AIM Prospector morning thoughts (ISG, STM)

9th Sep '14 by AIM Prospector

5 comments 7356 reads

Good morning,

Two announcements caught my eye this a.m.

First, fit-out specialist ISG (LON:ISG) announces its final results for the year ending June 2014:
http://www.investegate.co.uk/isg-plc--isg-/rns/final-results/201409090700071293R/

loads of sunshine as the economy recovers:

Revenue £1,483m £1,245m +19%

Underlying PBT £11.5m £9.1m +27%

Profit before tax £6.8m £3.0m +125%

Net cash position £46.3m £36.1m +28%

Underlying basic EPS 23.00p 22.09p +4%

Basic earnings per share 13.53p 9.17p +48%

Total dividend per share 9.45p 9.00p +5%

Further highlights:

Order book ahead by 18% at £1,011m (2013: £854m) of which £926m (2013: £801m) is for delivery in the current year
UK Fit Out and Engineering Services operating profit nearly doubled

The shares have recovered well in the last twelve months and the valuation now looks about right. Stockopedia has the company on a P/E of 10.3 times 2015 forecasts with the prospect of a 3.7% yield. The shares could run up a bit further from here but unless the business surges ahead it looks as though the big gains have already been enjoyed.

AIM Prospector featured the company in the April edition here:
http://issuu.com/aimprospector/docs/issuu_magazine/c/sle1l8t

Second RNS of note is from STM Group. The company describes itself thus: We offer innovative, impartial financial solutions for high net worth individuals, cross-border investors and expatriates

Interims here:
http://www.investegate.co.uk/stm-group-plc--stm-/rns/interim-results/201409090700061246R/

Again, sunshine all the way:

Revenue £7.4m £6.6m +12.1%

EBITDA £1.3m £0.8m +63%

PBT £1.0m £0.3m +313%

EPS 1.17p 0.85p +38%

Cash £5.5m £4.4m +25%

the shares have already risen significantly this year (likely driven by pension changes) and are up around 10% this morning. I could not find any forecasts in Stockopedia. With a market cap of around £15m this is the sort of AIM company that is well off the radars of many fund managers. This sometimes results in a significant opportunity for private investors.

Outlook:
The Board believes the progress being made in the first half of 2014 will continue well into the second half and beyond and looks forward to updating the market in this respect.

suggesting more progress to come.

Everyone have a great day.

David O'Hara
Editor, AIM Prospector

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Randval

9th Sep '14

Hello David,
The single most useful item of information that I look for in a report on an AIM share is ; does it qualify for Inheritance Tax Relief?
Is there any chance, please, of including this info in your report?

Regards,
Randval.

AIM Prospector

Hi Randval,

AIM shares are regarded as 'unquoted' for the purpose of their classification for business property relief. This makes most of them eligible for 100% relief from IHT, provided they are held for more than two years. There is a document explaining this here:

http://www.londonstockexchange.com/companies-and-advisors/aim/publications/documents/a-guide-to-aim-tax-benefits.pdf

which goes on to say:

Which companies qualify?
IHT is more concerned with the individual’s domicile. Accordingly, a company need not be UK resident. Most trades qualify but a company’s business must not be wholly or mainly that of:
• dealing in securities, stocks and shares
• dealing in land or buildings
• making or holding investments (unless that of a
market maker or discount house).

whether a company qualifies is probably best asked of the relevant company secretary. It is unlikely that I would ever cover such companies but if I do, will endeavour to point it out. Mind you, in some cases discovering the share's status will not be a trivial job.

Hope that helps,

David

Hi David,

Thanks for reply.

For some companies their status for business property relief is fairly clear.For example Nichols, James Halstead, Latham, Robinson, F.W.Thorpe.These companies are family companies and I guess they are listed on AIM to take advantage of IHT concessions.
Other companies are not so obvious, for example I feel unsure about Telford Homes and some Irish Companies.

In general when I ask a company secretary they hedge their bets and reply that they see no reason why they should not qualify. Fair enough, in some ways, but not altogether reassuring when hoping for a tax shelter.

Best wishes,
Randval.

Hi Randval,

My guess is that a company secretary would be reluctant to be giving tax advice. I have some sympathy with that response. In fact, I have heard execs complain previously that they cannot get the question answered categorically either.

My own stance is that if a company is predominantly involved in delivering tangible goods or services, it will be just fine. As for a company like a stockbroker (such as £SHRE) I would not worry either as they are clearly providing a service too.

If I could not identify any customers for a particular company, then I would start to question whether it qualified for BPR.

For example, I'd be sceptical whether an investment firm such as the ISDX-quoted Western Selection (OFEX:WESP) would qualify. But then I'm not a tax expert either.

Probably a discussion worthy of its own thread.

David

Hi David,

Thanks for your help and guidelines.

Regards,
Randval.

AIM Prospector morning thoughts (ISG, STM)

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