Billington (BILN, 160p, £20.69m) Trading for the first 6 months to June for the structural steel and engineering specialist is in-line with expectations. Although margins being achieved on structural steels are lower, the overall order book is at its highest for over 2 years, with a current order book of £36m, and that may even lead to some short term additional manning being required. Current forecasts to December 2009 are for pre-tax profits of £3m with 18.1p EPS and a 7p DPS, putting the group on a prospective PER of 8.8 times with a 4.3% yield. The rating seems appropriate given our concern that the UK may see a double dip recession driven by lower public spending, but the yield alone suggests there is upside. BUY to the 3.5% yield, or 200p.
Blacks Leisure (BSLA, 48p, £20.47m) AGM update on the 19 weeks to 11 July confirms a good performance with overall like-for-like group sales down just 1.8%, made up of Outdoor down 1.6% and Boardwear 3.2% - reflecting the conversion of 7 underperforming stores into the stronger Outdoor brand during the period. With heavy losses forecast for the year and the group still renegotiating the existing banking facility the shares rate a HOLD.
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Xaar (XAR, 91.25p, £57.39m) Interim update to June 2009 from the inkjet printing business is showing a modest improvement on the poor H2 trading but still down on the comparable period in 2008 with revenues of £20.9m (£22.5m) and pre-tax profits of £1.3m (£4m) but a marked improvement on the H2 2008 loss of £0.2m. Sales in Europe have continued to decline, offset by some recovery in Asia and the Americas. The board has confirmed its intention to pay an interim dividend, not unreasonable given the net cash of £10.3m at the end of June. Overall though the group continues to warn on the outlook, especially market conditions limiting the move to volume manufacturing. Forecasts for the year to December 2009 of around £2.7m looking achievable with 3.62p EPS - the group is sitting on a prospective PER of 25.2 times. Too high and we repeat our SELL recommendation with a price target of 72p.
Alkane Energy (ALK, 19.5p, £18.11m) Trading update for the six months to June is in-line with expectations. Lower overall gas volumes at Beavercotes led to some generation capacity being relocated - but overall the group generated 40GWh in the period. The group is sensibly highlighting that currently the average achieved price for its electricity will fall from £60/MW in 2009 to £50 in 2010 – though that will be helped by a renegotiation later this year for some capacity coming off contract. NI the second half the group will benefit from an additional 4.5MW at Bilsthorpe and 1.9MW at Shirebrook, offset partially by the closure of the German Joarin plant. Alkane is a natural beneficiary of the UK Government’s desire to reduce the level of energy imports and because it uses methane which is one of the worst “CO2” gasses. We remain convinced that the group should raise cash to expand its generation capacity which offers a healthy IRR and we maintain our BUY recommendation.
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Thorntons (THT, 75p, £51.26m) 4th quarter and thus year trading update from the confectioner saw the impact of the hot weather in June this year impact sales, especially against a cold-snap last year. Although trading was down 2.7% for the 4th quarter, overall the second half sales showed growth of 6.6%. Sales were impacted by failure of the Birthdays Ltd which led to franchise sales falling 25.3% in the quarter, though for the year franchise sales were down just 0.5%. Similarly the final quarter saw a 30% decline in Thornton Direct sales due to weakness in the key corporate customer market. Despite the impacts the overall performance for the year is expected to be “marginally ahead of the market consensus of £5.4m. Forecasts for next year of £6.5m pre-tax profits with 6.7p EPS outs the group on a prospective PER of 11.2 times – appropriate, HOLD.
Alterian (ALN, 122p, £69.89m) Has announced the acquisition of Techrigy, a provider of social media monitoring and analytics software, for an initial consideration of $0.6m met by 308,650 new shares and a maximum consideration, based on performance, of $4.1m to be met in shares to be priced at 120p. A logical expansion, which enables marketing operations to address the huge market of social networking and microblogs. We repeat our BUY recommendation to the 138p level, 1st iterated at 102p on 03/06/09.
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Contentfilm (CFL, 2.125p, £3.71m) Has announced it has received requests from 100% of the preference share holders for redemption, but that the lack of a positive profit and loss reserve precludes any repayment and there is no requirement to issue new shares. Discussions with the preference shareholders have now ceased. On 21/04/09 we repeated our March comment that a “trading update has highlighted revenues will be 12% lower than expected - with the obvious knock on effect on profits. Company has $ debts, falling revenues and convertible debt coming up for payment.” We rated it a SELL then and repeat the advice.
Veris (VERI, 15.5p, £4.00m) The group has updated on a strategic review, the company has already announced the unsolicited approach for 2 divisions, one – the Moving & Storage Division has already been sold, with the other, the Facilities and Property Management Division is still under discussion. A result of the smaller group is the CEO and CFO are leaving with the non-exec Chairman becoming executive, leading to lower management costs, together with the planned closure of the headquarters. Given the group reported losses to December 2008 investors should HOLD till current trading becomes clearer.
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Boomerang (Boom, 60p, £5.35m) A trading update has highlighted 2 key projects in the second half have failed to contribute to the expected levels. As a result the outcome for the year ending May 2009 will be materially below current expectations. The group repeats it has a healthy pipeline for 2010 and it remains with positive net cash. Clearly the failure of projects to contribute will lead to a lowering of forecasts for next year as well – to probably around £1.5m from £2.5m which implies a 2010 PER of 5.1x, based on 11.7p EPS down from 19.5p. For a media company that is cheap and a risky SPECULATIVE BUY at these levels is appropriate.
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