Derek Pain: Fresh thinking provides a greater Clarity
No Pain, No Gain
Saturday 04 July 2009
Clarity Commerce Solutions, the most recent addition to the no pain, no gain portfolio, is clearly on the comeback trail. Hopes that new managers were turning round the fortunes of this little high-tech player prompted its recruitment in April.
At first I looked a little foolish as the shares initially gave ground. But the year's figures confirm that the bad, old days are behind the group and, all being well, shareholders should be able to look forward to increasingly prosperous times.
Profits for the 12 months ending March emerged at £1.1m, which were slightly better than expected – in the previous year it lost £7.1m. Chief executive Ken Smith says the group is "well placed" for the current year which should produce profits of £1.8m, suggest Robert Sanders and Oliver Cummings, analysts at stockbroker Arbuthnot. Indeed they feel confident enough to predict that in 2012 Clarity could achieve £3.6m.
I am not a great believer in long-range forecasts as too much can happen to render them meaningless. Nevertheless, the fact that Sanders and Cummings are prepared to put their names to such a bullish estimate is an indication that Smith and his Clarity cohorts have achieved an impressive reputation in a short time.
Clarity offers a range of commercial software, such as point-of-sales and loyalty tracking programmes. Its activities are largely directed towards the entertainment, hospitality, leisure and retailing sectors. The roll call of 7,000 clients embraces 1,200 cinemas, 1,500 pubs and 640 leisure centres spread over 20 countries.
Many of its customers are in the discretionary spend category and are obviously far from immune to recessionary influences. It could be argued that such operations would cut back on their software. But the need to reduce costs and develop business in these straitened times is a plus for Clarity, capitalised at only £7.8m.
Its interim figures were either just in the black – or red. Under today's daft accountancy rules, it was a case of "take your pick". The second six months were clearly highly rewarding. After special charges such as amortisation, year's pre-tax profits were £471,000 compared to a £9m loss.
The shares are now 33.5p against 29.5p when the portfolio arrived. That is only a modest gain, but Clarity looks a splendid lockaway.
I am less bullish about Private & Commercial Finance (PCF), another constituent. The shares bump along at 11.5p against the 19.5p the portfolio lashed out some 30 months ago. Profit prospects are not exciting.
Since the shares were recruited, we have endured the stock market crash and the horrendous problems that have engulfed various sections of the finance industry. As a provider of hire purchase facilities for small and medium sized businesses and individual car buyers, the group could not escape the bloodbath.
Still, PCF increased turnover 22 per cent to £62.2m, yet pre-tax profits were £263,000, down from £934,000. Some of the decline is due to our mad accountancy rules, introduced largely because of the Enron disaster in the United States. They forced the company to strip £427,000 from its profit calculations. No cash was involved, it was the impact of valuing marked to market interest rate hedges. Next year a similar non-cash amount could return to inflate the pre-tax level.
Chairman Michael Cumming says interest rate derivatives protect the group's borrowing position and "we have no intention of crystallising these losses as the derivatives form part of our long-term hedging strategy".
Analysts Justin Bates and Tom Mills at stockbroker Daniel Stewart expect profits this year to be flat at around £200,000 before returning to the £900,000 level.
The group is currently attempting to raise £2.2m to replace convertible loan notes that expire soon. It is offering new notes, which carry a 10 per cent interest rate – a staggering return in these low-interest days. The recession has forced some of its competitors to discontinue their operations, allowing PCF to improve margins and be more selective, which must help combat higher costs.
PCF would have to trim its activities if it falls short of its £2.2m target. Still the sale should succeed, and the loan notes represent a small part of its funding that is largely provided by high street banks. They have re-pledged approaching £140m – but, not surprisingly, PCF is having to pay more for its cash.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
How to protect your assets if the stock markets begin to head south again
Child Maintenance Service to replace Child Support Agency - but is it better?
A student's guide to financial survival: You don't have to drown in debt at university
Bargain Hunter: Kit yourself out in sports gear - at a healthy discount of up to 75%
Energy firms found guilty of bad practice could have licences revoked under Labour government
- 1 'Alien thigh bone' on Mars: Excitement from alien hunters at 'evidence' of extraterrestrial life
- 2 West poised to join forces with President Assad in face of Islamic State
- 3 Mother fed her daughter tapeworms to make her skinny for pageant
- 4 Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
- 5 Pamela Anderson rejects ice bucket challenge because of ALS experiments on animals: 'Mice had holes drilled into their skulls'
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Disgusting, frustrating, but intriguing: how the country really feels about its politicians
Bin bag full of cats' heads discovered near Manchester's Curry Mile
iJobs Money & Business
£30000 - £45000 per annum: Harrington Starr: A global investment management fi...
£65000 - £75000 per annum: Harrington Starr: Senior Network Engineer-(CCIE, CC...
£70000 - £80000 per annum: Harrington Starr: Senior Network Analyst - (CCIE, C...
£60000 - £80000 per annum: Harrington Starr: Senior Network Engineer-(Design, ...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony