Football is like austerity – it requires perseverance, self-denial, hard work, sacrifice, dedication and respect for Germany

Last week …

… on balance the news flow was positive. The FTSE 100 closed 0.6% better at 5513.7, the FTSE 250 improved by 0.9% while the AIM All Share at 675.6 was 0.18%` better. CPI  Inflation fell  to 2.8%  in  May from 3%, Retail Sales improved by 1.4% but Unemployment rose by 8,100.  Further QE seems a stronger possibility as the BOE minutes show a narrow 5:4 vote against.

This week …

…  noteworthy are  the UK Balance of Payments to be reported on Thursday with Consumer Confidence on Friday.  Similarly in the US, Consumer Confidence is on Tuesday with Unemployment figures reported on Thursday.  Global growth and euro debt remain the key drivers of macro market sentiment and it could be Italy’s turn to wobble.  Markets are likely to be volatile on falling volumes our guess is for a lower week.


Company Reports

Communisis (CMS) – £25.7m at 25.75p

No Communication Problem

There was a very solid trading update and small acquisition from CMS,a data-led marketing services group who help customers improve their communications process. The historic P/E of 6.1x  and 5.6% yield suggests economic and debt   concerns  that may  not be relevant to earnings prospects. Communisis acquired 49% of Garden Marketing (GM) for £0.4m with an option to acquire the balance for £0.6m. GM’s £1m revenues are from being a full service integrated marketing agency. It specialises in lead creation, largely for financial services and technology clients including Legal & General and Cisco. This allows strong cross-selling opportunities. The GM deal follows the acquisition in May of Kieon, a website and app developer and Yomego, a social media agency.  Interims to June are to be reported on the 26th of July and trading remains encouraging with a strong pipeline of business development opportunities. Profits for the full year are forecast at £10.2m for an EPS of 5.8p for a prospective P/E of under 5x while yielding 6.1% with the dividend covered 3.6x by earnings


There is net debt of £22.1m in Bank Loans which was renewed in February 2011 with Barclays, Lloyds and HSBC. They have credit facility of £45m and it is committed to August 2014 while the NAV is 93p a share largely goodwill.


 Software Radio Technology (SRT) – £26.3m at 22.75p

A Strong Signal

The AGM is to be held on the 6th of July and should remind the market of the strong year ahead for this marine technology supplier SRT. Partly the recovery is from a poor March 2011-12 due to delayed orders. Chief executive Simon Tucker is optimistic and  expects a much better performance this year.  This is backed up by orders from North America for $3.6m, and new products to improve sales to existing customers. EU fisheries regulation and Russian legislation mean that the automatic identification system (AIS) technology is to be fitted by 2014. SRT’s technology is used in the majority of AIS products sold so this should underpin trading for the next couple of years. There is also potential for India to mandate the use of the technology. Revenues fell from £9.15m to £6.17m in the year to March 2012 while gross profits margin remained a  healthy 51%. Lower sales and higher admin costs saw the net profit fall to £175k from £1.94m. Expectations for 2013 are for rebound to profits of £3.3m giving an EPS of 2.6p  and a prospective P/E of 8.6x.


The debt free company had £646,000 in the bank at the end of March 2012 and just after the year end £2.56m was raised 27p. A further R&D expenditure of £1.7m this year will complete the development of its product range so from here on R&D costs will fall and the SRT will be increasingly cash generative.


Silverdell (SID) – £41.8m at 13.38p


An acquisition and new banking facilities were announced by this environmental support services group. Silverdell completed the earnings enhancing acquisition of EDS Group who provides decommissioning and dismantling services extending the groups expertise in hazardous waste removal .  The main customer base is in the chemicals, pharmaceutical and power generation industries and include Rolls-Royce, GlaxoSmithkline and Rio Tinto. The acquisition provides cross-selling opportunities and enables expansion into Canada and Australia. An initial £15m payment will be paid in cash and shares with potential deferred consideration of up to £3.6m. Silverdell and EDS already had a joint venture that won a substantial framework contract for Magnox. The combined order book is £209m, with £46m relating to the rest of this financial year and £92m next year. Profits are forecasts at £4.8m on revenues of £75m for the year to September 2012 giving a prospective P/E of 7.8x with EPS of 1.4p. For 2013 which includes a full contribution from EDS profit could increase to £9.0m dropping the likely prospective P/E  6x.


The EDS acquisition was part funded by a £8.81m placing at 11p. Net debt was £6.7m at the end of March 2012 and it is expected to fall to £6m by the end of September 2012. The new revolving three year facility is with HSBC for £5.45m and includes a £3m term loan.

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