…the FTSE 100 closed down -1.4% while the FTSE 250 improved a mere 0.1%. The AIM ALL Share at 880.1 also mildly improved. US Data on lower houses sales, higher unemployment at 9.1% and widening trade deficit could stall 2011 GDP growth to perhaps 2.5%. The UK PM Index (manufacturing) was stagnating while consumer and business spending was decelerating. All of which, points towards a slow winding economic recovery.
…double dip concerns rather than inflation should see the BOE leave interest rates at 0.5% when the decision in announced on Thursday. The Euro Bank did recently increase rates and may also announce no change on Thursday. The UK’s Trade Deficit narrowed in the last Qtr of 2010 to £9.3billion but the 1st figures to be announced on Thursday are likely be less encouraging. Share likely to end this week lower.
Trifast (TRI) – £41.1m at 48.25p
The industrial fasteners supplier is well into its recovery programme and the UK business returned to profit in the year to March 2011, helping Trifast as a whole to quadruple its underlying pre-tax profit. Revenues grew from £85.9m to £106.1m while the profit jumped from £920,000 to £3.77m. That does not include restructuring costs in China and Scotland. Asia continued to grow although the second half was tougher, while the US and Europe moved towards breakeven. Automotive revenues rose 41% last year and there is a continued focus on growth in this sector. Trifast also wants to grow in the electronics sector, which currently accounts for 15% of revenues. Geographically, Trifast is increasing its sales presence in the US. Trifast is keen to continue to improve margins and it is still winning new contracts. Analysts’ expect Trifast to make a profit of around £4.2m in 2011-12 which gives a prospective P/E of 14x.
Net debt rose from £4.68m to £7.14m by the end of March 2011. This is because of an increase in working capital, partly down to an increased focus on transactional sales in the UK requiring more stock. Trifast would like to start paying dividends again when its financial position is stronger. That should happen this year. An interim of 0.93p a share paid in January 2009 is the most recent dividend.
Management believes that it is a good time to look for acquisitions. The plan is to grow the scale of Trifast in the fasteners sector. It is only interested in companies that already have a solid base and is not interested in turnarounds.
Strategic Thought (STR) – £16m at 52.5p
The company is changing its name to Active Risk Group.
Risk management software group Strategic Thought grow its revenues in the year to March 2011 by 8% and turned from losses to a profit. . A loss of £272,000 was turned into an underlying profit of £605,000. Costs were cut in the period but more investment was put into sales. This helped to push revenues up from £8.24m to £8.87m with 20 new customers won in the period. US sales fell and all the growth came from the rest of the world. Licence sales increased 23% to £4.7m, while support revenues were 16% ahead at £3.33m. Services revenues declined but they generate little in the way of profit.
Risk management is becoming increasingly important in the Middle East and Saudi Aramco, which is the world’s largest oil corporation, is a new customer. A partnership with Nasdaq-listed Deltek should help to boost sales to the US government contracting sector. Deltek has a much bigger sales force than Strategic Thought could afford. Strategic Thought will continue to deal with existing customers and sell into other sectors in the US. House broker FinnCap forecasts a profit of £800,000 for 2011-12 giving an EPS of 2/4p so a prospective P/E of 21.9x, this could drop to 12.8x for the 2013 year end.
Strategic Thought raised £1.45m at 50p a share on the 3rd of fun in order to strengthen its balance sheet. Customers are reassured by a strong balance sheet and the new cash means that this will not be a problem for Strategic Thought when it is trying to win new business. The company had net cash £2.2m at the end of March 2011. No dividend is being paid and Strategic Thought wants to make higher profits before it starts to make a distribution to shareholders.
ASOS (ASC) – £1,502m at 2001p
ASOS reported figures broadly in line with expectations but the share price fell because of a lack of reasons for analysts to upgrade their existing forecasts. UK sales remained the majority of total revenues of £340m in the year to March 2011. That was a 52% year-on-year increase. International sales more than doubled and they are on their way to becoming the majority. The new US website helped US sales increase 235%. If the costs of the warehouse move to Barnsley are excluded pre-tax profit rose from £20.3m to £28.6m. ASOS continues to target revenues of £1bn by 2015 and the new warehouse will be able to cope with further investment. Mobile is a fast growing area for ASOS. Although conversion rates are one-third of the website it is still an important way of gaining new custom. Geographically, more countries will be added and China will be entered in partnership with a firm with local knowledge. This year, there will be a further £6m-£7m of costs relating to the warehouse move. Underlying 2011-12 profit forecasts range from £35m -£42m.
Investment in the new warehouse and computer software meant that the cash pile dwindled to £4.68m. Up to £10m more will be spent on the warehouse this year – out of total capex of £25m.