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AIMprospector

Issue 9 November 2014

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

five AIM companies profiled world-leading manufacturer dividend-paying software firm thriving family business service company growing again free to private investors


AIMprospector AIMprospector

Issue 9 November 2014

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

Welcome to AIMprospector, the online magazine from Blackthorn Focus.

This month’s 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. five AIM companies profiled

world-leading manufacturer

dividend-paying software firm

Contents Welcome ...............................p2 Dillistone ..............................p3 Top Pick: Begbies Traynor....p4

thriving family business

service company growing again

free to private investors

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 Dean’s 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 Stredder’s 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 investorled 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 month’s AIM Prospector and good luck with your AIM endeavours.”David O’Hara, Editor, AIMprospector 2

Executive Insight ..................p6 Nationwide Accident Repair Services........................ p7 FW Thorpe...........................p8 Gooch & Housego ................p9 AIM Investor Focus.............p10 Next month.........................p12

Contact twitter: @aimprospector email: editor@aimprospector.co.uk www.aimprospector.co.uk

Published by: Blackthorn Focus Limited www.blackthornfocus.com www.aimprospector.co.uk


AIMprospector

Established niche-player with dividends If there is one thing I have learned about companies on AIM, it is that the successful ones have a habit of keeping on winning. 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.

Currency movements have not helped 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. Dillistone’s 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. Dillistone’s solutions are configured for the different flavours of recruitment that take place in industry. Executive search is handled through the group’s 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. www.aimprospector.co.uk

‘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 group’s skills testing operation ISV Software. Recruiters use this product to assess candidates’ skill levels. The company’s 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 longerterm recurring revenues. This was evident with the company’s 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

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.

the company is well-financed Dillistone has a solid track record. It’s enhanced product range will bring significant opportunities to crosssell. Recent noises around FileFinder Anywhere are very encouraging. Considering more than 80% of the company’s revenues are earned at home, improving business confidence in the UK could deliver a significant sales boost. DILLISTONE GROUP (LON:DSG) FOR Longstanding success Good dividend yield AGAINST FileFinder Anywhere needs to sell Acquisition integration risk Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high

£18m 93p:98p 12.7 4.0% 88p:127p 3


AIMprospector

TOPpick

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.

Ric Traynor owns 29% of the company

Following years of researching AIM companies, today I own shares (via a spread bet) in just one: the Manchesterbased insolvency practitioner Begbies Traynor.

lenders have been reluctant to push companies into insolvency 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.

fall in insolvency numbers has hurt Begbies Traynor To thrive, a business like Begbies Traynor needs an environment where corporate insolvencies are plentiful. 4

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 year since to £45.8m for 2014. I bought shares in the company in February 2013. At the time, the shares were trading in the mid-30s. For the six months ending 31st October 2012,

Begbies Traynor reported adjusted EPS for 2.5p. The dividend was held at 0.6p.

I bought shares in the company in February 2013 That put the shares on an extremely low P/E, with the prospect of a large yield. At that price, the insolvency market did not need to pick up for me to see value in the shares. However, I continue to expect an improvement in Begbies Traynor’s market could start soon. Moreover, such a recovery has some way to go and could take the shares much higher than they are today. For the year ending 30 April 2010, Begbies reported profit after tax of £5.6m. Basic EPS came in at 6.3p, total www.aimprospector.co.uk


AIMprospector

TOPpick could prove terminal for companies already in financial distress

Begbies Traynor needs a stream of corporate insolvency work to thrive

dividends for the year were 3.1p and the company had net assets per share of 75p – in-line with the share price at the time. According to government statistics, in twelve months from July 2009 to end of June 2010, there were just over 17,000 corporate liquidations in England and Wales. In that period, 0.91% of all registered companies failed.

the incidence of company liquidations has been declining Every year since then, the incidence of company liquidations has been declining. In the twelve months ending June 2014 there were around 14,500 company liquidations — as just 0.6% of companies collapsed. This downturn was manifested in Begbies’ 2014 full-year figures as revenues fell to £45.8m and basic EPS was just 3.3p. According to Stockopedia data, the book value per share as of the last balance sheet date was 65p, a www.aimprospector.co.uk

considerable premium to today’s price. While these are not growth figures, they do demonstrate the potential profit upside if corporate insolvencies increase. I have identified three reasons why this scenario might come about. One reason why corporate insolvencies can pick up in an economic recovery is because the uptick in demand produced by a stronger economy cannot be met by already stretched companies. The second comes from the fact that creditors become more confident in the amount of debt that they can recover if they petition for insolvency. Consider a public house or other hospitality business. If you were a bank with debts secured against the premises, it would make excellent business sense to wait for asset values to pick up before taking action. My third reason for expecting insolvencies to increase is because I expect interest rates to start rising.

In June this year, Bank of England governor Mark Carney explained in a BBC interview that he regards a 2.5% base rate as “not inconsistent with returning the economy to normal” and that the Bank was forecasting this level to come about by the end of Q1 2017. If the first rate rise does not come until just after the general election, this timetable suggests that the Bank would need to increase the base rate by around 0.25% a quarter until the ‘normal’ rate was hit. Such a rate of increase could prove terminal for companies already in financial distress. According to Stockopedia, Begbies Traynor is expected to make 4.35p of EPS in the current financial year and 4.65p the year after. While that doesn’t make Begbies shares especially cheap at today’s price, a company that can maintain a good level of profitability through an industry downturn will frequently trade on a premium P/E. If the insolvency cycle does pick up, or even race higher with interest rate rises, then the 65p net asset value seems a reasonable target price. Begbies Traynor Group (LON:BEG) FOR Clear upside if cycle turns Good yield AGAINST Management control is significant Hostage to the market it serves Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high

£41m 44p:47p 10.6 4.8% 36p:55p

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AIMprospector

Deborah Walter

Executive Insight With over 1,100 companies now listed on AIM, how can ambitious small caps stand out from the crowd? Investors have an overwhelming choice, less space is being devoted to smaller companies in many of the mainstream business publications and few equity analysts wish to write independent research on small caps where there is no obvious commercial benefit. So how can companies gain recognition amongst potential investors and the wider financial audience? Consider what motivates investors Before beginning any profile raising campaign, executives must consider what might attract potential investors to their company. Does it have unique, innovative or interesting products or services? What is the growth strategy and competitive edge? What are the realistic prospects of delivering an attractive return to shareholders through capital growth or dividend payments?

Keep it simple & bring the business to life It is critically important to explain the business clearly, distilling any complicated messages into simple language and eliminating unnecessary jargon. And try to make it memorable. How much scope is there to bring the company to life through case studies, photography or video?

How to get noticed by the press Press coverage can play a really useful role in gaining profile for smaller companies. But before talking to journalists, consider what the news angle is and why the press will be interested in your story. There are now few dedicated small cap columns in the financial pages of the national papers. But there are specialist AIM publications and, if you

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are inventive, there are also interesting opportunities to gain coverage in the mainstream press. Consider what columns might suit your business. Are you looking for personal profiles, are you an entrepreneur, do you have innovative products to talk about or are you creating jobs? Can you provide eye-catching photography or graphics to support your news? Journalists are keen to illustrate their stories with creative images and, for readers, they can create a lasting impression. And don’t rule out broadcast opportunities – the producers of dedicated business slots on radio and television are always keen to talk to articulate business leaders about their products and markets.

Extending your reach Many small cap companies will only have one analyst producing forecasts and research notes – and that will be their house broker. Nonetheless, it is important to take your investment case to the sales teams of other broking houses. High quality paid-for research can also be a useful way of reaching a wider range of potential investors. Small cap companies should also consider targeting the retail investor market. Over £450bn is held in the UK for private clients, either directly or by broking firms, and of this over 80% is

invested in an advisory or discretionary capacity. Private client fund managers are generally interested in meeting companies with growth stories and/or dividend yields.

Communications ground rules Finally, there are some golden rules in communicating with the financial audience, whether you are talking to investors, analysts or the media. Firstly, keep the market informed – aim to deliver regular news flow and consider how to maintain your profile between each set of results. Secondly, present to a high standard – a professional website, clear presentations and well-crafted press releases all create a favourable impression. And finally, cultivate your relationships – be approachable, be trustworthy and keep your supporters onside.

Deborah Walter is a Director of KTZ Communications, a specialist financial PR consultancy focused on advising AIM-listed companies. KTZ provides strategic advice on corporate positioning, profile raising, IPOs, fund-raisings, M&A, reputational issues and crisis management.

www.aimprospector.co.uk


AIMprospector

Nationwide prepares to step up a gear Nationwide Accident Repair Services (NARS) provides vehicle repair management services to motor insurers, fleet owners and private customers. These services include repair sourcing and repair itself – both the vehicle and glass. In recent years the company has been diversifying from working exclusively for insurers into fleet and consumer work. Fleet work has grown substantially and now represents 25% of group revenues. Growing mobile repairs is another ambition of the company as it is frequently higher margin work. NARS has been successfully building on its leading position in the UK repair industry through recent acquisitions.

Further revenues were added by the acquisitions Against this, one has to balance an awkward balance sheet that is encumbered with a significant pension deficit, a lack of historic revenue growth and the strong possibility of a large share overhang. NARS trades well when there are more vehicles on the road and crash incidence is high. Obviously, the first factor can influence the second. The strength of the pound has helped reduce fuel costs: the September price for petrol was the lowest since February 2011. Growth in the UK economy bodes www.aimprospector.co.uk

well for the number of miles being put in by drivers, something that will be further encouraged by low fuel prices.

NARS would have to continue making payments for another nine years In the first half of its year, a significant contract with AXA was renewed. Further revenues were added by the acquisitions of Exway (August 2013) and Howard Basford (February 2014). Post-period end, Gladwins, a repair company operating eight bodyshops, was acquired. In aggregate, these three businesses made annual revenues of £35m prior to their acquisition. Given that NARS made £156m of revenues in the year prior to these additions starting, the new operations will have a significant effect on future revenues. The larger geographical footprint of the repair network should also bring margin improvements. The enhanced size of the group will make servicing the group’s pension deficit less onerous. For 2013, NARS had to pay £1.3m to service a liability that closed the year at £19m. At a discount rate of 4.4%, NARS would

have to continue making payments for another nine years. A flurry of RNS announcements was made earlier this year as Quindell plc built a 25.3% stake in NARS. I don’t expect Quindell to hold on to its stake in NARS much longer. While this may result in an unpleasant share overhang, such situations can present an opportunity for investors to acquire stock at a depressed price. The acquisitions are expected to help EPS reach 8.4p this year, with the dividend held at 2.9p. Given that half-year revenues were 14% higher and gross margins were 2% higher at 36.2%, a significant improvement for the full year seems nailed on. Nationwide Accident Repair Services (LON:NARS) FOR Industry positioned for upturn Margins set to improve AGAINST Possible share overhang Pension deficit will deter some Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high

£34m 73p:76p 9.0 3.8% 61p:92p

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AIMprospector

Family firm is one of AIM’s leading lights

FW Thorpe is a long-established family-controlled lighting business. The company is a paradigm of financial conservatism, using its continued business success to reward shareholders via consistent dividend increases. The company was founded in 1936 by Frederick Thorpe. Family members remain substantial shareholders today, with members of the Thorpe family owning around 54% of the equity. Frederick Thorpe’s grandson, Andrew Thorpe, is today Joint Group Chief Executive and Group Chairman. He owns 21.7% of the company.

Thorlux accounted for just over 80% of sales FW Thorpe operates through seven brands: Thorlux Lighting, Philip Payne, Sugg, Compact, Solite, Portland Lighting and TRT Lighting. The dominant brand is Thorlux Lighting. Over 60% of the products from this business are sold to the commercial sector, e.g. offices and hospitals. Philip Payne produces bespoke emergency exit signage for architects and interior designers. Clients range from Ascot racecourse and Wembley Stadium to The Ritz Hotel and Oxford’s Ashmolean Museum. Sugg lighting produces decorative and heritage outdoor lighting (i.e 8

fancy lamps). The company was established in 1837 and acquired by Thorpe in 1999. Sugg was awarded the prestigious Royal Warrant in 2008. Compact and Solite address specialist niches. Compact provides lighting to retailers. Solite specialises in installations where cleanliness is a priority — such as laboratories and kitchens. Portland Lighting makes lighting for outdoor signage/displays. TRT Lighting was recently borne out of Thorlux and is dedicated to road and tunnel lighting. In the year ending June 2014, Thorlux accounted for just over 80% of sales and over 90% of operating profit. Geographically, 87% of group sales are within the UK market. The company recently opened an office in Abu Dhabi to face the Middle East market. TRT Lighting is finding its own feet and moving toward profitability. Shareholder dividends at FW Thorpe have been increased from 0.45p in 1997 to 3.25p for 2014. In that time, the dividend was increased in every year but two (when it was

held). The 2014 payout was further augmented by a special dividend of 1.5p per share. Thorpe’s record of dividend increases in the last five years puts the company among the top twenty on AIM. Sales and profit growth have been more pedestrian. Since 2008, annual sales and net profits have progressed at 3.4% pa and 3.8% pa respectively. However, the last reported full-year numbers showed growth significantly ahead of this. There are reasons to expect that higher growth might be repeated in the future as the company has launched initiatives to improve LED margins and has made significant investments in production and warehouse capacity.

no forecasts in the market Sadly, there are no forecasts in the market for the company. However, the history of dividend increases, along with the strong balance sheet, would suggest another year of payout increases is on its way. FW Thorpe (LON:TFW) FOR Long track record of success Strong balance sheet AGAINST Controlled by the founding family Only modest growth opportunities Market cap Bid:offer P/E (historic) Yield (historic) 52week low:high

£150m 130p:135p 15.5 2.4% 120p:150p

www.aimprospector.co.uk


AIMprospector

Hi-tech West Country firm is making hay From its headquarters in Ilminster, Somerset, Gooch & Housego (G & H) is a world-class technology manufacturer and engineer, enjoying high sales and profit growth. The company researches, designs, engineers and manufactures advanced photonic systems, components and instrumentation. Wikipedia defines photonics as ‘the generation, emission, transmission, modulation, signal processing, switching, amplification, and detection/ sensing of light’. G & H’s work involves the provision of components, sub-systems and systems for laser-related end products, such as providing much of the optical hardware that goes into the Retinal Scanning Systems found in high street opticians. Customers include Honeywell, Agilent Technologies, Northrop Grumman and Leica. G & H serves its customer base via three UK facilities and five sites in the US. Gooch & Housego provides equipment used in, for example, fibre optic telecoms systems. As the deployment of photonics solutions moves deeper into aerospace, communications and medicine, G & H looks set to enjoy continued sales growth. Management strategy is to move the company up the value chain, from being a manufacturer of components, www.aimprospector.co.uk

to more specification, design and build work. This would see the company become a key partner for systems manufacturers rather than just a component supplier.

three UK facilities and five sites in the US Based in Torquay, the company’s Systems Technology Group is at the forefront of this effort. This operation draws expertise from all G & H sites. The company has doubled the size of this team in 2014. G & H’s most recent trading statement suggested that its strategy is already delivering, with management highlighting new product development initiatives that are aligned with the company’s long-term strategic objectives. The announcement also confirmed that the year to September 2014 is expected to finish in-line with management expectations. The Stockopedia 2014 consensus forecast figure is currently 35.2p, a 27% increase on the normalised EPS figure reported last year.

18% ahead of where it was twelve months prior

Chief Executive, Gareth Jones, took the opportunity to point out that management initiatives are delivering greater operational efficiencies and improved margins. Current consensus is for a 2015 EPS number that is just 9.6% ahead of the forthcoming 2014 result. If the sales and margin growth already reported can be sustained then I would expect forecasts to be upgraded. As photonics applications increase and the industry grows, G & H is likely already on the radar of larger engineering technology firms. Meanwhile, the company continues to reward its shareholders via dividends and share price growth. Back in 2010, the shares traded at less than two pounds. Dividends totalled 2p per share for the year. For 2013, dividends of 6.6p were declared. The shares began 2014 trading at more than 700p, having advanced at a slightly faster rate than the dividend. Gooch & Housego (LON:GHH) FOR Market leading position Strategy looks to be working AGAINST CEO change at end of year Strong pound could affect exports

More encouraging is the fact that management reported an order book for the start of the 2015 year that is 18% ahead of where it was twelve months prior.

Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high

£156m 630p:655p 18.6 1.1% 591p:740p

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AIMprospector

Event review: AIM Investor Focus October 23rd saw the Blackthorn Focus event AIM Investor Focus run for the fifth time. Five companies were present on the day. Each met with an AIM Prospector staff writer. Here is the lowdown on all five.

In the last five years, defence supplier Cohort plc has grown net profits from £3.8m to £5.9m. In that time, the dividend per share has been increased five years running: from 1.2p for 2009 to 4.2p for 2014. The market forecasts further significant profit and dividend increases in the next two years. The positive outlook given in the Cohort management presentation at AIM Investor Focus further underlined the growth potential. Cohort is a group of four companies: MASS, technical consultancy for the education and military sector; SEA, systems, software and electronic engineering services particularly for the submarine fleet (recently beefed up with the September acquisition of J+S); SCS, advisory services to the MoD; and MCL, acquired in July, which delivers electronic communications and surveillance technology. The company has a strong balance sheet, with a net cash position of some £4m, even after the purchase of J+S for £12m. Cohort’s biggest customer is the MoD. The company is well embedded in the submarine manufacture sector, which remains a growth area. The business is thus positioned to deliver long-term, 10

sustainable operating margins, generating the cashflow required to support further acquisitions and/or dividend increases.

that was recruited following a 2007 acquisition. The company’s market valuation remains attractively modest relative to both small and large-cap IT Services sector peers.

SCISYS is a computer software supplier to specialist industry (media broadcast, defence etc). The company has steadily improved operating margins over the past six years and has increased its dividend to shareholders every year for the last four years. In that time, net profits have increased almost fourfold. In their presentation at AIM Investor Focus, management confirmed their hope to bring in revenues exceeding £60m at double-digit operating margins by 2018. According to Stockopedia, the market is forecasting a double-digit increase in earnings per share for 2014. SCISYS’ recent half-year results showed a 19% increase in adjusted earnings per share and a 10% dividend hike. SCISYS is strongly cash generative and achieved an operating margin of 7.6% in 2013, demonstrating the completion of its operational rehabilitation following the demerger of CODA in 2006. Much of the recent strong financial performance has been down to the management team

After many years listed on PLUS/ISDX, fire safety products firm Sprue Aegis joined AIM in April 2014. In 2008, revenues were £9.4m and net profit was £1.1m; for 2013, revenues were £48.4m and net profits hit £4.2m. The company declared a maiden dividend of 0.5p for 2009 and the payout has increased every year since, reaching 6p for 2013. 2014 interims revealed sales up 11% and a 34% increase in earnings per share; net cash was £11m and a 2p maiden interim dividend was announced. At the AIM Investor Focus presentation, management confirmed the continuing strong markets in France and Germany with a record order book extending into 2015. For Sprue’s 2014 full year, the market is forecasting a 20% increase in sales to £60m and a jump of over 70% in net profits to £7.5m. Whilst growth in sales and profits will be more modest from 2015 onwards, the magnitude of future growth will likely remain significant enough to justify www.aimprospector.co.uk


AIMprospector continued investor interest. Jarden Corporation (an American multinational with a market cap of £4.9bn) is the largest shareholder in Sprue Aegis and supplier of the BRK appliances marketed and sold by Sprue Aegis. After failing with a takeover attempt pitched at 90p in 2013, Jarden is now free to bid again for the whole company. At some point in the future and at the appropriate price, I expect that Jarden will succeed in acquiring Sprue Aegis and incorporate Sprue products into its own vast offering of global consumer appliance brands.

Trakm8 is an automotive telematics business, established in 2002 and listed on AIM in 2005. The company has grown fast in recent years, through both acquisition (four acquisitions since 2006 with the latest, BOX Telematics in 2013) and organic growth. Revenues, which were flat in the previous 4 years, more than doubled in FY2013/14 following the BOX purchase. The company has been profitable since 2010 but earnings doubled in FY2013/14 on consolidation of BOX. During their presentation at AIM Investor Focus, management confirmed the growing strength of recurring revenues and the transformational impact of the BOX acquisition. The market is forecasting a further surge in revenue and earnings growth for FY2014/15 and beyond. Recently, Trakm8 has successfully added bluewww.aimprospector.co.uk

Market Cap

Price

P/E (forecast)

Yield (forecast)

Cohort (LON:CHRT)

£99m

235p:243p

14

2%

SCISYS (LON:SSY)

£27m

90p:94p

9.7

1.7%

Sprue Aegis (LON:SPRP)

£130m

280p:295p

17.1

2.8%

Trakm8 (LON:TRAK)

£21m

70p:75p

12.7

0

Ideagen (LON:IDEA)

£42m

33.5p:34p

16.9

0.5%

Company

chip customers such as Direct Line Insurance, the largest motor insurer in the UK. No dividend payments are expected in the medium term but the company could surprise given its strong cash position. As Trakm8 expands the number and range of its installed telematic devices, it is effectively building an intelligence-based service derived from data aggregation. The Executive Chairman, John Watkins, has previous experience in monetising an information database, having successfully sold Omitec, the UK’s biggest vehicle diagnostics company, to the German automotive giant Continental in 2012.

Formerly known as Datum International, Ideagen (listed on AIM since 2012) is an information management software company specialising in GRC (i.e. ‘governance, risk and compliance’) for major enterprises and clinical content for UK NHS Trusts. The company has demonstrated adroit integration capability having acquired six companies over the last four years, resulting in revenues growing

ninefold to £9m. Earnings trends have been affected by amortisation of sizeable acquisition intangibles during the same period meaning that dividends did not start until 2014. Management is confident in its outlook for FY2014/15 with continuing growth in recurring revenues and a further increase in earnings forecast. The June 2014 acquisition of EIBS, a software company with 40 major clients in the NHS and other public sector bodies is expected to be earnings enhancing in FY2015/16. Ideagen will likely have £4m in net cash at year end FY2014/15, unless another acquisition is made. The potential for growth in the NHS is enormous because over 50% of Health Trusts do not have appropriate software for either EDM (i.e. ‘electronic document management’) or OCM (i.e. ‘online case management’). Ideagen provides both of these solutions. Moreover, the flexible and modular ‘portal configuration’ of Ideagen’s GRC software, already embedded in many blue-chip multi-national companies, should continue to be an attractive offering to many more large and especially international enterprises. If you have not previously attended AIM Investor Focus but would be interested in participating at a future event, register your interest with Blackthorn Focus. 11


AIMprospector

Next month: AIM Prospector will be bringing another five AIM-quoted companies to readers next month. Remember, to ensure that you get AIM Prospector first, sign up here: www.aimprospector.co.uk. Registered subscribers receive the magazine as a pdf at least 24 hours before it goes live to the public. Your details will not be shared with any other organisation and there is no spam.

Smallcap markets seem to have returned to more normal behaviour, with valuations fairly even. Conditions like this make AIM a classic stockpickers market. AIM Prospector will continue to introduce the investor community to more AIM companies worth further examination.

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NEDucation is a one day update event from Blackthorn Focus, dedicated to covering all the issues that matter for nonexecutive directors of UK-listed companies. NEDucation will next run on November 25th at the offices of BDO.

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November 2014 AIM Prospector  

Featuring ten AIM-quoted companies: Dillistone Group, Begbies Traynor, FW Thorpe, Gooch & Housego, Nationwide Accident Repair Services, Spr...