“A US default would result in massive disruption the world over and we would be at risk of tipping yet again into recession “. IMF Chairman
Last week …
… the FTSE at 6487 increased 0.5%, the FTSE 250 increased by 0.9% while the FTSE AIM All share at 786 improved marginally. The FTSE 100 hit a 3 month low on Wednesday, before rallying on ’hope’ of a US debt ceiling extension which if agreed would perhaps only buy enough time until the end of November. The steer from the BOE Interest Rate meeting is being replaced by more frequent economic statements from the Government. George Osborne prepared for his Autumn Statement by massaging down expectations of Tax sweeteners.
This week …
… Thursday is the deadline for the US to agree the debt ceiling extension. In the UK the Chancellor will need to consider Inflation and Unemployment figures which are reported on Tuesday and Wednesday. On Wednesday there are Inflation reports from both the US, which at 1.5% is trending down and Eurozone which at 1.1% is at its lowest for three years but may be affected by increased energy costs. After a volatile ride markets could end the week slightly higher.
Waterman Group (WTM) – £18.3m at 59.5p
Paying a premium for growth
Director purchasing shares after reporting confident finals have seen the price increase to just off its year’s high of 61p. This supports the confidence reported in the Chairman’s statement along with the 67% dividend hike to 0.5p. After closing non-productive offices, PBT was reported at £1.1m, which was the same as last year as was turnover at £66.8m. Waterman is an international engineering and environmental consultancy and reported a 5% increase in the order book to £105m. Confidence is returning to the UK property which is its main market accounting for around 75% of turnover. These results included the restructuring of overseas activities leading to the withdrawal from China during the year. The United Arab Emirates will also be closed after the year end which is likely to give an exceptional cost of around £1.9m. Waterman was appointed for the design of a hotel and office complex in Lebanon by MAF Properties based in Dubai. Waterman is currently working on five major transport projects in London and the sector is anticipated to provide continuous workload. The chairman is confident of being well positioned to triple profits over the next three years. Profits for the June 2014 year-end are forecast at £1.7m for an EPS of 3.2p for a prospective P/E of 18x while yielding 1.0%.
Operations generated £1.87m which gave net cash of £2.8m.
Aeorema Communications (AEO) – £3.64m at 45.25p
After July’s Trading Statement the share price in this corporate communications and events specialist had rallied ahead of these finals, which reported a strong return to profitability. For the 12 months to June 2013 a PBT of £359k was reported compared to a loss of £36k, on a 41% increase in revenues to just under £4m. Client companies operating primarily in the professional and financial services, telecommunications and technology sectors and are provided screen media and events that bring new ideas, innovation and products vividly to life. The investment in new technologies, including an upgrade of media storage and new presentation software seems to be paying off. The company’s move into new offices has allowed the integration of the Events and Video companies which are now together on a single open-plan floor. The EPS, helped by a low tax charge, was 3p which gives an historic P/E of 15x while the strong cash flow allows a maiden dividend of 1.5p is to be paid to shareholders on the registrar by 25th October, so yielding 3.3%. Moderate growth can be expected for the June 2014 year-end
Cash generated from operations was a healthy £0.8m which gives net cash of £1.5m and there is no debt.