surveys suggest that the UK economy is likely to expand at a faster rate in the 2nd Qtr

“A recent stream of improved data and surveys suggest that the UK economy is likely to expand at a faster rate in the 2nd Qtr”.     

Howard Archer, HIS Global



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Last week …

the Aim All Share was down 0.6% performing better than the FTSE100 which at 6308 was 1.6% lower while the FTSE 250 fell 1.3%.  The evidence of the UK economic recovery taking hold is illustrated by 0.6% growth in GDP, unemployment steady at 7.8% and house prices raising the fastest for three years.  In the US, the S&P rating agency reported an up-grade of US Sovereign debt. The progress of the recovery has created investor uncertainty over the next moves in monetary policy.


This week …

on Tuesday the RPI measure of inflation may show an increase to 2.6%. The BOE Interest Rate Minutes are reported on Wednesday with the Chancellor’s Manson House speech that evening; both events may indicate changes in banking regulations and monetary policy. In the US the Fed Chairman has a press conference on Wednesday and maybe QE expectations will be reset, while the state of Consumer Confidence will be reported on Thursday. The market’s run of four weeks of falls could come to end this week.


Company Reports

Eckoh (ECK) – £37.8m at 17.9ps

Acquisitive Growth

Eckoh announced finals to March 2013 and a bolt-on acquisition. This provider of telephone and internet secure payment solutions which are keyboard and speech activate reported healthy figures. Revenue grew by 6% to £11m, EBITDA improved 9% to £2.4m with PBT at £1.6m, while the 67% increase in cash flow allowed a 25% increased dividend to the paid.  The non- financial highlights included long term contract wins and 11 new clients raising the total to 50. Clients include Train Information, Vue and Royal Mail.  Veritape was acquired for £6.3m and is UK based payment solutions with a call recording software. Cash was paid out of existing resources with 17% of the consideration to be paid in shares allows faster growth with access to clients who do not want a hosted services but also cross-selling opportunities. It is expected to be earnings enhancing. Growth seems set to accelerate and the March 2014 profits are forecast at £2.3m for EPS of 1p for a prospective P/E of 18x, while yielding 2%. Further acquisitions seem likely.


There is no debts and the business is highly cash generative with pre- the acquisition net cash of £8.5m


Ensor (ESR) – £15.6m at 52p

Progress Reported

The leap forward in the reported finals from this provider of building and security products, were acquisition assisted. A 53% jump in EPS to 5.5p a share was reported with PBT of £2.1m. Turnover increased 32% to £32.7m although on a like-for-like basis business levels were maintained. The roof tools and drainage business was ahead while the door manufacturing and door motors businesses performed satisfactorily in a difficult market.  Technocover, a manufacturer of physical security products for the utilities sector was acquired for a nominal consideration in January 2013. This was turnaround which seems to have been successfully completed. Profitability has been in line with forecasts and cash has been generated. While organic growth is likely to be moderate the prospective P/E remains less than 10x while yielding 2.3%. The share price is at a 52 week high.


Cash flow improved to £2.1m from £0.75m while total borrowings are £2.1m giving gearing of 23% while the NAV of 29p a share. Land in Stockport is sold subject to planning permission at a premium to book value.


Vianet (VNET) – £21.3m at 76.5p

Flowing Uphill

Reduced margins on contract extensions, contract delays and higher than expected costs of US expansion were the main factors behind a disappointing second half for fluid measurement systems supplier Vianet. In the year to March 2013, PBT at £1.8m had fallen from £2.5m although a Trading Update in February had reset expectations.  Revenues fell 8% to £21.1m of which 71% are reoccurring. The leisure division continues to contribute most of the profit. The fuel services division reduced its loss but major contracts were delayed. The vending division made a small loss as it waits for a large contract to come through. There are continuing legal uncertainties  concerning the core UK pubs market which are being addressed and the company do not expect significant further erosion in sales.  In the US evaluation pilots of the flow monitoring systems are underway with major chains which could lead to faster growth. Administration over-heads have been reduced by £800K . The business has been split into two divisions focused on leisure and vending measures and the fuel market.  EPS at 9.84p give an historic P/E of 9x while yielding 6.5% and the management’s confidence of making progress in the current year is illustrated by the increased dividend.


Net debt was £3m at the end of March 2013 and since then this has been reduced as Vianet  sold its stake in AIM-quoted Universe for £600k giving  £90K profit.

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