Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

Oh dear, Healthcare Locums receives a dreaded gong!

I see that Healthcare Locums has received a dreaded gong with former Chief Executive (now ‘promoted’ to Executive Vice Chairman) Kate Bleasdale winning the Entrepreneur of the Year prize at the recent Quoted Company Awards dinner.

I seem to remember that past awards winners from amongst AIM included Inter Link Foods and Torex Retail. These two companies clearly found the pressure of an AIM award too great a burden and were ultimately huge disappointments to shareholders. It’s also always slightly worrying to see the term ‘colourful’ used in the context of a group Chief Executive, or Executive Vice Chairman as she is now titled. An entrepreneurial market like AIM is bound to have an abundance of colourful characters. By contrast, the main market with larger more successful companies appears to possess fewer of them.

Let’s hope high flying Healthcare Locums doesn’t go the same way as those other former AIM stars and the Exec Vice Chairman becomes a little less colourful!

Redhall Group - Chieftain acquisition suddenly looks ill timed

Following the cancellation of a material £9m contract, the timing of Redhall Group’s acquisition of Chieftain, the former AIM quoted engineering group, now looks questionable.

The contract awarded to Chieftain by Sea Dragon Offshore Ltd covered the fit out of a semi-sumersible oil rig and was planned for the second half of the financial year ending 30th September 2009. The loss costs Redhall £1m of operating profit.

Given the materiality of the contract and it significance in the current financial year it does beg the question how much due diligence was undertaken by Redhall prior to concluding the acquisition. The company is seeking legal advice with regard to possible compensation but this will unfortunately result in yet more fees and is surely unlikely to fully compensate.

Let’s hope there are no more skeletons in Chieftain’s contract cupboard!

INDIAN FILM COMPANY - Disgruntled shareholders haven’t actually elaborated on what they intend to do!

I find it somewhat strange that the material shareholder (Altima Indian Master Fund) proposing the removal and replacement of 2 of the current Directors of the AIM quoted Indian Film Company hasn’t actually provided a full ‘formal’ explanation of reasons for suggesting this ‘drastic’ course of action. Altima has formed the IFC Requisition Group (‘IFCRG’) to engineer this, currently claiming the support of 32% of the shareholders.

The current board on the other hand has posted a circular to shareholders providing a full explanation as to why they don’t consider the rebel’s proposals to be in the best interests of the company and shareholders.

Altima has complained that the returns received by IFC have not materialised into returns for shareholders – welcome to the stock market of 2008/09 boys!

IFCRG plans a "review of the business, including an assessment of past performance and future strategy" if its resolutions are passed. Well that really tells us a lot!

The group only floated on 18th June 2007 with funds raised deployed over a period of 18 months. I would suggest there has been little time to properly assess trading performance. Furthermore, I can’t see what justification there is for the suggested appointments as the individuals concerned don’t appear to have any specialist knowledge of the industry.

I would agree that the board should come out with a detailed response to those financial queries but rather than simply make criticism of a general nature IFCRG’s position would be more credible if they put forward a detailed well supported proposal. The proposed removal of key board members would appear to justify this, at least!

Lots of activity at William Ransom

I see that the Directors of Willaim Ransom are keen buyers of the group's shares with the Chief Exec purchasing a further 1,400,000 shares at 6.50 pence each taking his total holding up to 4.3m shares.

Other board members also bought.

After successfully seeing off the rebel shareholders and former board members let's hope they can now focus on putting the company straight.

Sale of Radian B for £3.4m was clearly important/essential for the future. I'm somewhat surprised the gross contribution (£0.75m) wasn't even greater.

Small cap brokers complaining about too many companies on AIM

I note the recent article in the Daily Telegraph with the headline that 'Investors call for reform of AIM.

There were several comments from small cap brokers stating that too much money went into too many companies too fast;and who was responsible for this -the small cap brokers, who were happy to accept huge fees for raising paltry sums.

Surely it's the brokers that need reforming and not the market!
A cap on fees relative top sums raised would help

WEIR - broker's views conflicting but this is a high quality business

Positive final quarter, benefits from the effects of a positive foreign currency translation notably from the strengthening of the US dollar against sterling.

Net debt at 31 December 2008 expected to be lower than the half year figure of £261.7m with operating cash flow generation and the proceeds from the sale of the Materials & Foundries businesses being partially offset by an adverse foreign currency translation effect.

A total of £625m of committed revolving credit facilities, expiring in 2011 in place.

Full year outlook for profit from continuing operations before tax, intangibles amortisation and exceptional items to increase to around £174m (from £170m)

Lots of conflicting opinion from analysts:

Dresdner Kleinwort cuts Weir Group (WEIR.LN) target price to 550p from 1100p.
Arbuthnot Securities upgrades Weir Group (WEIR.LN) to buy from neutral,
Weir is a survivor and a winner – Evolution

Broker Daniel Stewart (‘DS’) is clearly keeping a close eye on things commenting that the number of active oil drilling rigs in the USA fell sharply (98 to 1,623 – that’s c6%) in the most recent survey by Baker Hughes, the US oil services company. Apparently the biggest week-on-week decline since the oil industry crisis in the mid 1980s bringing the fall to a total of 408 rigs (a 20% cut) since the peak of the market in early September 2008.
DS went on to say that the reduced activity will have an impact on SPM, the US-based manufacturer of high-pressure well service pumps and related flow control equipment which Weir acquired in June 2007 for £328m. It is the largest element of the group's Oil & Gas division, which they expect to produce just over one-third of the group's profits for 2008.

It’s obviously tough in the short term but WEIR is a high quality business.

At current price shares are trading at under 7x 2009 full year estimates, gearing c30%, yielding c5% covered over 2x.

Titan Europe - it's all kicking off again

First it was the Directors, then engineering group Mefro Wheels now it's Titan Inc that has started topping up its holding in associate Titan Europe.

Surely someone is going to make some money on this one

Bond International - management must be tempted!

The Specialist provider of software for the international recruitment and human resources industries cam out with a trading update year ending 31st Dec 2008

Deterioration in trading probably much as expected but deferral of key contracts disappointing.
Still expects to report revenues in excess of £31m for the year ending 31st Dec 2008 and an operating profit of not less than £5.4m. Consensus forecast was for pre-tax of £6.70m and revenue of £31.90m and eps of 14.90p. Operating profit guidance is pre amortization of intangibles. For the year ending 31st Dec 2007 operating profit was stated before net finance costs of £140k. Zero debt so finance costs in the current year are assumed to be irrelevant. Effective tax rate for 2007 was c29%.

Looks like eps is now going to be c8p.The board intends to pay an unchanged dividend of 1.6p which is very welcome. Outlook statement reasonably positive (in the circumstances); high level of recurring income across all divisions, has good order books and sales prospects and continues to take orders at an encouraging rate. Steps taken to reduce operating costs and remains leader in sector.

Nice little business, recurring revenue c50% of total (interim stage) and excellent cash generation (c100% + op profit). Operating margin has been steadily declining due to changed sales model (when will the benefits come through?)

Net asset value at interim stage was £34m, includes Goodwill of £14.3m

Given cash generation one can assume that management will be considering other options away from the market? Others out there must feel the same as shares were up 20% after this profit warning!



Investor's Champion is a registered trade mark of Investors Champion Ltd.  Investor’s Champion Limited is a company registered in England and Wales under number 03577867 whose registered office is at Langwood House, 63-81 High Street, Rickmansworth, Herts WD3 1EQ. Investor’s Champion Ltd is associated with Fundamental Asset Limited who is authorised and regulated by the Financial Services Authority.