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Good morning and welcome to this edition of “AIM’s Essential Top Ten”, a brief and early roundup of the main news announcements. This morning’s edition includes DTC, RBG and WIZZ from the Main Market.
Datalec (LSE:DTC)
Interim Management Statement: “Sound” trading start to the year. Improved gross margins. Revenues down 11% due to much stronger US dollar and tough comparatives.
GN view: Focus on gross profits is understandable in this context. Apart from the currency headwind, the company is performing well.
Fairpoint (LSE:FRP)
Trading Update, Appointment of Finance Director: Trading in line with the Board’s expectations. Overall revenues have increased in excess of 20% compared to the prior period (after acquisitions). Adjusted profit before tax o be flat compared to prior period (£4.1 million). Debt Management Plan operations to be shut down.
GN view: Lots of work to be done integrating acquisitions, and shutting down DMP. Many DMP assets were purchased just a few years ago. Corporate activity looks too high here.
IQE (LSE:IQE)
Trading Statement: Significant increase in revenues and profits to be delivered for first half of 2016. Balance sheet leverage to be further reduced.
GN view: Company very pleased with its strength of cash generation. Worth exploring the potential in their semiconductor wafer products and the likely trajectory of the balance sheet. Interesting company.
Judges Scientific (LSE:JDG)
Trading Update: Order intake in the first quarter was weak, for the third quarter in a row. Healthy rebound after May; five consecutive weeks of strong bookings. Armfield order intake well below the first half of 2015. Management believes weak oil price impacted public funding in many developing economies. Earnings per share for the full year will be substantially below market expectations.
GN view: I’m not very satisfied with the indirect explanation that low commodity prices have affected pubic funding which has in turn affected the demand for Armfield products. Worth checking for simpler explanations.
NAHL (LSE:NAH)
Pre-Close Trading Update: Trading in line with market expectations. Strong cash flow and cash conversion. Reduction in case volumes, resulting from regulatory uncertainty, in line with management forecasts.
GN view: Nothing unusual in this update.
Netcall (LSE:NET)
Trading Update: Final results for the 12 months ended June 2016 are expected to be in line with market expectations. Increased mix of sales from SaaS-based contracts. Net cash balance £14.1 million, following dividend payments.
GN view: Investors love to hear about SaaS, with its implication of recurring revenue streams. So this is likely to be received positively.
Revolution Bars (LSE:RBG)
Pre-Close Trading Update: Total sales up 6.9%, like-for-like up 2.3%. Full year results to be in line with Board’s expectations.
GN view: Rollout plan is underway and being executed well; decent growth potential here.
Restore (LSE:RST)
Half year trading update: Trading is “encouraging” and in line with expectations. Records management business traded well and an integration proceeds according to plan. One major customer exited but margin increased. £83 million acquisition of PHS Data Solutions announced today, to be funded by a placing and existing debt facilities.
GN view: Document shredding and records management likely to remain important services for space-conscious companies who also need to ensure the confidentiality of their data. Organic growth better than acquisition-led growth, but this is an interesting deal nonetheless.
Vertu Motors (LSE:VTU)
AGM Statement: Full year results expected in line with market expectations. Revenues increased 21.5%, like-for-like up 8.4%. Margins improved due to higher used car and service margins. Placing funds deployed in earnings accretive acquisitions.
GN view: Car dealerships are known to be rated on a below-average multiple. Including Vertu, worth exploring for value opportunities. Risk of economic cyclicality.
Wizz Air (LSE:WIZZ)
Q1 Interim Management Statement: Passengers carried up 18%. Record Q1 profitability. Underlying net profit up 14% to €38.6 million.
GN view: These are great times for airlines as lower oil prices begin to materially affect their profitability. Wizz Air, like easyJet (LSE:EZJ), has a very healthy cash balance with free cash of €707 million. That’s an essential comfort blanket in this industry.
