Trading statements and cashing in a 50% profit

It's been a fairly eventful week, with two of the companies I hold shares in issuing trading statements.

Unfortunately neither statement was particularly pleasing, although it could be argued that neither was disasterous either.

However, I have subsequently sold one of my holdings and retained the other.

The holding I have sold are my shares in Indigovision.

During 2012 the company has been extremely bullish about its prospects, and as I have previously written, when Indigovision increases sales whilst maintaining margins the effect on the bottom line is quite dramatic.
 
When they issued their final results in September, the tenor of the report gave the impression that 2012/2013 was set to be a year with good growth prospects. In fact having achieved double digit growth in the second half of the year, it mentioned that double digit growth had continued into the new year. I quote " A good start has been made in the current year. Double digit sales growth has continued into the first seven weeks of the current year, and the rate of order intake is equally encouraging."

Barely a few weeks later revenue growth has been reported at 6% and order intake at 10% (just about double digits), more concerning is the fall in margins and the increase in operating expenses.

It begs the question, what exactly has happened in a few brief weeks?

Let's be generous and just say that the trading statement wasn't quite what I was expecting.

I was also a little puzzled by the following:- "As ever, the visibility of future orders remains short.....". Well that's obvious.

But then we have:-

"Given the outstanding performance achieved in last year's first half, we expect benefits to operating performance to be skewed towards the second half of the current year."

So let me get this right. Forward visibility is limited (to say the least), but they expect benefits to operating performance to be skewed towards the second half. How on earth do they have any idea what the second half will look like?

To be honest that line looks like gobbledygook to me. What's the first half of last year got to do with the second half of this year? Perhaps it's just me!!

Anyway, unfortunately I was out on Thursday, pretty confident that the statement would be good, if not great. I was more than a little surprised to see a 65p decline in the SP when I returned home.

My worry is that over the past year or two, there has been more time spent on a power struggle than on improving the performance of the business, and now I'm totally unsure about the prospects here. The picture is very opaque in my view.

I think the company is probably reasonably priced, but for me, the issue of forward visiblity will always be a worry and hence I sold my holding on Friday.

I have no complaints. With the special dividend and some capital growth, I have banked a 50%+ profit in just under a year. As ever, I'll keep them on the monitor, but for the moment I'll invest elsewhere.

Earlier in the week Densitron also gave out a trading statement. The bear points are that they will miss market expectations for the year (delayed orders which will now fall into 2013)and there is ongoing litigation (although they hope to settle out of court). The share price dipped by around 10%.

On a positive note, the possibilty that they would undershoot market expectations, and their intention to resolve the dispute about a lease out of court were flagged up in the interim results and not too much of  surprise.

Furthermore, operating profits for the year will still be ahead of 2011 which puts the company on a forward p/e of less than 7. The order book is strong and 10% ahead of the same period last year, with prospects for 2013 looking encouraging.

It appears that the bad news is already in the price. Clearly the uncertainty around the lease dispute is a risk, but a swift and not to painful resolution would see the company back on track and, in my opinion, undervalued on future prospects.

The current dividend is around 7%. I hope this can at least be held, but again I expect that the outcome of the litigation may influence their decision on this year's payment (0.2p was already distributed at the interims).