… Given that Britain’s total debt is estimated at 507% of GDP, America 279%, Spain 363%, Portugal 356% and Germany 278%.
Last week …
… the FTSE 100 increased 1.6% while the FTSE 250 improved 3.5% with the Aim All-Share up 2.5%. The Eurozone credit rating downgrades were largely expected. UK 2012 GDP growth has been downgraded by the E&Y Item Club to 0.2% from 1.5%, inflation fell to an annual rate of 4.2% and the volume of Retail Sales rose by 0.6% in December.
This week …
… the next drama in the debt saga is Greece’s potential default before March 20th, perhaps followed by Portugal but it is not necessarily a problem for this week. On Wednesday GDP provisional figures for the final Qtr of 2011 and BOE January Minutes will be reported. The report may show that the BOE are considering further rounds of QE, which helps markets. In the US there are House Price and Jobless Claims reports, while in Eurozone consumer confidence will be reported. Ignoring Greece markets are trending –up.
Goldplat (GDP) – £19.2m at 11.5p
Leverage gold production
Goldplat announced on January 17th that the first gold from its Kilimapesa gold mine in Kenya has been poured. The new plant allows Kilimapesa to smelt and produce gold bullion on site which increases operational efficiencies. This adds up to a significant milestone towards forecast production from the site of 3,829oz of gold in 2012, and 10,000oz per year thereafter. Goldplat is set to increases its JORC-compliant resource to 500,000oz at Kilimapesa. Profits forecast to June 2012 are increased to £5.2m from £3.1m last year this gives EPS of 2.5p and a prospective P/E of around 5x. Goldplat is a profitable gold producer from operations in Ghana and South Africa and is levering its position by acquiring conventional mining assets in Kenya and Burkina Faso. Significantly, there is potential additional uplift in valuation as Goldplat achieves its exploration targets at Kilimapesa and at the Banka Gold project in Ghana.
Goldplat is reported to be debt free and total production for 2011 was around 28,000 ounces of gold. In addition, Goldplat has a producing gold mine in Kenya and two brownfield gold development projects in Ghana and Burkina Faso which both production and resource upgrade potential.
Driver Group (DRV) – £8.7m at 33p
No dispute driving forward
Project and construction dispute services provider Driver Group returned to profit in the year to September 2011 and it has started paying dividends again. Driver has taken an annualised £3.5m out of its cost base and this helped it move into profit. The move into the power and process sector has helped revenues at a time when much of the rest of the business is at best flat. The number of fee earners is rising with a greater percentage of them sub-consultants. This helps to improve utilisation and gross margins. Revenues improved from £16.4m to £17.4m, while an underlying loss of £430,000 was turned into a profit of £548,000. Costs were slightly lower even though there were bonuses of more than £400,000 included compared with no bonuses last year. The European business made all the profit with the African business still at an early stage of development. The Middle East was loss-making for the year as a whole but it was profitable in the second half. Revenues have slumped in the UAE but they did improve in Oman. The recovery should continue into this year to September 2012 and revenues are expected to improve to £19.5m and profit is forecast to double to £1.1m for an EPS of 3.3p so the shares are trading on a P/E of 10x.Finance director Damien McDonald bought 10,000 shares at 33p each. This is his first purchase of Driver shares.
Strong cash generation and a tax rebate have wiped out net debt and left Driver with net cash of £572,000 at the end of September 2011. A final dividend of 0.5p a share was declared.
InfraStrata (INFA) – £10.1m at 12.88p
BP taking costs/Exploration upside
Gas storage developer and oil and gas explorer InfraStrata has importantlysigned up BP as its partner for its Northern Ireland gas storage project. BP Gas Marketing (BPGM), the company’s gas trading division, has been granted an option to acquire a 50.495% stake in Islandmagee Storage Ltd (IMSL). BPGM will finance development of the project up until the point where a decision can be made on whether to go ahead with a detailed engineering design. If planning permission is granted by the end of June then the drilling of the well for the first cavern could happen before the end of the year. This is the main expenditure that BPGM has to cover.
InfraStrata’s stake in IMSL will be diluted from 65% to 32.178% and Moyle Energy Investments’ stake will fall from 35% to 17.327%. INSL received £200,000 on the signing of the agreement and a further £200,000 will be paid when planning permission is obtained. This cash will be used to pay back loans from InfraStrata. IMSL will receive income from managing planning and other aspects of drilling operation.
Ignoring accounting profits of £5m plus the operating loss was £0940,000 and InfraStrata had £715,000 in cash in the bank.
Empresaria (EMR) – £9.6m at 21.5p
Rerating trigger insight
The trading update on the 19th of January reported an improved second half performance and that full-year trading would match market expectations. Empresaria is a multi-disciplined international specialist staffing group, operating in 18 countries with an investment focus on developing staffing markets and emerging economies. The European market had proved challenging but emerging markets are delivering, despite continuing investment in Asia where organic growth remain a strong opportunity. The potential claims for retrospective pay and social security contributions in Germany are still subject to on going court proceedings. The social security department has started to audit the branch network in Germany and there is likely to be an update when December 2011 finals are reported in March. Profits are forecast at £4.5m (excluding exceptionals) which gives an EPS of 4p so a prospective P/E of 5.25x, while yielding 1.7%.
The net debt is £8.5m which gives gearing of 31%but as expected for a support services business the assets are mainly intangible.