The Transparency and Trust discussion with the Stock Exchange could lead to legislation

“The Transparency and Trust discussion with the Stock Exchange could lead to legislation”. 

Vince Cable, Business Secretary       


Last week …

the Fed ‘in-effect’ stated the US Economy was not strong enough to bear a reduction in  QE; the S&P 500 and the Dow Jones reached record highs. The FTSE 100 responded with a 2.7% rise to 6545 the FTSE 250 rallied 3%, while the AIM All Share at 715 improved 1.7%. The weak Chinese Trade Data and reducing growth expectations alongside the weakness in the Eurozone ‘balance sheet,’ as Italy’s sovereign debt was re-classified as junk, both may only have had a marginal impact.

This week …

on Tuesday UK Inflation is reported, followed by the latest BOE’s Monetary Policy  Minutes   with the new Governor in-charge.  The Consumer Price Index (CPI) is likely to rise to 3% from 2.7% but has the BOE’s attitude changed? There is UK Unemployment on Wednesday with Retail Sales on Thursday.  In the US, the Fed has a put and call option on economic growth and Consumer Confidence and Employment are reported on Thursday. Perhaps more volatility but the trend is flat.


Company Reports

Coral Products (CRU) – £4.1m at 9.75p

Building Value

Finals to April showed flat turnover at £17.3m but a 98% jump in Operating Profits to £0.5m. Coral design and manufacture injection moulded plastic products mainly for packaging.  Although flat turnover was not helped by the general economy the product mixed has changed. The improvement results from the implementation of the strategic plan which refocused the product and sales efforts from a reliance on declining media packaging  such as CD& DVD cases, which has fallen to less than 50% from 80% of turnover. The development of the Merseyside Plant should allow a wider new range of packaging products such as food to be produced more in-line with clients demands generated from the reorganised Sales and Marketing team. Gross Margins improved to 24.6% from 22.1% and the focus on higher value products remains. If profits for the April 2014 year-end doubled to £0.7m the EPS of 2.2p would give a Prospective P/E of 4.5x while the yield is 5%.


The freehold of the factory was acquired for £1.75m with a 70% mortgage a placing of £0.4m at 12.5p. Cost savings are estimated at £0.3m and the purchase was seen to be strategically justified.  Cash flow from operations increased to £1.6m from £0.5m. The NAV is 20p a share or £8.6m of which £6.3m is property plant and equipment with net debt of £3.9m.


PHSC (PHSC) – £3.2m at 29.5p

Worth More

Finals for the year to March reported a 30% increase in revenues to £5.8m, while EBITDA rose 35% to £0.6m and the dividend was increased by 50% to 1.5p to give a 6.1% yield. The results included couple of acquisitions; in July 2012 QCS was brought for £200k, which is around 2x operating profits. B&B was acquired in September 2012 for a staged total consideration of £0.92m or around 3x PBT. PHSC provides a range of health, safety, hygiene and environmental consultancy services and security solutions to the public and private sectors and has around 8 subsidiaries. The largest is Adam Lab Services with turnover of £2.4m making a profit of around £237k. The two complementary acquisitions, while not adding critical mass to any existing division does help expand the service offering and client base and the post-acquisition strategy is seemingly working.   Profits had been relatively flat for some years and the current EPS of 3.64p gives a prospective P/E of 6.7x while yielding 6.1%.  Further acquisitions could be financed with combination of debt and equity although the sensible service diversification strategy may soon leave the impressions of a loose micro conglomerate.


Cashflow was positive but cash has been absorbed into acquisitions so the net cash fell to £216k from around £900k and further staged payments for acquisitions of £450k will fall due in the current year.  The NAV is 53p a share or £5.63m.


1PM (OPM) – £11.9m at 0.27p

Higher Risk Loans

Small company equipment lease financier  of between £1k – £50k, 1PM reported record figures for the year to May 2013.Revenues increased by 35% to £3.11m, while pre-tax profit jumped from £436kto £775k, as admin expenses rose more slowly than revenues. Due to the strict lending criteria the bad debt provision was just 1.4% of the portfolio. New business has reached record levels and the growth is set to continue as small businesses seek alternatives to bank finance. The loan book is expected to be worth more than £16.5m by the end of May 2014. 1PM intends to offer new products, such as higher risk small business loans. The base case profit forecast for May 2014 are £0.98m for an EPS of 0.02p which gives a prospective P/E of 15x.


New funding lines of £4.14m have been opened and as the business becomes more successful the cost of financing reduces. The pro forma NAV is just over £6m.

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