS $2,000,000,000.  It is hard not to support the need for regulations  to ring fence/ split up big bank activities.


Last week…

…the FTSE 100 and FTSE 250 jumped ahead  2.9% and 2.7% respectively making, last week the  best performance for around 11 weeks. The Aim All Share at 769.2 retreated -0.6%.  Euro fears  were eased by  the world’ s leading Central Banks agreeing to pump liquidity into Europe’s banking sector allowing more recapitalisation time. UK inflation rose to 4.6%, unemployment increased 80,000 to 2.51m and Retail Sales fell slightly by -0.2% three reasons not to be cheerful.

This week…

…the BOE report  Minutes on Wednesday which may show that QE2 (Quantitative Easing)  remains  an active discussion and maybe  the mention of a number of say  £50-£100 billion would be received well. Much of this Week’s economic newsflow will be from Europe and likely to show growth at a standstill.  Markets could tread water so be little change.


Company Reports

Cello (CLL) – £26m at 323.25p

An initial contribution from pharma research firm MedEergy and organic growth in the rest of the market research division offset a decline in revenues from the public sector enabling Cello to increase its revenues by 2% to £62.9m in the first half of 2011. Even the Tangible communications business managed to grow its non-government revenues. Underlying profit improved from £2.84m to £3.06m. Costs have been cut to reflect the lower government revenues and the loss of a contract with a major supermarket. This will benefit the rest of the year. There is good revenue visibility for the second half and pharma will account for the majority of research revenues in the near future. Forecasts  for the Dec 2011 are for a  rise in profits from £6.4m to £7.2m which gives an EPS of6.8pand a prospective p/E of 4.9x while yielding 4.4%


Net debt was £11.2m at the end of June 2011 and the second half is always much more cash generative than the first half. The interim dividend was increased 5% to 0.55p a share.


InterQuest  (ITQ) – £17m at 53p

IT staff recruiter InterQuest Group improved its net fee income in the first half of 2011 but write-offs relating to the most recent acquisition hit the reported figures. InterQuest bought Contract Connections Ltd (CCL) in the first half and then one of its clients alleged that there had been fraud in its business and it withheld a payment to CCL of £600,000. InterQuest has provided for that bad debt and written-off £2m of goodwill on the acquisition. There were also £300,000 of acquisition costs in the period. Net fee income rose 11% to £7.81m in the six months to June 2011 and a profit of £1.06m in the first half of 2010 was turned into a loss of £1.67m. Underlying profit did show a small improvement.  Mark Braund was appointed chief executive in April. A Singapore office will open in the fourth quarter. House broker finnCap forecasts a small improvement in underlying 2011 profit from £3.4m to £3.7m, then a jump to £4.9m in 2012. The shares are trading on 7x prospective 2011 earnings. The yield on the forecast full year dividend of 2.8p a share is 5.1%.


Net debt was £5.4m at the end of June 2011. An interim dividend of 0.5p a share was announced.


Despite the CCL experience InterQuest are seeking  further acquisitions.


NetDimensions (NETD) – £5.89m at 23.25p

Learning management systems supplier NetDimensions reported an increased underlying interim loss but it is still on course to make a higher full year profit in 2011. Revenues rose 31% to $4.41m in the six months to June 2011 and organic growth was 20%. The loss increased from $259,000 to $699,000, although that includes amortisation and share-based payment charges of $416,000 – up from $49,000 in the first half of 2010. Deferred revenue is 26% higher at $2.8m. Contracts tend to be for three years but deferred revenue purely includes one year’s worth of revenue. House broker Arden forecasts a rise in full year profit from $700,000 to $900,000. The shares are trading on less than 12x prospective 2011 earnings.


There is $5.86m in the bank which is the equivalent of three-fifths of the current market capitalisation. NetDimensions intends to start paying dividends with the first being a final dividend for 2011.


NetDimensions is looking to acquire resellers in major markets such as France, Germany, Brazil and India.


Stadium Group (SDM) – £19.8m at 67.5p

Contract electronics manufacturer Stadium Group reported flat interim revenues even though there was no repeat of a £1m roadside lighting order fulfilled in the first half of 2010. New contract manufacturing business and growth in the power systems division made up for that one-off contract. Revenues were £23.2m in the year to June 2011 and pre-tax profit improved 9% to £1.58m. The improvement in profit all came from the power supplies division, with a lower contribution from contract manufacturing.  New chief executive Stephen Phipson joined at the beginning of September so it is still early days. Phipson has spent the past 14 years with Smiths Group. Stadium believes that it is running at around 50% of capacity so there is scope to improve profit by adding more new business.  Weaker demand from some existing customers is being more than offset by new business wins this year. House broker Brewin Dolphin forecasts that profit will edge up from £2.9m to £3m this year  to December 2011, which would give an EPS of 7.1p and a prospective P/E of 9.5x while yielding 4.1%.


Selling the surplus property that housed the company’s former plastics business boosted the cash position and net cash was £3.7m at the end of June 2011. The net pension liability was £4.7m and the switch from RPI to CPI for inflation-based increases should help to reduce the liability. The interim dividend has been increased from 0.95p a share to 1.05p a share.

Growth Strategy

Phipson targets acquisitions in the power supplies division including intellectual property in other technologies. He also plans to invest in product development.  This growth strategy is not blue sky as there is plenty of scope to develop existing technology.

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