US Consumers are forecast to increase spending by 5%

Anticipate a Merry Christmas as US Consumers are forecast to increase spending by 5%, the largest gain in 8 years.

Sunday Times                                                                                            

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Last week …

larger shares drifted lower with the FTSE100 down 0.3% to 6674, the FTSE250 declined 0.4%, while the Aim All Share at 817 improved 1.1%. In the US the S&P 500 has had a run of seven weeks of gains and reached an all-time high. The cunning FED are ambiguously implying that a US Interest Rate raise and QE tapering will only start when the economy is ready and markets are prepared. In the UK the Monthly BOE Minutes showed a unanimous vote to keep rates unchanged. The OECD reduced Global growth forecast due to a slowdown in emerging markets.

This week …

on Monday Mortgage approvals will give an indication of the underlying strength of the growth in the Housing Market (the 20 year average is 85,000 a month).  A more accurate measure of GDP will be reported on Wednesday followed by Consumer Confidence figures on Friday. In the US there is also Housing, Confidence and Jobless figures.  We suspect that tapering will be announced retrospectively, i.e. after it has been done, so markets on both sides of the Atlantic could remain flat.

 

Company Reports

Future FUTR – £55m at 16.5p

Digital future arrived

On appropriately adjusted financials Future reported strong progress. The 12 months to September 2013 included exceptional items of £2.5m and discontinued business.  This now mainly digital publisher with more than 200 publications, apps, websites and events reported profits had increased by 4.8x to £5.8m. Net debt was halved allowing for a dividend to be paid. Revenues from on-going business was 3% higher at £112.3m and generated from 57m monthly global unique users of its websites, which include tachradar.com, gamesradar.com, bikeradar.com and musicradar.com. Revenue from digital advertising accounts for 59% of the total which is up from 48%, while sales of Digital editions grew by 44%. Techradar reaches a global audience of 20m users a month.  The US business returned to profits and there is an on-going programme to reduce the cost base. The advances in digital revenues following the strategy to diversify from print media marks an important turning point for the business, with advertising revenues now two thirds digital. The challenge is to effectively increase monetisation of this digital traffic and to development the digital agency activity in the US and the UK as a substantial new business. Profits for the September 2014 year-end give an EPS of 1.2p for a prospective P/E of 13.8x while yielding a potential 3%.

Financials

Cash inflow from operations jumped to £9.2m from £2.1m which was used to pay down debt and capital expenditure. Debt is £6.9m from £14.1m.

 

600 Group (SIXH) – £18.17m at 21.5p

Poor Odds

Interims from this machines tool company reported a return to profits with £0.58m from a loss of £0.33m. Confidence is reported to be returning to their major markets which surprisingly include Europe and revenues improved 5.2% to £20.94m. 600 design and develop metal cutting machine tools and manufactures precision components. Electrox designs, develops and manufactures equipment for the permanent marking of a wide variety of materials using lasers and is launching new product ranges with software which should come on stream in the second half.  In September when the share were around 13p it was announced that  a bid approach had been received from Qingdao D&D Investment Group Co Limited that may or may not lead to a cash offer being made for the Company. Discussions are ongoing, the relevant deadline to fill or kill by the takeover code is by is 5pm on 4 December 2013. There can be no certainty that an acceptable offer will be made. Profits for the full year to March 2015 are forecast at £2m for an EPS of 2.3p which gives a prospective P/E of 9.4x. There is no yield.

Financials

Net assets increased to £21.85m net assets excluding the effect of pension schemes (net of associated taxation) were £9.79m. Cash flow generated from operations was £0.83m, or 108% of operating profit, compared with an outflow from operations exceeding £2.5m in the prior year. Net debt increased slightly from £5.41m to £5.60m, primarily to finance investment in fixed assets and product development, resulting in gearing of 25.6% (March 2013: 25.0%).  Gearing after excluding net pension assets was 57.2% (March 2013: 61.1%)).

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