Is this a FCUKing recovery or not?

French Connection is an interesting company. Once a darling of the high street, it has lost it's sparkle in recent years and, as a consequence, investors have suffered a torrid time. However, the stock is certainly a potential turnaround and recovery situation.

Investors will no doubt be heartened by this mornings trading statement which is encouraging.  Sales of their Winter collection have been strong and all other areas of the business are also trading in line with expectations. Importantly, as they continue to close non-profitable stores they will also vacate their Regent Street, London store at the end of March 2016, at which time they will receive a compensation payment of £2.4million, while also removing the on-going trading losses of the store.

Certainly all of this sounds encouraging and they sound pretty confident of meeting market expectations, despite still having the all important Christmas period to come.

The attraction of French Connection as a recovery play has always been the strength of it's balance sheet and whether or not it can achieve a turnaround in it's fortunes before significantly depleting it's cash pile.

In the half-yearly report net tangible assets were around £47.5m with no debt against a market cap., after this mornings sharp rise in the share price, of around £36m.

I'm not a holder or potential investor, but it does look interesting, although what the FCUK do I know?

By the way, I do hope that they have dropped the FCUK branding since it will stop me posting puerile jokes?

Actually, I'd guess they did this some time ago.

AEOREMA

http://cheerfultwentyfirst.exposecms.com/news/global-reach

Sounds encouraging. I am a holder of Aeorema. The company is a profitable, cash generative, dividend paying micro-cap. The company is growing and has a very solid balance sheet with no debt.

Give 'em that old Razzall Dazzle?

Boxhill Technologies is a micro-cap company that has been on my monitor for a short while, although I haven't purchased any shares in the company.  Investors who bought shares in April this year will be sitting on excellent profits since the share price has already multi-bagged during that short period.

The company appears to be making a dramatic turnaround in it's fortunes and reported an operating profit for the six months to 31 January 2015 of £296,000 which compared favourably to an operating loss of £49,000, before discontinued operations and exceptional items, for the six months ended 31 January 2014.

The company appears to be an eclectic mix of businesses and describes itself as a lottery, software, gaming and leisure company.

The balance sheet is ok, although tangible net assets are just over £200,000 against a market cap. of around £6m. At the interim stage the company was cash generative to the tune of £431,000.

The attraction of Boxhill is undoubtedly the sudden growth surge. From the most recent trading update, operating profits are likely to come in around £600,000 to £650,000. My rough calculations estimate that the shares are trading on a very modest p/e ratio of less than 10.

The most recent trading statement also suggests that the current financial year is likely to be even stronger :- "Operating profits continue to increase, not just compared with the year to 31 July 2014, but also comparing the second and first halves of the year to 31 July 2015."  Good news indeed.

On the face of it, this looks like a promising micro-cap and despite it already multi-bagging, there does appear to be more to come.

One small  niggle might be that Lord Timothy Razzall, the Chairman of the Company, has been a recent seller, although he says that this was to meet personal obligations. He still retains 4.33% of the company.

As I stated earlier, I am not holder and my interests lie elsewhere at the moment, but it's certainly one that merits further investigation. Of course the question is, whilst it's certainly got that old Razzall Dazzle, will it ultimately Razzle Dazzle 'em?

Today's updates and a share purchase

7Digital announced the launch of new services this morning and a further contract win:-

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/12597876.html

The launch of the new services through Mariposa Holdings Group are with two of the largest telecommunications companies in South America: Oi and Algar Telecom.

The company states that:-

"The provision of this kind of mobile music service is key to the Company's growth, and these launches also mark a significant expansion in 7digital's South American business."

Furthermore, 7Digital has also announced that it has signed an agreement with digital multimedia streaming platform Playster, to expand their music streaming service into 15 additional territories.

I hold shares in 7Digital. Currently the company is loss making and cash burn has been quite high, however they appear to be gaining considerable traction and their business model looks promising where they are creating a recurring revenue stream with the associated improvement in gross margins (currently 64%). In their interim report they said:-

"The Company has significant deals at various stages in the contract process, with 63 new prospects as well as existing customers who are looking to expand current services or extend into further territories."
 
The shares were up 4% on the news.

Netcall released a positive sounding trading update today:-

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/12598146.html

They state that:-

"We have had a positive start to the year with the total value of sales orders considerably ahead of this time last year. "

"Our significant levels of recurring revenue combined with a strong order inflow and a continuously expanding product suite give the Board confidence in achieving a successful outcome for the full year."

 

I don't hold shares in Netcall, but I mention it because Michael Jackson is Chairman of the company.

By the way "Billie Jean is not his lover,  She's just a girl who claims that he is the one, But the kid is not his son". Sorry couldn't resist.

 

This Michael Jackson is also Executive Chairman of Access Intelligence, a company in which I do hold shares.

 

I am hopeful that Access Intelligence's fortunes will follow a similar path to Netcall. Netcall is profitable with a high percentage of recurring revenues, it has a very sound balance sheet with no debt and plenty of cash. It is also highly cash generative. It is predicted to pay dividends of 3p in 2016 which equates to a yield of 5.6%. The market cap. is around £74m after a small rise in the share price this morning.

 

In a separate announcement, I further note that it has "secured a five-year SaaS contract worth GBP400,000 to provide its Liberty Customer Experience Manager solution to a Local Authority".

 

Netcall's P/E ratio is currently high at around 29 on a fully diluted basis falling to 24 next year.

 

N.B. After doing more research on Netcall, I have made a small purchase. This is a profitable company with a strong balance sheet, excellent cash flows and gross margins at a mouth-watering 91%. Recurring revenues currently make up 62% and are likely to increase going forward. Whilst the p/e ratios look high, I can envisage that they will fall quite quickly and the company will prove to have been very good value. I like their enhanced dividend policy which equates to 4% this year (ex-div on 10th Dec) and set to rise. The share price is well below it's early year highs of over 70p.