Adventis Group (LON:ATG) (ATG, 11.0p, £5.22m) A profits warnings expects adjusted PBT for 2010 to be up to 50% below market expectations of £1.97m. We now expect adjusted PBT of £1.0m and adjusted EPS of 1.5p for the current financial year. The poor performance is reflected by a slowdown in the Healthcare division, campaign delays in the Media, Planning and Buying Businesses. The stronger performance in the Technology and Telecoms division due to the expansion of services from the addition of bChannels in February 2010 has failed to offset the poor performances in the other divisions. We expect the current and coming financial years to remain extremely challenging for the group. The share price has almost fallen by 30% this morning. Adventis is currently rated on 7x for the current financial year. We believe there is still scope for the price to fall further. We reduce our recommendation to a SELL with a target price of 9p, equivalent to 6x 2011 earnings.
Eg Solutions Plc (LON:EGS) (EGS, 38.0p, £5.43m), the provider of back-office optimisation software, reports trading for the 6 months to 31 July 2010 is in line with the Board’s expectations. New contract wins coupled with broader and deeper relationships with existing customers has driven revenues up 15% to £2.41m (H109: £2.09m) and normalised PBT are up on the previous year. Stronger cash generation has improved the net cash position to £0.7m. We are provided with confidence by 71% of the anticipated revenues for the FY ending 31 January 2011 under contract. The market forecasts 2011 PBT of £0.31m and EPS of 1.6p and 2012BT of £0.57m and EPS of 2.9p. The stock is rated on 2011 earnings of 23.8x falling to a more reasonable 13.1x in 2012 – in line with the sector. We therefore reiterate our HOLD recommendation.
Forbidden Technologies (LON:FBT) (FBT, 21.0p, £17.04m), the developer of Cloud video platform FORscene, reports North One Television, part of All3Media, is using FORscene for the production of a new series of 'The Hospital'. This highlights repeat customers which confirm FORscene's position as an efficient workflow tool. The group is still very exciting and with a valuation that leaves plenty of upside. SPECULATIVE BUY
Innovation Group (LON:TIG) (TIG, 10.75p, £100.56m), the global provider of business process outsourcing and technology solutions to the insurance, fleet and automotive industries reports an IMS from 1 April 2010 to date. Restructuring of the group has helped boost l-f-l outsourcing sales up 4% at constant currency, despite the tough environment. The group continue to anticipate exceptional charges of £9.0m relating to £5.2m of provisions relating to the property consolidation, which will deliverc.£4.0m of annualised cost savings in 2011. For prudence, the group recognise bad debt of £0.75m relating to a Tier 1 European insurer. Customer retention is good. The group continue to win new business and are focussed on increasing revenue visibility. We expect the group to be trading in line with 2010 PBT and EPS estimates of £11m and 0.5p respectively. We reiterate our HOLD recommendation.
ROK (LON:ROK) (ROK, 19.75p, £35.41m) Following the poor trading statement early on this month, stating underlying PBT would be significantly below market expectations, this morning’s interims are no real surprise. Interims to 30 June 2010 saw underlying PBT halve to £3.0m (H109: £6.0m) on a 15% decline in revenues to £308.1m (H109: £364.5m). Net debt fell to £47.6m (H109: £57.0m). The 33% cut in the interim DPS to 0.5p (H109: 0.75p) sends signals of deteriorating profitability. The squeeze in the fiscal spending does not bode well for the business. The group has already planned for lower volumes in construction next year. The high level of future revenue visibility supports a potential increase in ROK’s market share in the declaiming social housing industry. Visibility of revenues in the Maintenance and Improvements business is good and the Board expect income to grow through new insurance customer wins. ROK has a strong order book at £435m. The market forecasts flat volumes in 2010 with PBT of £12.5m, EPS of 5.26p and DPS of 2.4p. In 2011, the market forecasts PBT of £14.2m, EPS of 6p and DPS of 2.4p. The stock is rated on 3.7x 2010 earnings falling to 3.3x in 2011 to reflect the weak economic climate. We reduce our recommendation to a HOLD.
Software Radio Technology (LON:SRT) (SRT, 21.5p, £21.0m) has received new orders for its AIS Class A product, valued at $0.75m, and to be delivered around the world over the next three months. The orders highlight the strength of revenues generated from existing customers. The contract wins are supporting the share price. We repeat our HOLD recommendation.
Vitesse Media (LON:VIS) (VIS, 9.0p, £2.75m), the online, print and events business, reports interims to 31 July 2010 are in line with market expectations. The first half will see pre-tax losses from the previous year move to a profit. The market shows some signs of improvements with Q2 like-for-like sales up 3.5% over the same period the previous year. However, we do not believe this is sustainable. The market forecasts 2010 PBT of £0.2m and EPS of 0.5p. We reiterate our HOLD recommendation.
Xaar (LON:XAR) (XAR, 127.5p, £80.19m) Interims to 30 June 2010 for the inkjet printing technology group are no surprise. Adjusted PBT remained flat at £1.3m on a 14% increase in revenues to £23.9m (H109: £20.9m). Encouragingly while the P! (platform1) printing product sales were stable the newer P3 generation is seeing an increase in demand with the group now expanding production. Gross margins of 39% (H109: 42%) have been hit on the older products. The group has committed to maintaining a 1p interim dividend per share, aided by net cash of £8.2m (FY09: £11.1m), but allowing for £2.8m of capital expenditure and £0.9m of dividends. The outlook statement is mixed. Despite the uncertainty surrounding the global markets, the Board believe better visibility of certain markets and increasing P3 product demand will require substantial investment in capacity and capability to capitalise on the potential. We continue to rate the group as a HOLD as it is sitting on over 24x PER for this year, falling to some 13.7x next year.
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