Featured Companies Update

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Markets have been particularly negative in June as investors fretted over the Greek debt crisis. However, the companies we feature in AimZine have continued to report good progress with their businesses.

Red24

This global security group issued its final results on 10 June.  The headlines from the results showed that red24 made excellent progress in the year to 31 March 2011:

 

■            Revenue increased by 22% to £5,263,007 (2010: £4,287,744) 

■            Profit Before Tax up 18% to £741,946 (2010: £628,294) 

■           Basic EPS of 1.51p (2010: 1.43p) 

■            Dividend payment increased by 60% to 0.24p per share (2010: 0.15p)   

■           Net cash increased to £1,196,150 (2010: £937,885) 

■          Two main distribution deals on three year contracts 

■           New contract wins to provide additional special risk services, including a major international

   insurer starting May 2011

Red24’s broker, Seymour Pierce, is forecasting that earnings per share will grow to 1.7 pence in 2012, which puts red24 on a 2012 p/e of 7.6. This is very low, in our view, for a Group with: 1) two major 3 year contracts under its belt, 2) £1+ million in cash, 3)  a promising new business in green24 and 4) security business benefitting from a (sadly) unstable world.

Red24’s shares have increased five-fold since AimZine first covered the Group in May 2009 – see the May 2009 article here.

Avacta Group

Last month we reported on how the partnership with Pall Corporation had lead to the first sale of Avacta’s Optim product in the US. The relationship with Pall Corporation has subsequently developed further; on 13 June Avacta announced that it has entered into an agreement with Pall to deliver analytical services to biopharmaceutical developers. The announcement explained the arrangement:

“Under the terms of the collaboration Pall will utilise the services of Avacta and market joint services with a focus in North America, and in certain other regions globally where Avacta is not currently represented. Pall's expertise in developing high yield purification processes for biopharmaceutical compounds is well recognised but the current state-of-the-art in process optimisation is enhanced by more information on how the structure and stability of compounds are affected by manufacturing or purification processes. Avacta's analytical capabilities provide a significant value add in this, and other areas, ensuring Pall's analytical service offering is the most comprehensive option for its customers involved in drug development.”

“The combined services are aimed at reducing drug development risk by giving customers greater insight into the effects of their manufacturing processes. They will leverage Avacta's expertise in analysis at the very early stages in drug development to provide customers with new opportunities to screen molecules early on, for their manufacturability as well as their functional properties.”

This appears to be an excellent step forward for Avacta. Pall is a $2.4 billion US corporation and it is encouraging that they are already keen to develop their relationship with this small AIM-listed company. We contacted Avacta’s CEO Alastair Smith who is clearly pleased with developments. Alastair told AimZine:

“The recent RNS relates primarily to Avacta’s analytical services business which provides formulation and stability contract services to biopharma using a range of techniques including Optim based service work. We have been delivering these services in the UK and EU for some time but have not had the ability to exploit these services in our biggest market, the US, before now.  What is important to state is that the subtle difference with this collaboration with Pall is that we are combining our services offering with Pall’s existing services to create a unique package that helps drug developers optimise their manufacturing and purification processes in much greater detail than previously.

If I can be technical for a moment, when manufacturing or when purification processes are optimised they are done so to achieve best yield (primarily) and there is no information about how these processes has affected the molecule’s stability or propensity to aggregate.  So, optimisation may well select a set of conditions that are ideal for the purification of a product (say) but are not ideal in terms of maintaining stable monomeric protein with the likelihood of problems occurring down the line.  So, the joint offering combines our ability to measure stability and aggregation with their ability to optimise processes to get efficient processes that don't affect the integrity of the molecule.

We believe that there may be potentially strong revenues associated with this ‘tie up’ in years to come”. 

the subtle difference with

this collaboration

Pressure Technologies           

This engineering group was featured in the May edition of AimZine - see ‘Core Cylinders and bubbling biogas’. When we met with Pressure Technologies in preparation for that article, the Group had just issued a trading statement to explain that results for the first six months of the financial year to 31 March 2011 were expected to be below forecasts because of a slow recovery in the deep sea oil and gas market. 

The interim results were released on 14 June and showed that the Group had indeed recorded a loss of £0.3 million (2010: profit £1.5 million) for the first six months. However, the second half of the year is expected to be stronger and Pressure Technologies has a cash cushion of £2.7 million and no debt. These points were picked up by Chairman, Richard Shacklady, in his comments on the Group’s prospects:

“The Group's order books are recovering and we enter the second half in better shape than six months ago. Our cylinder business is likely to have a more gradual recovery than the sharp rebound experienced in the Engineered Products businesses. The Alternative Energy business is expected to grow rapidly in 2012. The Group is positioned to enjoy a better trading performance in the second half of the current year and position itself for further recovery and improvement through 2012.”

“The Board will continue to pursue further acquisitions that fit our strategy and enhance the overall business. Our balance sheet remains robust with significant cash balances remaining after the costs of acquisitions and R&D and an unused working capital facility. The financial strength and prospects facilitates supporting the dividend to shareholders.“

“Pressure Technologies is proving resilient in managing its way through a protracted downturn in its key markets and with sound financial management transforming itself into a stronger and better balanced business.“

YCO Group

In a short RNS issued on 15 June, YCO announced that it had contracted a project to build a superyacht with a leading European shipyard on behalf of a long-term client. This new motor yacht will be in excess of 80 metres in length.

The deal will deliver material revenues to YCO during the construction period up to delivery of the yacht in 2014. Commenting on the transaction YCO’s Chief Executive, Charlie Birkett, said:  "We are delighted to have been chosen to undertake the contracting and project management of a yacht of this calibre.  YCO is now involved with every major European shipyard and this latest project is further validation of YCO as a leader in the brokerage and management of the world's most significant superyachts."          

AimZine comment: No figures were given for the value of this contract for YCO. However, it should be noted that superyachts of this size usually sell for in excess of €50 million and often for over €100 million. Thus, even if YCO only receive a very low single figure percentage commission, it would be useful revenue. See also this AimZine article on YCO which deals with commission rates.

ZOO Digital

There were two important announcements from ZOO in June. The first, issued on 7 June, reported that a leading video game publisher had adopted two of ZOO’s software products. Importantly, this deal marks the first significant new client to come through ZOO's key relationship with Multi Packaging Solutions Inc.

In the second RNS, issued on 21 June, ZOO reported two exciting product development areas:

1.  In the electronic books market, ZOO has augmented its Media Collaboration platform to include an eBook Builder which provides an efficient and cost-effective way for publishers to repurpose traditional books for sale online, across a wide range of genres;

2.  Another area of development for ZOO is in the music industry, where publishers are beginning to promote their products with value-added materials using Apple’s iTunes LP format.

ZOO is expected to release preliminary results shortly and we expect to comment further on these recent developments along with the results in the next edition of AimZine.

to repurpose traditional

books for sale online

Synchronica

Keeping the Regulatory News Service (RNS) busy again this month was Synchronica with four announcements:

 

1.  9 June           An expansion order from a Latin American mobile operator

2.  14 June         Bollywood Boost for new Wynncom OGO Phones powered by Synchronica

3.  23 June         Airtel Africa launches mobile messaging service

4.  23 June         AGM Statement - " in-line with management expectation"

 

To get a flavour of the Bollywood campaign take a look at this very amusing 30 second advertisement video.

Despite issuing positive news each month, Synchronica’s share price remains in a downtrend. The shares had fallen from 33 pence at the start of 2011 to 20 pence on 23 June.

If Synchronica meets broker forecasts for 2011 it will then report much increased turnover and greatly reduced losses. Perhaps the sight of clear progress with its ‘numbers’ will turn the tide for Synchronica.

keeping the Regulatory

News Service busy

Bango

This mobile web payments company issued preliminary results for the year to 31 March 2011 on 14 June. As expected the Company reported a loss for the year. The pre-tax loss was £0.7 million compared to a profit of £0.01 million in 2010. At least there was an improving trend with the H2 loss at £0.27 million being an improvement on the £0.43 million loss in the first half.

With the 2011 financial year behind it, 2012 looks a lot more promising for Bango, particularly as its agreement with RIM develops. (To read more about the agreement with RIM and understand why results were weak in 2011 see AimZine's article on Bango here.)

Ray Anderson, Chief Executive Officer of Bango, commented:

"The key development during the year was the decision to focus on the fast growing smartphone market segment, developing relationships with App Stores as a way of deploying Bango technology more widely. Bango's agreement with RIM to provide carrier billing for BlackBerry App World announced in the first half is potentially transformational and resources have been re-allocated to ensure the success of the project. Bango is now developing a number of other significant "App Store" opportunities including those focussed on the increasingly popular Android platform.

"As expected, the continued decline in end user spending on low-margin content for featurephones reduced gross profit from that part of the business. However, good progress in growing smartphone payment and analytics business resulted in an overall growth in gross margin in the second half.  

"The second half showed an underlying profit after allowing for one-time costs related to the acceleration of cost reduction in the featurephone business and a change in recognition of gross profit on mobile operator integrations.

"Since the year end, the number of mobile operators activated for RIM has doubled and in May overall end user spending grew compared with April. Progress with RIM and other App Stores in the pipeline gives us confidence that we are well placed to accelerate this growth in future periods."

Ray Anderson                              

In Brief

Forbidden Technologies held its AGM on 17 June and Chairman, Vic Steel’s statement gave a good summary of progress at the Company – read the AGM statement here. The day before its AGM, Forbidden announced that Filemobile, which provides social media applications, had integrated Forbidden’s FORscene product into its social media platform. The platform has been customised for universities and colleges as can be seen in this video.

Crimson Tide announced on 9 June that it had launched a new advanced software product under the name ‘mpro Gemini’. The product has consolidated the Company's experience in mobile facilities management, healthcare and auditing to allow its application to deal with asset and part management as well as the ability to initiate jobs from the smartphone.

Barrie Whipp, Tide’s Executive Chairman, commented in the announcement: "mpro gemini is a significant leap forward in the capability of our software products.  We have learnt from our customers and incorporated many of their feature requests into mpro gemini. The ability to complete jobs on particular assets, with before and after photos, geotagging and manage associated parts is a significant step forward."

On 16 June Media Corp reported a ‘major contract win for its Eyeconomy media subsidiary. The deal, with Digital Sports Group, will double the size of Eyeconomy’s banner advertising network and should enhance earnings from the commencement of the contract on 1 August 2011. The deal obviously pleased Directors Justin Drummond and Nilesh Jagatia as they were both reported as buying Media Corp’s shares on the same day as the contract announcement.

Also buying shares in his company in June was Nishith Malde, Finance Director of Inland. Nishith purchased 150,000 shares at 19.5p per share for his pension fund. 

Yet another director buying shares was the recently appointed Chief Executive of InterQuest Group, Mark Braund. Mark subscribed for 208,000 shares at 62.5 pence per share. The announcement on 23 June reported that “Mr. Braund chose to subscribe for these Ordinary Shares directly from InterQuest due to a lack of available stock in the market.”

The share purchase by InterQuest’s CEO came the day after the Group had announced that it had acquired Contract Connections Limited, a technology staffing business specialising in the provision of contract and permanent IT personnel to the legal sector. The acquisition price was reported as ‘up to £4.6 million’ including an initial payment of £3.7 million. The acquired business is expected to be earnings enhancing in the first full year. This is InterQuest’s first acquisition since 2007 and it is encouraging to see that the Group has the confidence in its markets to return to the acquisition trail.

Directors buying shares

...and another

...and another

Written by Michael Crockett

 Copyright © Aimzine Ltd 2011

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