One Thousand pound invested in the Numis Smaller Companies Index in 1955 would be worth £160,000 assuming the dividends are reinvested.
Last week …
… the FTSE 100 fell 1.3% to 6521, the FTSE 250 declined 0.7% while the AIM All Share at 796 improved a fraction. In the UK GDP was recorded at 0.7%, while a measure of consumer confidence, the Markit Household Finance Index was at its highest and most positive level since 2009. On the downside the BOE Governor does not see the need to extend QE. There was a small decline in Eurozone manufacturing while Angela Merkel’s Christian Democratic Union party was four seats short of a majority. In the US Consumer Confidence tapered off from 81.8 to 79.7.
This week …
… the US budget and debt ceiling is returning to haunt investors as Congress are hopefully going to approve the budget on Tuesday, thus preventing a government shutdown and Armageddon ‘lite’. On Thursday US Jobless figures will be reported. In Europe there is an Interest Rate meeting at the ECB on Wednesday followed by manufacturing and construction reports and Italy adds some political uncertainty. In the UK there are the PMI reports on most sectors of the economy. Markets seem likely to go lower.
Transense Technologies (TRT) – £20.3m at 7.5p
Transense Technologies reported reduced losses for the 12 months ended June 2013 but could be within sight of profitability. Revenues increased from £1m to £1.5m and may hit £6.2m this year. It’s Surface Acoustic Wave (SAW), wireless, battery-less, sensor systems has significant advantages over legacy wireless sensor systems. Demand from the mining sector for the iTrack tyre monitoring technology is growing with Otraco Chile the latest to place an order, worth an initial £1m. There should be recurring revenues of £250k a year from this contract. An initial order from Anglo American has grown to the next stage. The heavy R&D investments seem to have developed products and the company have worldwide partners and distribution network, the company is in a phase of rapid expansion which is supported by a strengthened balance sheet. Losses should reduce from £2.4m to £500k for June 2014 and 2015 could see profits of £2.4m which would be a P/E of 6.7x.
After a £2.5m fund raising at 7.5p in June net cash is around £3m, which should be enough to get to profitability.
Corero Network Security (CNS) – £15.1m at 17.75p
IT network security products supplier Corero is cashed up following the disposal of its business division for £13m which ought to finance operations until the next generation of products are launched. Corero is increasing its market by moving into the cloud computing and hosting areas. The initial launch of the next generation of cyber defence technology is imminent but the full range will not be launched until 2014. The market opportunity for protection against DDoS and cyber-attacks is substantial and growing with the products already developed revenue should increase. The interims include the businesses division sold to Civica. Revenues fell from $10.8m to $9.5m, while the loss increased from $2.79m to $3.01m. The continuing operations were responsible for that increased loss as costs have risen due to developing and marketing and new products. For the finals to December 2013 losses are forecast at $4m but should then start reducing.
Pro forma net cash is $15.2m but is likely to fall sharply as there was a cash outflow of $6.41m in the first half of 2013.
SciSys (SSY) – £20.2m at 69.5p
In the six months to June 2013, revenues improved from £19.6m to £21.4m and underlying profit edged ahead from £1.15m to £1.19m and the dividend is unchanged at 0.4p a share. IT systems and services provider SCISYS reported, however that markets were ‘stubbornly challenging’ as government and broadcast customers have delayed investment in software and systems. The £21.5m order book while comfortable is lower than last year. The recently acquired MakaluMedia has been integrated into the Space division and was earnings enhancing. The media and broadcast division has been hit by delays in orders and the anticipated orders may not come through until next year. The government and defence, applications management and environmental divisions are being merged to increase efficiently and the restructuring changes cost £284k. A contract with Lockheed Martin for the Warrior armoured vehicle has been won. Profits growth expectations have been gently reduced with profits forecast reduced from £3.0m to £2.8m on turnover of £42m which gives a prospective P/E of 9x while yielding 2%.
Net debt was £2.1m due to the MakaluMedia acquisition and the large increase in cash outflow should be reversed in the second half.
Coracm (CRA) – £38.8m at 12.5p
In the six months to June 2013, revenues improved from £4.26m to £8.35m and losses fell from £3.8m to £2.4m. Corac has a strong pipeline for its technology which produces valuable solutions in compression systems, atmosphere management and heat exchangers for government, energy and industrial users. This technology can help extract more oil/gas from wells and a new product/service is to be launched next year while the order book is £13.2m. Interim revenues were however lower than expected because of delays in business from the acquired air purification systems supplier ACI and heat exchange equipment maker Hunt Graham. Major contract signed with BP for offshore compression have extended the reach of developed technologies. The cash outflow was £3.9m which is down from £4.1m and losses for the December 2013 year-end are forecast at £3.9m on £17.8m revenue.
The management are expecting that its net cash of £2.77m will be sufficient, as the burn rate has been reduced by the partner funding of projects and the profit stream from ACI and HG.