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 2010 2010-07-21T12:39:56+00:00 http://www.investorschampion.com/blog/entry/zetar-plc-lonztr-prelim-results-show-tasty-returns #When:12:39:56Z{/if} Zetar, the AIM listed confectionary and snack company, yesterday announced its preliminary results for the period ending 30th April 2010. The company, which was listed on the 6th January 2005 (Share price 100p), and acquired its first business, Kinnerton, on 13th April 2005 for £32.2m, set out with a strategy to acquire, or make investments in, companies or businesses engaged primarily in the confectionery and snack foods or related markets. Having experienced an interesting 5 years on AIM (Share price high 590p in March 2007) the company now consists of 3 brands; Kinnerton, Readifoods and Humdinger Foods. The latter two are part of the natural snacks side of the business and were both acquired in 2006. The preliminary numbers speak for themselves, with turnover up 11% to £131.9m and adjusted profit before tax* up 40% to £6.4m and adjusted diluted earnings per share were up 27% to 35.4p (Consensus 34.85p). Cash generated from operations was up 97% to £7m and helped to reduce net debt from £15.4m in 2009 to £11.1m. Growth of the company has been supported with the approval of a new 4 year bank facility (fully credit-approved, with legal documentation at advanced stage, and all material commercial terms agreed). Development has continued apace on production capability, specifically at the York site, whilst everyday chocolate sales increased to almost one-third of Confectionery division’s revenue.  Broker Shore Capital was very positive post the results reiterating their BUY stance with the results slightly ahead of their expectations , following a challenging 2008/2009. Speaking about the company’s facilities, they said “We were most impressed by the Fakenham facility, which we have visited. The company has also expanded its York confectionery site in the year.” With the appointment of Roger Matthews (previously of Compass and Sainsburys) comes a great deal of experience in the consumer sector, and the addition of value lines has enabled Zetar to weather the market conditions quite successfully. This is backed up by good 2010/2011 figures for the first 11 weeks of the current financial year, with sales up a further 11% on 2009/2010 at £16.4m vs. £14.6m. It’s worth noting Roger Matthews, purchased 25,000 shares in February at 235p per share. Ian Blackburn, Chief Executive of Zetar Plc, said “We are confident that the building blocks are in place to realise our three year organic sales growth plan… encouragingly last year’s positive trading momentum has been sustained into the start of this year and, whilst we remain cautious due to the uncertain economic outlook, the Board anticipates further growth in the current year.” Broker upgrades likely! 2010-07-21T12:39:56+00:00 http://www.investorschampion.com/blog/entry/vantis-tenon-now-its-administrators-acquiring-administrators #When:07:56:22Z{/if} RSM Tenon, the fully listed accounting and businesses services group, has been quick to take advantage of the demise of Vantis, which fell into administration yesterday (as we anticipated!), by snapping up certain business and assets of Vantis for a cash consideration of up to £6.8 million, from the administrators of Vantis. The assets acquired comprise the trade and assets of three of Vantis’ Business and Advisory offices, the Thames Valley Recovery practice and the trade and assets of Vantis’ Financial Management business i.e. all the best bits! The initial consideration is only £5.7m in cash on completion, with £1.1m deferred subject tothe realisation of certain debtors acquired.  They estimate a further 3.6m will incurred integrating everything into RSM Tenon, which sounds somewhat over prudent and the transaction costs related are estimated at £0.5 million. Not surprisingly the acquired assets are considered to be earnings enhancing in the first full year of ownership by RSM Tenon. The Acquisition is being financed through the Group’s existing bank funding, which is to be extended to maintain the level of headroom within the Group. An additional £10 million revolving credit facility will be provided by Lloyds TSB Bank plc on terms consistent with the Group’s existing facilities. For the financial year ended 30 April 2010 the Acquired Assets generated total revenues of approximately £27 million and achieved a profit contribution (before central costs) of approximately £4.1 million.  Looks a really good deal although this is a people business so there is still much to do on the integration front. One can safely assume that the management of RSM Tenon were closely following the saga of Vantis and ready to pounce. Let’s just hope that RSM Tenon don’t go the same way as Vantis by piling up the debt on a reckless acquisition spree! 2010-06-30T07:56:22+00:00 http://www.investorschampion.com/blog/entry/acm-shipping-decent-results-and-unexpected-diversification-into-dry-cargo #When:22:02:01Z{/if} The leading international shipbroker announced decent preliminary results for the year ended 31st March 2010 but for us there was news of somewhat unexpected diversification into dry cargo. Pre-tax profit of £6.2m and basic earnings per share of 24.5p were below consensus estimates of £6.38m and 26.06p respectively but apparently moderately ahead of management expectations – not sure these were ever communicated to the public though! The total dividend of 9.5p was marginally ahead of expectations and equates to a yield of just under 5% at the current share price. Given this slight miss and the fact that the time charter forward order book at US$18 million (2009: US$25 million) was down due to market uncertainty we were surprised that the share price actually rose on the announcement, however, a volume of only 13,600 shares traded hardly offers a great indication and simply illustrates the lack of interest in micro-caps in the current market. The Group retained their usual strong cash position with £4.3m net cash at the period end and this after the Group acquired 500,000 of its own shares through its Employee Share Option Plan for a cost of £1m. Unfortunately the pension deficit for the defined benefit scheme increased to £2.1m from £1.2m. In line with the Group’s (new) strategy to become an integrated shipbroking service provider they are now diversifying into the dry cargo market worldwide through the acquisition of Endeavour Shipbrokers Pty Limited for AU$10 million (£5.8 million). ACM originally floated on AIM selling their oil specialism but who says you can’t change strategy! CEO Johnny Plumb commented how demand for oil is growing and returning to levels of two years ago with the start to the new financial year encouraging. One can only hope that investors regain their enthusiasm for high quality AIM stories such as ACM 2010-06-24T22:02:01+00:00 http://www.investorschampion.com/blog/entry/nwf-group-plc-lonnwf-another-record-year-trading-ahead-and-new-long-term-fi #When:14:19:52Z{/if} NWF Group, the specialist distributor set up in 1871 with an eclectic mix of activities, aimed originally at supplying farmers with food, feed and fuel recently announced the expectation of another record year for the Group with trading in the year ending 31st May 2010 ahead of market expectations. May 2010 consensus is for pre-tax profit of £6.7m and earnings per share of 9.79p. The new financing secured from the Royal Bank of Scotland runs until October 2013, and is a total facility of £51m available at ‘similar costs to the previous existing facility.’  Along with this net debt has been reduced from the £19.3m at the end of last year, thanks to ‘prudent cash management’. The Group is made up of three divisions. These are; •      Ambient Grocery Distribution (grocery distribution for retail businesses) •      Manufacture and distribution of animal feed (Feed for all types of livestock, with large technical department) •      Fuel distribution (Fuel Oils and lubricant distribution to farmers, fuel stations and domestic clients) Food distribution is on course to deliver a record result, largely attributed as the result of work done to increase operating efficiency. However, it is also appreciated that the industry has been largely unaffected by the economic climate. Feeds saw a shaky start in the first half, but has improved significantly in the second half, bringing trading inline with expectations for the full year. A cold winter, resulting in increased demand for heating oil has meant that the Fuels division has had outstanding results in the second half, significantly ahead of expectations. Chief Executive, Richard Whiting commented “The Group’s strong trading performance is a reflection of the underlying strength of all three divisions, and another record set of results are anticipated for the year to 31 May 2010, in our prelims in early August.” NWF doesn’t bring the excitement/hope of a material oil find in the South Atlantic but, as we have heard said before, ‘slow and steady often wins the race’! 2010-06-16T14:19:52+00:00 http://www.investorschampion.com/blog/entry/bp-the-pension-fund-managers-should-be-doing-more-to-help #When:11:00:03Z{/if} There has been lots of press coverage how the cut in the dividend would be a blow to millions of savers with approximately £1 in every £7 received by UK pension funds coming from BP. It’s also worth remembering that there are probably a large number of US pension fund holders are well. However, very little seems to have been made of the crucial role being played by the pension fund managers and large institutions who are the major shareholders in the oil giant. The more than 40% fall in share price hasn’t arisen through private investor selling, it’s been the big institutions and hedge funds who have been leaving the sinking ship. It’s surely time for the big pension fund managers to offer support in the best way possible by acquiring shares. All the leading institutional analysts take great pleasure in telling us how cheap BP’s shares now appear, however, their investment management brethren sitting across the trading floor appear reluctant to act. JPMorganCazenove has this morning reiterated its view that BP’s entire US upstream and downstream business has a likely market worth in excess of US$100bn. Goldman Sachs has also reiterated its own Enterprise Value/Discounted Annualised Cash Flow based (that’s a mouthful!) target price of 600p (US$52 for the ADR) which includes an assumed US$23bn post-tax liability to BP. Goldman cites key risks as a failure in the relief well, a deeper cut to the dividend than currently forecast and materially lower oil prices. We disagree; the key risk in the short term appears to be inappropriate rhetoric from the Obama administration. Even House Speaker Nancy Pelosi is now getting in on the act criticising BP for their “lack of integrity”; remember Bhopal Nancy! To conclude it’s surely time for the big institutions to stand up and be counted and offer whole hearted support to BP’s management, shareholders and employees by actively buying the shares.  2010-06-11T11:00:03+00:00 http://www.investorschampion.com/blog/entry/bp-the-barracking-needs-to-stop #When:12:19:20Z{/if} President Obama’s motivational skills are coming into question as he continues his tirade against BP and more particularly the company’s Chief Executive, Tony Hayward, who has honorably been prepared to face the music, almost single handedly, since the Deepwater Horizon rig sank back in April. In contrast, BP’s Chairman Carl-Henric Svanberg has ‘conveniently’ remained largely hidden from view. Although, to give him credit the former chief executive of Ericsson is the only member of the board who has put his hand in his pocket and acquired a material number of shares in the company since the disaster, picking up 175,000 shares on 28th April at the heady price of 618.92 – they were considered cheap back then!  Mr Obama’s first name apparently means “one who is blessed” in Swahili but his recent outbursts warrant the addition of another ‘r’ to reflect a more appropriate meaning! It’s hardly helpful when the leader of the country starts openly bashing the CEO of the only organisation capable of sorting out the mess!  BP has a responsibility to its shareholders and employees not just the fishermen of Louisiana and they aren’t going to agree to freely give handouts to everyone, whatever the merits of the claim -can’t wait for BP’s legal team to get into full swing! Following another material fall in BP’s share price (currently 364p) leading equity analysts are doing their best to offer suggestions. Since 20th April, BP’s equity market value has now fallen by over US$81bn with the market capitalisation of Exxon ($288bn) now 2.6x BP’s ($112bn). It’s also worth noting that for the year ending December 2009 Exxon generated revenue of US$310bn and net income of US$19.2bn compared with BP’s US$244bn and US$16.5bn respectively. JPMorganCazenove (‘JPMC) points out that consensus eps estimates for BP have fallen, primarily they suspect due to the oil price fall (since 20 April, Brent has fallen 14%) – surely the clean up costs have something to do with it as well chaps! BP currently trades at around 5.2x December 2010 estimates which is apparently almost half Exxon Mobil’s comparable PER of 10.7x. Assuming the dividend is maintained, which looks increasingly unlikely in the face of mounting US political pressure, the yield would be around 10%. BP’s Q1 2010 reported net assets were $104bn, so we are reaching that Benjamin Graham/Value investor moment when the shares are trading just above historical cost net book value. JPMC has pointed out that ExxonMobil trades on 2.6x net book value. JPMC’s Sum of the Parts (‘SOTP’) break up value of BP is approximately 950p share ($84 per ADR) with BP’s share price discount 57% and the ‘missing intrinsic value’ approximately US$159bn – all rather big numbers! Prior to this event, BP averaged a 23% discount to JPMC’s SOTP – the increased discount represents $91bn of equity value. Morgan Stanley (‘MS’) considers that the recent share price reaction is telling BP’s Board to show its hand quickly, rather than wait for the Q2 results (27th July 2010), both on the payout policy and on how it intends for BP to provide a clearer line of sight on payment of future liabilities for the oil spill. They also consider that investors will want to see the board reiterate confidence in the management team. Without this, political pressure could continue to outweigh fundamental value. MS considers that clarity on these issues should support a significant bounce away from the bear case and a 2010 PE multiple of 4.4x (a 38% discount to the group). Many analysts have commented how much progress has been made with the containment effort, however, the pictures continue to show oil gushing from the well and until this stops entirely no one will have any faith in the figures being quoted.   Citi has pointed out that BP’s cashflow generation remains strong and on their estimates the group will generate c$40bn of cashflow a year between 2011 and 2013. Capex of c$20-25bn pa leaves headroom of $15-20bn which is more than enough to pay the $10bn dividend and fund the oil spill response. The Obama administration clearly has little time for cashflow and financial statements and assumes that open BP bashing is all that’s needed.  2010-06-10T12:19:20+00:00 http://www.investorschampion.com/blog/entry/vantis-aimvts-are-the-administrators-close-to-falling-into-administration-t #When:16:43:40Z{/if} Vantis, one of the UK’s leading accounting, tax, business recovery and advisory groups recently announced that, as part of its ongoing plan to reduce its level of debt, it is reviewing a number of alternative courses of action. About time some would say! Alternative courses of action include progressing negotiations with potential investors as well as entering into preliminary discussions with its debt providers regarding a potential restructuring of the Company’s balance sheet to reduce the level of debt outstanding to a more suitable level. Unfortunately negotiations with both investors and the Company’s banks are at an early stage which, given that net debt at the interim stage (31st October 2009), excluding finance leases & loan stock, amounted to £40.4m remains cause for concern. Equity was £34.3m leaving net gearing, excluding those leases and loan stock at 117%. Vantis Business Recovery Services, in the guise of Nigel Hamilton-Smith and Peter Wastell are currently Joint Liquidators of Stanford International Bank Ltd. If new funding arrangements can’t be secured they appear to be running the risk of calling in the Business Recovery Experts themselves 2010-06-04T16:43:40+00:00 http://www.investorschampion.com/blog/entry/is-pharma-plc-aim-isph-results-marginally-miss-estimates-but-hardly-a-big-d #When:14:15:54Z{/if} The company, which provides specialist pharmaceuticals and equipment in core areas such as Oncology and Neurology saw revenue up 17% to £14.2m (2009: £12.2m). This includes £0.7m from the Volplex and Isoplex Distribution and Sale agreement. Product sales were up 19% to £13.4m (2009: £11.2m) and pre-tax profit up 30% to £2.6m (2009: £2.0m) post exceptional items of £0.4m (2009: £0.6m). Basic earnings per share were 7.3p (2009: 9.1p). Consensus estimates were for pre-tax profit of £2.98m and eps of 8.23p, however, there was a big spread between the 2 analysts covering this one (6.7p to 9.6p!).  Cash generated from operations was up 24% to £3.1m (2009: £2.5) and cash balances at the year end were £4.2m (2009: £6.0m). During the year the Group paid down £3m of debt and invested a further £2.7m in product acquisitions and development, principally the acquisitions of Episil and Aquoral.  They also drew down £1m from their debt facility with Bank of Scotland to part fund the Episil acquisition, and at year end, the balance drawn down on this £8m facility was £4.5m – so plenty of headroom!  Net debt was £9.7m representing net gearing of c32% As we spoke of in April 2010 when the company released a trading update for the period ending 31st March 2010, they continue to implement their strategy including the acquisition of exclusive European rights for Epsil (Oncology support care product) and similar rights in the UK for Aquoral (Aequasyal) with an option for Germany. In addition Aloxi (a drug used to prevent Chemotherapy-induced nausea) is now recommended in international cancer guidelines with revenues of this drug up 84%! The Volplex and Isoplex Distribution and Sale agreement mentioned above was worth £1.4m with £0.7m paid in the year under consideration. Commenting of the results, Tim Wright, Chief Executive Officer, said “We are pleased to report another year of exceptional performance as we continue to deliver against our strategy of building a leading European speciality pharmaceutical company. “ With exclusive rights to important drugs and revenues of key drugs up, this promises to be an interesting company to watch. As we write the share price has fallen 6.7% to 69.5p on a whopping 17,000 shares traded – such is AIM!  2010-06-02T14:15:54+00:00 http://www.investorschampion.com/blog/entry/advanced-medical-solutions-aim-ams-seals-the-deal-with-new-distributors-in- #When:13:20:19Z{/if} Advanced Medical Solutions Group plc (AIM: AMS), the global medical technology company, today held its annual general meeting. The company, which was founded in 1991 and supplies specialist wound dressings and healing solutions, including Silver Alginate dressings and Cyanoacrylates (glues used to seal wounds). The chairman, Dr. Geoffrey Vernon, said the company had seen a strong first half with trading substantially ahead of the same period of 2009, and inline with market expectations for the full period ending 31st December 2010.  Consensus estimates for the financial year ending December 2010 are for pre-tax profit of £5.11m and eps of 3.48p. He reported several key initiatives on which the company would focus in the near future.  The company’s ‘LiquiBandΒ (wound closure) range found three new distribution partners in addition to Cardinal Health (NYSE:CAH), the $12bn market cap US healthcare giant.  The addition of the largest pharmaceutical distributor in North America gave the product coverage in non hospital sites as well as the hospital and medical practise sites. The Liquiband® trademark was registered in the US, and received regulatory approval in Japan and Canada for the full product range. The company’s Activheal® ( first option wound care products which promote moist wound healing) value range has been pushed to the NHS, who is looking to cut budgets, offering substantial savings to Trusts. With the move to the new facility at Winsford on schedule and on budget, the board remains positive very positive about the 2010 outlook and intends to confirm the payment of a maiden dividend for the full 2010 financial year, payable in 2010. One to support! 2010-06-02T13:20:19+00:00 http://www.investorschampion.com/blog/entry/rws-holdings-half-year-report-shows-strong-operational-performance-despite- #When:13:16:14Z{/if} RWS Holdings, Europe’s leading provider of intellectual property support services and technical translations, today released its half year report for the six months ended 31st March 2010. Formed over 40 years ago, the company provides specialist technical, legal and financial translation services for industry. The market is a strong one, approximately 1,000,000 patent documents are published every year, 200,000 of which are published in Europe (Source: European Patent Office). The half year report showed many positives, despite the £1.9m hit due to currency fluctuations. Sales were up 10% to £29.4m (2009: £26.8m), while underlying profit (before amortization of intangibles) was up 16% to £6.9m (2009: £5.9m) after eliminating the negative impact of currency fluctuations. However, profit before tax (taking in the same considerations) was down to £6.8m (2009: £8.0m). Nevertheless, this again takes in the £1.9m negative currency impact and a £0.2m reduction in interest due to the lower interest rates. The interim dividend was increased 13% to 3.15p (2009: 2.8p). Net cash at period end was £23.8m (2009: £24.5m) after a £2.5m development loan and £.0.7m acquisition in H2 2009. The company has experienced tough trading conditions, especially in Germany and Japan, but has seen resilience of its core patent translation business. The Chinese business arm grew revenue by 40% and moved into profit. New client wins in December 2009 and a 31% increase in PatBase subscription revenues boosted the numbers. The outlook looks promising with new client wins and sales expected to benefit the second half incrementally. Executive Chairman Andrew Brode who holds 45% of the shares went on to say that “With the anticipated benefit of new clients won in December 2009 to be realised incrementally during the second half of the financial year, our expectations for the year as a whole remain unchanged.” Consensus estimates for the financial year ending 30th September 2010 are for pre-tax profits of £15.28 and eps of 25.96p resulting in a PER of 11.36x (share price 295p). With a commanding market presence and net cash of £23.8m that implies decent value. 2010-06-02T13:16:14+00:00