This is a good time to hold UK Small Caps as …

… profit expectations are reasonable and valuations are relatively low.

Daniel Nickolas, Old Mutual


Company Reports

KBC Advanced Technologies – £42m at 75p

Earnings not slipping

First Quarter Trading reported to be solid despite continuing tougher market conditions in Europe. Management remain confidence of meeting full-year estimates although there is a second half bias. KBC is an independent consulting, process engineering and software group seeking to optimise operating efficiency and financial performance for clients in the oil refining, petrochemical and other process industries worldwide. Two major contracts have been signed since the start of the year. One of these is a license renewal and extension for PetroSim with a major Latin American client, worth £1.1m per year over three years. The other is a consultancy project with an Australian gas producer to support upstream operations feeding a new LNG plant. This project is estimated to be worth £3.2m, to be executed in 2012. The overall pipeline is said to have remained healthy, with some uptick seen in Russia and the Middle East. Profits for December 2012 are forecast at £7m for an EPS of 8.1p giving a Prospective P/E of 9.2x with a yield of 3.5%. Acquisition opportunities are still being exploited.


Dec 2011 year-end cash balances were £5.9m.


Energetix Group (EGX) – £13.5m at 20.24p

Power to the People

The First DC 100 Data Centre Installation Centre went live last week providing ‘ mission critical’ back-up power to the Co-Op. This reference site could be a significant milestone in the development of this once boiler maker into an alternative and efficient energy supplier. Energetix originally developed the Kingstone boiler and the new focus will be becoming an energy supply business. An innovative part the strategy is to provide a boiler at no cost to the consumer but selling th energy under contract.  This creates new distribution opportunities as there are around 1.5m boilers installed in the UK each year and they can cost between £2,500 and £3,500 each. Energetix intends to offer its Kingston boiler to householders at no charge except for installation costs of around £1,000. In return Energetix will generate income from selling gas and electricity to the customer, who has to sign up for five years. This is to be launched and rebranded in the autumn and is a strategy that will require significant cash. A business model is based on just 300,000 customers could make the business highly profitable.

Energetix still owns 100% of back-up power business Pnu Power which won the Co-op  deal but getting a significant contract from National Grid is likely to be the catalyst for the sale of the business.  VPhase is quoted on Aim and Energetix have a 27.2% stake, which has been diluted as this voltage optimisation technology developer’s raise funds. Both businesses are non-core.  Revenue for the Interims to June 2011 were £0.1m with a loss of £1.6m.  There are no forecasts although the finals to December 2011 will reflect the changes underway.


In February Cenkos raised £4.5m at 25p a share and there is no longer term debt.


Ultima Networks (UTN) – £3.4m at 1.23p

Cloudy skies

Ultima Networks’ cleantech and renewable energy operations are becoming increasingly important to the company. The finals to Dec 2011 showed that revenues increased 55% to £2.97m with solar energy installations making an initial contribution of £320,000. Pre –Tax  profit improved  from £356,000 to £486,000.The green technology division, which mainly supplies electric bicycles, generated three-fifths of revenues with the benefits of designing a new range of bicycles for the Netherlands. There are differences in designs for each of the main European markets and a new range is being developed for Germany. Ultima has installed more than 1MW of solar capacity in the UK and this has led to opportunities in Mexico and Pakistan. There is also potential for large scale solar plants in Morocco. Ultima is looking to move into the ground source heat market and it has invested in its own drilling equipment. A typical installation costs £15,000-£20,000 and it can save around £2,300 a year for 20 years. Ultima plans to come up with a package where the payments for the installation are matched with the savings. The legal software business continues to make progress and generate cash that can be invested in the other activities. There is continued investment in the software business as well with new versions being launched. The historic P/E of 6x reflects the changes in UK Law on Feed In Tariffs on solar installations which will lead to a changes in business model.


There was £388,000 in the bank at the end of 2011. The NAV per share is 1.25p and is mainly property, plant and equipment.

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