… 2% in 2013. According to the UK’s independent financial forecasting body, the Office for Budgetary Responsibility (OBR).
… both the FTSE 100 & 250 fell 1.9% while the AIM All Share at 793 was off 1.7%. The Budget was received positively but the market’s fall reflected Eurozone factors such as Spanish debt yielding over 5.5% and a near recessionary fall from 49 to 47.7 in the Euro Manufacturing PMI. Also the fall in Chinese Manufacturing PMI to 48.1, the lowest for 4 months helped weigh markets down.
…UK GDP Figures are reported on Wednesday and may start showing a relative improvement. This is followed on Thursday by QE assisted Lending Data. In the US Consumer Confidence is reported on Wednesday followed by Jobless and Income data. A week of modest gains seems likely.
KBC Advanced Technologies (KBC) – £45.9m at 82p
Finals showed that the competitive pressure on refining margins in the developed countries and growth in refining capacity in the developing world are helping to push KBC Advanced Technologies forward despite a tough economic background. The year to December revenues grew 5% to £55.7m while underlying profit moved ahead by one-fifth to £5.9m for an EPS of 4.9p. The three-year contract with PEMEX was an important contributor and will be again this year. The litigation about KBC’s software has been concluded in its favour. The growth drivers are positive in 2012 in Europe and North America where difficult operating environment in the refining industry cause clients to seek to improve the performance of their assets. In other parts of the world client investment in downstream assets continued and has driven demand for KBC’s services and technology. There is also increasing demand in adjacent sectors of the energy industry. Cenkos forecasts a 2012 profit of £7m giving ad EPS of 7.7p and so a prospective 2012 P/E multiple of 10.6x with a yield of 3.1% forecast.
There was £5.8m in the banks at the end of 2011 and this should rise significantly this year. The dividend has been increased by 22% to 2.25p a share.
Cyprotex (CRX) – £11.2m at 5p
Demand pull expansion
Cyprotex offers pharma companies services that enable them to choose the compounds most likely to be effective. It lost its second biggest client last year but still grew revenues by one-third to £7.91m – helped by a full contribution from the US business bought in the previous year. UK revenues were flat at £5.31m so the revenues lost from the client were broadly replaced by new business. Cellciphr toxicology assays are making a growing contribution. The 157 customers give a wider spread with the largest accounting for 13% of turnover. Pre-tax profit trebled to £590,000 although this was lower than forecast the shortfall was offset by a tax credit due to recognition of past tax losses. Cyprotex has now established itself as a thought leader in the ADME Tox field, with a strong position in the fast-growing in vitro toxicology market. It’s laboratories in both the UK and US have had major expansions to accommodate increased demand.House broker Singer forecasts a profit of £1.4m in 2012 for the December 2012 year end which gives and EPS of 0.6p and a prospective P/E of 8.3x.
Net cash was around £100,000 at the end of 2011 even though cash has been spent on increasing capacity. The business is cash generative.
SciSys (SSY) – £15.4m at 53p
Improving Operating Margins
IT services provider SciSys is on its way to achieving its target operating margins of 7%. Revenues slipped back from £43.6m to £42.3m in 2011 but underlying operating profit increased from £2.14m to £2.37m. That is an operating margin of 5.6%. It will improve further this year and the 7% figure could be achieved in 2013. Underlying pre-tax profit improved £2.04m to £2.21m in 2011. The tax charge more than halved to £249,000. The annual dividend has increased 10% to 1.21p a share.
The biggest improvement in profitability came from the space business, while government, broadcast and support divisions all improved profitability. This more than offset the sharp decline in the environment division. Staff have been moved to the busier areas of the business while the environment business remains weak. House broker, Canaccord Genuity assumes an operating margin of 6.7% and forecasts a December 2012 profit of £2.7m on revenues of £43m which gives a prospective P/E of 7.2x with a 2.4% yield.
SciSys was cash neutral at the end of 2011, down from net cash of £4.85m at the end of 2010. The business generated cash but SciSys spent £5m on the freehold of its Chippenham head office. This will reduce rent costs by £500,000 a year and help SciSys move nearer to the operating margin target. There is also going to be some rental income from spare space to offset a higher interest charge on cash borrowed to buy the property
Statpro (SOG) – £57m at 94p
Cloud based growth
Fund management performance software group, Statpro finals showed that it is shifting towards a rental model or cloud based model, which will hold back short-term revenues but provide an even more solid base for the business. Revenues dipped 4% to £31.7m although this reflects the disposal of the South African data business during 2010. Renewal rates are being maintained at 92%, while recurring revenues accounted for 94% of total revenues although little of those recurring revenues come from the rental model as yet. StatPro Revolution’s recurring revenues are £470,000 which will become more important as a new version of the software is being launched in 2013 and this will replace the core software product StatPro Seven. R&D spending continues at 16% of revenues. Some is capitalised but a greater proportion has been expensed in the past year. Cenkos forecasts a 2012 profit of £4.8m. the shares are trading on a prospective P/E of 17x 2012 falling to 15.6x the following year.
The business is cash generative enough to finance capex and dividends as well as reducing borrowings. Net debt was £3.4m at the end of 2011. Dividends rose 8% to 2.6p a share yielding 3%.