Updates - Avesco and Stilo

Two quick updates.

I've held shares in Avesco since 2009, and I've been extremely pleased with the progress that this company has made in the intervening years. If you're looking for frequent news stories from the company then you're going to be disappointed. This is the type of company that I love. It just gets on with the job. It's a growing company that is cash generative and pays a good dividend. It operates a progressive dividend policy.

Avesco is a company that benefits from large events, and they don't come much larger than the Olympics. I was a little apprehensive this year since it's been apparent from various media outlets that the budget for the Rio Olympics was significantly less than for London 2012. Would this affect Avesco's earnings?

I needn't have worried. The company released a RNS this afternoon stating that trading is comfortably ahead of market expectations for the full year:-

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/AVS/12951319.html

Even after today's 13% rise in the share price, previous broker forecasts were for around 22p and 23p in 2016 and 2017 putting the forecast p/e ratios at around 12 and 11  respectively. Given that tangible NAV is around 230p (and almost certain to rise), net debt is very low following the sale of Fountain Studios and broker upgrades will follow, the shares still look very cheap to me. The World Athletics Championships to held in London in 2017 should also provide a nice boost to earnings.

Stilo International is a relatively new holding for me. See my two previous blogs:-

http://michae1mouse.blogspot.co.uk/2016/06/stilo-international.html

http://michae1mouse.blogspot.co.uk/2016/07/stilo-update.html

Stilo released their interim results today, and although I correctly predicted in my more recent blog that the results this year wouldn't "blow the bloody doors off", they have shown further progress.

Sales revenues and EBITDA were up 11%, but perhaps more significantly cash was up 30% and the interim dividend increased by 33%. This is the second significant increase in the dividend following a 33% hike last year. It's more often than not a sign of confidence in the future.

Results for the full year are expected to be in line with management expectations, and my guesstimate would be earnings around 0.30p-0.35p putting the shares on a p/e ratio in the low 20s with three months of the current year to go.

The exciting part for me is 2017 and beyond. If sales of OmniMark and Migrate show some steady growth or even remain consistent, and AuthorBridge begins to make a more significant contribution to revenues then with 99% gross margins the extra revenues will pretty much drop through to the bottom line. Costs are kept tightly under control and the company is debt free. It's worth bearing in mind that every £120,000 profit adds 0.1p to earnings. Profit for the full year in 2015 was £309,000 for earnings of 0.28p. A relatively modest lift in earnings will see the p/e ratio fall quite dramatically.

Whilst waiting for AuthorBridge  to (hopefully) accelerate Stilo's growth trajectory, Stilo appears to be a relatively low risk profitable, cash generative, debt free, (progressive) dividend payer operating in a niche area.

p.s. IBM was indeed the prestigious client that is using AuthorBridge. (see previous blog).

"Its initial deployment in production at IBM, following extensive co-operation and testing by the central Information Developer Tools team, serves as a good foundation upon which we can build."