from the Sunday Times
Last week …
… the FTSE 100 at 5768 fell -1.5% with the FTSE 250 down -0.2% while the AIM All Share at 795 gained 1%. The performance is perhaps reflecting First Quarter profit taking and the lower revision of GDP to 0.3% from the previous 0.2% for the last Quarter of 2011. The FTSE has improved 4% over the last 3 months which has been outpaced by 14.8% leap in the Aim All Share Index. The reported 4% increase of 700 billion euros to build the Eurozone ‘Firewall’ could help offset Spanish and Italian debt and growth concerns.
This week …
… the BOE Interest, same again, meeting is on Wednesday which may also discuss QE3. The policy conflict, between low growth and inflation remains so no new funds are expected. On Friday the latest US unemployment rate will be reported and before then there are a number of Sales and Indices reports indicating the strength of growth. The week is likely to be highlighted by low volume of trades and lower markets can be anticipated.
EG Solutions (EGS) – £9.1m at 63p
Back office optimisation software supplier eg solutions was hit by delayed orders last year but the company has got off to a strong start in this financial year as these orders arrive. A third party component of the Nuqleus data capture software was replaced and this meant that sales did not come through in the second half. It also meant that R&D spending increased from £646,000 to £861,000 but modules of the software have now been re-engineered. Five orders have been gained and two made some contribution to last year. The latest contract win is with a large international bank, which initially covers 3,250 users but could be many times that number. Revenues fell from £5.15m to £4.71m in the year to January 2012, while underlying profit slumped from £451,000 to £146,000. Recurring revenues account for 49% of total revenues and a contract of £340,000 was recently won from an existing client. Forecast for the January 2013 year-end are for £1m which gives an EPS of 5.41p and a prospective P/E of 11.6x.
At the end of January 2012, there was £64,000 in the bank but since then there has been a significant cash inflow. There is also a convertible loan note of £141,000 which is repayable in the autumn.
VPhase (VPHA) – £10.9m at 0.86p
Pipeline into orders needed
Voltage optimisation products supplier VPhase produced energy saving products for commercial and residential properties. Revenues for the December 2011 year –end increased by 65% to £440,000 in 2011 but it is still some way from profitability. There have been significant orders from two social housing organisations and utility sectors with more to come this year. The larger orders being with Stockport Homes (1,200 units) and British Gas (980 units). Whilst the take-up from these is slower than hoped and other contracts are taking longer to conclude than expected, good commercial progress is being made and there is a substantial pipeline of contracts in negotiation.
The group loss increased from £1.71m to £1.97m. There are trials with 53 housing associations. Housing associations tend to rewire their properties every 25 years. Sales through the Tesco website have yet to commence because national distribution has to be built up first. This should happen later this year. An Australian contract was announced earlier this year. The first order was for 500 units and there will not be any more orders until the second half. VPhase believes that it will take three years to reach the maximum annual figure. Revenues of £12.4m are expected over the five year agreement. Turnover of £4.8m for December 2012 is forecast for a loss of around £0.6m.
There is £2.15m in the bank thanks to a fundraising at the end of 2011 at 0.5p. The cash outflow from operations was £1.97m in 2011.
Corero Network (CNS) – £34.7m at 59.5p
Set for strong sales growth
Network security and education admin software provider Corero transformed itself last year. Overall revenues jumped from £3.02m to £11.3m as network security made its first contribution. Even so, the original Corero Business Systems (CBS) division increased its revenues from £3.02m to £4.39m. The network security is loss-making as the group invests in growing these operations. CBS grew its profit contribution from £1.02m to £1.59m. 78 new customers have been won in 2011 with an average spend of £36,000. A new network defence system has been launched and is supported by a increased marketing budget. The overall 2011 loss was £1.43m. House broker finnCap forecasts a £500,000 loss for December 2012 on turnover of £18.6m and believes that Corero will be profitable in 2013 on turnover of £24m.
There was a £4.3m raised from a share placing at 43p a share which was at a 2.3% discount at the time. To organic growth plans for 2012 and 2013, by investing in the sales and marketing function of the Corero Network Security division, and to fund investment in the network security division’s product development. Deferred income has increased from £1.49m to £6.22m.