aim prospector
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A publication dedicated to companies quoted on the London Stock Exchange's Alternative Investment Market.TRANSCRIPT
AIMprospector
NEW investor magazine dedicated to AIM stocks
Quids in AmericaThe AIM company set for roll-out in the USA
Issue 1 March 2014
Five AIM companies researched and reviewed
The most exciting area of the London market
Income, turnaround and growth opportunities
FREE to private investors
Supported by
AIMprospector
2 www.aimprospector.co.uk
Welcome to AIMprospector, a new magazine dedicated to AIM-quoted companies.
With recent and forthcoming tax changes, AIM shares are now one of the
most favourably-treated asset classes available to investors. Following some
successful campaigning by myself and others – a big thanks to anyone that
signed my government e-petition – all AIM-quoted companies can now be
held within a self-select ISA. From April, trading AIM shares will no longer
incur stamp duty. On top of this, when it comes to inheritance tax, nearly all
AIM-quoted companies qualify for Business Property Relief. Provided a few
conditions are met, ownership can be transferred to your heirs on death, tax
free.
AIMprospector brings you monthly write-ups on five AIM businesses. These
are not investment recommendations. Each article is simply a collection of
opinion, analysis and news. Even the ‘Top Pick’ article is not a recommendation.
Each month, the ‘Top Pick’ will be awarded to a company that I feel is play on a
particular investment theme.
This month, that theme is roll-
outs and the ‘Top Pick’ is Goals Soccer
Centres.
Unless stated otherwise, the
contributor responsible for each
article has no shareholding in the
company mentioned and neither does
Blackthorn Focus Ltd, publisher of
AIMprospector.
Anyway, that’s enough from me. Get digging and see you next month.
David O’Hara, Editor, AIMprospector
ContentsChristie Group ................p 4
Goals Soccer Centres ......p 5
EMIS ...............................p 7
Sigma ...............................p8
Maintel ............................p 9
next month… ................p 10
Contacttwitter: @aimprospector.co.uk
email: [email protected]
www.aimprospector.co.uk
Published by:Blackthorn Focus Limited
www.blackthornfocus.com
AIMprospector
NEW investor magazine dedicated to AIM stocks
Quids in AmericaThe AIM company set for roll-out in the USA
Issue 1 February 2014
Five AIM companies researched and reviewed
The most exciting area of the London market
Income, turnaround and growth opportunities
FREE to private investors
AIMprospector
www.aimprospector.co.uk 3
walbrook pr has a strong reputation for working with smaller growth companies and has clients ranging from £5m mkt cap to £250m mkt cap covering a wide variety of sectors.
walbrook pr provides financial public relations and investor relations to small cap. and aim listed companies.
focussing on communicating to four key groups: 1. the financial media; 2. sell-side research analysts;3. private client brokers; and 4. private shareholders.
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INVESTOR RELATIONS
AIMprospector
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currently under a stay of execution
while interest rate swap mis-selling
compensation claims are decided.
Add in expected interest rates rises
and a marked improvement in trading
within Christie’s PBS division looks
increasingly likely as insolvencies rise
and more businesses change hands.
The Group currently has a net debt
position of around £3m. With a share
price today of 114.5p, that gives an
enterprise value of £33m. Considering
the Stock & Inventory Systems &
Services operation is already enjoying
profitable growth, there seems little in
the market rating for a recovery in PBS.
Shareholders may be further
encouraged to learn that Lord John
Lee, one of the UK’s most celebrated
private investors, has made Christie
Group one of his largest AIM holdings.
Christie’s PBS division specialises
in the valuation, sale, financing and
insuring of businesses. Trading within
this part of the Group went into steep
decline following the collapse of
Lehman Brothers in 2008.
The magnitude of the change in
trading within the PBS operations can be
seen from business transaction statistics.
Back in 2007, 869 UK businesses were
sold to other UK buyers. In the five years
since, the deal count has averaged just
361 sales a year.
In 2007, Christie’s PBS division
reported an operating profit of £9.9m
on sales of £51m. In 2012, this division
reported revenues of £30m, resulting
in an operating profit of just £0.6m.
These figures reveal how Christie’s
profits are strongly geared to business
transactions. Fortunately, current
economic conditions could deliver the
significant upturn in deals that Christie
needs to thrive.
As the economy recovers, asset
values and business confidence
increase. Somewhat counter-
intuitively, insolvencies can also rise
as overstretched businesses struggle
to meet increased working capital
demands. Lenders become more likely
to remove support as the market value
of the assets (real estate etc.) used to
secure their loans increases.
Many businesses in the UK are
The smallcap share revival that began in 2009 seems to have passed by Christie Group. However, the ongoing upturn in the UK business environment could take profits back to levels not seen since the global financial crisis. If management can secure such a
recovery, then the upside in the shares
could be significant.
Christie Group comprises two
divisions: Professional Business Services
(PBS) and Stock & Inventory Systems &
Services. Recent announcements from
Christie’s management illustrate how
both of these divisions could increase
profits significantly.
At the halfway stage this year, it was
announced that the Stock & Inventory
Systems & Services operation had
delivered an operating profit of £0.8m:
a 44% increase in operating profit on
the previous year. However, the PBS
side disappointed, pushing the group to
a £0.3m operating loss for the first six
months of the year.
Despite this setback, Christie
announced that it still expects 2013 to
be profitable. Obviously, this can only
be achieved with a significantly better
second half.
Christie Group (LON:CTG)
FOR
Highly geared to economic improvement
Still profitable, despite tough markets
AGAINST
Some recovery expectation already priced in
Decline in licensed trade in the UK
Market Cap £30m
Bid:offer 110p:119p
52week low:high 59p:116p
P/E (forecast) 43
Yield (forecast) 1%
Profitable and dividend paying, Christie Group looks ideally positioned to benefit from the changing UK economy.
both divisions could increase
profits significantly
still expects 2013 to be profitable
economic conditions could deliver
the significant upturn in deals
that Christie needs to thrive
AIMprospector TOPpick
www.aimprospector.co.uk 5
TOPpick: Goals Soccer Centres Five-a-side football operator Goals Soccer Centres could be the most outstanding roll-out opportunity on AIM. The company is this month’s AIMprospector TOPpick.Goals Soccer Centres is one of
AIM’s most successful companies.
The company today runs 44
sites,employing 800 people.
In the last 12 months the shares
have risen 37%. However, four years
ago, the shares were trading significantly
higher, on a smaller sales base. While the
company’s revenues and profits have
progressed, its market rating has fallen.
As Goals has expanded, newer
sites have proved to be less profitable.
Competition has increased, making
site acquisition more expensive and
damaging pricing. The increase in debt
required to support the continued roll-
out deterred buyers of the shares.
From trading at over 200p in
2009, shares in Goals hit 90p at the
beginning of last year.
Since then, Goals has successfully
deployed modular centre build. Goals’
Chester site was built at two-thirds
of the price of a traditional centre,
in a build time of 14 weeks versus
the usual 22. Modular build has also
delivered higher quality results with
minimal build/fit errors. This revolution
dramatically changes the financial
equation in any potential new site
appraisal.
Most significant however, has
been the dramatic increase in profits
delivered by Goals’ one site outside the
UK: the Los Angeles site in California.
Many UK companies have foundered
when trying to take their product
Stateside. However, Goals has some
powerful trends working in its favour.
These factors combine to present an
opportunity for profit far in excess of
what Goals has achieved in the UK.
First, two boring (but reassuring)
facts. Goals runs the only five-a-side
centre of its kind in the entire USA.
Second, it does so profitably: EBITDA
from the Los Angeles centre increased
a massive 150% in the first six months
of 2013 versus the same period in
2012. This took operating profits at
Goals US to £0.2m.
On an operating profit basis,
Goals’ US centre is two-thirds more
profitable than its average UK site.
Goals is not a `jumpers for
goalposts’ football experience. It is
a high quality leisure service, with
attached bar facilities. Organised
football has strong social and
cultural aspects that make it less of a
discretionary purchase compared with
alternatives such as cinema or dining.
This makes Goals the sort of
operation that should thrive in a market
where consumers have enhanced
disposable incomes. Even better, there
are further massive advantages to
operating in the USA that Goals has
just begun to cash in on.
From humble beginnings in 1985, the
US women’s soccer team is now a true
sporting superpower. They have won
Olympic gold at four of the last five
Games. Of the seven FIFA World Cups,
they are most recently runners up,
twice winners and have never failed to
make the semi-finals.
Their success is both a reflection
and driver of the women’s game in the
Their success is both a reflection
and driver of the women’s game
in the US.
Goals was the first operator to receive FA accreditation
AIMprospector TOPpick
6 www.aimprospector.co.uk
US. In the America’s National Women’s
Soccer League, the average match gate
is over four thousand. In the English
women’s league, the most popular
teams are watched by only a few
hundred spectators.
The scale of the women’s game in
America dramatically increases the
number of customers that can be
attracted to a Goals facility. Football
has a level of cross-gender appeal in
the US that a five-a-side operator
could only dream of over here.
The men’s game is also progressing
well stateside: with the average Major
League Soccer attendance hitting
18,600 in 2013.
Football is also experiencing fast
growth among American youths.
According to salon.com, soccer is the
second most popular sport in the US
among those aged 12-24. Among
the broader population, soccer’s avid
fanbase is measured at around 10%
of the population i.e. 33 million. The
game’s growth threatens to overtake
baseball as America’s third most
popular sport.
Deep-pocketed investors have been
buying the Goals story. The company
received a takeover bid in July 2012
at 144p from a Canadian pension
fund. However, this was rejected by
shareholders when put to a vote.
Goals followed this by raising
£2.8m, placing new shares at 115p in
September 2012 - a tiny discount to
the prevailing share price at the time.
The shares are today 218.5p. According
to financial website Stockopedia, that is
14.0 times normalised EPS for 2012 and
15.3 times the forecast for this year.
For the last four years, the
company has maintained a 1.85p
dividend, equating to a yield of 0.9%.
It would be fair to suggest that the
company’s borrowings have held back
the roll-out and market valuation.
However, recent interims showed
a £5.8m reduction in net debt in 12
months (thanks in part to that £2.8m
placing). The company is clearly
able to generate the kind of money
required to continue its expansion.
Of course there is execution risk
but Goals has already rolled out in
one country successfully and without
the massive advantages present in the
American market.
In the last 12 months that shares
have risen 37%
Modular build enables faster, cheaper roll-out
© Blakedown
Goals Soccer Centres (LON:GOAL)
FOR
US site already very profitable
Rolling-out into growing market
AGAINST
Borrowings may hamper rate of expansion
Execution risk of parallel overseas rollout
Market Cap £116m
Bid:offer 217p:220p
52week low:high 124p:235p
P/E (forecast) 15.3
Yield (forecast) 0.9%
On an operating profit
basis, Goals’ US centre is two-
thirds more profitable than its
average UK site.
AIMprospector
www.aimprospector.co.uk 7
with doctor’s receptionists is possibly
reason enough to own the shares.
EMIS also works beyond the GP’s
surgery, helping streamline referrals
e.g. to physiotherapists. The company
website claims some impressive
efficiency gains: patient notifications
being reduced from ten days to just
one and community matrons spending
one third of the time co-ordinating
with GPs than was taken prior to
adopting EMIS services.
EMIS’ most recent trading
statement confirmed growth in all
three main divisions with ‘positive
contributions’ from two second-half
acquisitions. The largest of these,
completed in September, was Ascribe,
itself previously AIM-quoted before
delisting in 2009.
Ascribe specialises in pharmacy,
A&E and Patient Administration
Systems. In the year previous, Ascribe
reported an operating profit of £4.3m
from £24m of sales. In the same
period, EMIS reported a £24.1m
operating profit from sales of £91m.
The Ascribe acquisition brings EMIS
established relationships in new
markets and will make a significant
contribution to group revenues.
Software firm EMIS offers both dividend income and fast profit growth
Leeds-based EMIS is software supplier to GPs, pharmacies and NHS trusts. The company first came to AIM in 2010. Since then, EMIS has increased sales by 40% and net profits by 70%. Today, EMIS is one of AIM’s blue chip shares.The Group comprises three divisions:
GP services, pharmacy software and
Secondary & Specialist community
care programmes.
EMIS is big and successful. Its
quality customer base delivers high
visibility of sales and profits. Three
quarters of sales are recurring.
EMIS’ achievements have been
noticed by the market. The shares trade
today on 18.1 times 2012 profits and
17.1 times forecasts for the year just past.
A typical EMIS customer might be a
practice manager within a GP surgery.
EMIS frequently provides the tools to
manage patient appointments, recall,
report production and record access
out-of-hours. EMIS also delivers a
combined hardware/software solution to
enable patient self check-in. That EMIS
is helping people to avoid ever dealing
EMIS reported revenues of £86m
for 2012 and net profit of £19m.
This produced EPS of 33p, 14.2p of
which was paid out in dividends. The
company is expected to report modest
earnings growth with 2013 finals in
March. Earnings and dividend growth
is forecast to pick up in 2014 with
analysts pencilling in double-digit
increases in both.
The shares have sold off somewhat
in recent months, likely due to worries
over the future of a GP framework
contract. This has brought the 2014
P/E down to 15.1. A reasonable
dividend is forecast, equating to a
yield of 2.9%.
EMIS enjoys a dominant position
within a lucrative niche. As demand
for healthcare services rises with an
ageing population, the value of EMIS’
product and size of the market that
it faces will both increase. The shares
look like a great way to access some
of the strongest trends in the UK
health industry.
quality customer base delivers
high visibility of sales
notifications reduced from ten
days to just oneEmis Group (LON:EMIS)
FOR
Shares the cheapest since July 2012
Industry increasingly looking to outsource
AGAINST
Just 6% earnings growth forecast for 2013 but a P/E over 17
Success will attract competition
Market Cap £377m
Bid:offer 595.5p:600p
52week low:high 575p:860p
P/E (forecast) 17.1
Yield (forecast) 2.7%
a dominant position in a lucrative
niche
AIMprospector
8 www.aimprospector.co.uk
Sigma Capital is a ‘residential property and urban regeneration specialist’. The company has been quoted on AIM for more than ten years.In August 2011, Sigma acquired
InPartnership Limited. At the time,
Sigma described InPartnership as a
‘bridge between public and private
sector organisations’, working on ‘large
scale property-related regeneration
projects’. The acquisition brought
InPartnership’s three existing
arrangements with Liverpool, Solihull
and Salford councils. Each partnership
has earmarked significant long-term
development projects.
The relationships acquired with
InPartnership helped Sigma to secure a
company-changing deal last year.
Sigma’s share price soared in
November when the company
announced a joint venture with
Gatehouse Bank to build 2,000 new
rented homes in the North West.
The final number to be built could
reach 6,600. Sigma’s Chief Executive,
Graham Barnet, described the deal as
having the potential to deliver one of
the UK’s largest portfolios of privately
rented residential property portfolios.
Earlier this month, Sigma announced
another deal on a site in Barking,
London. Here, Sigma will work with
the Greater London Authority and
Bellway on the development of the
area and delivery of 318 new homes.
Similar schemes have been
announced by insurance giants
Prudential and Legal & General. They
plan to use their financial reserves
in the construction of large housing
projects in the UK. These properties
will then deliver long-term, reliable
income for policyholders.
The significance of this deal was
not lost on the company’s directors.
The same day that it was announced,
Sigma’s Chief Operating Officer and
Investment Director each purchased
over 100,000 shares in the company at
a price of 30p.
Three weeks later, Sigma issued 5%
more shares at a very small discount
to buy out a former partner’s stake in
InPartnership.
The Gatehouse deal has an
estimated development cost of
£200m, rising to £700m should
the full 6,600 homes be delivered.
The project has significant
political support. On the day of its
announcement, statements were
issued by both the Prime Minister and
the Business Minister, Vince Cable.
Number 10 described the deal as
“brilliant news for the North West and
for Britain”.
Revenues are not yet in the bank
and Sigma/Gatehouse are yet to
secure finance for the deal. However,
the extent of political support for the
project and the ambitions of large
investment firms, suggest that there is
a high probability that the go-ahead
will be received.
To quickly follow the Gatehouse
deal in the North West with the
Bellway agreement for Barking is
impressive. Shareholders look set to
enjoy a significant increase in company
profits beginning at some point in the
future, or an offer for Sigma’s stake in
these projects from a larger firm.
After rising tenfold in the last twelve months, have shares in regeneration specialist Sigma Capital got further to go?
significant long-term
development projects
considerable political support
Sigma Capital Group (LON:SGM)
FOR
Early leader in new regeneration/housebuilding model
Strong government support
AGAINST
Lack of experience on projects this size
Unclear when cashflows will be delivered
Market Cap £44m
Bid:offer 89p:93p
52week low:high 8.2p:93p
P/E (forecast) n/a
Yield (forecast) 0%
AIMprospector
www.aimprospector.co.uk 9
deliver a 70% increase in earnings
per share with its 2013 final results
in March. A near one-third increase in
sales is then forecast for 2014 (thanks
to the Datapoint acquisition). A
further 20% increase in earnings per
share is expected for 2014.
Maintel’s history of dividend
increases is expected to continue,
taking the payout for 2014 to 17.4p
per share.
Between them, two directors own
45% of the shares. Another 18% is
owned by two private shareholders:
one is an early investor in the
company and the other is the partner
of a former CEO. The concentrated
share register may deter some fund
investors. However, it has not stopped
Maintel becoming one of AIM’s most
successful companies, providing
significant returns to shareholders
along the way.
Too small for many fund managers, this smallcap telecoms firm is a big success
Maintel Holdings is a telecom and data services company providing solutions to UK businesses.In the last five years, sales have
increased at an average rate of 7.8%
a year. This has delivered average EPS
growth of 13.3% a year. Maintel has
delivered unbroken dividend increases
since 2006. In the last five years, the
pace of those rises has averaged 19.8%
per annum. Only six other AIM-quoted
companies have a better record.
One of Maintel’s areas of expertise
is Unified Communications: bringing
together the range of voice, video and
text communications that come in
and out of a company. This technology
can be used to receive a message in
one medium and send in another: for
example, running voicemail messages
through speech recognition software
to convert them into an email for the
intended call recipient.
Maintel draws this technology
together into a process that it calls
‘Contact Optimisation’. One example
of this is ‘Outbound Virtualisation’.
This enables an organisation to
respond to, for example, a customer
via their preferred medium at their
preferred time. For example, daytime
notifications can be sent to a landline
number and email inbox with out of
hours messages being delivered to a
mobile phone as voicemail or text.
The aim of streamlining these
processes is to reduce human
intervention (i.e. call centre staffing)
and increase the probability that a
message will be successfully received
by the target.
Another service offered is Business
Continuity Management, ensuring that
phones can be answered etc. if a firm
is unable to access their own offices.
Maintel also provides maintenance
services to reduce possible downtime
within a call centre or large
organisation.
The company’s last results
statement showed a cash balance
of £0.7m and no debt. This position
changed post-close, when a £3m
loan and £1m overdraft facility were
taken on to help secure the purchase
of telecoms firm Datapoint. Prior to
the transaction, Datapoint had been
making sales approximately half those
of Maintel.
According to the consensus
of broker forecasts reported by
Stockopedia, Maintel is expected to
average EPS growth of 13.3% a
year, sales growth of 7.8% a year
dividend has increased every year
since 2006
one of AIM’s most successful
companies
Maintel Holdings (LON:MAI)
FOR
Datapoint acquisition will significantly increase scale
Successful team
AGAINST
Off-radar for many investors
Ownership and control concentrated between a few key people
Market Cap £59m
Bid:offer 540p:550p
52week low:high 300p:600p
P/E (forecast) 14.9
Yield (forecast) 2.6%
AIMprospector
10 www.aimprospector.co.uk
Next month:In the March edition, we begin our search for AIM’s most successful company.AIMprospector profiles five more AIM-quoted companies
as we continue to bring you the lowdown on some of
the opportunities presented by London’s Alternative
Investment Market.
Once again, AIMprospector will be reviewing the
outlook for some of AIM’s most established companies.
According to share ranking site Stockopedia, just
ten AIM-quoted companies have a five year record
of successive sales, earnings per share and dividend
increases.
We have picked out one of these companies as Top
Pick. Not only is the company in question one of the
most successful shares on AIM, it is possibly the most
successful company listed on the entire London Stock
Exchange.
To get the lowdown on this company and four other
featured stocks, make sure you get the notification email
by joining the distribution list on the AIMprospector website. Your details will not be shared with any other
organisation.
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