Companies: ASG ��

David Williams, chief executive of Avanti Screenmedia, seems to report only good news to the market – and report it regularly. The boss of the UK’s market leader in TV advertising to the retail and leisure sector – and the owner of a broadcast satellite set to launch in 2008 – recently buoyed shareholders with news that his firm had been awarded a �5.4 million deal by the European Commission to support a project called SISTER. This stands for Satcoms In Support of Transport on European Roads and is part of the Galileo satellite programme.

Avanti will lead a pan-European consortium that is integrating satellite and terrestrial communications with Galileo, to enable mass-market take-up by road transport applications. It hopes to use the project to develop new applications it can offer to the automotive sector.

This news was preceded by a C651,000 deal with the European Commission to act as a consortium partner for a telecommunications system to co-ordinate, analyse and disseminate data to improve emergency services responses to natural disasters.
This, in turn, preceded a screen-advertising contract with retailer SPAR, which almost overshadowed the recent full year results. These showed pre-tax profits up 162 per cent to �3.1 million on turnover up 54 per cent to �12.9 million, though earnings per share fell slightly to 16.26p (18.25p) following a �25 million placing in December 2005 to pay for the satellite launch.

We first backed the shares at 126.5p back in 2004 and, although they have almost tripled to 333.5p (for a market value of �74.52 million), we believe there is much more to come from this superlative stock. The last time house broker ABN AMRO put out forecasts, it reckoned Avanti would hit profits of �3.3 million in 2007 and �4.1 million the following year. It is likely to do substantially better if Williams keeps the transaction pipeline flowing. These shares are not to be sold.

Hold Hyder for global growth
Hyder’s subsequent stellar share price turn since its summer profile in GCI reflects consistently strong numbers from the international engineering design group.

Results for the half to September were well ahead of the previous year’s figures and market expectations, with pre-tax profits surging 212 per cent higher to �8.1 million on revenues up 20 per cent to �97.2 million. The interim dividend was lifted more than 70 per cent to 0.6p and there was 13 per cent growth in the order book to �246 million.

Chief executive Tim Wade’s key messages were the strength of the group’s markets and margin improvement, with returns enhanced through a focus on higher value work and select infill acquisitions. Operating margins increased to 5.2 per cent, representing good progress towards the ten per cent target set ‘for the next three-to-five years’.

During the half, UK environmental consultant Cresswell was acquired, as was German highways design consultancy Munnich Projekt and planning and landscape architects ACLA China. All three should make useful contributions in the second half.

Further acquisitions should be completed by the year-end, with acquisitive firepower enhanced through a recent �7.6 million funding bringing new institutional names like Old Mutual and UBS onto the shareholder register.

As well as buoyancy in the Middle East, where profits perked up from �900,000 to �1.3 million, Hyder is starting to see work related to the 2012 Olympics kick through, as well as improvements in its oft-difficult German and Asian markets. On the evidence of these numbers, the shares are worth holding for further strong growth.

Property recruiter primed for growth
Prime People, the recruiter recommended here at 105p, is growing swiftly, has delivered strong half time figures to September, and yet trades at a discount to the wider recruitment sector. Quoted for many a year (with a very uneven history), Prime People was transformed in late 2005 through the reverse takeover of successful commercial property recruiter Macdonald, founded by chairman Robert Macdonald.

The professional recruitment consultancy is thriving in a buoyant UK real estate and construction market, where it is servicing demand for ‘white collar’ professionals ranging from property fund managers to town planners, asset managers and architects.
On a like-for-like basis, the interim results demonstrated impressive 18 per cent pre-tax profits growth to �780,000, on a 20 per cent hike in gross fee income to �9.3 million, reflecting a greater number of fee-earners on the books.

To balance the reliance on the cyclical British market, 15 per cent of Macdonald’s fee earners are now based in Dubai and Hong Kong, offices recently opened to
tap real estate and construction booms in those regions. An office opens in Sydney soon, and the board is weighing up the South African market.

For the year to March, broker WH Ireland envisages pre-tax profits of �2.2 million from income of �19.9 million, ahead of profits of �2.6 million for March 2008. These numbers leave the shares on a forward multiple of 8.3 (falling to 7.4). There is also a decent yield. Hold.

Care group yet to claim markets
Claimar Care, the provider of domiciliary care services to local authorities throughout the Midlands and the North West, was profiled on these pages as a strong buy back
in July.

Justifying our faith in the business, chief executive Mark Hales delivered strong maiden results for the year to September, showing earning growing 61 per cent to 4.78p following a 61 per cent sales surge to �13.2 million. Three acquisitions were completed by the deal-hungry group during the last financial period, and another three businesses have been bought since the year-end. The most interesting is franchised business SureCare, which could supply a stream of further acquisition opportunities down the track. ‘We like a high volume of acquisitions,’ explains Hales, ‘because we are able to integrate them very efficiently.’

Operating profits powered north by 89 per cent to �1.4 million, even after infrastructure investment to ensure further growth. Gross margins edged up to 37.6 per cent (36.9
per cent) as fee increases from local authorities stayed ahead of wage inflation.

Although local authority clients are experiencing ‘extreme budgetary pressures’ in the care market, Hales only sees opportunities as councils are increasingly outsourcing care requirements. Another factor playing into Hales’ hand is the fact that councils are increasingly looking for larger providers at tender.

Ninety five per cent of revenues are wrought from long-term deals with local authorities, giving great visibility for investors and ‘we now have 31 local authority clients, with the biggest accounting for only 7.7 per cent of revenues,’ adds Hales.

At current levels, (88.5p) it’s worth adding to your holdings.

DFD continues to deliver
Financials from Lancashire-based debt advice and solutions counter Debt Free Direct (DFD) dazzled on every metric at the half year to the end of October.

Adjusted pre-tax profits powered ahead by almost 130 per cent to �4.26 million, sending earnings 146 per cent higher to 7.66p, all on turnover up 91 per cent at �12.2 million. The interim dividend was doubled to 3p and chief executive Andrew Redmond expects to pay out at least 6p to shareholders for the year.

Redmond said the IVA market in the UK is still a young and growing market place, and is sympathetic towards calls for regulation of the sector, with the group’s processes ‘regulation ready’. He is equally hopeful about Debt Free Direct Australia, which began trading in August.

For the year to April, the City expects a rise in profits from �5.1 million to �10.9 million and growth in earnings from 9.4p to 20.3p.

For 2008, investors should look for 31p of earnings from profits of �16.7 million. Those estimates place the 467p shares on a lofty-looking forward p/e ratio of 23.9 this year, falling to a more palatable 15.7 for April 2008.

We think the premium price for DFD is worth paying, with personal insolvencies burgeoning as borrowers overstretch themselves, and bumper growth looking assured. If you already own shares, consider topping up your holding. Add.

Latchways scales dizzy heights
In our last update on Latchways, the maker of ‘fall-arrest’ safety systems backed here at 315p, we urged readers to book some profits at 792.5p. This was in the wake of an impressive share price ascent. Investors that pocketed gains and retained a sensible stake have since seen their remaining shares surge north to 1230p, valuing the business at over �130 million.

Spurring this powerful performance was another broker upgrade following formidable figures for the half to September. These revealed a 36 per cent pre-tax profits hike to �4.1 million on turnover lifted 18 per cent to �16.6 million. Gross margins improved to 56 per cent, despite high stainless steel prices, and cash generation was strong, with net cash balances at the half-year increasing to almost �6 million. As well as upping the interim dividend 54 per cent to 5.92p, the board declared a special dividend of 30p, representing a return of cash to shareholders of �3.34 million.

In addition to the core business, there was a notable profit contribution from the Wingrip range, products that are gaining acceptance in the aircraft manufacturing and airline industry.

Following the numbers, Bell Lawrie’s Ian McInally upgraded his forecasts for 2007 and 2008. He envisages pre-tax profits of �7.6 million for the year to March, giving earnings of 47.25p, ahead of profits of �8.3 million and 52.5p of earnings the following year. Those metrics place the shares on forward ratings of 26 and 23.4, multiples McInally thinks ‘well justified given the out-performance by the company’. If you’ve still got a stake, sit tight.

Avanti Screenmedia	AIM	�71.16m	318.50p	1.00p
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Other company articles:
Avanti does the splits			14/12/2006
Avanti gets bigger and better			08/12/2006
Avanti Screemedia wins new contract			17/11/2006
Avanti enters new market			27/10/2006
Avanti Screenmedia going great guns			06/10/2006