november 2014 aim prospector

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Featuring ten AIM-quoted companies: Dillistone Group, Begbies Traynor, FW Thorpe, Gooch & Housego, Nationwide Accident Repair Services, Sprue Aegis, SCISYS, Trakm8, Cohort and Ideagen.

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  • AIMprospector

    five AIM companies profiled

    My favourite AIM shareFrom 1,100+ shares, I own just one

    Issue 9 November 2014

    world-leading manufacturer

    thriving family business

    dividend-paying software firm

    free to private investors

    service company growing again

  • AIMprospector

    2 www.aimprospector.co.uk

    Welcome to AIMprospector, the online magazine from Blackthorn Focus.This months AIM Prospector (finally!) features the one AIM company whose shares I personally have direct exposure to: Begbies Traynor plc. So far, I have been half-right on this one. While the

    shares have risen significantly since I first climbed on board, the business performance is yet to pick up as expected. I hope that after reading the article on page 5 you concur with my reasons for backing the shares. This month also features a special write-up from the recent Blackthorn Focus event

    AIM Investor Focus. Five AIM-quoted companies were present on the day: Cohort,

    Ideagen, SCISYS, Sprue Aegis and Trakm8. An AIM Prospector staff writer met with

    the management of each company, and a write-up appears from page 11.

    One company previously featured in AIM Prospector that recently reported

    is restaurant group Richoux. While the trading performance was down on the

    previous year, management was very positive, particularly as the company has

    solid plans to soon expand its most profitable operations: the Richoux pattiserie

    and the American-style Deans Diner. Together, these plans could see the

    company end 2015 with a portfolio of over 20 restaurants. I expect that this

    would lead to an improvement in group sales of around 30%.

    The recent market sell-off has been very unkind to some AIM companies.

    Note particularly Iomart. Only in June, the company received a 285p cash bid. Yet

    the shares recently traded as low as 170p as the market fell into a state of funk.

    Another AIM share that is beginning to look attractively priced again is the

    precision instruments firm Judges Scientific. Although the recently announced

    organic growth from the company is modest, Judges is still moving ahead at

    pace. The management team here has a comprehensive track record of success

    and rewarding shareholders. I hope to take a closer look in a future edition.

    A final call for David Stredders smallcap gala event in Derby beginning on

    Thursday. Mello2014 is a three day investor-led event for investors, featuring

    some high quality listed companies and top fund managers. Here at AIM

    Prospector, we believe it is important that investor-

    led initiatives such as Mello2014 are supported by the

    community and industry. AIM Prospector readers have

    kindly been offered discounted entry to Mello2014.

    Register using the code PROSPECTOR-DISCOUNT for a

    half price ticket at this event here.

    Enjoy this months AIM Prospector and good luck with your AIM endeavours.David OHara, Editor, AIMprospector

    ContentsWelcome ..............................p2

    Dillistone .............................p3

    Top Pick: Begbies Traynor ...p4

    Executive Insight .................p6

    Nationwide Accident Repair Services ....................... p7

    FW Thorpe ..........................p8

    Gooch & Housego ...............p9

    AIM Investor Focus ............p10

    Next month ........................p12

    Contacttwitter: @aimprospector

    email: editor@aimprospector.co.uk

    www.aimprospector.co.uk

    Published by:Blackthorn Focus Limited

    www.blackthornfocus.com

    AIMprospector

    five AIM companies profiled

    My favourtie AIM shareFrom 1,100+ shares, I own just one

    Issue 9 November 2014

    world-leading manufacturer

    thriving family business

    dividend-paying software firm

    free to private investors

    service company growing again

  • AIMprospector

    www.aimprospector.co.uk 3

    Software firm Dillistone is a great

    example of an AIM winner. In the last

    five years, the shares have more than

    doubled as the company has been

    reporting profits and paying dividends

    to shareholders.

    The company today looks like a

    rare AIM investment opportunity:

    a smallcap software firm with an

    impressive dividend yield.

    Dillistone is a provider of software

    to the recruitment industry. The

    company first came to AIM in 2006.

    Dillistones current form has come

    about via three acquisitions: Voyager

    in 2011, FCP Internet (the company

    behind Evolve) in 2013 and finally ISV

    at the end of September this year.

    Dillistones solutions are

    configured for the different flavours of

    recruitment that take place in industry.

    Executive search is handled through

    the groups eponymous Dillistone

    Systems. This division accounted for

    just over half of H1 group revenues.

    Voyager Software Limited

    addresses the temp and contingency

    recruitment market with customers in

    more than 20 countries.

    Evolve is a general recruitment

    database programme with additional

    mid-office software links through to

    invoicing etc.

    Distinct to these activities, but related,

    is the groups skills testing operation ISV

    Software. Recruiters use this product to

    assess candidates skill levels.

    The companys recent development

    makes comparison with prior years

    difficult. Things are complicated

    further as sales move to a subscription

    model. This is a phenomenon being

    repeated across the industry. The

    transition results in immediate

    revenues being swapped for longer-

    term recurring revenues.

    This was evident with the companys

    recent interim results. Dillistone reported

    non-recurring revenues down 6% at

    1.13m for the six months ending in

    June. Recurring revenues, however, were

    19% higher at 2.86m.

    Pre-tax profit fell from 817k to

    646k. Currency movements have not

    helped: if 2013 exchange rates had

    held, adjusted H1 2014 pre-tax profits

    would have shown a 4% increase on

    the comparable period.

    The dividend was increased 4%.

    Dillistone Systems flagship

    product FileFinder Anywhere has

    recently been through an ambitious

    upgrade. Management expects the

    administrative overhead that comes

    dividendsIf there is one thing I have learned about companies on AIM, it is that the successful ones have a habit of keeping on winning.

    DILLISTONE GROUP (LON:DSG)

    FOR

    Longstanding success

    Good dividend yield

    AGAINST

    FileFinder Anywhere needs to sell

    Acquisition integration risk

    Market cap 18m

    Bid:offer 93p:98p

    P/E (forecast) 12.7

    Yield (forecast) 4.0%

    52week low:high 88p:127p

    Established niche-player with

    Currency movements have

    not helped

    with rolling out the new product to

    hold back immediate growth, resulting

    in a 2014 outcome for the Group

    similar to the previous year.

    Given that Dillistone reported a net

    profit of 1.2m last year, the shares

    today do not look particularly cheap.

    However, the company is well-financed

    and can be expected to enjoy some

    growth thanks to the recent acquisitions.

    Dillistone has a solid track record.

    Its enhanced product range will bring

    significant opportunities to cross-

    sell. Recent noises around FileFinder

    Anywhere are very encouraging.

    Considering more than 80% of the

    companys revenues are earned at

    home, improving business confidence

    in the UK could deliver a significant

    sales boost.

    the company is well-financed

  • AIMprospector TOPpick

    4 www.aimprospector.co.uk

    My best pick from all of AIM There are over 1,100 shares on AIM. I have taken a good look at several hundred and used screening software to measure up the whole lot.

    Following years of researching AIM

    companies, today I own shares (via a

    spread bet) in just one: the Manchester-

    based insolvency practitioner Begbies

    Traynor.

    Begbies Traynor (Begbies) is led by

    its Executive Chairman and co-founder

    Ric Traynor. Today, Mr Traynor owns

    29% of the company.

    The bull case is based on understanding

    what an insolvency practitioner does and

    what drives its business.

    Basically, a company or individual

    is insolvent if it is unable to pay its

    debts. Creditors or a court appoint an

    insolvency practitioner who endeavours

    to ensure that the situation does not

    deteriorate further and that creditors

    are treated fairly.

    Insolvency practitioners rarely get

    involved unless there are substantial

    assets involved.

    To thrive, a business like Begbies

    Traynor needs an environment where

    corporate insolvencies are plentiful.

    Surprisingly, despite the recession, this

    has not been the case in recent years.

    Experts frequently attribute this

    phenomena to the forbearance of

    banks: lenders have been reluctant to

    push companies into insolvency due to

    concerns over bad publicity (especially

    pertinent when two of the largest

    banks were recently rescued by the

    taxpayer) and the value that may be

    realised for assets.

    The fall in insolvency numbers has

    hurt Begbies Traynor. From revenues

    of 62.8m in 2010, income has fallen

    every