Eurozone will continue to be weak

It seems reasonable to plan on the basis that the Eurozone will continue to be weak as the structural, fiscal and demographic challenges play out. 

Sunday Times

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Last week …

various key reports were not too bad. The FTSE 100 improved 1.5% to 6521, the FTSE 250 increased 0.9% with the AIM All Share at 714 gained 1.1%.  In the Euro-zone interest rates were cut by 0.25% to 0.5% with a promise from the ECB Governor, “to do what it takes to spark growth”. US Markets reached new highs as the Fed Reserve’s $85bn a month growth stimulant continues and success is illustrated by the 165,000 growth in non-farm jobs to drop Unemployment to 7.5%, which is the lowest since 2008.  The UK PMIs (Purchasing Managers Index) were above expectations with Services at 52.9, Manufacturing at 49.8 and Construction at 49.4 which averages above the dividing line between recession and expansion of 50.

This week …

is slower for economic reports so company earnings could set the tone. A Middle Eastern conflict escalation seems to be  threaten.   On Friday, however there are UK Trade, German Inflation and a Budget Statement from the US Treasury which is a reminder that the Fiscal Cliff is not that far away.  A weaker week seems likely.


Company Reports

Vislink (VLK) – £34.7m at 30.5p

Small World

The annual 1st quarter statement restated the aim to achieve profitable growth to £80m of annualised revenue by the end of 2014 with a 10% operating profit. Continued growth will be achieved through new product development such as Mantis MSAT, the world’s smallest and lightest satellite data terminal and sales to  high-growth emerging markets such as Brazil, which is expected to benefit from the Rio Olympics and 2014 World Cup. Other key initiatives are the development of products such as the LiveGear-branded product range, which has taken Vislink into the emerging market for collection of video content over cellular and IP networks, and the penetration of new segments such as unmanned aerial vehicles. Vislink is a global technology business specialising in solutions for the collection and delivery of high quality video and associated data from the field to point of usage. These are sold to the broadcast market for the collection of live news, sports and entertainment events and to the video surveillance market for defence, law enforcement and public safety applications. The forecast for December 2013is for a PBT £4.25m on revenue of £62m, for an EPS of 2.28p gives a prospective P/E of 10.7x, while yielding 4.2%.  This organic  growth forecast is short of management’s ambitions but they could be targeting to supplement organic growth with acquisitions.


There is no debt with net cash of £8.1m.


Deltex Medical (DEMG) – £23m at 13p

Squeezing niche

The AGM contained a Trading Statement from this fluid monitoring medical equipment developer.  Sales of its high margin disposable surgical probes continued to grow despite it being tough generating new equipment sales.  For the year to December 2012 which were reported in March revenues rose 7.6% to £6.78m but higher marketing costs and R&D increased the operating loss ito £1.1m from £0.7m. There is evidence that the Deltex’s CardioQ-ODM monitor can save around £1,100 as it can shorten the hospital length of stay by two days. The implementation of NICE guidance will lead to greater usage of the technology in NHS hospitals and therefore more probe sales. In the US there is a physician payment of $101 per patient to use the CardioQ-ODM and this should help growth. Deltex has also secured a deal with US hospital purchasing operation Premier although this may take two years to give a large boost to sales. The rate of growth may depend on how quickly the new NHS guidelines are complied with by hospitals and US take-up. Revenue growth will increase over the next two years but it will remain loss-making.


In January, £1.9m was raised at 19p a share leaving net cash although there is a £1m convertible and a £724k invoice facility. The UK operation with significant NHS sales is strongly cash generative.


Piries Investment (PIRI) – £1.18m at 0.065p


At the CVA and reorganisation £1.7 million was raised at 0.1p. The company continues to look for a reverse takeover but it is also looking to take advantage of opportunities to seed transactions at a pre-IPO stage with the intention of incubating them to come to market. So a small investment has been made into a US shale oil project. To implement the investment strategy shares were brought in a range of liquid quoted investments. The NAV of £1.3m consists of cash of £1.2m so the market cap is a 10% discount.

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