Kingston Communication is a small (£500 million or so) telecommunications service provider to both domestic and corporate sectors. They are centred in Hull where they were previously owned by the local council as a local monopoly before they converted to a plc in 1987 and partially floated in 1999 (See here for the full history), although they compete like every one else these days. They do this nationally by offering their own network with value added services and a wholesale partnership with BT, they also carry out consultancy work and offer IT support to businesses.
They describe the results themselves as being in line with expectations which seems about right although they seem to have matched next years earnings number this year given that only very modest growth had been forecast. Meanwhile the dividend was in line with their guidance being up by 10% to 4.88 pence in total with the final dividend being 3.25 pence. Within the numbers debt came dwon to be 1x EBITDA from 1.2X as they have strong cash flow. They did however flag that this will go back up to around 1.5x next year as they have some capital expenditure requirements on some contracts, but this reflects timing differences rather than a step up in capital expenditure requirements. There is also a pension deficit of £59 million which seems manageable. They have also agreed some new facilities with which they hope to pursue some new organic and inorganic growth opportunities especially in value added services to businesses to help offset some declines in traditional network revenues. They are also apparently seeing a good consumer uptake of fibre services.
Overall a fairly small, dull but solid company in a fairly competitive field. However, the rating reflects this with it being on around 12x current earnings and offering a yield in excess of 5% which is expected to be increased by a further 10% this coming year and next as they have committed to this rate of growth until March 2016. So the yield is the main attraction with this one as the shares have been weak recently, having come down from 100 pence to the low 90's where I would have thought they should be well supported by the valuations discussed above. Thus there could even be a trade in it as I wouldn't be surprised to see it back up towards 100 pence or above in the not too distant future plus you have a yield of 3.5% to come from the final dividend alone which goes xd on the 25th June 2014.
According to a website that tracks analysts recommendations called wkrb (sounds more like an American FM station) two research analysts have rated the stock with a sell rating, one has issued a hold rating and three have assigned a buy rating to the company. KCOM Group PLC currently has a consensus rating of “Hold” and a consensus target price of GBX 103.67 ($1.74). The range of their price targets is 75 pence to 130 pence for what that is worth.
Tweeted earlier today about the fact that the Church of England is now going to be giving out Financial advice! Apparently to help combat parishioners debt problems and encourage Credit Unions over Pay Day Lenders who themselves are likely to face tighter regulations which might drive some of them out of business and their customers into the arms or Loan sharks. Huh, next they'll be going into Asset Management - no wait they already do that.
Any way on the topic of Money or cash and keeping it topical De La Rue (DLAR) the troubled bank note printer has announced some results today. I say troubled because it has had a couple of profits warnings in the last couple of years or so and parted company with its CEO back in March this year and is currently being run by the Executive Chairman, Philip Rogerson, until a new CEO is appointed. The results today showed some signs of recovery as they are in the first year of a three year improvement plan, you can read the full announcement at the link above. They maintained the dividend for a chunky 5%+ yield, although it is not very well covered and there are a number of uncertainties ahead after the Bank of England said their Australian rival Innovia Security will provide the polymer substrate for its new plastic £5 notes. So it remains to be seen if they can win any future business on this programme and what will happen when their current 10 year contract with the Bank of England comes up for renewal next year. It is not one I am in and given the uncertainties it looks reasonable value (12x and 5%+ yield) so it may warrant some further investigation as a contrarian play - especially as it has had bid approaches in the past, but probably not for me at the moment.
Meanwhile, other forms of payment are increasingly becoming available including using ubiquitous mobile phones, which begs the question - will we need physical notes in the future? Certainly I know I rarely use cash these days. With this in mind an alternative to De La Rue that I have been tracking is Paypoint (PAY), which is a leading specialist payments company, processing consumer payments across a wide variety of markets through its retail networks, internet and mobile phone channels. It also offers something called Collect+ which is for consumers to collect parcels from shops to tap into the whole internet shopping / click and collect trend. However, this one has a higher price tag as it is more expensive on around 19x to 20x but with a 3% to 3.5% yield. The yield is what attracted me initially plus the fact that it scores well on my screens. Having done some work on it I like the fact that it is Chaired by David Newlands, who was FD at GEC under Arnold Weinstock and generally a safe pair of hands. Again this is topical because they report their final result tomorrow, 29th May 2014 - so I'll be watching out for those as again this is not one I currently hold and it has fallen back quite a bit with other mid cap stocks recently despite upgraded forecasts. You can read more about it in the meantime at their investor relations site. Finally, if you prefer more up to date music too then as Jessie J says Its all about the Price Tag!
News is a bit of a commodity and available 24 hours a day on television these days, there are even channels like Bloomberg devoted to business and markets with lots of annoying talking heads. Not my cup of tea really and if you are a busy person or want a life then I guess you might not have time for all this.
However, in investing it is important to keep abreast of news developments relevant to the business world and to look out for things which might involve your investments or point you towards new investment opportunities. Now there are numerous sites on the web out there which can help with this and I have listed many on my Reading List which can be accessed from the menu at the top of the site.
The other way I like to do this using the web / technology is to listen to business based news broadcasts from that ancient technology called Radio. I do this via pod casts which I get automatically downloaded each day to the media player on my old world desk top PC. However, I assume if you are a commuter or someone who goes out jogging then you could probably do this on your smart phone or portable audio player.
The broadcasts I listen to and other are from the BBC:
1) Best of Today - From Radio 4 - This gives you lots of the features from the early morning news show including Business with Simon Jack, all very pukka and a good variety of topics covered.
2) Wake Up to Money - From Radio Five Live - Which features similar content to the Radio 4 Business section but in greater detail. It features an old geezer, Mickey Clarke, who is a lot less posh, quite funny and bit more down to earth, plus another younger person called Adam Parsons to keep him in check.
3) World Business Report - From BBC World Service - The latest business and finance news from around the world, not one I listen to as it comes out later in the day and I have better things to do by then.
4) Money Box & Money Box Live - From Radio 4 - featuring Paul Lewis with in depth features on personal financial issues. Not a regular listen for me but sometimes I listen to it if it has a topic of interest to me personally, but I guess others may find it more useful.
5) Business Daily - Another From BBC World Service - Which they describe as the daily drama of work and money. Again not one I really listen to but there it is of interest to you.
Finally, if audio is not your thing, in case you are not aware of it, something called RSS feeds are a really useful way of keeping up with news and updates from web sites. There is one on at the top of my site which you can use to subscribe for updates if you want and although I'm new to it I gather Twitter can be used for this too.
When I wrote this one up recently I mentioned something called the GPSoC Framework agreement which was due to be agreed by the end of this month as this seemed quite important to them. They announced in an RNS yesterday that commercial terms of Lot 1 of the expanded English GP Systems of Choice (GPSoC) Framework had been successfully finalised.
Lot 1 covers the centrally funded GP Clinical IT system functionality, support and hosting essential for a modern paper-light practice and already in use by a large majority of practices.The initial procurement contract runs for around two years to December 2016 and is expected to be extended a further two years thereafter. On the effect of this they said:
"The Board of EMIS Group confirms that it considers the outcome of the Lot 1 negotiations to be positive and in line with management's expectations. The revised Framework offers opportunities for EMIS Group to benefit from a degree of additional funding in exchange for expanded and enhanced capabilities and increased usage ("more for more") and EMIS Group expects no material effect on profits in the current financial year to 31 December 2014, with the benefit starting to flow in 2015."
So good that they got the work and should help to underpin this years forecasts with further benefits to come in 2015. They may also get some more work from Lots 2 and 3 which are to be decided later in the year which they discuss in the full announcement at the link above if you are interested. Encouraging news so happy to run with it and will have to see if there is any further price reaction to this in the next few weeks once the news is digested.
..with a sick looking share price.
This is an AIM listed stock with a market capitalization of £375 million which describes itself as the UK’s leading supplier of healthcare software to GP's and a major software supplier to high street pharmacies. I think this is interesting because GP's are getting bigger budgets and a greater role in healthcare provision and the government is also trying to make greater use of patient data to improve health outcomes and efficiency in the NHS, although I see there have been some delays to the roll out of this on privacy concerns.
Their business provides a range of services across healthcare. This is broken down as follows:
Healthcare Record Systems
EMIS Web allows primary, secondary and community healthcare practitioners to view and contribute to a patient’s cradle-to-grave electronic healthcare record. This can improve patient care and increases efficiency. As at 30 June 2013 they had a UK GP market share of 52.4%.
RX Systems is a major supplier of software to pharmacists with a UK market share at 30 June 2013 of 34.9%. Their ProScript software is the most widely used community pharmacy dispensary management system in the UK, efficiently managing the dispensary process, labelling and endorsing patient records, ordering and stock control.
Egton specialises in the supply of ICT infrastructure, application software and value added services to healthcare and other public and private sector organisations.
Healthcare Gateway facilitates the sharing of patient data via the medical interoperability gateway (MIG). EMIS IQ meets the demand for high quality clinical and management information to support the national General Practice Extraction Service (GPES).
Patient.co.uk is the leading independent health information and healthcare transactional site. It helps patients play a key part in their own care with an information library, health apps, on line and mobile services such as GP appointment booking and repeat prescription ordering.
Brief Highlights from Last years full year figures are:
Turnover £86.3 million with £69.4 million or 80.4% recurring and an operating profit of £22.8 million for an operating margin of 26.4%. They reported earnings of 30.76 pence and a dividend of 14.2 pence. They also did a couple of acquisitions last year (2013) spending £57.5 million and moved into a net debt position of £13.5 million at the year end having had net cash of £7.7 million at the end of 2012. These acquisitions were funded by a placing at 615 pence which raised £27 million and a new £32 million debt facility.
This year they are expected to report around 35 pence and a 16 pence dividend which is then forecast to rise to 39.7 pence and 17.6 pence which at the current price close to 600 pence leaves it on around a market rating of 15x with a 3% yield for the year to December 2014 growing at around mid teens rate. So it is certainly not cheap, but I think it looks quite good quality given that it supplies the healthcare industry, has high market shares and a high degree of recurring revenue. This is demonstrated by the return on capital employed (ROCE) of 31.3% and the operating margin of 26.4%. On Stockopedia it get a 98 on quality (100 is best). For an AIM stock it has quite good institutional backing with Standard Life owning 9.4%, Schroders - 5.63%, Liontrust and Investec around 5% each. In fact major shareholders make up around 69% of the shares so they are probably quite tightly held, although the share price momentum has been surprisingly poor.
The reason for suggesting you check up on it now is that they have final results next week on 20th March, which could remind the market of its existence and maybe act as a catalyst to help turn around the depressed share price. Given the share price trend it will be interesting to see how the results are received and what they have to say about the outlook as they sounded pretty positive in the year end trading update in back in January when they said:
"Trading for the year was in line with the Board's expectations with continued organic growth in revenues and profits together with positive contributions from the two acquisitions completed during the second half of the year. The Group has continued to gain market share in each division during the period." They also mentioned progress being made with the renewal of the English GP Systems of Choice (GPSoC) Framework which is due to be concluded by 31 March 2014. This seems to be a contract that is up for grabs that EMIS is on the short list for, so I guess this could either be a positive or a negative depending on the outcome.
On this basis I have taken a small position as I like the quality and the value is OK, if not outstanding. Probably not one to rush out and buy but certainly worth watching I think, although I could be wrong.