Hornby (HRN, 118p, £44.83m) reports trading for the year ended 31 March 2010 is ahead of market expectations of PBT of £5.0m and EPS of 9.1p due to significant reductions in stock and more favourable dollar/ sterling exchange rates. Thus cash generation has been strong and net debt levels have been reduced to £3.2m (2009: £11.8m). The commencement of dividends signals the group’s strong order intake. The key risks are further weakening of the economy and a decline in consumer confidence. The market forecasts 2011 PBT of £6.8m and EPS of 12.3p, which puts the stock on a reasonable 9.6x. We retain our HOLD recommendation.
Indian Restaurants Group (IRGP, 3p, £0.33m) has announced a placing of 5.578m new shares with Brainspark PLC to raise £0.139m – thus giving Brainspark 29.9%. This does overcome our short term funding concern with a not unreasonable level of dilution to existing shareholders but, for the time being, we maintain our HOLD recommendation.
Legion Group (LGNG, 2p, £12.94m) has sold its security systems maintenance business with an annual contract value of £0.9m for £0.9m. We maintain our BUY stance.
NCC Group (NCC, 388p, £130.74m) has acquired SDLC Solutions Ltd, a testing services provider, for an initial £7.75m in cash with 2 further payments, totalling a maximum £7.25m, based on performance targets over the next 26 months. The group will meet the consideration from its existing cash-flow and debt facilities. To April 2010 SDLC is expected to have EBIT of £1.5m on £12m of revenues and gross assets of £3.8m. With the potential to cross ell with NCC’s existing customer base and work with the earlier Meridian Services acquisition we see this as EPS accretive and maintain our BUY with a 480p price target.
Richoux (RIC, 6.5p, £2.73m), the owner and operator of Richoux restaurants, reports prelims to 27 December 2009. Following the closure of the Amato restaurants, revenues declined by 10% to £5.0m (2008: £5.6m) and pre-tax losses increased to £0.25m (2008: £0.07m). Net cash reduced to £2.96m (2008: £4.34m) exceeds the current market capitalisation. The outlook statement is mixed. Trading remains tough, but the group have acquired two new sites, to help enhance trading. There are no forecasts in the market. The strong cash position encourages us to initiate with a HOLD recommendation.
Travelzest (TVZ, 14.5p, £21.04m) Trading update for the 6 months to end of April 2010 reports a strong improvement on the comparable period last year with good growth in market share in both the UK & Canada. Winter 2009/10 bookings are up 14% - driven by the Canadian operations. Summer 2010 bookings are up 30% in the UK and 22% in Canada. The group has mentioned further infrastructure consolidation is set to happen in H2, post the closure of its UK Berkeley Square office. The group reports minimal impact from the Iceland volcano. We move up to a BUY with a 16.5p price target – which would put it on 10x PER falling to 8.7x the following year.