“ attempts to reduce the deficit while boosting growth are proving tricky and credit Ratings are largely symbolic .”
Vince Cable, Business Secretary
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Last week …
… volatility was caused by the likelihood of policy changes, particularly the US reviewing its QE. The FTSE 100 managed to close up 0.1% at 6635, the FTSE 250 up 0.8%, while the AIM All-Share at 746 was marginally lower. The pound’s weakness, falling to a 15 month low against the dollar, reflected the Government’s policy dilemma of austerity verses growth. This resulted with the UK first credit downgrade in 35 years on Friday Evening to AA1.
This week …
… the economic newsflow will be fast in Euroland and the US but hopefully not too furious. In the US there are Durable Goods figures to reports on Wednesday which are a forward indicator followed by GDP on Friday. On Wednesday there are both UK and Euro Confidence Surveys with a host of other Euro statistics to be reported. Also on Tuesday/ Wednesday the Italian election results will be known with a win by the Centre/Left party lead by Bersani’s most likely to be stabilizing. Moderate gains seem likely.
ALL Leisure (ALLG) – £23.3m at 37.75p
Keeping afloat with tours
These finals to October 2012 were not helped by the sinking Italian cruise ship and the Euro crisis so a profit of £0.8m was reported compared to £5.6m. Group revenue for the year increased 58.5% to £127.4m reflecting the acquisition of Page & Moy Travel Group for £4.2m in May 2012. During the year, revenue from cruising decreased by 18.5% and it lost £8m. This was offset by the strong post acquisition performance of the combined Tour Operator business earning £8.8m. All Leisure tours provide fully escorted holidays to a wide range of overseas destinations including touring holidays, city breaks, river and ocean cruises, safaris and classic rail journeys to the over-55s as well as families aimed at providing value for money with quality. The committed capacity of the Cruise holiday division has been reduce with a two year rolling charter agreement with Allways and Joint -Ventures. All Leisure own three ships with 1 on lease. The historic P/E is 8.1x while yielding 3.5% and the company is confident that it is well positioned for an improved performance notwithstanding the uncertain economic outlook.
The NAV is £31.8m or 51p per share with borrowing of £5.8m while cashflow helped by the tour acquisition improved to £18m from £6.7m.
Netcall (NET) – £44.8m at 37.25p
Spend to Save
Interims to December from this customer engagement software provider, showed a 12% increase in revenue to £8.16m with a 46% increase in profits to £1.34m. Netcall provide cost saving business process solutions with intelligent contact handling, workforce optimisation, process and enterprise content management. The expanding customer base of over 700 organisations include the NHS, telecoms operators such as BT, Orange and Cable & Wireless and organisations including Interflora, Lloyds TSB, Interserve, Prudential, British Sugar and Thames Water. An earnings enhancing acquisition was made for £1.69m which broadens the client and product base. The strategy is to continue to combine organic growth with targeted acquisitions while remaining focused on operational cost management. Organic growth will continue to be helped by the high proportion of reoccurring income and the launch of a new platform. Profits for the full year to June, without anticipating further acquisitions, are forecast at £3.6m giving an EPS of 2.6p so a prospective P/E of 14x while yielding 1.8%.
The balance sheet is debt-free with net cash funds of £8.2m while cash generated from operations increased 32% to £2.4m.
African Potash (AFPO) – £6.76m at 3.38p
Cash shell African Potash has finally secured the deal to buy 70% of a potash project in Congo, which it had walked away from due to delays in government approvals. There is a positive outlook for potash demand and prices have already risen in recent years. The recent GM approved the acquisition of a 70% interest in La Societe des Potasses et des Mines S.A. (SPM), which holds the exclusive right to conduct mining research activities for potash salts over the Lake Dinga project in the Republic of Congo. The project has been granted formal rights for mineral exploration. The rights last for three years and there are potentially two extensions of two years each. Initially four holes will be drilled by the end of 2013, while the second phase involves the drilling of 12 more holes. The project is near to the Sintoukola and Mengo potash projects. These projects can share data and infrastructure investment. The terms of the deal are the same as the purchase price is $15m – $12m in shares and $3m.
There is $7.8m in the bank at the end of 2012, although this will fall to $4.5m after the acquisition and this will finance exploration and development of the asset. Further out Phase II could cost a further $16m.