…the FTSE improved 0.1% at 5733.45 while the FTSE 250 increased 0.3% with the Aim All Share at 764, raising 1.2%. UK GDP, before adjustments for mild weather, strikes etc. contracted -0.2% for the Dec Quarter. The BOE’s decision to leave interest rates unchanged was unanimous although there were no hints of increasing QE. The FED committed to keeping US interest rates at between 0.0% and 0.25% until 2014 before slowing GDP at 2.8% was reported and growth expectations downgraded. Austerity, the Eurozone debt management cure, may also help kill-off World Recovery which in 2011 was 3.8% and the IMF are forecasting at 3.3% for 2012.
….UK news slows but EU news flow goes hyper. UK Consumer Confidence Survey and Mortgage Approvals are reported on Tuesday. While the PMI (Purchasing Managers Index) on Manufacturing, is on Wednesday with Construction reported on Thursday. Watch-out for the Eurozone verses Greek debt talks (again) and there is a whole host of data with Jobs on Wednesday, Consumer Confidence and PMIs. Friday will see the US latest Unemployment rate reported. The recent upward trend is likely to bend.
Netcall (Net) – £24m at 19.5p (Cash £7.2m)
A tempting takeover target ?
Netcall’s annual interim Trading Update was reported ahead of the actual announcement on the 27th of February. Trading is in-line for a good year, while investors are reminded of the £7.2m cash, representing 30% of the Market Cap. Netcall’s software product suite provides solutions for end-to-end customer engagement, incorporating call handling, callback, smart automation, workforce management and data unification. Netcall’s customer base contains over 600 organisations in both the private and public sectors. These include over 65% of the NHS Acute Health Trusts, major telecoms operators such as BT and Cable & Wireless and leading organisations including Interflora, Lloyds TSB, Oracle, Cineworld, Interserve, Orange, Prudential, RBS and npower. There are high levels of recurring revenue with strong cash generation. The last acquisition was Telephonetics in 2010, and management have achieved £1.8m of annualised cost savings as the two businesses are integrated. The forecast for the year-end to June 2012 are for a PBT of £3.2m (£2.6m) giving an EPS of 1.9p (1.5p) for a prospective P/E of 10.3x (13x). Significantly lower than the 25x P/E x which is given to the average company in the software and computer services sector. If the cash was deducted Netcall would look cheaper still.
Media Corporation (MDC) – £4.0m at 1.25p
M&A strategy remains ambitious
Online gaming and advertising services provider Media Corporation announced a modest white label deal with the Hippodrome Casino and raised £356,000 at 1.1p to fund it. Media Corp is re-refocusing on the gaming sector as most of the 2011 underlying loss related to the internet publishing operations. It took time to wind down the operations of the sites sold and there are three sites left – Onthebox.com, lightcomparison.co.uk and Creditcardexpert.co.uk which are non-core assets. Eyeconomy is the advertising division and moved into profit in the year to September 2011. It has renewed a £1m contract with Express Newspaper to continue to sell and manage all advertising formats across the Group’s UK network of websites. A new site , www.forexspace.com was launched with an initial advertising sponsorship contract worth £45,000 per month and, in addition, Eyeconomy is in advanced talks with a number of further advertisers to generate additional revenues for the site. There was a cash outflow from the loss offset the money from the disposal of the site Gaming .com and net cash declined from £2.15m to £2.03m. No forecast are available but there should be an improvement on the loss of £2.87m on turnover of £35m made last time.
Mergers in the on-line gaming sector could mean that there are non-core brands available for sale and Media Corp wants to be a consolidator. It may be too dilutive to make acquisitions before EBITDA positive is reached.
Pinnacle Telecom (Pinn) – £6.8m at 0.34p
Contract win Acquisitive growth increasingly evident
Pinnacle Telecom have worked as a contractor for the BBC on a number of iconic outside broadcast events such as Royal Wedding, Pope’s Visit and recently announced on the Olympics. This is the largest as the event could be watched by over 4 billion and PINN will provide data, connectivity and voice services to the BBC and its world media partners. BBC International will occupy the Stratford Broadcast Tower for the duration of the 2012 Olympic and Paralympic Games, offering the world’s media, facilities that include broadcast studios, presentation suites, production offices and stand-up positions for broadcasting their coverage. Pinnacle day job is a value added, solutions based provider of integrated telecommunications services including IP solutions. It focuses on the UK SME market providing a wide range of communications solutions including telecommunications calls, access and consultancy, IT support, IT Security, mobile solutions – both voice and data and hosted broadband voice services. Finals to September 2011 will be announced on the 20th of February but will not include much contribution from the four acquisitions made since July. Pinn has been however operating profitably and has no debt. The contribution from acquisitions should be increasingly evident during 2012.
Servoca (SVCA) – £7.22m at 5.75p
Market conditions in public sector recruitment remain tough and Servoca has not been immune in the year to September 2011. Revenues declined from £50.2m to £47.9m and underlying profit slipped from £2m to £1.8m. Recruitment is still two-thirds of revenues even though the outsourcing division increased its contribution by 66%. The profit contribution of the outsourcing division is nearly as high as recruitment and it will take over as the main profit contributor this year with recruitment unlikely to contribute much in profit terms. The decline in recruitment came from the doctors and education businesses, although the supply teacher business is doing better than permanent teacher recruitment. Nursing revenues held up better than in the other areas. The outsourcing division offers domiciliary care and security services. The care business has doubled in size and outsourcing margins have risen sharply. House broker finnCap believes that profit will fall to £1m in the year to September 2012. The shares are trading on just over P/E 8X for September 2011-12. Hawk Investment has bought 125,000 shares at 4p each and 1.4m shares at 5p each. Bob Morton-related investors now own 59.8% of Servoca.
Net debt has fallen from £3m to £2.8m in the year to September 2011. It could fall a similar amount to £2.6m this year.