… a Eurozone recovery in the second half of 2013 is predicated by the (ECB)
President Mario Draghi.
Last week …
… markets drifted-up with the FTSE 100 at 5866, 0.8% ahead, the FTSE 250 increasing 1.2% but the AIM All-Share at 692 was a marginal 0.15% lower. UK Consumer Confidence was reported to have improved to the highest level since May 2011, while revised GDP remained unchanged showing 1% growth in the last Qtr but GDP is still 3.5% lower than in 1st Qtr of 2008. The persistent worries of Greek debt was mildly alleviated but the fingers on the edge of US fiscal cliff are slipping .
This week …
… the BOE Interest Rate decision is on Wednesday and will be watched by the ‘communicator’, Mark Carney, the next Governor. The Chancellors’ Autumn Statement is also on Wednesday and a new policy initiative on Government debt is expected. UK Manufacturing and Production figures are reported on Friday and in the US there are Employment figures on Thursday and Friday. A negative week seems likely.
Next Fifteen Coms (NFC) – £58.7m at 100p
Madman eats PR
Next Fifteen Communications is a worldwide digital marketing communications and technology public relations group (PR is currently 66% of revenues). Over the past 8 years it has been building organically and increasingly by acquisition. Recent finals to July 2012 reported a 15% rise in EPS to 10.1p on a PBT of £9.6m, giving an historic P/E of 10x while yielding 2.3%. The increasing focus is on digital marketing communications which has been boosted by a successful acquisition in 2011. The strategy is to help brands use technology, at a lower cost and more rapidly, to scour the internet and learn significant insight about their customers and potential customers in ways that the old market research industry could only do with large budgets and long timelines. The group’s largest 10 clients represent around 26% of net revenue, with no one client larger than 5%. This gives the traditional PR significant upselling and cross selling potential of digital marketing. The finals for the Year end July 2013 are forecast at £10.5m for an ESP of 10.6x with a 2.5% yield.
Net debt is around £2.6m for a gearing ratio of 8%. There are minority stakes to acquire and performance related payments that impact on EPS growth. It seems likely that at some stage this specialist group will be swallowed by a major.
Omega Diagnostics (ODX) – £11.9m at 13.6p
HIV ready to Test
Medical diagnostics supplier Omega Diagnostics reported interim towards the end of November. Revenues were flat at £5.5m due partly to the Euro exchange rate changes knocking –off £200k while the fall in allergy sales was offset by higher demand food intolerance tests. Underlying pre-tax profit fell 12% to £375,000, but included £100k of restructuring costs. New products are almost ready and strong growth is expected from the Visitect CD4 test of the immune status of HIV patients. The CD4 test should be fully commercialised in around one year as evaluations of the test will commence soon. The selling price is likely to be $5/test. Two tests per year would suggest a potential market of 34.2m tests – based on HIV-infected individuals without access to treatment. Secondary manufacturing is being arranged in India, which has the third largest HIV population in the world, and Brazil, where trade agreements will enable access to other Latin American markets. So far, a network of 65 distributors has been appointed. The current run rate is £470,000 a year and fast growth is anticipated. For the March 2012 year end on £12.9m turnover a profit of £1.3m can be expected which gives EPS of 1.4p and a prospective P/E of 9.7x
Net debt is around £0.5m and there are unused bank facilities of £1m which could be renegotiated higher. To pump prime new products further working capital maybe required.
Sanderson (SND) – £21.2m at 48.5p
Finals to September 2012 from, enterprise software provider Sanderson Group reinforce the wisdom of the decision to sell its high street retail software business as former customers , such as Comet are suffering. Selling the business wiped out the debt and enabled Sanderson to focus on the higher growth multi-channel retail operations and the cash generative manufacturing software division. Sanderson’s revenues from continuing operations dipped from £14.1m to £13.4m, although the decline was down to the ending of sales of a product line. Operating profit from continuing operations improved from £1.71m to £1.91m. Demand is strong for ecommerce sites in the multi-channel retail division, while food and drink is the main growth sector in the manufacturing division. The order book is 40% higher at £1.89m. There is potential to grow both divisions particularly through mobile commerce-related software. Profit are forecast at £2.1m for the 2013 year-end for an EPS of 4.16p which gives a prospective P/E of 11.7x while yielding 3.1%. The plan is to accelerate growth with acquisitions.
There is net cash of £4.0m and cash flow is building helped by two years of tax losses. The gross pension liability is £4.51m.