The transformation is due to an increasing use of its presentation technology for events.

The key to the success is its nVision presentation system. It wasn’t even in existence back in 2002 when Cheerful Scout floated on Aim – but the combined skills and technical know-how of the group were.

The nVision software enables a corporate, media or business presentation to be richly interactive because the visuals deployed can actually be changed, adjusted and tweaked as an event progresses. This is much more attractive than a normal presentation where the slide show would be prepared prior to the event and can’t really be adapted to take into account any changes.

Reputation builder
The nVision Presenter product was launched in 2006 and it is still building a reputation in the market. That makes it even more impressive that Cheerful Scout managed to do so well in the year to June 2006, even though nVision Presenter only contributed for part of that period. A newer version, nVision Strategy, is being developed for the business intelligence and strategy market. The 3D graphics will help the users visualise the effects of changes in business strategy using their own data and spreadsheets.

Cheerful Scout already had relationships with organisations such as law firm Allen & Overy, with which it has a two year contract advising on conferences and communications, and accountants Deloitte, where it has produced corporate videos. Both are ideal customers for the new product and will add to its credibility. The reaction to the system is positive and Cheerful Scout is actuallly increasingly organising events where the product is used. It intends to take on more staff in this part of the business.

Branding ambitions
The corporate videos side of the group is also becoming involved with branding projects. For example, it is creating characters and images for the new Tesco Direct service.

The DVD post-production operation contributes around one third of turnover. Although some complex interactive DVDs aren’t generating enough revenues to cover the cost of producing them, there is still plenty of demand for Cheerful Scout’s services. It has even designed a version of chef Jamie Oliver’s Jamie’s School Dinners DVD which deletes the swearing.

Strong numbers at last
In terms of the full year figures, turnover jumped from £898,000 to £2.17 million in 2005-06. The DVD and corporate videos operations contributed the majority of last year’s turnover, but the events business is likely to grow much faster than the other parts of the group. A pre-amortisation loss of £220,000 was turned into a profit of £259,000 in 2005-06.

It is important to understand that although Cheerful Scout’s DVD post-production operation is a facilities business, the company is not like other facilities businesses, which spend any money they earn on new equipment. Cheerful Scout is not obsessed with spending all its cash on the latest toys. It has all the equipment it needs
to provide the required services to its clients.

That explains how the company generated £164,000 in cash after all capital spending. While it continues to make a profit it will still generate cash. This, combined with a capital restructuring, makes a dividend a possibility this year.

On the corporate front, Cheerful Scout plans a 25-to-one consolidation of its shares on 24 November. At first glance this may seem cosmetic, but it will make institutional shareholders take the business more seriously – and it is of course the perfect time to do so.

At 1.25p – equivalent to a consolidation price of 37.5p – the group is valued at £3 million. Profits of £350,000 are forecast for 2007 and they are expected to double the following year. The shares are trading on 11 times 2006-07 earnings falling to less than six the following year. That strong profit growth warrants a higher share price.

Cheerful Scout	AIM	£0.37m	3.75p	0.00p
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