“Inflation will not hit 2% target as fuel and food prices rise”.
Bank of England (BOE)
“Action by the BOE can and should continue to support the economy”.
www.tradersown.co.uk. Where shares can be bought and sold for £6 a trade. It is an informative share trading site and our new share tip will be posted there on the week of the 18th February .
Last week …
… European political and economic uncertainty along surprisingly with a stronger Euro triggered a sell-off in the FTSE100 which fell -1.3% to 6264. The FTSE250 was 0.7% higher with the Aim All Share at 746 improving 0.8%. Better than expected reports on UK Construction, up 0.9% and a recovering Services PMI, at 51.5 while interest rates at 0.5% with QE at £375bn the BOE inflation policy seems to be unchanged. In the US the strong 20.7% month-on-month fall in the Balance of Trade signalled an upward revision of 4th Qtr GDP.
This week …
… UK Consumer Prices and Retail Prices are reported on Tuesday with the BOE Inflation Report on Wednesday. If, the new BOE Governor is serious about hitting the 2% inflation target monetary policy may need to be tightened. On Friday the UK Unemployment rate will be reported currently 7.7% with just under 2.5m out of work. There are growth, production and inflation figures from Germany on Wednesday, Thursday and Friday. We remain bullish.
Allocate Software (ALL) – £50m at 78p
Dull Interim revenue growth was reported from this niche mainly healthcare compliance and workforce optimisation software provider with a strong presence in the NHS. Revenue increased by a mere £0.1m to £16.1m while higher costs resulted in adjusted EBIT falling from £1.4m to £0.4m. The business model is moving towards higher margin subscription based from licensing fee income. Allocate are investing in completing a comprehensive suite of inter-operable solutions that can improve productivity throughout the operations of a heathcare provider so are able to offer customers an altogether more nimble integrated solution. Recurring revenues (from subscriptions, support and maintenance) grew by 11% in H1 and now account for 51% of sales, up from 46% last year. The geographic and product diversification is showing improvement from Sweden and Australia while Maritime and Defence income is increasing. Revenue is forecast at £37m for the May year end with profits at for £5m for a prospective P/E of 14 which drops to 12x a further year out. The dividend yield is 1.6%
There is net cash of £6m.
NWF (NWF) – £54.4m at 115p
A jump in the profit from the animal feeds division meant that NWF’s interims to November improved despite a poor performance from the food distribution division and underlying profit rose 28% to £2.3m. Commodity price increases helped the feeds business and NWF plans to sell a wider range of products to its customer base of farmers. Fuel profit recovered at the half way stage and the division will benefit from the colder weather in recent weeks. Food distribution was hit by the loss of AB World Foods as a customer. That knocked capacity utilisation and it has taken longer than expected to find new customers to replace the AB volumes. Fuel distribution revenue fell 5% to £171m and while costs have been cut but this has only partly offset the decline. A £1m rise in full year profits are forecast to £6.1m which gives an EPS of 9.6p and a prospective P/E of 12x while yielding a potential 4.2%.
Net debt was down 53% to £13.7m and will not be much lower for the year-end. Opportunities in the agriculture markets are being sought.
Hayward Tyler (HAYT) – £12.1m at 26.5p
The change of name from Specialist Engineering Group to Hayward Tyler maybe poised for growth as the focuses is on three main sectors, of power generation, offshore oil and gas and nuclear. The Year-end Order book was reported to be 10% higher at £34.5m and a significant improvement in H1 profits anticipated. The core product is boiler circuit pumps, where reliability is most important. They can weigh up to 12 tonnes. Customers include RWE, Rolls-Royce, ExxonMobil, Alstom, EDF Energy and TXU Energy. The main competitors are based in Germany and Japan. Growth in power generation is mainly coming from China and India. Hayward Tyler has an installed base of more than 2,000 units and more than one-fifth of them are in China. Hayward Tyler is also becoming involved in syngas projects.Net asset value was £8.6m at the end of June 2012, including £5.6m of net tangible assets. The unaudited figures to December 2012 to be published in early March and could show a profit improved to £2.1m according to a recent trading statement which would give a P/E of 6.5x. A dividend in the ‘future’ has been promised.
Net debt was down to £5.6m at the end of June 2012, following a £5m placing in May 2012 at 50p a share – double the then share price to a trading partner MBE Mineral Technologies who now own 22.1%.