… if the Euro debt crisis remains resolved.
National Institute of Economic and Social Research.
…markets fell back, with a 3.1% fall in the FTSE 100 to 5527.1 while the FTSE 250 was 3.6% lower. The Aim All Share at 724 fell 1.3%. The Euro saga rolls on with another cliff-hanger Greek episode, if it was not so serious it would be entertaining. As a side issue the UK economy grew at 0.5%, an OK rate in the circumstances, between July and September but manufacturing fell at the fastest pace for two years. US Job creation of 80,000 and an unemployment rate felling to 9% is not a disaster.
…the BOE meet on Thursday for the monthly Interest Rate Decision where they may signal a willingness to increase QE2. There are a number of EU economic statistics including German Inflation on Tuesday. Greek and Italian politics may however be ‘A Carry On’ worth watching as Europe feels its way to a sovereign debt solution. Markets could drift back again this week.
Noble Investments (NBL) – £26.2m at 172p
Coins and stamps dealer and auctioneer, Noble Investments reported strong profit growth despite a slump in revenues due to a greater proportion of business being done through the auction operations. This means that the whole value of the sale is not taken to revenues, just the commission. Revenues fell from £14.1m to £12.7m in the year to August 2011. Pre-tax profit improved from £2.18m to £3m thanks to the higher margin auctions business. The Prospero auction of ancient Greek coins will happen in January and make a significant contribution to the first half. Chief executive Ian Goldbart says that he is more optimistic than ever before about the prospects for Noble. This is a combination of the strong opportunities and the improved management team. A profit of £3.3m is forecast for this year and the shares are trading on 10x prospective earnings.
Net cash fell from £3.5m to £1.46m but this was down to prepayments on collections being auctioned – predominantly the Prospero collection. The total amount was just short of £3m. This helped to secure the business and it will unwind after the auctions. However, these prepayments may be a regular feature of the balance sheet. The underlying business remains cash generative and the total dividend has been increased from 3.5p a share to 4.3p a share.
GETECH (GTC) – £5.99m at 20.5p
Oil exploration data services provider GETECH Group reported full year results that were ahead of house broker WH Ireland’s recently upgraded figures. The broker had upgraded its forecast profit to £500,000 but the outcome for the year to July 2011 was a profit of £670,000, on revenues that increased from £3.25m to £5.33m. GETECH lost money in the previous year. The renegotiation of a revenue sharing agreement helped with this improvement and it will continue to benefit future periods. WH Ireland forecasts a profit of £730,000 in 2011/12 giving a prospective P/E of 10.7x. The strategy is to try to smooth revenues by getting longer-term commitments to global studies from its customers. A larger sales force will also mean that there should be more regular sales of reports. A European magnetic data compilation is being launched.
GETECH had net debt at the end of the previous financial year but this was turned into net cash of £585,000 at the end of July 2011. GETECH has recommenced paying dividends and the final dividend is 0.2p a share.
GETECH is looking for acquisitions with synergy with existing business in terms of skills and data.
Avacta (AVCT) – £16.3m at 0.98p
Sales of Optim’sDiagnostics technology are starting to build up after a slow start and this is already showing through in the latest results of diagnostic technology developer Avacta Group. The Optim bench top instrument analyses a range of biological samples and can be used by pharma companies to make a decision about which drug candidates have the best chances of success. There were 14 Optims sold in the year to July 2011, up from two in the previous year. There have already been eight Optim sales in the first quarter and the target for the full year is 27. The commercial partnership with Pall Corporation has been extended to South East Asia.
The AX-1 rapid blood immunoassay system has been hit by delays but it could start generating revenues in this financial year. Revenues grew from £2.07m to £2.45m in the year to July 2011 and the loss decreased from £2.03m to £1.12m. Revenues are forecast to rise to £3.6m in 2011-12 and the loss should continue to reduce.
Avacta had net cash of £1.77m at July 2011. The operating cash outflow was £1.11m last year. There is also deferred consideration of £250,000 payable.
Lombard Risk Management (LRM) – £20.7m at 10p
Trading and regulatory risk software provider Lombard Risk Management reported a sharply higher profit in the six months to September 2011. During the period, Lombard announced a software deal with Société Générale that will be worth more than £2m in the first two years and a further deal with an unnamed German bank. They both contributed in the first half. However, much of the improvement in pre-tax profit from £154,000 to £1.75m was due to the capitalisation of £1.29m of development costs. Even stripping that out, there was still a significant profit improvement as revenues grew from £5.8m to £6.35m. The regulatory outlook for the financial sector should mean additional demand for the software that Lombard supplies. New rules introduced through Basel III, Dodd-Frank, Solvency 2 and other new regulatory compliance rules should stimulate sales from the second half of 2012.
Lombard believes that it is gaining market share from the market leader Algo Collateral. Lombard has derivatives clearing software and most of its competitors have yet to release a product in this area.
Hardman forecasts an underlying profit of £3.26m for the year to March 2012, rising to £3.94m in 2012-13 so the shares are trading on 11.3x then falling to less 7x.
Lombard has a strong balance sheet with £1.35m in the bank at the end of September 2011. More cash came in after the period end. A maiden dividend of 0.03p a share was paid earlier in the year. This has been followed by an interim dividend of 0.02p a share.
Lombard will consider acquisitions but financing them may depend on a higher share price.