We need a new British Business Bank with a clean balance sheet.

“We need a new British Business Bank with a clean balance sheet. I am working with the chancellor to develop a state-backed institution that will combine up to a billion pounds of new government capital. This will then apply further leverage through guarantees to support up to £10bn of finance to SMEs and mid-sized business”.                              

Vince Cable, Business Secretary


Last week …

…  most markets were moderately lower. The FTSE 100 was off 1.1% while the FTSE 250 was down 1.4%, although the Aim All Share, at 716 improved by 0.6%. The RP-Inflation eased 0.1% to 2.5% while monthly Retails Sales fell by 0.2% but grew 2.7% year-year.  The Government borrowed £14.4 bn in August which was inline but predictably the BOE gave no signs of a UK QE3. The Spanish effect, lower Chinese manufacturing and US QE3 stimulus doubts were moderartely depressing.

This week …

…  on Thursday  UK Consumer Confidence,  Balance of Payments  and GDP are reported.  The trends are likely to up, down and there could be signs that GDP is bumping up from the bottom.  In the US Consumer Confidence is on Tuesday with a host of Euro news such as employment filling the rest of the week. Markets should be positive.


Company Reports

NetPlay TV (NPT) – £34.3m at 12.12p

Good Gamble

Increased marketing and TV advertising spending is paying off for interactive gaming business NetPlay TV. The number of  new depositing customers in the first half of 2012 was 74% higher at 24,951 and a higher proportion of these are coming from mobile and tablet customers. This translated into a 33% increase in revenues to £13m and a 500% jump in pre-tax profit from £268,000 to £1.61m. Although the number of additional customers looks impressive not all of these end up as active players. The number of active depositing players increased 51% to 36,730 over the 12 months to June 2012 with mobile and tablet customers accounting for 18% of the total. Average daily revenues are 28% higher in the third quarter of 2012 than the same period last year. Profits are forecasts for the full year at £2.6m for an EPS of 1p for a prospective P/E of 12x while yielding 2.8%.


The business is strongly cash generative and there was £10.5m in the bank at the end of June 2012, including £425,000 raised from the sale of the bingo operations.



IS Solutions (ISL) – £11.9m at 48p

Worse Case – Slow Growth

E-commerce software and online technology services provider IS Solutions reported higher interim profit but warned that the second half could be slower as customers are taking longer to make purchase decisions. IS have 60% recurring revenues giving some resilience to this uncertainty. Revenues improved 11.4% to £4.52m in the  first half of 2012, while pre-tax profit increased 8.7% to £337,000. Growth in the managed services operations was held back by lower maintenance renewals from government departments. Project work revenues are growing but the use of contractors knocked one percentage point off gross margin. Product Sales  are less predictable but there are some opportunities to  be closed. Profits are forecast at £0.9m for the Dec 2012 year-end for an EPS of 3.3p which gives a prospective P/E of 14.5x while yielding 2.8%.


Net debt was £984,000 at the end of June, although there is a near cash investment of £538,000. There is also a £700,000 investment in web-based analytics software developer Speed Trap. The second half is normally the period when cash is generated and net debt should fall to £300,000 by the end of 2012.


Centaur Media (CAU) – £58m at 41p

Digitally enhanced

Full year results to 30th June showed a strong operating performance and improving cash flow. The results reflect the wisdom of the decision to develop the higher margin digital offering with acquisitions and organic investment and so leverage up on the well-established print and events businesses. Revenues were down 2% to £65.6m but profits improved 23% to £8m with operating cashflow up 32% to £10.3m.  Centaur provide business information and marketing solutions to high value professional and commercial markets and titles include Marketing Week and Money Marketing. Profits are forecast at £11.6m for the 2013 year end which gives EPS of 6p and a prospective P/E of 7x while yielding 5.8%. Further acquisitions seem likely.


Net debt was £7.2m and there a new four year £40m revolving credit facility.



Reach4Entertainment (R4E) – £2.4m at 3.7p

Putting on a Glitz?

The interims to June, recently reported were mildly positive with a 3.2% increase in Gross Profit at £9.1m, despite a relatively hash economic background. The  Administration expense were reduced by  3.4% to £9.18m and the loss on Ordinary Activities after £400k of interest was £419k, and  58% lower than last year’s  loss of £994k.  R4E is a transatlantic Media and Entertainment Company with two well positioned companies Dewynters in the UK and Sportco in New York. The client list they provide with marketing and ticket sales generating activities is a who’s-who of venues and theatres and the company see an opportunity to increase the spend per client by offering additional IR/PR services. The second half of the year is traditionally stronger with summer over and Christmas ahead and  therefore R4E could  show an overall operating profit for  the year.  A key concern for equity investors is the £14.8m loan taken out when the previous directors acquired the present businesses. The loan is with Allied Irish Bank  and is  currently paying 3.8% interest above Libor until May 2013 when the interest goes up in steps to maturity,  in May 2015. Assuming that there are some more easy hits on reducing administration costs and that turnover can recover particularly in New York due to the high operation leverage effect EPS and cash flow could show sharp relative improvements. The strength of their market position in this rich and growing niche sector of marketing support services could make R4E attractive to a number of broader agencies.


The issue of the £14.8m debt remains a key strategic conundrum as it will clearly sucks any cash flow-out which could have been used for advancing the business, while the low cost of the loan it could make alternative sources of finance seem expensive.

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