“If the markets start to think that the ECB and Fed are all talk …

… and no action the euro debt crisis could spiral out of control”    

www.cebr.com

 

Last week …

… the FTSE 100 closed at 5787, which was up 2.8%. The FTSE 250 increased a more moderate 1.1% while the AIM All Share at 676 rose 1.2%. The economic background for the UK remains  ‘bumping along at the bottom’, with the BOE deciding not to change interest rates as Consumer Confidence fell, Manufacturing PMI  falling the fastest for two years although the Service Sector improved. The brighter spots were US Employment gaining 63% more jobs than expected at 163,000 with an unemployment rate of 8.3%. The ECB remain in discussions about supporting Spanish and Italian debt and confidence for a settlement is growing.

 

This week …

… seems a bit too busy with economic reports given the other distractions. Perhaps not to be ignored is the UK  Balance of Trade figures on Thursday, while Industrial Production, on Tuesday and the BOE Inflation report,  on Wednesday may also be worth noting. Elsewhere In the world we would highlight German Industrial Production on, Tuesday and Thursday’s US Consumer Confidence. Markets should be up again this week.

 

Company Reports

Allocate Software (ALL) – £47m at 74p

Healthy Prospects

The share price retraced despite reporting strong finals to May 2012. Sales increased by 22% while PBT increase 16% to £6.2m for an historic P/E of 12.8x, while yielding 1.6%. Allocate provide software used in workforce and compliance optimisation with a primary focus on healthcare which accounts for 71% of sales the majority of the reminder is from defence. Of the sales growth 10% was organic the rest from acquisitions, such as Zircadian, the doctor planning application solution which is generating cross-selling leverage, where there are  27 specific examples of it being sold to existing customers. RealTime Health was acquired last week for an initial consideration of £1.2m going to £7.2m if significant growth targets are met. This is a Patient flow product is only sold into 8 NHS trusts and Allocate supply 262 NHS Trust with at least one product, suggesting further cross selling opportunities. Profits for 2013 are forecast at £6.5m for an EPS of 7.5p giving a prospective P/E of 9.8x while yielding 1.7%.

Financials

Cash has been used for acquisitions so the year end cash balances have fallen to £4.3m from £10.3m but it will start to rebuild.

 

Ebiquity (EBQ) – £53.5m at 93p

Measured Growth accelerating

Recent finals showed that this media analysis services provider can get the most out of its acquisitions. A further acquisition was announced on 3 August as FirmDecisions is to be acquired for £1m and paid from existing facilities. The maximum total consideration is up to £7m, payable in cash, depending on three year performance and is expected to be earnings enhancing in the first full financial year. FirmDecisions specialises in media and production cost auditing, with specific reference to the advertise clients who benefit from contractual compliance by their agencies and transparency of transactional value to enable its clients to measure the effectiveness of their advertising and marketing. Ebiquity’s has an international spread of 1,000 clients over 70 countries. Finals to April 2012 reported that revenues increased from £44.2m to £52.9m, while profit rose at an even faster rate from £4.8m to £7.6m. The organic profits growth was 35% and are forecast at £9.6m to April 2013, for an EPS of 8.75p giving a prospective P/E of 10.7x.

Finance

Net debt was £12.2m at the end of April 2012 and  likely to raise further  as new banking facility were  put in place to help finance continued acquisition programme.

 

1PM (OPM) – £3.3m at 0.098p

Controlling the growth

During July this finance provider announced it had more than doubled its profit as it continues to grow its loan book. Revenues rose 21% to £2.31m in the year to May 2012, while pre-tax profit jumped from £202k to £436k and bad debt provision fell £10k to £180k. Demand remains strong as small companies seek alternatives to borrowing from banks. The range of products that 1PM will lend money for has increased and now includes vehicles and the company has started lending in Northern Ireland. There are 1,881 customers and the maximum advanced to established businesses has increased from £30,000 to £50,000. Existing customers are a good source of repeat business, 1PM’s borrowings cost an average of 9% while it lends at an average rate of 19%.  Profits to May 13 are forecast at £0.5m for an EPS of 0.01p and a prospective P/E of 8.3x.

Finance

The lease portfolio is worth £11m. 1PM has obtained additional funding of £4.1m to increase the loan book.

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