The Euro crisis is over

Pause for Thought

“The euro-debt crisis will strengthen as we all have instruments for stability, solidarity and an improvement in economic governance. The Euro crisis is over.”  

French President Francosis Hollande


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Last week …

… the FTSE 100 dropped -2.6% to 6,411 and on Wednesday alone it fell -2.12%. The FTSE 250 fell -2.4% with the Aim All Share at 719 was -2.5 lower. Markets were heading even lower until US Jobless claims grew by less than expected giving an Unemployment rate of 7.6%. UK economic news was positive with UK Manufacturing PMI at a 14 month high, UK Construction is growing again and even Eurozone Manufacturing is declining at the slowest pace for 15 months. Investors were perhaps depressed about the consequences of the Fed reducing its liquidity stimulus policy.

This week …

on Tuesday Industrial and Manufacturing Production is reported followed on Wednesday by Unemployment figures. In the US there is Retail Sales and Consumer Confidence  reports on Thursday. It is likely that Chinese Industrial Production and Retail Sales will have a significant influence on sentiment. We expect markets to end the week higher.


Company Reports

Sanderson Group (SND) – £22.78m@ 52p

Growth yielding profits

Interims to the end of March showed this software and IT services business had increased operating profits 13% to £0.91m from £0.8m while revenue improved 3.6% to £6.37m. The PBT was £0.8m compared with around £0.2m,when the profit of a discontinued business is taken-out and the dividend was increased by 30%. Sanderson provide software and IT solutions specialising in the multi-channel retail and manufacturing markets. The solutions are proprietary software integrated, when appropriate with market leading products  and are supported and developed to offer ‘value for money’ and tangible business benefits such as increased efficiencies and cost savings.  There are pre-contracted recurring revenues of £3.96m or 62% of sales generated from the long-term customer relationships.   Sanderson continue to invest in development with an emphasis on further developing the range and scope of solutions for online sales and ecommerce businesses as well as a range of  supportive mobile solutions.  Selective acquisition opportunities will also be made to augment organic growth and a number of small opportunities are being considered. Profits for the year-end September are forecast at £2.1m for a prospective P/E of 13x while yielding over 3%.


There is positive cash flow and there is net cash of £4.5m or 10p a share.


Silverdell (SID) – £44.6m@14.25p

Growth in Muck

Decommissioning and remediation services provider Silverdell reported strong growth in its interim revenues but this was mainly due to a full contribution from the EDS acquisition, which made no contribution in the corresponding period. Revenues doubled to £63.9m in the six months to March 2013. Organic growth was 10.5%. Margins have been hit by a greater proportion of cost-plus contracts and all of the profit growth came from EDS thanks to large decommissioning contracts in Canada and Australia. Pre-tax profit still trebled to £3.3m thanks to cost savings. Earnings per share doubled to 0.8p a share. The inclusion of EDS means that the power generation market dominates revenues. The order book is worth £238m and £66m of this is due to be delivered in the second half.  The EDS acquisition has made the business more international so less UK dependent. Profits for the September 2013 year-end are forecast at £9.6m for an EPS of 2p giving a prospective P/E of just over 7x while yielding 2%.


Net debt is £15.8mbut include finance leasing of £8m and should fall to £12.1m by the end of September.


Mediwatch (MDW) – £3.7m@2.63p

Over Engineered

Mediwatch’s interim to April showed operating profit had improved to £161k from £78K despite a 3% fall in revenue to £4.9m, the PBT was £121k. The contributory positive factors are the restructuring of UK sales, a new distribution agreement in the US and product launches. For over 10 years Mediwatch has developed faster, simpler and less invasive diagnostic products for people with a variety of urological conditions and have a range of medical equipment for the diagnosis of these urological disorders. There are number of recent product launches such as the New Clinic+ Urodynamics system, NANO Portable UDX system, Mediwatch Procedure Couch and  the Venus Pelvic Floor device.  A good year to October 2013 can be anticipated so assuming a PBT of £0.3m the prospective P/E would be 13.5x. It maybe that Mediwatch are better at developing products than sustainably increasing its global sales, which could leave them open to corporate activity.  In April the CEO lifted his stake to 17.3% after buying 100,000 shares at 2.5p


The company was not cash flow positive at the interims as stocks were built-up and net debt was £0.87 ad the NAV is £6.1m.


@UK (ATUK) – £6.16m@7.25p

Room for Significant Improvement

Ecommerce software supplier @UK have reported lower turnover and increased losses for the December 2012 year end but the current year starts with some contract wins and a strong pipeline of potential projects. A partnership agreement with Visa will provide a base for international expansion. In 2012, revenues fell 6% to £2.22m and the loss increased from £177k to £850k. There were additional costs for newly opened subsidiaries in Australia and India. Both these businesses have moved into profit. A US office has been opened this year. The fall in revenues was down to a lower contribution from the company formations business but the growth in the ecommerce side was also disappointing and revenues were only 7% higher at £1.18m. There are currently proposals for the UK worth £8.9m although not all of these will be converted into revenues. The partnership with Visa will help @UK to win additional international work. Some delayed contracts have already come to fruition this year. Profits are forecasts at £200k on revenues of £3m for the Year-end December 2013 for a prospective P/E of 24x.

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