AIM Prospector

Page 1


Issue 1 March 2014

Quids in America

The AIM company set for roll-out in the USA

NEW investor magazine dedicated to AIM stocks Five AIM companies researched and reviewed Income, turnaround and growth opportunities The most exciting area of the London market FREE to private investors

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Issue 1 February 2014

Quids in America

The AIM company set for roll-out in the USA

NEW investor magazine dedicated to AIM stocks Five AIM companies researched and reviewed Income, turnaround and growth opportunities The most exciting area of the London market FREE to private investors

Welcome to Contents AIMprospector, Christie Group.................p 4 a new Goals Soccer Centres.......p 5 magazine EMIS................................p 7 dedicated Sigma................................p8 to AIM-quoted Maintel.............................p 9 companies. next month….................p 10

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 rollouts 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


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Profitable and dividend paying, Christie Group looks ideally positioned to benefit from the changing UK economy. 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.

both 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. 4

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.

economic conditions could deliver the significant upturn in deals that Christie needs to thrive 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 counterintuitively, 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

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.

still expects 2013 to be profitable 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 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 Bid:offer 52week low:high P/E (forecast) Yield (forecast)

£30m 110p:119p 59p:116p 43 1%



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.

Their success is both a reflection and driver of the women’s game in the US. 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 rollout 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

Goals was the first operator to receive FA accreditation

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 5


TOPpick In the last 12 months that shares have risen 37%

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, 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.

On an operating profit basis, Goals’ US centre is twothirds more profitable than its average UK site. 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. 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




52week low:high


P/E (forecast) Yield (forecast)

15.3 0.9%

Modular build enables faster, cheaper roll-out

© Blakedown



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.

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

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.

quality customer base delivers high visibility of sales

notifications reduced from ten days to just one 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

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.

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. Emis 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 Bid:offer

a dominant position in a lucrative niche

52week low:high P/E (forecast) Yield (forecast)

£377m 595.5p:600p 575p:860p 17.1 2.7%



After rising tenfold in the last twelve months, have shares in regeneration specialist Sigma Capital got further to go? 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.

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.

considerable political support 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. 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





52week low:high


P/E (forecast)


Yield (forecast)



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.

average EPS growth of 13.3% a year, sales growth of 7.8% a year 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.

one of AIM’s most successful companies 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

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.

dividend has increased every year since 2006 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. 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




52week low:high


P/E (forecast) Yield (forecast)

14.9 2.6%



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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