UK’s Triple AAA Credit rating seems safe after …

…  Standard &Poor’s described the outlook as stable.


Last week…

…at 5651 the FTSE 100 fell -1.3%, while the FTSE 250 receded -0.6%. The Aim All Share at 780 declined by 1.8%. Spanish bond yields of over 6% signalled a return of euro-debt traumas. Markets were not impressed by US consumer confidence data or Chinese GDP growth of a relatively sedentary 8.1%.  In the UK Construction growth of 6.1% was 4.6% lower year-on-year, consumer spending however improved year-on-year by 1.3%, Retail Price inflation slowed to 3.6% which is lower than last year’s 4.1%.

This week…

…there are UK Employment figures on Wednesday which maybe lower so contrasting with likely higher Consumer Confidence Index on Tuesday.  In the US there are further Confidence and Employment figures which may bring the prospect of a further round of QE. Market confidence seems unlikely to be helped by the current round of general economic news so we expect a decline.


Company Reports

Ariana Resources  (AAU) – £8m – 3p

Digging a gold mine

Ariana, the Turkish gold explorer has investor meetings this week. This follows a recent sequence of positive announcements showing steady progress of its Red Rabbit JV project, where first production is forecast to start in June 2013. The most significance news item is the pit optimisation study defining the extents of the pits to be mined at the Kiziltepe Sector. Consequently it was also announced   up to 4,000m of exploration drilling will follow. The timeline to first production includes the results of the feasibility study and environmental impact that are due in May. Ariana are seeking to strengthen its exploration portfolio by applying for further licenses and exploration to  establish a 1Moz resource base close to Red Rabbit.  It could be that the NPV10 increases to over 6p before production starts.


On 30th June 2011 there was £1.5m cash and in January 2012 a US$2m loan agreement with a Yorkville Company was taken which will assist with development of Red Rabbit.            Ariana continues to review a number of financing strategies (and offers) for full funding of Red Rabbit (c £12m). Further news is likely with the finals in May 2012.


ReThink (RTG) – £11.36m – 10.88p

Quality of earnings increasing

Recruitment services and technology provider Rethink Group doubled its underlying profit to £1.8m during the year to December 2011 and there is likely to be further strong growth this year. Revenues increased by 40% to £78.9m with a net profit margin of 3.4%  there was a strong contribution from the permanent recruitment division, while contractor numbers increased from 560 to 837 over the year. The majority of that growth was organic the rest coming from the acquisition last year of Berkley and Irish based technology recruiter. Overseas revenues are growing as new branches are opened. House broker Merchant Securities upgraded its 2012 forecasts to a £2.5m profit, which gives an EPS of 1.7p  so a prospective P/E  of 6.4x while yielding 3.8%. There will be a combination of organic and acquisitive growth. The broader strategy is to increase the higher margin business sectors  of talent management and technology divisions to 50% of the  revenue.


Net debt was £7.34m at the end of 2011, which is well within the company’s borrowing facilities. The total dividend has been increased from 0.188p a share to 0.331p a share.


Toumaz (TMZ) – £86m – 10.6p

Vital signs and cash

Although still loss making Toumaz, a technology and equipment manufactures is making progress with both sides of its business. The Sensium electronic plaster, used to monitor physiological vital signs and transmit them to the hospital, is just about to be launched while the Telran ultra-low power radio chip was launched at the end of last year. In 2011, revenues dipped from £2.7m to £2.3m with the majority still coming from development income and licence fees. The main product revenues relate to digital radio technology.  The underlying loss rose from £6.6m to £7.2m. Toumaz has a strong relationship with Imagination Technologies who own 11.3%. Toumaz was involved in the setting of the new IEEE radio standard and is hoping to produce the first compliant chip. The Sensium electronic plaster has gained FDA approval and is being launched in California this month although it will take time to build up sales. Although revenues are expected to grow to £3.6m in 2012, the loss will still be nearly £7m. Based on a sales price of $30 per sensium electronic plaster, the hospital market could be worth up to $508m a year. There is also scope for use of the Telran chip in smart energy, home automation and entertainment products.


There was cash of £2.2m at the end of 2011 but since then £11.2m gross has been raised through a placing. There was £11.4m in the bank at the end of March 2012. This gives Toumaz enough cash to launch and market its new products, as well as developing new ones.


Nationwide Accident Repair Services (NARS) – £28.7m – 66.5p

High yield slower growth

Car crash repairer, Nationwide has reacted to a downturn in demand by rationalising its branch network. There are 63 bodyshops, following the closure of 8 sites but as the UK’s largest accident repair group economies of scale are an important part of its competitive advantage. Nationwide also 71 mobile vans, which is a part of the business where revenues were 57% ahead in 2011. Vehicle usage fell by 2% in 2011 and new registrations also declined. However, the largest decline of all has come in motor claims frequency, which is estimated to be running at half the rate it was a decade ago. Revenues were flat at £173m in 2011. Four-fifths of revenues come from insurance customers, where revenue declined, but growth is coming from fleet (14% of the total) and retail (6% of the total). There was a fall in underlying pre-tax profit from £6m to £5.5m and all of this profit was turned into cash. This excludes non-recurring costs of £8.1m, which relates to the costs of closing sites and the write-down in the value of assets. Management expects to achieve annualised cost savings of £1.9m.

The shares are trading on a prospective 2012 P/E of 7x for the year end to December 12 while yielding 8.5%. Further growth in fleet and retail work is the key to pushing the business forward. However, Nationwide has secured all accident repair work for Hastings and it is winning more business with AXA.


There was net cash of £8m at the end of 2011. The strong balance sheet has enabled Nationwide to increase its final dividend from 3l.5p a share to 3.6p a share, taking the total to 5.5p a share, against 5.3p a share for 2010. This means that the yield is more than 8%. The net pension deficit was £19.6m at the end of 2011, which is nearly double the level of the previous year.

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