http://www.investorschampion.com/ Provides refreshingly forthright, objective comment on small cap companies. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses. en Investor's Champion Copyright 2012 2012-01-31T09:22:59+00:00 http://www.investorschampion.com/blog/entry/uk-aimatuk-the-cloud-platform-provider-has-issued-an-encouraging-trading-up #When:09:22:59Z{/if} The Group has confirmed improved trading during the year with results now anticipated to be ahead of current market expectations.. Revenues are expected to show an 18% increase on the prior year to approximately £2.415m, while the loss before tax is expected to have decreased by 76% to approximately £0.14m. The Company’s e-commerce business, its main growth engine, delivered a stronger than expected performance with 61% growth in revenues. Having raised £0.5m just before Christmas the Balance Sheet is in much better shape which should vastly improve its future chances when competing for larger Government contracts. They have established a telesales team focusing on selling their SpendInsight and GreenInsight products across the Public and Private sectors. The first two team members are focusing on the NHS in support of the NHS Carbon Footprint project and also to Local Government, with two more joining in the next few weeks, who will focus on Universities, Housing Associations and Central Government.  In all they have identified a whopping 10,000 UK-based prospects for their analysis offerings at £10,000 each for either Spend Analysis or Green Analysis – that’s a substantial number of prospects! We remain of the view that partnering with a larger company might be a good option for the Group. They would sacrifice some margin but it could lead to greater overall sales and exposure to much larger contracts under the management of experienced teams. They are currently working with a large public sector outsourcer who has a good understanding of their offering and who could be an ideal partner, or even acquirer! 2012-01-31T09:22:59+00:00 http://www.investorschampion.com/blog/entry/northbridge-industrial-services-news-of-an-unexpected-impairment-but-tradin #When:12:59:14Z{/if} The pre-close trading statement drew attention to an unexpected impairment, although pre-this exceptional item trading remains in line – consensus eps for 2011 25.05p with a projected dividend of 4.99p Profits for the year ended 31 December 2011 are expected to be in line with market expectations and trading has remained robust in the majority of the Group’s markets. As a result the house broker isn’t making any changes to their £4.7m adjusted PBT forecast for 2011 and no changes to their adjusted PBT forecasts for 2012 (£6.2m) and 2013. Tasman Oil Tools (acquired in July 2010) is now fully integrated into the Group and has performed in line with management’s expectations. In addition, it is anticipated that the acquisitions of Loadcell Services and DSG Rental, announced on 13 December 2011 and 16 December 2011 respectively, will make a contribution to the Group’s results in 2012. The Group also confirmed it was looking to sell certain rental assets that are acheiving low levels of utilization with the sale the proceeds then being released for investment into core hire assets. Unfortunately, as result they have to recognise an ‘exceptional’ impairment provision that would write down the value of the assets to reflect the estimated proceeds should the equipment be sold. There was a positive outlook statement from the Chief Exec without a hint of the usual ‘cautious optimism’. Despite the recent recovery the shares remain well off highs and attractively valued 2012-01-27T12:59:14+00:00 http://www.investorschampion.com/blog/entry/plastics-capital-plc-aim-pla-reassuring-trading-update #When:09:29:21Z{/if} A reassuring trading update from the niche plastics products group who confirmed that trading was broadly in line with market expectations – year ending 31st March consensus estimates are for normalised pre-tax profit of £3.94m and earnings per share of 10.56p.  Management commented that trading conditions remain challenging although new business is helping to offset a general softening in demand. The Group’s bearings division (BNL) recently converted a major design project for a bathroom products company to manufacture plastic bearing devices for a new customer based in the USA.  The project is expected to be worth over £2m with sales expected to commence in 2013. It’s pleasing to note that cash flow continues to be strong and the Group’s debt is falling ahead of expectations – net debt at 30th Sept 2011 was £11.2m having fallen 24% from the comparable period. A cracking little business with a strong management team there to grow a much larger organisation. 2012-01-17T09:29:21+00:00 http://www.investorschampion.com/blog/entry/kbc-advanced-technologies-aimkbc-a-great-little-business #When:16:49:50Z{/if} Today’s trading update from consultancy and software provider to the oil and gas sector failed to impress the market but this is a great little business that has a lot to offer in 2012 The trading statement confirmed that the forecast for the year ending 31st December 2011 is “broadly in line” with expectations, delivering over 20% profits growth in the period – pre-tax profit for 2010 was £3.65m . The largest single item contributing to the increase in consulting activity is the US$42m Profit Improvement Program with Pemex Refinación. They now expect a healthy level of software sales in the first half of 2012 and with previous legal challenge consigned to history the Group will now be able to fully realise the potential of its own software products and services across all of the markets in 2012 and beyond. Cash generation was once again very strong with net cash at year end now expected to be approx £5.5m at up from the £2.6m held at 30 June 2011. The backlog at the year end is expected to be around £49m. Although the refining industry is having problems, witness the recent problems with Swiss listed Petroplus which is on the verge of going under, KBC anticipates there are opportunities for its consulting services. Other markets in which they operate, such as petrochemicals and gas processing, remain stronger than refining and will also provide additional opportunities in 2012. Encouragingly there wasn’t a “cautiously optimistic” statement in site and management looks “forward to the coming year confident that KBC will continue to deliver a strong trading performance.” KBC has consistently delivered over the past few years, is cash rich and the shares trade at sub 10x 2012 estimates. There is also a juicy 3.4% yield - can one ask for more 2012-01-12T16:49:50+00:00 http://www.investorschampion.com/blog/entry/belgravium-technologies-aimbvm-the-designer-and-supplier-of-computing-solut #When:17:38:24Z{/if} The statement confirmed that trading performance in the second half has been stronger than in the first half (First half turnover was £4.7m and pbt £321,000) resulting in overall trading performance for the year ending 31 December 2011 expected to be in line with market expectations (Expectations are for pre-tax profit £1.1m and eps of 0.73p).  Trading in all the Group’s major markets of logistics, transportation and on-board retail has been satisfactory with on-board retail being particularly strong.  In addition to the completion of the Monarch Airlines contract, the second half also saw a contract win for another major airline. Another significant contract completed in the second half was the supply of over 600 units of its “Atlanta 5000” hand held terminals to Hermes, the UK’s largest home delivery courier network which handles more than 140 million collections and deliveries per year – next time you get a home delivery think of little Belgravium!  The Group manufactures and installs complete systems incorporating both hardware and software for real-time data capture in the logistics, petrochemical and mobile retailing markets and looks particularly well positioned to benefit from the growth in home delivery activity from the warehouse to the point of ultimate delivery. With net cash of £600k at the interim stage the balance sheet is in reasonable shape and the valuation at just under 9x December 2011 earnings estimates looks modest, to say the least. A Director last bought a small parcel of 150,000 shares at the 5p level back in April 2011. The current share price is 6.5p with 5 year highs of 15p back in 2007 and lows of 1.75p in October 2008. Another one to keep an eye on in 2012, for all the right reasons! 2012-01-11T17:38:24+00:00 http://www.investorschampion.com/blog/entry/may-gurney-integrated-services-aimmayg-yet-another-nice-contract-win #When:17:07:23Z{/if} The AIM quoted support services group announced the award of a new long-term highways maintenance contract for Harrow Council valued at up to £50 million Starting in April 2012, the initial contract period with Harrow Council is for five years with an option to extend for a further two years. The contract has been awarded in three “bundled services” lots and includes maintenance of the Council’s key infrastructure assets - highways, carriageways, footways, streetlights, gullies, and watercourses. As part of the contract, May Gurney will also undertake maintenance of highways infrastructure assets belonging to London Underground and Overground, as well as watercourses belonging to the Environment Agency. Quite a lot to potentially complain about then! The latest contract win boosts MAYG’s current forward order book to £1.5bn The shares only had a modest run in 2011 and bearing in mind its financial track record and valuation at sub 10x 2012 estimates with a yield of just under 3%, it could be a an interesting one to watch in 2012. 2012-01-11T17:07:23+00:00 http://www.investorschampion.com/blog/entry/nichols-aimnicl-and-majestic-aimmjw-a-tale-of-2-tipples #When:23:02:30Z{/if} Two of AIM’s ‘blue chips’, both of whom ironically offer sustenance of one type of or another,  issued highly positive trading updates to open the New Year. First out of the tap on 6th January was Nichols plc (AIM:NICL) whose brands includes the iconic Vimto (sold in over 65 countries), Sunkist and Panda and more recently the Levi Roots brand that rose to fame through BBC’s Dragon’s Den. The trading update confirmed that Group profit was now expected to be ahead of market expectations (Now for pre-tax profit £17.8m, earnings per share of 34.5p).  Sales for the year to the 31 December 2011 increased 18% compared to 2010, ahead of the Group’s internal expectations despite the strong prior year comparatives and continued downturn affecting the UK economy. Although management alluded to gross margins remaining under pressure due to a combination of raw material cost inflation and the exceptionally high level of promotional activity in 2011they have still been able to maintain operating profit margins as a result of ongoing productivity improvements and tight control of costs. The Group’s balance sheet remains strong, with underlying cash generation also ahead of internal expectations; the Group had net cash of £1`4.4m at the interim stage. January brings the launch of a new and innovative range of Weight Watchers branded, low calorie soft drinks into the UK and the Republic of Ireland – well timed for those New Year resolutions! Despite it’ seemingly unexciting offering (and awful TV ads according to my 4 children!) Nichols has proved a real star of AIM, offering lots of lovely earnings and dividend growth over the past 5 years driving the share price ever higher. Next to ‘pop the cork’ today was the somewhat better known Majestic Wine (AIM:MJW) whose current Mkt cap of £254m is slightly bigger than that of Nichols at £220m. Majestic reported total UK store sales, excluding VAT, were up 8.4% for the nine weeks of Christmas trading from 1 November 2011 to 2 January 2012 underpinned by like for like UK store sales growth of 4.0%.  This brings the like for like UK store sales growth, excluding VAT, to 2.7% for the first 40 weeks of the financial year. Having previously reported on 14th Nov 2011 that comparable sales has fallen 1.1% in the first six weeks of the second half some had feared that Majestic would disappoint, dragging the shares down to 12 month lows. They shouldn’t have worried, despite the ongoing challenge from the large supermarkets the wine retailer has continued to perform…...‘majestically’ over the past few years, which reflected in the excellent share price performance. What can one learn from these 2 AIM stars? Essentially it’s the usual story of simple is best, with both Nichols and Majestic presenting relatively simple businesses for UK shareholders to understand. 2012-01-10T23:02:30+00:00 http://www.investorschampion.com/blog/entry/straight-aimstt-directors-buy-when-others-remain-fearful #When:14:52:47Z{/if} Following its pre Christmas trading statement, which saw the shares fall sharply to new lows, Directors in the UK’s leading supplier of specialist kerbside recycling containers have taken the opportunity to add their shareholdings. Three of the Board acquired an aggregate 60,000 at 29pence per share with Chief Executive Jonathan Straight acquiring a further 25,000 shares to bring his holding up to 4,550,500 shares or 38.24% of the issued capital. As we commented in December, the lowly market capitalisation of less than £3.5m seems unwarranted for a business that has been transformed over the past 12 months from one previously reliant on outsourced manufacturing (and the financial well being of its manufacturing partners) to a vertically integrated manufacturing business with revenues of approximately £30m. As the benefits of the restructuring of the manufacturing operation are realised, combined with the new investment, there should be a material improvement in profitability and cash generation in 2012. Management has supported our view to “buy while others (or the market in general) remain fearful!” 2012-01-05T14:52:47+00:00 http://www.investorschampion.com/blog/entry/geong-cash-flow-still-awful-and-red-flags-building #When:19:20:03Z{/if} The China based and focused internet solution provider announced its unaudited interim results for the six months ended 30 September 2011 with the usual cash flow issues highlighted…...and the usual excuses! Turnover was broadly flat at £4.8m (H1 2010/11: £4.7m) and profit before tax up £0.71m compared with £0.67m in the comparable period. The rise in net cash to £7.3m from £4.1m was as a result of the £2.9m of new money raised in the period but there was another operating cash outflow of £757,000 as a result of the rising level of trade receivables of £18.7m, due largely to building levels of accrued income of £13.2m (H1 2010/11: £10.0m) There was reassurance from management that debtor days would begin to decline in the next nine to twelve months as the proportion of SaaS sales increase, however, management made the same comments 12 months ago: 2nd Dec 2010 “We remain confident that debtor days will decline as the Group continues to roll out its new SaaS delivery models because this should result in payment terms that are relatively shorter compared to IaaS, as the offering will be sold on a per-usage basis.” Debtor days (including accrued income) now appear to be running at an annualized 712 days (that’s nearly 2 whole years at current revenue levels!) compared with 569 days in the comparable period and 520 days for the year ending 31st March 2011. If the business was experiencing meteoric sales growth one could understand this, but it isn’t! Rather than improving, the cash collection has actually got materially worse. The use of worrying marketing spiel (“We continue to execute our “Go-Deep-and-Broad” strategy”) also hardly gives confidence. Investors need to forget about the claimed changing business mix (we had that 12 months and more ago!) and simply focus on the numbers – they tell their own story.  The increase in gross margin to 51% from 50% surely isn’t worth mention in a business of this nature! They also entered into an annually renewable short-term facility of £1m secured on ‘new’ debtor balances (isn’t that factoring by any other name?) against which they had bizarrely drawn £500,000 at the period end despite holding mountains of cash –does this imply that a large element of cash is subject to specific covenants? We are also staggered at the low level of doubtful debt provision given the mounting receivables number and the recent change of auditor also hardly gives confidence. It’s hard to imagine a business with as many red flags! 2011-12-20T19:20:03+00:00 http://www.investorschampion.com/blog/entry/pursuit-dynamics-the-penny-drops #When:09:56:30Z{/if} Shares in one of the most over hyped AIM stocks of recent times have finally fallen to earth following the announcement of its full year results and news of a proposed Rights Issue to raise net £8.88m at a discount of approx 50% to the Closing Price on the day before the announcement. Much was expected of Chief Exec Roel Pieper who was appointed back in Sept 2009 but he has now resigned for “personal reasons”, to return to his venture capital activities. Mr Pieper has no doubt benefitted from a handsome salary during his time at PDX (2010 combined remuneration appeared to be approx £377,500) and holds few if any shares other than interests via a huge number of options – why are institutions prepared to go along with such ludicrous remuneration packages? Preliminary results for the year to 30 September 2011 offered the usual disappointment with revenue in the period only £490,000 (2009/10: £128,000) and a pre-tax loss of a whopping £15.3m (2009/10: £8.7m). Spending on fixed assets during the year totalled £1.9m, of which the substantial majority (£1.5m) was spent installing the ERS in five US ethanol production plants. What we find hard to understand is how the largest element of the capital expenditure was used to upgrade the Group’s R&D facilities in Huntingdon, when most had assumed they were well past this stage. Somewhat more promisingly the PDX Board (does that include Mr Pieper pre-resignation?) has approved a revenue forecast of not less than £22m and expects the business to be cash flow and EBITDA positive before the end of the fiscal year. However, the future still appears to be one of hope over substance with references “Letters of Intent” rather than firm Contracts. The significant sums invested in this company (over £50m) have been dependent on the support of large institutional investors. We remain totally mystified how anyone with any intelligence is prepared to invest their own shareholders money in such non profitable ventures where senior management are paid so much. 2011-12-15T09:56:30+00:00