Company Watch News

Rising broadcaster demand for factual programming buoyed annual profits at Ten Alps, the independent TV production venture co-founded by Alex Connock and Bob Geldof. In a stellar year to March, profits rose nearly fivefold to £628,000 as revenues more than doubled to £34.8 million.

Immediately after delivering the above figures, chief executive Connock cheered investors further by announcing that revenues in the first half of this year will rise by more than 50 per cent. Connock also added that the Teachers’ TV channel deal, which lasts until 2008, gives the company considerable medium-term revenue visibility. Teachers’ TV, a multi-million pound venture funded by the Department for Education and Skills, was launched last February and Ten Alps has a 70 per cent stake in the consortium which has a four-year contract to operate the channel.

Elsewhere, Ten Alps has 35 television productions underway, including documentaries and docu-dramas for the BBC, Channel 4 and the Discovery Channel. However, this impressive organic growth could soon be supplemented by acquisitions in a consolidating marketplace. Says Connock, ‘with a four-year track record of successful delivery [it is now] time for Ten Alps to move to the next stage of its development.’ Shares in the company, which we recommended at 44p last month, have climbed to 57p. We reckon this group looks a steal trading as it does on a p/e of around 14 times forecast earnings. Keep buying.

‘Add’ at aerospace play UMECO

Readers who bought into UMECO on our advice in December 2004 at 428p are sitting on a healthy 10.75 per cent gain, with the shares now trading at 474p (and they have been as high as 487.5p).

In his most recent missive to the City, chief executive Clive Snowdon reported profits up 46 per cent to £14 million on a 31 per cent turnover improvement to £242.4 million for the year to March. Snowdon was keen to point out the strong underlying growth within the business and the excellent contributions from acquisitions Advanced Composites and Avionics Mobile Services – these ventures were responsible for £3.3 million of total profits.

The most important message though was that UMECO is flourishing in the recovering civil aerospace sector, where it has ties with key players like Rolls Royce and Bombardier, and where build rates for new aircraft are in the ascendancy. ‘Confidence in the aerospace recovery is pretty solid,’ reflects Snowdon. Throw in a strong US defence market, and a clamour for UMECO’s composite materials, and the shares remain attractive on 15 times 2006 earnings based on a forecast jump in profits to £15.8 million. Add.

Strong first half at RWS

Patent translation and technical search specialist RWS Holdings increased interim pre-tax profits 16 per cent to £3.5 million and expects a good second half year.

AIM-quoted RWS, Europe's leading provider of intellectual property support services, pushed sales up ten per cent to £17.2 million in the six months to March, against the background of an overall European patent market growing at seven per cent a year. Operating profit, before goodwill amortisation and exceptional items, rose 28 per cent to £3.3 million and net cash at the end of March stood at £9.7 million after funding the £2.25 million acquisition of Eclipse Translations.

Executive chairman Andrew Brode, also a non-executive director of Vitesse Media (publisher of Growth Company Investor), says the second half year should show stronger growth by comparison with a relatively weak second half in 2003-04. RWS, which serves customers

in the medical, chemical, pharmaceutical, motor and telecoms industries and also provides technical, legal and financial translation outside the patent field, should additionally benefit from increasing its market share.

Brode says the company likes Eclipse partly because it brings two or three longer-term contracts to a mostly one-off business, a proportion he would like to increase. RWS would have 'no problem' funding another suitable acquisition, possibly in new areas of patent support.

The company is expanding its staff and office space in Japan and would one day like to be bigger in the huge US market, though that would require a daunting commitment of sales and marketing effort. Looking to the future, Brode says completely mechanised translation, on which the EU Commission has spent 'hundreds of millions', is still '17 years away', but RWS will be ready when it does come.

At 192p, RWS is valued at £73 million. The shares still offer investors significant scope for improvement.

Evans eyes £7.7m

Accident Exchange, the post-accident prestige car replacement specialist we tipped at 285p, almost fell through our stop- loss in June, but we remain fervent fans of this business.

The fast-growing outfit increased pre-tax profits from £1.1 million to £6.7 million in 2004-05 on turnover up from £4.1 million to £21.7 million. During the year, the company boosted its fleet size from 250 to 961 vehicles and agreed to provide its services to Glasgow Audi customers, BMW and franchised West Country car dealer Helston Garages. Along with the figures, Accident Exchange also announced deals with divisions of HR Owen and Inchcape.

At present, chief executive Steve Evans is on the fundraising trail, looking for £7.7 million to fund further growth and slash gearing. The fundraising has been pitched to institutions at 230p.

As is obvious, we did get our timing wrong on this stock. But if you bought on our advice, stay calm, as this group is set on a great growth trajectory.

Electric Word delivers again

In contrast to Accident Exchange, subscription publishing business Electric Word – at 6.3p currently valued at £5.94 million – is trading above our 4.5p recommendation level. The company, led by Julian Turner, has been on the acquisition trail yet again, buying Fieldwork Online Training (FOT), the schools management e-learning division of Fieldwork Education, in an all-cash deal. Chief executive Turner says the acquisition is a good addition to Electric Word’s education information products, and broadens the product range for cross selling. The shares, trading on a forward p/e of 17 times, are well worth holding ahead of interims out this month. These should not disappoint. Hold

Torex takes out XN

XN Checkout, the EPOS play we urged readers to buy at 141.5p in February, is being taken over by Torex Retail in a recommended all-share deal valuing XN at £72.7 million. Significantly, Torex Retail is another of our recommendations (we backed the stock at 59.5p).

Shares in both businesses have performed well in the wake of our recommendations, and then fallen through our stop-loss level after posting impressive gains. Crucially, both are trading comfortably ahead of the levels at which we recommended them.

It will be well worth staying exposed to the enlarged group, which will have greater critical mass and a wider geographic presence. To emphasise the upside, XN has just snared a significant deal in the hotel industry, as part of a consortium, with Rocco Forte hotels.

Leaps and bounds at Latchways

Latchways, currently at 427.5p, trades 36 per cent ahead of the 315p at which Growth Company Investor backed it in late 2003. The group, which designs, makes and sells a range of fall arrest safety systems that protect workers plying their trade ‘at height’, beat forecasts with its 2005 preliminary numbers to March – pre-tax profits soared more than 30 per cent higher to a record £4.3 million, on a 15 per cent hike in revenues to £22.4 million.

We think the strengthening height safety legislative environment

will enable this well-run venture to deliver further growth, and with profits for 2006 forecast to hit £4.8 million (giving the group a forward p/e of 14.2), we urge readers who haven’t yet got exposure to the stock to buy in.

Avanti’s £6m deal sets market alight

Good news continues to flow from Avanti Screenmedia, the largest and most profitable supplier of TV to pubs, shops and retail chains in the UK. In his latest announcement to the market, CEO David Williams announced that his group had secured a £3 million, three-year deal with The Mall Limited Partnership, a £2.3 billion venture that operates 22 shopping centres throughout the UK. Under the terms of the deal, Avanti will provide a 'total screenmedia solution', which will see it broadcast an array of programmes, advertising and marketing messages to the estimated five million people who use The Mall's centres every year.

Williams also expects to earn around another £3-4 million from advertising and has an option to renew the contract for a further five years. This news follows a £4.3 million contract from the European Space Agency, a superlative set of interim results (profits of £287,000, sales up 35 per cent at £3.5 million and a net debt position transformed into net cash of £2.87 million) and an acquisition at the turn of the year. The consensus among the City's analysts is that at 230p this group is still very much a strong buy. We are inclined to agree.